spending-money-wisely

5 Things you should Never Waste Money On

When saving to build your emergency fund, retirement account or even that vacation you’ve been dreaming about, you’ll have to be prepared to make a few lifestyle and financial adjustments along the way. Below are some products and services that you should never even consider spending your hard earned money on.

Brand New Cars, trucks or SUVs

As soon as a new vehicle is driven off the showroom floor, it loses as much as 30% of its value immediately. Instead of purchasing a brand new vehicle, consider searching for those that are between one and five years old. This will prevent you from losing a sizeable chunk of your hard earned cash, while still being able to obtain a vehicle in good condition.

Lending Money to Friends and Family

If you’re fortunate enough to have a little extra cash on hand from time to time, chances are that you’ve been approached by friends or family members with regards to lending them money. Although it may be tempting to provide them with financial assistance, you not only stand an extremely strong chance of never getting those funds back; you could find yourself going short in your own budget at a later stage.

Interest on Store and Credit Cards

Many working people consider it normal to be carrying permanent balances on store and credit cards. This results in you having less money to spend each month because of the installments that need to be paid on these cards, and over time, you will end up paying up to three times the original price of any items you purchased with these cards in the form of interest and finance charges. Rather save up for any large purchases, as this will save you thousands of dollars over time.

Paying Full Price for Anything

These days, a number of companies are willing to provide some form of discount on their products and services. However, these special offers may not always be known to the general public – which is why you should always ask whether any discounts or specials would be applicable when making a purchase. This strategy usually works best when purchasing items like appliances or even vacation packages. As the saying goes, “If you don’t ask, you don’t get.”

Anything that Seems too Good to be True

Each year, thousands of hardworking individuals end up being scammed out of their money by conmen who promise to provide them with ‘double returns on their investments’ and other similar schemes. This can seem like a financial lifeline for anyone who is desperate to ensure that they have enough money saved to cover emergencies or other essential expenses. 

As such, you should only ever work with registered and licensed financial advisors or brokers when looking to invest your money.

If you would like to learn more about how you can reduce your expenses or invest more money for future use, get in touch with our advisors today. 

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teaching kids finances

Teach your Kids about Finances during Lockdown

The pandemic has resulted in millions of parents around the world scrambling to find ways of entertaining their children such as home schooling, baking, arts and crafts, and various other activities. However, with finances being extremely tight in many households because of parents not being able to work, this can also present an ideal opportunity for them to teach their kids more about the household budget and finances in general. 

Below are some easy ways in which you can teach your children how to manage their money.

  1. Help them Set Savings Goals

Helping your child to set a savings goal for that must-have toy or video game will teach them that nothing in life comes for free. You can allow them to earn money by doing additional chores that aren’t part of their daily routine if they need to earn extra cash to save up for the item they want. If you can afford it, offer to match the amount of money your child saves.

Once your child achieves their financial goal, it will help them see the benefit of saving a portion of any money they earn going forward. This will also help set them on the path to long-term financial security when they are adults.

  1. Make Use of Money Apps for Kids

As more and more banking and other money-related services move over to digital platforms, children are being exposed to fewer physical checks and cash money. However, there are several fun and child friendly money management apps available that can help teach them about spending, saving, and investing wisely from a young age.

  1. Don’t Underestimate your Child’s Understanding of Finances

Although your children may be too young to start investing money on their own at the moment, it doesn’t mean that they don’t understand anything about finances. 

Children as young as three or four years of age can start being taught the basics of how to use and save some of their money. In many cases, you can open a Junior ISA for your children so that they can familiarize themselves with the ups and downs associated with investing money over time. 

  1. Let them Assist when Compiling your Budget

At present, money is extremely tight in millions of households across the country. This means that budgeting the little money you may have more important than ever. 

Letting your children assist with compiling your household budget plan will allow them to see what items such as mortgage payments, utilities, and groceries really cost compared to the amount of income you currently have to work with. 

Another great way to teach them about saving money is to encourage them to find ways to cut expenses around the house. You could even turn it into a contest to see which child comes up with the most ideas or even the most unusual money saving tips. 

If you’re keen to teach your children more about financial matters and are unsure how to go about doing so, contact one of our professional advisors today. 

 

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afford to retire

Steps to take when you can’t Afford to Retire

Although several individuals reach the age where they’d like to retire, many of them simply cannot afford to do so and think it’s too late to try and remedy their financial situation. However, there are a few steps that can be taken in an effort to solve this dilemma.

  1. Enlist the Help of a Reputable Financial Advisor

Trying to determine whether you’ll have enough money to retire with can quickly become overwhelming – to the point where many individuals simply give up and hope for the best. However, speaking with an accredited and reputable financial advisor should be your first course of action to take.

A financial advisor will take a look at your current savings strategies (if you have any) and then provide a plan of action that will involve you investing a predetermined amount of money each month into an appropriate retirement fund. 

  1. Consider Delaying your Retirement Date

Although you may have grown tired of taking part in the corporate rat race every day, you will have to ensure that your finances are in order before handing in your resignation. 

Delaying retiring for a few years will not only allow you to continue putting money into your retirement accounts; waiting a few more years before claiming Social Security will mean that your checks will be larger as well. For each year that you delay obtaining Social Security payments, you’ll receive an additional 8% in benefit payments – up to age 70. 

  1. Evaluate your Current Lifestyle

Being able to afford to retire can sometimes mean that you’ll have to make a few changes to your current lifestyle so more money can be saved. 

Take a look at your current budget to see where expenses can be reduced. For example, you might need to reduce the amount of money you’re currently spending on entertainment, meals out or even traveling. Now will also be the time to do everything you can to reduce or eliminate any debt you may have, such as credit cards and personal loans. 

Reducing these expenses will enable you to invest more into your retirement accounts each month. 

  1. Consider Part-time Employment

If your only sources of retirement income will be Social Security and whatever you’ve managed to save until now, you’ll most likely have seen that a lot more money will be needed. However, this need not be the case if you’re willing to consider part-time employment after officially retiring. This will not only benefit you financially; it will help keep your body and mind active as well. 

If you’re unfortunate enough to be behind on saving for retirement, it will mean that you’ll have to put in extra effort as soon as possible to try and catch up. Should you wish to discuss your retirement plans with a professional financial advisor, get in touch with us today. We look forward to helping you to better understand and manage your finances so that your retirement years can be something to look forward to. 

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covid savings

Coping Financially during Lockdown

COVID-19 has left several families scrambling to try and make ends meet because of not being able to earn their regular incomes. If you have been unfortunate enough to not be able to work over the past few months, the tips below could help ensure that you stretch each dollar as far as possible. 

  1. Don’t be Tempted by Sales

After lockdown is lifted, several retailers will most likely have a glut of stock that they need to move from their inventories. This will result in there being a number of sales that advertise along the lines of, “Once in a lifetime opportunity,” or “final clearance.”

Regardless of how good a deal seems to be on an item, resist purchasing it unless you can afford to cover its cost in full. Chances are that similar items will be sold at reduced prices later in the year again. 

  1. Start Saving

Households that were able to plan ahead by having an emergency fund to cover at least one to two months of expenses will experience less financial stress during this time.

Although you might be thinking that it’s counterintuitive to start saving now, this is not the case. Starting with a small amount such as $10 to $15 per week or $50 per month may not feel like a lot of money, but the truth is that it will add up over time and come in handy if you’re suddenly unable to earn an income again. 

  1. Cut Expenses wherever Possible

Most individuals are familiar with the standard ways of reducing expenses such as not purchasing new clothing, cutting back spending on takeout’s and restaurant meals, and not taking vacations. However, during these unpredictable times, your cost cutting may sometimes have to become a little more drastic until such time as you’re earning wages again. 

While subscriptions such as Netflix Spotify may provide entertainment, you may need to consider cutting them for a few months. Any gaming group or other club memberships you may have should also be canceled, as they are not genuine necessities. 

  1. Repair and Repurpose

At a time when you’re receiving little to no income, the saying, “Use it up, wear it out, make it do or do without” can be a budget lifesaver.

Refrain from purchasing items until what you have has already been used up as much as possible. Don’t purchase clothing or shoes unless an existing item has genuinely worn out or been outgrown. If a clothing item has a small rip or other minor damage, consider repairing it before tossing it in the trash – several YouTube videos are available that can teach you the basics of clothing repair. 

Drastically cutting your expenses during this time could make all the difference with regards to being able to pay your rent or mortgage and put food on the table for your family. While you and your family may feel deprived during this time due to decreased spending, keep in mind that these difficult times will eventually pass.

 

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retirement healthy

Keep your Body and Mind Healthy after Retirement

Although retirement sounds like a dream come true for several individuals, the end of what has often been a lifelong career path is usually accompanied by a sudden decline in mental stimulation – which can result in the development of many different health issues. As such, it’s essential that you keep your mind and body as active as possible once you’ve stopped working and the tips below can help you achieve this. 

  1. Learn a New Hobby or Skill

Do you have interests that you simply didn’t have time for while you were working? If so, now may be the ideal time to pick up on them. Don’t be afraid to sign up for those ballroom dancing classes, art classes, or even sewing classes. Now could even be the right time to learn how to play a musical instrument.

Studies have revealed that seniors who actively engage in one or more creative activities on a regular basis were at a far lower risk of developing conditions such as Alzheimer’s as they aged. 

  1. Remain Physically Active

Regardless of whether you enjoy tacking challenging hiking trails, taking a slow bicycle ride through your neighborhood or playing in the yard with your grandchildren, you will be stimulating your body and mind simultaneously. 

Engaging in physical activity on at least three days per week will help keep bones strong, reduce your risk of developing high blood pressure and/or heart disease and even lower cholesterol levels over time. If you haven’t been overly active until now, it’s recommended that you schedule a physical exam with your healthcare provider before rushing into any form of exercise. 

  1. Calm your Mind

Many individuals think that their stress will miraculously disappear once they’ve stopped working. However, daily family life and even financial concerns can negatively affect your mental clarity. 

Some of the best ways to keep your mind clear and sharp are to become involved with yoga or meditation and to avoid unnecessary stressful situations wherever possible. It’s also a good idea to severely limit the amount of time you spend with people who are constantly exuding negativity. 

  1. Eat a Balanced Diet

Although no one is expected to live only on healthy foods day in and day out, you should do everything possible to ensure that the bulk of your food choices are as healthy as possible. 

A balanced diet is one that should include a wide variety of fresh fruit and vegetables, a selection of nuts, meat, fish and chicken (if you aren’t vegetarian or vegan) and a variety of healthy fats. In some cases, you may need to supplement your diet with fish oil capsules and a good multivitamin. 

Retiring from the workforce certainly doesn’t mean that you’ll have to give up everything else as well. The more active you keep your mind and body after you have stopped working, the healthier you will be. Making your mental and physical health a priority during retirement will ensure that you’ll be able to feel fit and healthy for as long as possible. 

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covid 19

How COVID-19 Could Affect your Retirement Savings

COVID-19 has not only affected the way in which millions of individuals live and work each day; economists have noted that it could have disastrous effects on retirement savings as well – with some even being wiped out completely. Below are a few ways in which the current pandemic could have a negative effect on your retirement funding and plans.

  1. Retirement Savings worth Trillions of Dollars could Vanish

During 2008, the Russell 3000 index that reflects the performance of the whole US stock market lost almost 40% in value. This resulted in the value of several US retirement accounts such as 401(k)s and numerous private retirement accounts falling by approximately 25% – effectively erasing as much as $2 trillion in retirement savings. 

So far in 2020, the Russell 3000 Index fell by 25%, and this has decimated as much as $3.8 trillion in retirement savings funds and accounts.

  1. Some Employers may Cut matching Contributions for 401(k) Accounts

More than 10 million employees have filed claims for unemployment benefits in the past few weeks, and those that have been laid off are also no longer able to contribute to their 401(k) plans. 

Virtually all employers that provide 401(k) plans for employees offer to match contributions up to predetermined amounts, and these matches usually average up to 5% of an employee’s earnings. However, as the economy takes a nosedive, several employers are cutting costs wherever possible – with these matching contributions often being the first in line to be reduced or even eliminated. 

  1. Employees may have to Dip into Retirement Accounts

When financial emergencies arise – such as having income eliminated during the current pandemic – several individuals have no other option but to dip into their retirement accounts just to put food on the table or avoid being evicted from their homes. 

If the funds withdrawn from these retirement accounts are not repaid, this will result in many employees not having sufficient capital to see them through retirement. 

  1. Some Employees may have to Retire Earlier than Planned

Many older employees who have been laid off as a result of the pandemic may be forced to take early retirement if their places of work don’t reopen or staff numbers are reduced upon opening. In many cases, older employees are among the first to be laid off when companies have to cut expenses. 

Although Social Security provides a financial lifeline to unemployed individuals who are over the age of 62, beneficiaries who start collecting as soon as they reach 62 will receive up to 30% less funding than if they had been able to hold out until reaching age 66 and 8 months.

It’s clear that the pandemic will have a negative effect on the value of retirement accounts for the foreseeable future. However, this doesn’t mean that all is lost where your savings are concerned. If you would like to find out how you can get your retirement savings back on track or you’d like to start planning safor this time of your life, contact our advisers today.

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pandemic savings

Dealing with Financial Uncertainty during a Pandemic

Coronavirus has significantly impacted the daily lives of millions of individuals all over the world, with several countries implementing stringent lockdown procedures to curb the spread. Not only has this affected the way people live in general; many businesses have had to close as well, leaving scores of individuals with any way to earn an income. If you’re currently struggling with financial uncertainty, the tips below can help you through this challenging time. 

  1. Put Large Purchases on Hold

The last thing you want to do when your finances are severely limited or worse, non-existent is commit to making any large purchases – especially if they will require monthly repayment. For instance, you may have been planning on replacing your vehicle or doing home upgrades while your finances were more stable, but now is certainly not the time to spend any money unnecessarily. Hold off until such time as your income is more stable.

  1. Cut General Expenses wherever Possible

At a time when your next paycheck is not a certainty, you’ll also want to keep your general spending to an absolute minimum. This is the ideal time to go through each line item in your budget and determine whether it’s a genuine necessity or not. Items such as Netflix or other monthly subscription services may be nice to have but should be eliminated until such time as you’re more financially stable. 

When planning your grocery list, snack items may sometimes need to be reduced or even eliminated to cut costs. Sugary cereals can be replaced with oatmeal for example, which will provide far more value for money over time. Although it may initially be difficult to eliminate fancier foods, it’s important to remember that maintaining financial stability is far more important over time than a bag of crisps.

  1. Don’t be too Proud to Apply for Assistance

Although many individuals think that applying for and obtaining government assistance is only for ‘poor folk.’ However, various stimulus packages and other forms of financial assistance have been made available in each state to specifically address shortfalls that members of the public are experiencing as a result of not being able to work at the moment. 

While it may seem like there’s a tedious amount of paperwork to fill in when applying for this assistance, it will certainly go a long way in helping you to put food on the table or even pay your rent while you aren’t able to earn an income as usual. Most recipients who have applied for assistance have received direct deposits into their bank accounts within a few days at the most. 

The most important aspect to remember when dealing with any form of financial uncertainty is to limit spending wherever possible – and until such time as you’re able to work again. If you’re unsure of how to compile a realistic budget or you need assistance with regards to seeing where some of your expenses can be trimmed or even eliminated, get in touch with our financial team today. We will be more than willing to assist you. 

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Keeping a Good Credit Score during Retirement

Keeping a good credit score requires a lot of effort and commitment, especially as your time to retire draws closer. While it may not be wise to make large purchases after retiring, keeping a good credit score will ensure that you’ll still qualify to use your accounts if the need arises. Below are a few tips that will help you keep your credit score as high as possible throughout retirement.

 

Use or Risk Losing Old Accounts

It’s not enough to simply keep old accounts open; they need to be used from time to time to prevent the creditor from closing them without warning. If you’re fortunate enough to be debt-free, it’s even more important for you to use your older accounts every so often – otherwise credit bureaus will not have any information to base your credit score on. Several older folk have been taken by surprise after being denied loans because they had been debt-free for a number of years. 

It’s not necessary to incur large amounts of debt to ensure that your credit score remains active. Even making a single, smaller purchase occasionally and paying for it the following month will normally work well.

 

Don’t Close Accounts you’ve had for Many Years

Several individuals don’t know that keeping a good credit score on an account over many years will have a positive impact on their credit ratings. 

If you’re going to retire soon, you might have various accounts that you opened many years ago that you’re tempted to close off. However, closing all of these will unfortunately have a negative effect on your credit history. 

Another way in which your credit rating can be affected is if you decrease the amount of credit that is available for you to use. Quite a large part of an individual’s credit score depends on the amount of credit that has been granted to them versus the amount of credit that they are using. As such, reducing your amount of available credit can have a negative effect on your overall score. 

 

Don’t Co-sign for any Loans

If you have children that have left home, it can be tempting to lend a helping hand by co-signing on a student loan or car note for them. However, this is not recommended because it will significantly increase the amount of debt that is reflecting on your credit history. Although this might not always have an effect on your credit rating, it could affect your ability to qualify for a loan if your debt-credit ratio is overly high.

 

Take your Debt into Consideration before Retiring

Another aspect that affects your credit score is your ability to repay debt installments on time each month. This could be problematic if you’re going to be living on less income after you retire or if you experience unexpected medical bills that eliminate your savings. It’s normally recommended that you eliminate as much consumer debt as possible before retiring. 

After retiring, unexpected expenses can arise that will require you to apply for a loan. Protecting your credit score now will help ensure that you’ll be prepared to do so with ease in the future.

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Being Smart with your Savings and Retirement Funds during this Difficult Time

At present, large parts of the world are on lockdown status due to the rapid spread of Coronavirus. While it may be little more than an inconvenience for some individuals in that they cannot leave their homes as often as they like at the moment, for others, it spells financial disaster because of the fact that a number of them are unable to go to work to earn a living. 

As such, it has become more crucial now than ever before to ensure that you work as wisely as possible with any money you may have available to you at the moment. Below are a few ways in which you can stretch each dollar as much as possible.

 

Consider Filing for Unemployment

Although the rules to qualify for receiving unemployment benefits tend to vary from one state to another, many have become somewhat more lenient with regards to providing financial assistance to families where breadwinners have been laid off or had their hours cut substantially as a result of Coronavirus. 

In many cases, applications to file for unemployment can now be completed online, which can save a lot of time and effort. 

 

Avoid Dipping into Retirement Accounts

When times get tough, many individuals turn to their retirement accounts as a convenient way of borrowing money. However, this is not recommended because you will be penalized in two ways. Firstly, you will lose out on any interest that would have accumulated on the amount of money you’ve borrowed, and secondly, you will highly likely be taxed on the amount of money that has been borrowed from a retirement fund as well. 

In fact, many financial experts only recommend dipping into your retirement funds if you are facing immediate foreclosure on your primary residence. 

 

Only Purchase Essentials

When funds are as tight as they are because of shortened working hours or layoffs, it’s not the time to consider purchasing a new flat screen TV or another pair of fashion shoes. Instead, restrict all purchases at this time to genuine essential items such as food, rent or mortgage, transport and utility bills.

In situations where you’ve been granted a reprieve for paying any of the above-mentioned bills, keep in mind that once the lockdown period has ended, all outstanding amounts may become due with immediate effect. As such, it’s strongly recommended that you continue paying as much as you possibly can on rent, mortgage, utilities and car notes. 

With regards to groceries, you can save up to 30% on your bill if you’re willing to opt for store brand items, plan weekly meals around sale items and reduce the amount of non-essentials that you put in your cart such as crisps, soda and other luxury items. 

Although the next few months may be extremely tight financially for several families, keeping the above-mentioned tips in mind can go a long way to help get the most out of every dollar wherever possible. 

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Various Stages of Retirement to Consider

While you’re formally employed, there would have been various steps of the career ladder that you navigated along the way. Your retirement years will work in much the say way, with various stages to take into consideration. Below is a simple breakdown of what you could expect to encounter during each of them with regards to finances.

 

Stage One – the Beginning of Retirement

Otherwise known as the honeymoon phase, this is when a lot of retirees tend to be the most active. The initial excitement of now being able to engage in activities that they couldn’t partake in before due to time constraints is experienced during this time. In addition, younger retirees are usually in better health, meaning that they will want to do as much as possible during this time. 

As a result of being more active during these first few years, you could find yourself spending more money – especially if you’re traveling more than you did before. However, it’s crucial that your retirement funds be carefully managed during this time. Failure to do so could result in you struggling to make ends meet later on.

 

Stage Two – Slowing Down

This stage starts taking place approximately ten years after you’ve retired, and you find that you’ve grown tired of traveling and any other leisure-related activities that you were enjoying at first. You may find that you’re also ‘starting to feel your age’ at this point, causing you to slow down a bit. 

Age-related health conditions may also start making their appearance during this time, resulting in you having to spend a bit more money on medication and other required treatments. During this time, you could notice an increase of between 3% and 5% on your cost of living each year. 

 

Stage Three – Nearing the End of your Life

This stage of retirement takes place when you’re reaching the end of your life. Although it’s difficult to determine exactly when this stage will arrive, it normally tends to be when individuals become frail and more inactive. During this stage, you might find that you’re no longer interested in activities that you once enjoyed and you may even find yourself staying home a lot more than before.

During this final stage of your retirement years, you will most likely also see a decrease in your regular monthly expenses. However, increasing healthcare expenses or even the cost of relocating into an assisted living facility could cause your living expenses to skyrocket. As a result, you can expect an average cost of living increase of as much as 5% per year if you intend keeping up with your current lifestyle. 

It’s important to keep in mind that the information above is merely a basic guideline because no one ever knows how your living conditions or circumstances could change after retiring. As such, now is the right time to start putting a retirement plan into place. If you would like to learn more about compiling an effective financial plan for retirement, speak to our team today. 

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