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5 Excuses to Avoid Not Saving for Retirement

Retirement seems like it is so far away that it is probably the furthest thing from your mind right now, especially if you just started your career, we’re talking decades away from happening.  What you should realize is though, is that the earlier you can contribute, the more it will compound, and the more you will have to enjoy when you need it.  Avoid all of the putting retirement savings off excuses and start contributing now.

It’s Not a Priority Right Now

That might be a valid excuse for your high school, college, or even immediately out of school and into your career, but the longer you wait, the less you will have to live off and enjoy in retirement, so if it is not a priority right now, make it one.  You can still save for your next vacation but you will need reduce expenses somewhat so that you can allow a portion of your income to be saved.

Don’t Have Company Matching Contributions

Some companies offer if you contribute to 401(k) they will match up to a certain point, say 6% per example.  That is free money, of which could be thousands of dollars put in your account just by you contributing the same, but just because your company does not offer, you still need to contribute the maximum you can, and even higher without the extra gift from your workplace.  The next time you are in the market for a job, take 401(k) matching into consideration.

But I’ll have Social Security

If you are a Baby Boomer you will be lucky if Social Security will be there when you retire, let alone a Millennial.  Well maybe it is not that far off from being extinct, but any notion that you will be able to live off of Social Security can be squashed right now.  Even if it is there by the time you retire, it will be a fraction of what you make now, so if you are used to living high on the hog now, those days will for sure be over, when it will be the time you should be enjoying life even more.

Afraid There Will Be Another Crash

You could be a little more conservative with your retirement fund allocation, but you can’t let the stock market crash of roughly ten years ago sway you from saving for your future.  Sure, most of you, and if you’re younger, your parents, may have finally recovered from that devastating crash, you cannot jeopardize your future for something that may or may not happen, that is out of our control.

I Don’t have the Extra Money

Now I totally understand that if you are barely getting by with your regular bills, there is not much leftover to contribute to savings, but this is where you will have to be creative.  What is your spending money situation like?  Do you have excessive shopping, go out to eat a lot, do the bar scene?  Well every little you can avoid spending you can put towards saving, so try and make the best spending decisions you can.

Financial Implications that Come with Buying a Home

Real estate has recently become an investor’s darling again, promising gains in this rising market. However, most underestimate the full financial implications that come with buying property, especially if this is your first house or else first investment property. Just because you have saved up for a down payment doesn’t mean that you are financially primed to step into the real estate market.

Securing a Mortgage

Some banks make it sound easy: all you do is ask for a mortgage and you have one. In the end, it’s not that simple. Depending on your income, the status of other loans, the size of the down payment, and the assessed value of the house you are interested in buying, this first step might just become your greatest hurdle. This can become an even greater problem in markets where the competition is fierce and many buyers put in competing offers, often without a condition for financing. This can leave you in a difficult financial and legal situation, in which many turn to trusted private mortgage lenders that can provide quick funding solutions in time of need.

Property Taxes

Property taxes were an expense you never directly had to deal with when living at your parents’ house or in a rental. However, they can be quite the annual expense depending on where you live and the size and nature of your property. Make note of last year’s tax amount when looking through the listings because sometimes it can become a factor which breaks the budget.

Maintenance

Many people buy houses because it makes fiscal sense to them, but others also consider it as a chance to gain independence. No more asking the landlord to switch out the carpets for wood flooring, or waiting to no end for an updated kitchen. Rather, you can do whatever you’d like to the house (assuming it’s common sense), offering a free pass for those who like to renovate, redecorate, or putter around in the garden. However, even those who don’t like these things will most likely end up having to pay to have them done. That’s because when you buy a property, it’s your responsibility to maintain it, including replacing damaged or outdated aspects like the roof, the boiler, or whatever else needs to be addressed. When calculating the true cost of a home, remember to include the money you will be spending annually on these projects. Even if you plan on doing them yourself, the cost of materials and initial investment into tools like lawnmowers, saws, etc. can add up to a small fortune.

Closing Costs

You know how when you shop online, something can seem like an awesome deal, but by the time you make it to the check out, you realize that it was a waste of time? This is a reality when buying a home, however, it’s not as easy to just closing the browser and moving on with your life. The initial cost of the home doesn’t include things like land transfer tax or legal fees, which combined can be more than 2% of the purchase price. It doesn’t seem like that much when you add it to the total cost, but remember it’s a cost you can’t put on the mortgage and need to have available right away.

Making Your House a Home

Depending on whether you will be living on the property or whether you will be renting it out to tenants, you will have to either partially or completely furnish the place. This could include buying all-new appliances, furniture, window coverings, trimmings, décor elements, etc. The purchasing of all these items can sometimes be as high as the cost of the down payment you just put down. Therefore, either keep some money in reserve for this exact reason, or else look for an opportunity to purchase a furnished house within your price point.

Of course, there are more financial implications when it comes to buying a home, like paying utilities, insurance, and potentially condo fees, however, those might seem more obvious than the potentially larger-than-expected mortgage, property taxes, maintenance costs, closing fees, and expensive “nesting”.  This usually does not detract from the attractiveness of real estate investing, however, it can affect the timing of a less-experienced investor. It’s important to be financially prepared for the entirety of the costs and still maintain cash flow throughout the process, or else buying a home can become a very painful experience.

7 Unexpected Costs People Run into After They Retire

Many of us think of our retirement as an extended vacation: a time to travel, relax, and spend time with the ones we love. However, it takes a lot of time and foresight to plan a retirement like that. Budgeting expenses during our working years and putting money away in an account is just the minimum which most of us have to do to “get by” after retirement. If you really want to enjoy yourself and “live it up”, it’s essential that you plan not only for the good times, like for a river cruise down the Seine, but also for the bad times, like when your furnace and car break down in the same week.

In order to live your retirement dream, you have to financially plan for a retirement nightmare in which many “what-ifs” come to life.

Here is a list of unexpected costs which retirees have trouble dealing with if not thought of in advance:

  1. Taxes

You have been paying your taxes for all these years, and now you finally get the chance to benefit from them, right? Sort-of. Though you will get a check every month if you had been paying into the government’s retirement fund, and an income based on what you have saved, that total gets taxed as well! That’s right, the money you get from tax-payers gets taxed again. So, if you have squirrelled enough away to have a comfortable living during your retirement years, remember that it will be taxed and you might end up with less than you initially thought.

  1. Supported Living

No one plans to have a stroke or to develop a condition in which they can no longer live at home. Many people plan to live in their homes or apartments for the rest of their lives, ignoring the fact that there is a large probability that there will come a point in time when they will have to move to a facility in which they can have more support. Unfortunately, these places are often quite expensive, so if you don’t want to burden your family with your life costs, save enough that if the need arises, you can pay your own “rent”.

  1. Transportation

Right before you retired, you bought a new, good-quality car which will last you ’til the end of your days. That’s just wishful thinking. On top of maintenance and fuel costs, which are constantly on the rise, there will come a time when there will be nothing to salvage of your vehicle. Did you financially plan for that? Or for the possibility that you won’t be able to drive and will come to rely on taxis or public transportation to get places?

  1. Funeral Planning

Nobody wants to think about death, but it’s as much of a part of life as birth is. Funerals are expensive and having to cover the cost of your spouses and/or your own final arrangements can be overwhelming at a time when you aren’t making a real income. Chose a funeral home that helps families commemorate the lives of their loved ones, respecting their wishes, faith, and budget, and research their options regarding pre-arrangements. This might be something you invest in while still working so that you can lock in the price as early as possible.

  1. Child Support

How can you say no to your child, especially when this child is having a hard time with life and has just found itself at its mercy? Many adult children run into financial situations in which they turn to their retired parents for assistance, mostly in the form of a payout or a loan. No one plans for these things to happen, but as you are setting aside money for retirement, it’s something that you should expect at some point or another.

  1. Uninsured Health Costs

If you purchased or have the benefits of having health insurance, you are one of the lucky ones. But even you can fall prey to issues which are not covered by your policy, whether that is dental work, or a fitting for a prosthesis. These uninsured health costs can mount quite quickly, so if possible, put some money aside monthly for this kind of situation.

  1. Rise in Cost of Living

Many of those putting money away for their retirement are planning for the future based on today’s economy and today’s costs. Unfortunately, we can tell by looking at the experiences of our elders that cost of living goes up, and there’s no way around it. Many financial advisors agree that saving for today’s conditions instead of future ones is a major mistake that many of their senior clients make.

Retirement can be everything that you wanted it to be, but first you need to plan for it to be devoid of huge and unexpected costs you forgot to plan for.

5 Ways to Save While on a Strict Budget

Whether you are living off of wages that you feel could be higher, or do not have much leftover due to being on a strict budget, there are always ways to reduce spending so that you can gain a few extra bucks at the end of the month.  Once you have accounted for every dollar that comes in and goes out, you may have to think outside the box when it comes to saving extra money if you feel that you have reached your limit in getting rid of unnecessary expenses.

Pay Off Debt First

It may seem like common sense to pay off dent, and you might be thinking to yourself that you are already doing that but where do you get more money to do that?  Well basically any money that you have besides a necessary expense such as your mortgage, utilities, or food should go towards debt before anything else.  When I say food, I also mean grocery shopping for the necessities, not eating out or impulse purchases at the register.

Look for an Alternative to Daycare

Being a new parent I never paid attention to the prices of daycare until I had to enroll my child into one, and for those of you that do not know, it is ridiculous.  The daycare at my wife’s work is $63 per day which includes food and diapers, but for a newborn, diapers, maybe.  Let’s say this is every work day for a month, that is over $1200 a month.  If you can find a trustworthy family member to do it for say even $40 a day, that is around $800 a day, which gives you an extra $400 a month!

Sell Unused Items

If you are looking for extra money, look no further than what you probably have packed away in your house.  Try coming up with a rule of thumb, if you have not used the item in the past year, sell it, and see how that works.  If you do not have any high-priced items to sell online, then gathering your household items together for a garage sale might be a good way to get some extra cash together.  You can probably scout out items from family members too that they want to get rid of and have you sell.

Three’s Company?

A good way to bring in an extra few hundred a month, not to mention sharing utilities, whether you bring that into the overall cost or not, is getting a roommate.  Sure, you may think you left that behind in your college days, but back then your parents were paying, and now if money is tight it may be a great way to come up with some extra cash.

Trade Down

Take a look at your house and car.  Is your house too big for what you need and can you downgrade to say, a ranch?  Then maybe it makes sense to sell.  For your car, if you need a new car every few years with a lease, can you take a step down that may save a hundred or two a month?

5 Smart Ways to Use a Tax Refund

Tax time can be a little stressful.  It is when you take a look at all the documents, expenses, and hopefully receipts, over the past year to see where you fall.  The goal would be to have a $0 refund, which meant that you paid enough taxes during the year and received the most in your paycheck, but if you are lucky to get money back, try and spend it wisely.

Home DIY Projects

If you have not already been thinking what you wish you could do around the house if you magically came across some money, well this is your lucky day, so spend it wisely.  With buying some higher-end paint, you can bring new life to a room, and adding a fresh coat of white for the trim and doors to really made it pop.  Replacing the worn-out carpet can be fairly inexpensive to do as well.

Build Up an Emergency Fund

If you ever heard your parents say “put it in the bank”, this is one of those times when you get a little money that you want to spend, but need to hold onto it.  Experts have long said that you should have between three and six months’ worth of expenses on hand in case of a job loss or event where you need money to fix an appliance or car repair.

Decrease Debt

If you are carrying a credit card balance over month-to-month there is plenty of interest being charged that could have been used elsewhere, so it is always good to pay off the balance each month, but in the event, that you have not been able to, then you should pay down debt with a tax refund.  Some cards can have an APR of 16%, so most of your monthly payment could just be going toward interest and not putting a dent in the principal balance.

Take a Vacation

I am cautious saying this as it seems that I may be giving a nudge to blow the money but that is not it at all.  If you stick to a budget and live frugal the rest of the year, then you may be in for a long overdue vacation that you are able to take for free with a tax refund.  After all, it is important to save, but life experiences are as important to others as well, so make sure to still live life, without breaking the bank of course.

Donate to a Charity

Sure, this may not be the first idea that comes to your head when you see a check made out to you come in the mail and get you excited, but your donation could go a long way for those in need.  There are endless numbers of charities that are out there, so give to one that you are most passionate about, whether it be child, animals, or research.  If you are wondering what is in it for you, besides given to someone less fortunate, you will be able to write-off on your tax return, getting a little back when you file next year.

How to Financially Plan for the Birth of a Child

The birth of a child is said to be a miracle, but it is a miracle that we can even afford children in this day and age.  If it is your first child, you are in for a rude awakening.  According to a recent study by the U.S. Department of Agriculture, the cost of raising a child born in 2015 until the age of seventeen is $233,000, or $13,000 a year, and that does not include the cost during pregnancy or the whopping costs of college.  Before your little one is born, try and plan for what will likely to be a huge hit to the wallet.

Budget

Having a household budget is important no matter the size of the family.  It may be a little easier to budget if you are solo or even married, but throw in children to the mix and you will begin to adjust on the fly.  Babies bring extra expenses that come with medical bills, but as the child gets old you will need to factor in food and activities to monthly costs.  It is no wonder that two-thirds of American’s fail at a successful budget.

Start Saving for Day Care

As soon as you find out you are having a baby, it would be a good time make sure not only that emergency fund is built up, but that you begin to save for day care.  With most day care centers charging upwards of $60 per day to care for your child, for working parents that will add up to huge costs over the course of a month.  Figure around twenty working days, you can plan on spending the cost of an extra mortgage payment a month.  Maybe you have a relative or friend that is retirement age that wouldn’t mind being paid a discounted rate.

Try and Make Other Sacrifices

Like any successful budget to work, you will need to reduce unnecessary expenses so that at the end of the month, there is more money coming in than going out.  Well throw in having a child, and you will need to continue to cut spending even further, most likely reducing some of your priorities.  If concerts are your thing, maybe you go to a few shows a year instead of all of your favorites.  Eating out is probably the biggest money saver, so if you really try and stay strict on going grocery shopping and only going out to eat once in a while, you will see the savings add up.

Life Insurance Premiums

If you are looking to leave your spouse and baby with a comfortable means to live on for a while due to your unfortunate passing, then setting up a life insurance policy right away is a must.  Premiums will begin to go out the older you are, so if you are young, healthy, and free of tobacco, then you could probably get a good thirty-year policy for around $40 a month, which is not bad knowing that at least your family is taken care of if something were to happen.

Take Advantage of 5 Free Things You Always Had to Pay For

As we find ourselves getting older we always look back and say “I remember when…”, sounding like our grandparents did to us when they would say they would have to walk to and from school in three feet of snow, making note of how easy we had it compared to them.   Our kids have it even easier than us when it comes to items that we used to have to pay for that are free now.

Current Events

I was actually kind of sad when I cancelled my newspaper subscription.  My whole life since I was a kid I have known the newspaper to be part of the morning, and even when I didn’t read the paper, could look forward to the Sunday sale papers.  Now, I find myself reading it every day now, but online, for free.  I even remember having the newspaper at the library attached to those sticks.  Let’s hope the website ads are helping to pay for the lost subscriptions, otherwise I will feel really bad.

Checking Your Credit Report

These days you are entitled to one free copy of your credit report once a year from each of the three major credit bureaus:  Equifax, TransUnion, and Experian.  Much like anything you have to enter your personal information, especially your social security number, so you will want to make sure it is a legit site, so if you are not clicking a link off their sites, AnnualCreditReport.com is a trusted site.  The credit score is not included, that will be an additional charge, but with most credit card companies giving your score on monthly statements, you should not have to shell out the extra money.

Every Song at Your Fingertips

This is not talking about downloading songs from pirate sites, that is free and illegal, but something that is free to use and legal (for now), and always a topic of conversation around the industry, is streaming songs.  With sites like YouTube, you can find literally any song to listen to, and with music streaming site such as Spotify and Pandora, as long as you don’t mind a few ads, you are able to listen to stations, genres, and artists of your choosing.

Making Long-Distance Calls

Probably most of you reading this article does not remember having to dial a (1) and then the area code when having to make a long-distance call from your landlines, but I bet your parents remember getting the phone bill in the mail with the outrageous charges and screaming when they see what the damage is.  Now I suppose parents could yell over minutes and data usage.

Directions

It is not only the gas station maps that we used to have to pay for, but I thought it was the greatest when I got my Garmin GPS as a gift, but even those are obsolete a decade later now that we have the free map app on our smart phones, only using the data we have included in the plan.  The other plus is that the app can refresh when maps are updated, giving you the latest possible info.

Four Items Americans Overspend on the Most

If there is ever chatter about how Americans are racking up the credit card debt or not having much in savings, it is probably true, as they love to spend.  There are four areas that get extra spending attention that could probably be scaled back a bit.

Weddings

The cost of weddings continue to rise to give, whether it is having a little extra money to spend as the economy has recovered, or that a huge dream wedding is in order, Americans are spending over an average of $26,000 for one night of bliss.  Those brides must be watching “Say Yes to the Dress” as well, as the average wedding dress is over $1,200.

Rent

The American dream used to be buying a house right when you finish college and get your first “real” job.  Those that was old enough to live through the most recent economic crash, whether it was seeing parents suffer losses, or not wanting to be stuck in that situation of possibly being under water, seem to lean towards renting over purchasing.  If you do decide that renting is for you, think about the money that is being thrown away each month, with no return on investment or a tax deduction.

Student Loans

With the cost of college in general, not to mention the cost of textbooks, and add room and board into that, and there is a reason why a recent graduate is entering the workforce with an average of over $37,000 in student debt.  That is only figuring a four-year degree, so add in further education or even worse, medical school, you may never be able to pay off student loans until you are about to enter retirement.

Cars

It is not a myth that a car depreciates the second you drive it off from the lot, so why would you want to purchase a new car.  With loan terms being five or even six years to keep payments somewhat reasonable, that is also assuming that you will not be tired of the car even if it escapes the loan without having any major repairs.  I have learned my lesson and will never buy a car again.  For a few hundred dollars a month, lease, and you can get a new car every two or three years, never having to repair except normal oil changes and tire rotations.

Teach your College Graduate to be Financially Responsible

There is plenty to be learned at a university in addition to partying, but unfortunately what usually does not sink in is being financially responsible.  While the “making good life choices” may not be a class, that needs to come from the parents.  As your child graduates and now has the knowledge to get a job in their chosen field, how they spend and save money could affect them the rest of not only their young life, but their adult life as well.

I may have been tougher to get through to than the average child, so I typically had to learn from my own mistakes.  It is not that my parents did not try to teach me to make good financial decisions, but of course I knew better than them, so saving money was the least of importance for me.  Spending money was at the top of my list during college while I was not making much money working part-time, but after when I had my first job out of school I was making more, which meant I could spend more.  Credit cards were my biggest vice, as it was something easy to use when I did not have money, and would worry about it later.  Well the credit cards kept coming in the mail and the limits increased, so I was a favorite customer from the credit card companies, while I sunk further into debt.  When I finally came to realization that this could go on is when it was time to buy a house and get married, probably later than I should have.  It took many years to get them paid off, and plenty of discipline on not racking them back up.

Sure this is just my story and I am probably a more extreme case than others, but when you come out of college without a plan and go on a spending spree, it sets you up for disaster, whether you are hundreds or thousands in debt.  Teach your child to have a budget, which monitors the money coming in and going out.  Bills will increase as homes and cars are purchased, so it is important to stress the importance of maximizing spending, while still contributing to savings accounts.  We always strive for our children to do better than we did, as our parents did for us, so make sure your child comes out of the gate ahead.

Have Control Over Your Fees

No matter how smart we are, there are certain things in life that none of us has direct control over. The stock market is one of them. Interest rates are another. And our salaries are a third. True, we might be able to manage our stock investments, our income instruments, and our careers over time. But we cannot, at the flip of a switch, dictate their terms.

Try as we might, we cannot force U.S. Treasury bonds to pay out more than they are yielding at the moment. We cannot, at the flip of a switch, dictate their terms. We cannot will stock prices to rise through prayer. And we cannot give ourselves an instantaneous raise, no matter how much we think we deserve it. The irony is, when it comes to managing our finances, we spend most of our time worrying about these things rather than the things we do have control over, like the fees and expenses we routinely pay out to our banks, brokerages, and mutual fund companies. Year in and year out, many savers overlook the detrimental effects of fees and expenses on their overall savings and financial plans. That’s a big mistake.

It’s easy to understand why we overlook fees and expenses. In the grand scheme of things, they seem like little annoyances. Two dollars to your bank for using a competitor’s automated teller machine. Twenty dollars for being one day late with a credit card payment. Fifty dollars for letting your account balance fall below a certain level. And a thousand dollars to pay your mutual fund manager, even though he or she routinely under performs the market. Soon it adds up to real money. Just counting basic banking fees, like those for credit cards and ATM charges, consumers shell out more than $150 billion a year to financial services firms. Add in investment-related costs, such as brokerage commissions and money management expenses, including the annual fees investors routinely pay to mutual fund companies, and the figure rises to around $300 billion a year. In case you are tired of your net worth being eaten away by fees, perhaps you want to take out some quick cash.

Compared to the $8 trillion investors collectively lost in the recent bear market, $300 billion might sound like a drop in the bucket. But the $8 trillion lost was a onetime event. Or at least we hope it was. Historically, stock prices rise more often then they fall. Fees, on the other hand, continue to grow year in and year out, in good markets or bad, in good economies or bad. In a decade’s time, the $300-billion-plus we lose to fees every year turns into more than $3 trillion lost, not counting the opportunity cost of investing that money. And over 25 years it balloons to more than $7.5 trillion, which is about what we lost to the bear market.

No wonder banks, credit card issuers, and even brokerage firms are looking to generate a greater percentage of their annual revenues from fee income. It’s simply more dependable than investment income. In the bear market of 2000, for example, while interest income fell for banks and credit card issuers and commission income fell for brokerages, fee income actually rose for many financial-services firms and guess who paid for all of that?