Three Pieces of Uncommon Advice for a Happy Financial Future

Everybody wants to be happy and secure in their older years. Most people suggest aggressive investment in order to have the cash to fund any lifestyle you want when you’re 65 or so. But riches aren’t available to everyone. Nor is this the way that many people will most enjoy their life, especially as they get older. I’m all for financial security, but that doesn’t mean I think that life has to be very expensive to achieve it. Here are three ways to adjust your expectations for the future in order to be able to have an attainable dream retirement.

  • Invest in People. The better friendships you have, the less you will have to spend to enjoy your life. A lot of people don’t realize this, or they forget it. In the early middle part of our lives, lots of people start their careers. Living is competitive. You’ve got to work really hard in order to make enough money to stay afloat. People also have kids at this time in their lives, which can isolate them from friendships they used to have more time for. If this sounds like you, it’s time to start investing in people again. Go on trips with your friends. Invest in people in your neighborhood by volunteering or tutoring. Get involved with local government. All of these are focused ways you can spend time with other people. As you meet the right kind of people that work as good friends for you, you’ll find that enjoyment of life is free if you know where to look.
  • Invest in the Basics. I’m talking about the very basics here: food and shelter kind of stuff. Warren Buffett is famous for living in the same house he and his wife bought in the 50’s. It’s small, they got it for a few thousand dollars. And he hasn’t carried a personal mortgage since then, not that he couldn’t afford one. It’s an example of the way in which people can be satisfied with simple things. If you buy a cheap house and pay it off in 10 years, that’s a huge amount of your living costs gone. If you invest time and energy gardening, you’ll be amazed at the reward and diversity of knowledge that comes from this pursuit, and you’ll be less dependent on things you have to buy from grocery stores. I’m not talking about going off the grid. But I am talking about being a little more independent than most people. Being dependent on others and services is expensive. If you cut that cost out of your life, your future lifestyle will be MUCH more affordable.

Of course, you should always do these things beside traditional investments like forex trading, mutual funds, IRAs, ETFs, and the like. But these usually aren’t enough by themselves to make the average person happy. If you have a balance of these investments and the personal investments that add value to your life, you’ll be happy and secure for a long time to come.

Saving is for the Young!

A lot of the financial gurus are saying that saving while you’re still young is way to go. When you’re young it’s easier to stash away money for investment because you have time on your side. Money stashed away and invested when you’re 22, 25 or 27 will enjoy four decades or more of market gains and compounding interest. Those powerful forces could mean $1 invested at 25 is five-times more valuable than $1 invested at 45. But when you’re at that age, savings and investment seems to be foreign words that you might not be familiar with. You might be thinking:  savings is for geezers waiting to retire. Or you’re probably more concerned with kick-starting your career and not ending them in the long distant future.

That type of thinking needs to change; because the fact is when you’re young it gives you a huge edge if you want to be rich in retirement. Consider this situation: If you begin saving for retirement at 25, putting away $2,000 a year for just 40 years, you’ll have around $560,000, assuming earnings grow at 8 percent annually. Now, let’s say you wait until you’re 35 to start saving. You put away the same $2,000 a year, but for three decades instead, and earnings grow at 8 percent a year. When you’re 65 you’ll wind up with around $245,000 — less than half the money.

Looks like a no-brainer, right? Save a little now and reap big rewards later. That should be every youngster nowadays. And there are several ways to help you save a little so that you can earn big in the end; such as:

Knowing which savings vehicle are liquid and which are not

A liquid account keeps money readily available and easy to transfer into cash — like a checking account. A savings account is slightly less liquid, as these most of these are legally required to limit withdrawals to six per month, with each withdrawal above that carrying a fee. Some of the least-liquid savings vehicles are time deposits, which incur an interest penalty for early withdrawal of funds, or retirement accounts like 401(k)s and IRAs, which will also penalize early withdrawals. Like for example, if you have some properties for rent, those might also be considered as a least-liquid savings as you might not be able to dispose it immediately if you need the money, not unless someone is currently renting the place.  So you might want to update yourself on the current rates by quickly checking up on the properties for rent section of real estate websites so you will have an idea on the current value of the property.s

Most debts are bad

Pay off your debts as fast as you possibly can. If this means living in a crappy studio apartment and eating ramen noodles every day for a couple of years, do it. If you want to buy a car, get a reliable beater. Forget about buying a house until your debts are paid off. However know that there is a good kind of debt. The good kind of debt is akin to you borrowing money from the bank to get a property to rent or to flip but you need to make sure that all the logistics has been done prior to taking that debt plunge.

Utilize technology – automate

While saving money is a habit you can cultivate, you can also set up your financial system to work toward your goals for you. There’s online banking, direct transfer and automatic transfer which you can utilize in order for you to save more each month. Automated deposits into your traditional retirement account will take the sting out of savings since it spontaneous.

Have a rainy day fund

As your salary grows, your emergency fund should be growing as well. Three to six months’ worth of income is the typical rule of thumb, and it’s likely you could live on a lot less when you were 21 than you can at 31, especially if you’re factoring things like a mortgage and kids into the mix. Financial advisers suggests saving at least 1% to 2% of the current value of your home in a fund for home repairs and maintenance.

Bottom line: saving might be a slow and boring process, but in the end you actually are doing what you should be doing: building up your retirement savings one dollar at a time

Making Your Retirement Income Last

It’s not unusual for person approaching retirement, and the next phase of their life, to have a lot more questions than they have answers. Questions about what your finances will look like after your employment has stopped, and whether your resources and savings will last you through retirement, are quite normal. In most cases, as you get ready to retire, key decisions and preparations need to be made to make sure that the next few decades of your life can be lived in financial security.

That being said, below are a few Top Tips that will help you to make the decisions necessary today that will help you to avoid problems in retirement tomorrow.

Tip 1: Figure out what your needs are, as well as your wants and wishes. This step is absolutely vital to your plans, as determining the type of lifestyle that you would like to have during retirement is no joke. You should start with your “needs”, including things like your day to day expenses, food, utilities, housing and transportation. Things like travel, vacation and social activities as well as automobiles and recreational vehicles are all “wants”. Gifts that he would like to give to friends, family or charity after you pass count as “wishes” and, if you make a list of all 3 categories and know exactly what you have in them, you’ll have a much better idea of how you need to budget in order to live well in retirement.

Tip 2: Determine how long your personal savings will last based on several criteria. Frankly, this is probably the least fun part of financial planning but it is definitely vital. By looking at your pension payments, Social Security, survivorship benefits and personal savings closely, and then looking at several scenario that could possibly occur, you will have a lot more information to tell you whether or not your savings are sufficient.

Tip 3: Create a withdrawal strategy for your portfolio. The ability to generate income during retirement is one of your biggest concerns right now and you need to definitely create a strategy as to how you will withdraw money from your investments now rather than later. Of course the composition of all portfolios will vary based on the types of asset vehicles that a person uses and the way that they plan to spend their money. Experts will tell you that, if you want regular, predictable income, the best fit for you is probably an annuity contract.

Tip 4: Make sure that you fully understand what your options are with Social Security and Medicare. Frankly, there are many opinions as to how and when a person should start receiving their Social Security income. All of these opinions are based on people being healthy and living long lives but, unfortunately, that’s not always the case. If you really need your social security payments now then receiving them as quickly as possible may be necessary. On the other hand, if you’re in good health you may want to delay payments as long as possible in order to get as much back from Uncle Sam as you can.

Tip 5: Don’t be afraid to ask a professional for help. Frankly, things like setting goals and making plans can be done by the average consumer but, when it comes to making big decisions that have real consequences, consequences that might mean losing thousands of dollars, talking to a financial advisor to make sure that you do things correctly is a great idea.

One final Tip is simply this; start saving for retirement as early as possible. This is far and away the best way to make sure that, when your “golden years” finally arrive, your financial situation is golden as well.

Are You Carrying a Mortgage into Retirement?

As the vast majority of Americans enter into retirement, one trend that has experts uneasy is the trend of entering into retirement while still paying off a mortgage loan of some kind. Simply put, the burdens of being a homeowner, along with the costs, can be too much to bear for many retirees as they become older and their capacity to function at 100% falls and their money runs out.

In a recent AARP survey, over 70% of respondents indicated that they would like to stay in their current residence for as long as possible. While that’s all good and well, many of those same people are going to face financial difficulties and limited choices, as well as having less liquid assets.

For those reasons we put together a list of things that you can do as a retiree, or near-retiree, if you find yourself carrying a mortgage into retirement. Enjoy.

First there’s the question of whether or not to refinance. If this reduces the total amount that you pay for your home it makes sense but, if you save a few hundred bucks a month but end up paying thousands at the end of the loan, it doesn’t. If you can get a lower interest rate however, and spend less than you do right now, refinancing might still be a good idea.

If you happen to have a good bit of equity in your home, you might consider a reverse mortgage. Depending on your monthly income, the amount of cash that you might need for repairs and taxes and some other needs, you will find a number of different types of reverse mortgages. You might also consider going to the Federal Trade Commission’s website to get more information or possibly talk with a housing counseling agency before you make any final decisions.

If you still haven’t retired yet, and your employer offers a matching contribution to your 401(k), make sure you max that out completely. The fact is, even if there’s only a few years left before you retire, leaving this free money on the table simply doesn’t make sense. 401(k) contributions also have the nice attribute of reducing your taxable income.

If you’re over 50 and trying to catch up with your retirement savings, the IRS lets you contribute an extra $1000 a year to a personal IRA. Similar to contributions to your 401(k), IRA contributions will reduce your taxable income, although they do have some limitations. Keep in mind that IRA contributions, while they aren’t tax-deductible, get you tax-free distributions once you’re retired.

Helping to bridge the housing cost gap are also a number of financial assistance programs and tax breaks on property. One important thing to keep in mind that, while these programs exist at both the state and federal level, you’re not going to get an engraved invitation to take advantage of them. This assistance can include exemptions, property tax credits and deferrals, so be sure to contact the local Housing Authority and Tax commissioner to find out what’s available in your area.

Finally, the best thing that you can do is stop putting off any decisions, and start stashing as much money away as humanly possible. If you have the extra money to pay off your mortgage faster, you should definitely consider doing that.

Simply put, if you want to be able to stay in your home as long as possible during your retirement, you’re going to need as much money as you can get your hands on. Starting early and saving as much as possible is the best way to ensure this happens.