Just How Important is your Credit Score?

In general, society has become increasingly dependent on the use of credit to make purchases and provide information to various lending institutions regarding financial decisions that need to be made. These days, a good credit score is needed for far more than just obtaining a credit card – it also demonstrates your history of repaying debts to any entities that you’ve borrowed money from. 

Here are some reasons why it’s crucial to maintain the highest possible credit score:

It will affect where you Live

Before you’ll be able to obtain a mortgage, lends will want confirmation that you’ll be able to repay them. If your credit score is low, many lenders will decline a loan application because you’ll be considered as a high risk for defaulting on payments. 

If you’re approved for a mortgage, your credit score will affect the interest rate on it as well – the higher your score, the lower your interest rate will be. Landlords now also take a person’s credit score into account to determine whether you’ll be a suitable tenant or not.

It will affect the Car you Drive

Most individuals simply don’t have the financial means to cover the cost of buying a vehicle outright and still paying rent or mortgage installments, meaning that they’ll apply for an auto loan at some point. Your credit score will affect whether you’ll qualify for an auto loan, the amount you are eligible to borrow and the interest rate you’ll pay on installments. 

A low credit score will not only make it more difficult to obtain an auto loan; being charged a higher interest rate on your loan also means that it will cost you far more to repay over time.

It Affects Living Expenses

Believe it or not, a good credit score will also be required when the time comes to establish utility services in your home. Electric companies for instance will state that you’re effectively borrowing your first month of electricity, so they will check your credit score to determine whether you’re a low or high risk customer. The same principle will often also apply to phone, water, internet and cell service providers nowadays. 

Tips to Manage your Credit Score

  1. Pay on Time

Your payment record has a major influence on your credit score – even paying one credit card installment a few days late will pull your score down. 

  1. Reduce the Amount you owe

Use your credit report to see how much debt you have and arrange them from smallest to largest amounts, or alternatively, according to interest rates that are being charged on them. Work through your list by paying off those with the smallest balances or highest interest rates first. 

Ensuring that you keep your credit score as high as possible will help ensure that you’ll be able to obtain the best possible interest rates if the need ever arises to apply for a mortgage or auto loan, or move into a better neighborhood. 

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Why so Many Individuals Cannot Afford to Retire

Several individuals look forward to the day when they’ll no longer have to wake up to an alarm clock and spend eight hours a day stuck inside an office. However, this idea is little more than a dream for a number of older individuals who have fallen short of being able to save the money they need to retire. Below are some of the reasons why so many older individuals aren’t able to afford to retire.

Seniors are Hoping to Work for Longer

A number of older individuals haven’t saved money for retirement because they had hoped to continue working throughout this time of their lives – either full-time or in a part-time capacity. However, these intentions often don’t go according to plan, with more than 50% of individuals being forced into retirement sooner than they’d hoped because of health or employer-related issues. 

One Third of Seniors Have No Savings

Up to a third of Americans have not set aside any savings for retirement, and the majority of those who have been saving are still far behind where they should be. Several reasons were provided for this deficit such as:

  • Prioritizing repaying student loans or starting college savings accounts for children
  • Having too much consumer debt that prevents money from being saved
  • Planning to rather save larger amounts of money at a later stage in life instead
  • A general lack of desire to start saving

Reduced Focus on Saving

Most financial experts strongly recommend having a minimum of 70% of your annual income saved before retiring. However, research has revealed that the amount of individuals who are actively saving money has declined rapidly over the past 30 years – to the point where up to 50% of Americans cannot come up with $500 to cover the cost of an unplanned emergency. One of the main reasons why people are saving less nowadays is that many of them have experienced income reductions that prevent them from being able to even cover the bare necessities. 

Higher Cost of Living

Even people who were under the impression that they were setting enough money aside for retirement could find themselves falling short because of continually rising living costs. Economists have warned that seniors throughout the country don’t have enough money saved to sustain their current lifestyle. Residents of Hawaii, Alaska and South Carolina seem to be faring better than seniors in other states such as New Jersey, North Dakota, Minnesota and Massachusetts. 

There are a number of reasons why individuals who are close to retirement age or are in the process of retiring don’t have sufficient savings to carry them through this time of their lives. In many instances, simply recognizing the reasons why they haven’t got enough saved is the first and most crucial step towards sitting down and compiling a plan that will at least help them to have a little extra cash set aside for when they’re no longer able to work.

If you have fallen behind with retirement savings or you’re unsure how to go about starting to save for this crucial time of your life, contact us today. 

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Why a Detailed Budget is Crucial for Financial Success

Many individuals think that if they can simply earn more money, they will automatically be better off financially. However, many households that are earning six-figure incomes have found that they are still struggling to make ends meet because they haven’t taken the time to compile a budget that would allow them to see where their hard-earned money is really going. 

If you’d like to ensure that your finances work for you over time, now is the time to compile a detailed budget.

Help Control Spending

When you use money without having a budget in place, there’s nothing to stop you overspending. Although you may have a basic idea of how much you’re spending each month, it’s too easy to overspend without having accurate figures on hand. 

When you and your spouse sit down and compile a list of where all of your money has been spent, you’ll quickly be able to see which categories of your budget are prone to overspending. For instance, you may find that your daily takeout lunch habit is setting you back to the tune of a few hundred dollars a month.

Achieve Financial Goals

Regardless of whether your goals involve having a good-sized emergency funs, paying for your child’s college fees or enjoying a dream vacation, having a detailed budget will help ensure that you’re able to allocate funds to the life events that matter most to you. For instance, knowing that you have an emergency fund will reduce stress levels in the event that anything goes wrong because you won’t have to worry about how you’ll be covering an unexpected expense.

Avoid Debt and Improve Credit History

Your budget will help you identify areas where overspending is taking place, which will in turn help you avoid racking up unnecessary consumer debt. If you have already accumulated high levels of debt, a budget will help you identify areas where spending cutbacks can take place and the savings incurred from them can then be put towards repaying your creditors. 

Compiling your Budget

When compiling your budget, you’ll need copies of bank statements as a starting point. These will allow you to see exactly where each dollar has been spent in previous months, making it easier to determine where spending reductions can be made. For instance, your bank statement will show how many times you purchased takeout in a specific month or how many subscriptions you’re paying for.

Once you have your bank statements on hand, carefully check to see which expenses are being deducted from your account – in some cases, a subscription you canceled a while back may still be getting charged to your account. If your expenses exceed your income, spending will have to be reduced – many households can trim expenses by purchasing cheaper grocery items, canceling unused memberships and only purchasing clothing when absolutely necessary. 

If you’re struggling to compile a workable budget or you’d like to obtain financial advice from experienced professionals, contact us to set up an appointment today. We look forward to assisting you.

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What is the Right Time to Start Retirement Planning?

A commonly asked question when it comes to retirement is, “When is the right time for me to start planning for my retirement?” If you’ve only recently started climbing the career ladder, you may be thinking that you’ll still have a lot of time before you need to start preparing. However, if it’s one thing financial experts agree on, retirement planning should always start sooner rather than later.

Your 20s 

The concept of saving for retirement can seem virtually impossible when you’re still in your 20s because you may have just recently started a career and not be earning a decent wage yet – or you may still be struggling to repay student loan debt and think you don’t have enough cash left over to still invest for retirement. Alternatively, you may have other goals at this time of your life, such as starting a family – causing you to push retirement planning further away than you should. 

Below are just a few benefits you’d be able to enjoy if you start saving towards retirement in your 20s:

Take Advantage of Compounding Interest

Every year, your money will earn interest in two ways – on the money you’ve saved and on any interest earnings that you received in previous years. This means that the earlier you start saving, longer you’ll be able to take advantage of two forms of interest being earned towards retirement.

Enjoy Tax Savings

By placing your retirement funds into an IRA or Roth account, you’ll be able to take advantage of tax deduction of up to $5,500 for each year that you make these contributions.

You won’t have to Catch Up on Contributions at a Later Stage

Individuals who don’t make any contributions towards retirement savings during their 20s and 30s usually only realize how far behind they’ve fallen when they reach their 40s or 50s. By the time this happens, they will have to contribute a far higher portion of their earnings each month to ensure that they’ll actually have enough to live on when they’re no longer working.

Develop Healthy Savings Habits

If you make it a priority as early on as possible to start saving for retirement – and any other emergencies that may arise from time to time – you’ll develop good spending habits that will help prevent you from needing to borrow money if times get difficult. 

The Case for Starting to Save Later in Life

If you’ve waited until your late 40s or even 50s to start thinking about saving for retirement, you may be thinking that it’s too late to do anything about it. However, there are several reasons to get started, even if you intend to retire in the next five to 10 years. 

  • Most individuals reach their highest earning potential at this time of their lives
  • Several employer 401 (k) plans allow employees over 50 to contribute more money than younger employees

In short, it’s never too late to start saving towards retirement. If you would like to find out how to get started, contact us today to schedule an appointment with one of our financial advisors. 

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windfall cash

Wise Ways to Use Windfall Cash

A windfall is considered as a rather substantial amount of money that you may have come into unexpectedly – some individuals may be fortunate enough to be heirs in a family will, while others may strike it lucky with their state lottery, for example. Regardless of how your windfall ends up in your possession, it will be wise to take the following steps so that you can make the most of the extra cash.

  1. Don’t Give up that Day Job Just Yet

While it’s certainly extremely tempting to ditch your day job after coming into a large sum of money, this may not be the wisest thing to do – especially not immediately. 

It’s too easy to underestimate the amount of money that will have to be invested to take the place of the income you’re currently earning. For example, to replace annual pay of $50,000, you’d require a nest egg of approximately $1.7 million – at a conservative estimate. 

Quitting your job will also cause contributions to your Social Security benefit to stop. In cases where your windfall investment experiences a downturn, you’d need to rely on Social Security to help cover that shortfall. If you’re genuinely unhappy in your job though, a windfall could provide you with the opportunity you need to take a short break and pursue a new career. 

  1. Set the Funds Aside Temporarily

Place your windfall cash into a relatively safe short-term investment option such as a savings account or CD. This will provide you with time to think and come up with a sound financial plan.

  1. Take Taxes into Consideration

In most cases, you’ll owe at least a portion of your windfall in taxes. It’s recommended that you consult with a qualified financial advisor before spending a penny, as this will help ensure that you won’t be faced with any nasty surprises from the IRS. A financial advisor will also be able to advise you regarding the best places to invest your money so that you get the highest returns possible. 

  1. Pay Consumer Debts and Set up an Emergency Fund

If you have credit card or student loan debt, it’s strongly recommended that you use windfall funds to help eliminate this – or at least reduce the amounts you owe substantially. This will help free up your income for other uses, such as investing into your IRA.

It’s also recommended that you set aside part of your windfall cash as an emergency fund – a minimum of three to six months worth of expenses should be covered in this account. 

  1. Treat Yourself

Make a list of items or experiences you and your family have wanted, but not been able to afford, and consider splurging on some of them. You only live once, so the luxury of a windfall can at least help you and your family to have a little fun after meeting your other financial obligations. 

Although coming into an unexpected sum of money can seem overwhelming, this need not be the case if you take some time to think and enlist the help of a qualified financial advisor. Contact us today to learn more about making the most of your windfall. 

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Why your Retirement Portfolio must be Diversified

When a retirement portfolio is diversified, it simply means that your investments have been set up in multiple places to help minimize the risk of losing everything you have. This means that if one of your investments experiences a loss, you’ll still have the rest of your portfolio to fall back on – while still earning reasonable profit on the rest. While it can be challenging to correctly diversify your portfolio, it’s a crucial part of planning a successful retirement

The Main Aim of Diversifying a Portfolio

Although a number of individuals think that diversification is necessary to maximize their return on investment, the truth is that the main reason why it must be done is to limit the impact that a volatile market may have on a portfolio. For instance, if an entire investment is placed in bonds, a large enough return may not be possible to support a retiree’s lifestyle. Alternatively, if everything is invested in domestic stock, the stock market’s volatility could cause the loss of a large part of your nest egg. 

  1. Limit your Losses 

When investing for retirement, your main goal should be to keep abreast of market averages and ensure that you’ll end up with enough money available after you stop working. It will not only be necessary to focus on your gains; you’ll need to keep in mind that there’s always the possibility that losses will be experienced – a large loss can totally derail your retirement plans. As such, the more diversified your portfolio is, the less chance you’ll have of experiencing big losses. 

  1. Less Overall Risk

Some individuals show interest in investing in high risk places that can provide significant returns, but it’s important to keep in mind that equally large amounts of money can easily be lost this way as well. While it can be fun to watch your money grow at a quicker than average rate, it’s recommended that some of your funds be placed into safe investment options like an IRA or bonds. Doing this will allow you to take a chance or two, but not at the risk of losing everything. 

  1. Keeping you on Track

Another aspect that’s essential when diversifying a portfolio is rebalancing. This refers to the practice of allocating money between various types of stock to find the right balance between risk and investing conservatively. For example, you might choose to spend a quarter of your stock investment budget on real estate, 5% on foreign stocks etc. Thereafter, you go back once a year to see how your balance has performed – and speak with a financial advisor if any changes need to be made. 

Ensuring that you have a diversified retirement portfolio won’t only help you get the best possible return on investment; it will also prevent you from losing too much money if a portion of your investment experiences a loss. If you are keen to discuss your retirement portfolio with a professional advisor, call us to set up an appointment today. 

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Why it’s Essential to Explain the Link between Work and Money to Kids

Financial experts agree that it is crucial for kids to learn about the value and appreciation of money from the earliest possible age, and the best place for them to obtain this information is at home from their parents. Children who have been taught the fundamentals of earning and saving money from a young age will be far more confident and successful as adults.

  1. Working Teaches Kids the Relationship between Money, Time and Possessions

It’s crucial for children to learn from a young age that money has to be earned. As such, parents or caregivers should discuss how important it is for them to work for their money, and one of the best ways to demonstrate this is to provide them with paid jobs that can be done around the house (not to be confused with regular chores though). For instance, younger children can be paid to clean baseboards or wash the family car. Older children can be encouraged to seek paid working opportunities like walking neighbor’s dogs or mowing lawns.

When children are working for their money, they will also realize that there is time involved with earning it. As they become more accustomed to working and earning money, they often realize that the plastic toy that they initially ‘had to have’ wasn’t worth the hours of labor they put in to buy it. 

  1. Teaching the Concept of Saving

Once children have earned money, they will usually be tempted to spend it right away. However, this is the right time for parents to teach them that they need to save a portion of each amount they earn. This can be done by implementing a rule stating that 20% of their earnings must be saved for a rainy day and a further 10% for charitable causes that they are passionate about. They should then be allowed to spend the remaining 70% however they like.

The above-mentioned percentages are merely a guideline – parents should adjust these accordingly if needed. Establishing this financial routine will help children learn to spend less than they earn, which will go a long way in preventing them from accumulating consumer debt as adults. 

  1. Part-time Jobs can Teach Time-management Skills

Many parents think that children should not have part-time jobs because ‘it will interfere with their education.’ However, many children’s schedules will allow for anything up to 10 hours of part-time work per week without it affecting their study time. 

Along with learning time-management, having a part-time job will also teach children valuable social skills, responsibility and work ethics – skills that are essential for them to succeed as adults. 

Teaching children the importance of working for their money from a young age will also help them deal with the discomfort of the fact that although not all work is pleasant, it simply has to be done. If you would like to learn more about investing for your child’s financial future, contact our team today.

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Questions to Ask your Financial Advisor while Planning your Retirement

Retirement planning is not something that should be taken lightly, which is why you should meet with your advisor regularly. If you’ve set up an appointment to chat with your financial advisor, chances are that you have a few questions to ask them. Below are some examples of questions you should be asking to help ensure that your retirement portfolio will be able to cater for your needs once you stop working.

  1. Can Debt Affect my Retirement?

Unfortunately, any type of debt will have a negative effect on your retirement, so this is something you should speak to your financial advisor about, If you’re saddled with high levels of consumer debt, you can work with your advisor to help find ways to reduce the amounts you owe as quickly as possible. It’s best to reduce or even eliminate debt before you stop working.

  1. Are my Retirement Savings on Track to Achieve my Goals?

Ensuring that you are keeping close track of your retirement savings plan is probably the most important thing to do – you won’t be able to retire as planned if you haven’t been saving enough money. As such, you must ask your advisor if the amounts you’re currently saving are sufficient or if any changes will need to be made to achieve your retirement goal. It’s also important to know how much interest your savings are accruing over time from compounding interest. 

  1. What Percentage of my Current Income can be Replaced when I Retire?

Most individuals have spent a few years or even decades earning a fixed paycheck, so it’s recommended that you ask your advisor if this will be changing after you’re no longer working. An adjustment to your income is serious business, so it’s important that you be prepared for when it happens. However, any reliable advisor will be able to let you know what your approximate income will be when you retire

  1. At what Age should I Take Social Security?

Knowing what it’s the right time to take Social Security forms an important part of a good retirement plan, and being aware of just how long to delay taking it will enable you to get the best benefit possible. Taking Social Security too early will have a negative effect on your retirement finances. 

  1. What Age will I Qualify for Medicare?

One of the biggest costs to take into consideration when doing retirement planning is health care. Although Medicare was established to help retired individuals cover medical bills, you’ll need to discuss with your financial advisor when the best time will be to sign up for it. 

Asking these questions will help ensure that you get the most out of an appointment with your financial advisor. These professionals address all aspects relating to retirement, so they form an essential part of your planning process. If you would like to learn more about being able to afford to retire comfortably, contact our team today.

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Why Debt and Retirement are Not Compatible

Retiring with any form of debt is considered to be extremely risky because it not only adds a level of stress that you definitely don’t need during this time of your life; it will reduce the amount of money you’ll have to live on each month as well – and Social Security will almost certainly not be enough to bridge the shortfall in your finances. 

Below are just some of the reasons why you should do everything possible to enter retirement debt-free.

Interest Payments could be Used to Fund Living Expenses

The last thing you need to deal with during your golden years is having to throw money away in the form of interest payments and finance charges – which is what you’d be doing if you’re still carrying consumer debt by the time you stop working. 

It’s strongly recommended to pay all consumer debts – and preferably mortgages as well – in full by the time you reach your late 40s or early 50s at the latest. This will give you enough time to start putting additional funds away that will come in handy once you’ve stopped working.

Your Income could be Severely Limited

Many seniors are disappointed to find that they will have to live on a fraction of the funds they were used to enjoying while they were employed – which will only be more difficult to do if you’re still trying to pay off debt when you retire.

Eliminating consumer, mortgage and student loan debt before retirement will help provide you with just that little bit extra to get by with each month – which will be crucial if you haven’t been able to save a lot of money for this period of your life.

This is Not the Time of your Life to Stress over Finances

Your golden years are not the time to be stressing over how you’ll make the mortgage payment or repay that car loan you took out while you were still working. Retiring debt-free will not only provide you with an increased sense of financial security; dealing with less financial stress will allow you to focus your time and efforts on the more pleasurable activities such as traveling, engaging in a new hobby or even enjoying a few extra meals out every so often.

Get your Budget and Investments Sorted before Retirement

Before you can even think about retiring, it’s essential that you’ve inspected your budget and investment or savings portfolio to ensure that you’ll have enough money to live on once you’re no longer employed. Setting up an appointment with an accredited financial advisor will help you determine where you are on your financial journey and whether any adjustments will need to be made with regards to your savings and investment plans. 

If you would like to obtain additional information about ensuring that your retirement years will be as financially stress-free as possible, contact our advisors to schedule an appointment with one of them today. We look forward to helping you plan the best retirement possible.

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Too Much Free Time After Retiring? Give these Boredom Busters a Try

Most individuals worry about the financial stresses associated with retirement such as covering the cost of healthcare, dealing with unexpected expenses such as home or car repairs or even paying property taxes. However, emotional and mental issues can quickly become all consuming during this time of a person’s life as well. 

Many seniors find themselves becoming restless and bored within just a few months after retiring, meaning that up to 40% of them end up experiencing bouts of depression. This can be alleviated though, by engaging in some of the following activities.

Learn Something New

Retirement can provide you with the perfect opportunity to expand your intellectual horizons. If you have a few hours to fill in the day, consider visiting your community college to see what classes are on offer for older residents. You could find yourself learning about botany, ancient history or virtually any other subject that interests you. Alternatively, some museums also offer free educational programs.

Start a New Hobby

Starting a new hobby need not cost a lot of money. In fact, activities such as baking, painting, cooking, fostering pets for your local animal shelter or even learning a new language can be enjoyed extremely affordably, and you’ll often be able to find classes to learn more about your new found interest before delving in completely.

Consider becoming a Volunteer

If you don’t have a need to work part-time during retirement to keep busy, volunteering for a cause that you strongly believe in can help keep you active – even for one or two days a week. In most cases, all you’ll need to do to volunteer is approach the organization you’d like to work with and let them know of your intentions. Most charitable organizations will welcome any assistance they can get.

Stay Active

Just because you’re no longer working full-time, it doesn’t mean that you should go home and assume the position of a couch potato – a lack of exercise during your golden years has been shown to encourage the development of many mental and physical ailments.

It’s recommended that you get some exercise at least three times a week for approximately 30 minutes at a time. Even a gentle stroll around your neighborhood will go a long way in helping to alleviate boredom and keep that brain matter active.

Keep those Social Connections Active

Although many retirees lose touch with several of their social connections after they stop working, this need not be the case. Ensure that you keep in contact with family and existing friends as much as possible – it also wouldn’t hurt to make a few new friends along the way during this time. 

Your retirement years can be extremely gratifying if you have planned for it correctly ahead of time. Ensuring that you find ways to beat the boredom blues as much as possible will help you enjoy what should be the most relaxing time of your life. 

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