Steve Repak's Blog, page 5
August 13, 2015
How Realistic Is the Cash-Only Lifestyle?
If you are in debt, you may have heard that you should stop using credit cards and switch to cash, at least temporarily.
But could using only cash really help you get out of debt? Not necessarily. If getting out of debt is your goal, there are three tried and true habits to keep in mind:
1. Spend less money than you take home each week.
2. Build an emergency savings account.
3. Develop and follow a get-out-of-debt plan.
Here are some of the potential pros and cons to consider when using either cash or credit cards:
Potential cons of using cash
One of the biggest disadvantages of carrying cash, of course, is that you can lose it. If you lose your credit card, you can cancel it and get a new one. Not so with cash. Also, if you use an ATM to withdraw cash, you may be charged fees, which is like throwing money away. Worst of all, flashing cash can make you a target for thieves.
Some pros to using cash
A great technique for getting spending under control is using what is known as the “envelope method,” where you have an envelope of cash for each different category of spending. For example, you might use an envelope specifically for food expenses, such as groceries and eating out, another for clothes, and a third for transportation.
You may also want to have an envelope for discretionary (fun) spending. It is OK to spend money on things you like or things you like to do—the key is to budget for those expenses just like you do for your savings, rent, credit card payments and other expenditures. With this method, you are only allowed to spend what is in the envelope and not a penny more.
Potential cons using credit cards
If you continue to use credit cards and you don’t have your spending under control, you may never get out of debt—it’s that simple. But even if you do have your spending under control, you still may be tempted to use credit cards the wrong way.
Balance transfers with introductory or teaser rates are a good example. It may sound enticing to consolidate your credit card debt with a balance transfer offering a low introductory rate, but you should always read the fine print. The 0 percent promotional rate is typically just that—a promotional rate that may not last forever. These offers typically last anywhere from six to 12 months and then the rate increases, often to a higher rate than you had on your old card.
In addition, there are usually transfer fees, which typically are around 3 percent but can be much higher. Make sure you understand these fees before consolidating your debt. There are online calculators you can use to see if transferring balances to a new card will really help.
Finally, if you do decide to consolidate your debt, you may want to consider paying more than the minimum payment due. Consider making your payments on the new card, at a minimum, equal the payments you were making on the old cards. In other words, you may want to avoid consolidating your debt and then paying less toward it.
Some pros to using credit cards
You can make credit cards work for you if you are disciplined. For example, there are credit cards where you can earn unlimited cash back on everyday purchases, with no expiration and no limit on how much you can earn. As always, make sure you read the fine print, as there are often annual fees for these credit cards.
The main thing to keep in mind is this: If you use a credit card with rewards, you still want to pay the balance in full. It will defeat the purpose of getting rewards if you have to pay interest, which could be more than the value of the rewards.
Building your credit, of course, is another benefit, and it’s very hard to build your credit history if you use only cash. Additionally, there are some circumstances in which you might want to use a credit card, such as booking a hotel or renting a car.
Remember, whether you use cash or credit, getting out of debt is only possible if you build a plan, spend less money than you earn, build your savings, and stick to it.
courtesy of http://blog.equifax.com/credit/how-re...
But could using only cash really help you get out of debt? Not necessarily. If getting out of debt is your goal, there are three tried and true habits to keep in mind:
1. Spend less money than you take home each week.
2. Build an emergency savings account.
3. Develop and follow a get-out-of-debt plan.
Here are some of the potential pros and cons to consider when using either cash or credit cards:
Potential cons of using cash
One of the biggest disadvantages of carrying cash, of course, is that you can lose it. If you lose your credit card, you can cancel it and get a new one. Not so with cash. Also, if you use an ATM to withdraw cash, you may be charged fees, which is like throwing money away. Worst of all, flashing cash can make you a target for thieves.
Some pros to using cash
A great technique for getting spending under control is using what is known as the “envelope method,” where you have an envelope of cash for each different category of spending. For example, you might use an envelope specifically for food expenses, such as groceries and eating out, another for clothes, and a third for transportation.
You may also want to have an envelope for discretionary (fun) spending. It is OK to spend money on things you like or things you like to do—the key is to budget for those expenses just like you do for your savings, rent, credit card payments and other expenditures. With this method, you are only allowed to spend what is in the envelope and not a penny more.
Potential cons using credit cards
If you continue to use credit cards and you don’t have your spending under control, you may never get out of debt—it’s that simple. But even if you do have your spending under control, you still may be tempted to use credit cards the wrong way.
Balance transfers with introductory or teaser rates are a good example. It may sound enticing to consolidate your credit card debt with a balance transfer offering a low introductory rate, but you should always read the fine print. The 0 percent promotional rate is typically just that—a promotional rate that may not last forever. These offers typically last anywhere from six to 12 months and then the rate increases, often to a higher rate than you had on your old card.
In addition, there are usually transfer fees, which typically are around 3 percent but can be much higher. Make sure you understand these fees before consolidating your debt. There are online calculators you can use to see if transferring balances to a new card will really help.
Finally, if you do decide to consolidate your debt, you may want to consider paying more than the minimum payment due. Consider making your payments on the new card, at a minimum, equal the payments you were making on the old cards. In other words, you may want to avoid consolidating your debt and then paying less toward it.
Some pros to using credit cards
You can make credit cards work for you if you are disciplined. For example, there are credit cards where you can earn unlimited cash back on everyday purchases, with no expiration and no limit on how much you can earn. As always, make sure you read the fine print, as there are often annual fees for these credit cards.
The main thing to keep in mind is this: If you use a credit card with rewards, you still want to pay the balance in full. It will defeat the purpose of getting rewards if you have to pay interest, which could be more than the value of the rewards.
Building your credit, of course, is another benefit, and it’s very hard to build your credit history if you use only cash. Additionally, there are some circumstances in which you might want to use a credit card, such as booking a hotel or renting a car.
Remember, whether you use cash or credit, getting out of debt is only possible if you build a plan, spend less money than you earn, build your savings, and stick to it.
courtesy of http://blog.equifax.com/credit/how-re...
July 14, 2015
Can debt free make life stress free?
Life is hard enough as it is but having to deal with debt along with raising your children will make life that much more stressful, on all of you! I had over $32,000 in credit card debt and that is not counting the other debt I had to deal with. Debt made my life much harder than what I could handle sometimes. To tell you the truth, I had nobody to blame except for myself but as soon as I started taking accountability for my situation and actually started making sacrifices by making smarter decisions with my spending, I started seeing real changes in my financial situation and also experienced a lot less stress as time went by.
I want to share with you 3 things to help you reduce your stress by reducing your debt.
1. Change Your Viewpoint
Many times we rationalize to ourselves when we don’t make the best decisions, especially when it comes to debt. The first realization is that there is no such thing as good debt. I am not saying that all debt is bad, but having debt will make your life more stressful. The sad truth is that we cannot totally escape all stress. Buying a house, paying for an education, or starting a business are a few examples of debt that aren’t bad but understand until those debts are paid off, you are adding risk to your financial health. Any debt you acquire for any other reasons (big screen TV, those new pair of designer shoes, that thing you really want but don’t really need) is bad debt and your life will be less stressful if you can just say no!
2. You need a spending plan
If you can spend less money than you earn each month, chances are you can live debt free. For many people, they have more month, than they have money and that is because most people do not make a plan for how they are going to spend their money. Discretionary expenses are usually the biggest culprit and what throws most people off their spending plan. Discretionary expenses are the things that you can do without. I am not saying you can’t spend money on things you can do without, but you must set boundaries in order to not overspend. For example family vacation. My family and I do not NEED a family vacation at the beach for a week, but we make a plan on how we are going to pay for it before we go. That might mean we have to eat out less throughout the year, make sacrifices with how many tv channels we subscribe to, or whatever little sacrifices we make throughout the year in order to set aside that money into a special account that we use to pay for our vacation instead of using a credit card.
3. The best defense is a strong offense
It is not a matter of if, it is only a matter of when some unexpected expense will occur and if you haven’t been building up your savings each month, most likely you will have no choice but to rely on a credit card to get through that financial difficulty. By allocating some of your money each month to savings can be one of your best defenses against emergencies. Make savings automatic and soon you won’t even miss it. I set my savings up like a bill pay, and each month, money is drafted out of my checking account to another financial institution.
Honestly, even if you are debt free that won’t mean your life will be stress free but I do believe by having less debt your life, you will have less stress in your life. The results of less stress is less bickering, better health, and most importantly a stronger relationship with your children because you won’t be worrying (stressing) about your finances as much.
Steve Repak, CFP®
Financial Literacy Speaker and the Author of "Dollars & Uncommon Sense: Basic Training For Your Money"
http://nicoleodell.com/2015/07/debt-f...
I want to share with you 3 things to help you reduce your stress by reducing your debt.
1. Change Your Viewpoint
Many times we rationalize to ourselves when we don’t make the best decisions, especially when it comes to debt. The first realization is that there is no such thing as good debt. I am not saying that all debt is bad, but having debt will make your life more stressful. The sad truth is that we cannot totally escape all stress. Buying a house, paying for an education, or starting a business are a few examples of debt that aren’t bad but understand until those debts are paid off, you are adding risk to your financial health. Any debt you acquire for any other reasons (big screen TV, those new pair of designer shoes, that thing you really want but don’t really need) is bad debt and your life will be less stressful if you can just say no!
2. You need a spending plan
If you can spend less money than you earn each month, chances are you can live debt free. For many people, they have more month, than they have money and that is because most people do not make a plan for how they are going to spend their money. Discretionary expenses are usually the biggest culprit and what throws most people off their spending plan. Discretionary expenses are the things that you can do without. I am not saying you can’t spend money on things you can do without, but you must set boundaries in order to not overspend. For example family vacation. My family and I do not NEED a family vacation at the beach for a week, but we make a plan on how we are going to pay for it before we go. That might mean we have to eat out less throughout the year, make sacrifices with how many tv channels we subscribe to, or whatever little sacrifices we make throughout the year in order to set aside that money into a special account that we use to pay for our vacation instead of using a credit card.
3. The best defense is a strong offense
It is not a matter of if, it is only a matter of when some unexpected expense will occur and if you haven’t been building up your savings each month, most likely you will have no choice but to rely on a credit card to get through that financial difficulty. By allocating some of your money each month to savings can be one of your best defenses against emergencies. Make savings automatic and soon you won’t even miss it. I set my savings up like a bill pay, and each month, money is drafted out of my checking account to another financial institution.
Honestly, even if you are debt free that won’t mean your life will be stress free but I do believe by having less debt your life, you will have less stress in your life. The results of less stress is less bickering, better health, and most importantly a stronger relationship with your children because you won’t be worrying (stressing) about your finances as much.
Steve Repak, CFP®
Financial Literacy Speaker and the Author of "Dollars & Uncommon Sense: Basic Training For Your Money"
http://nicoleodell.com/2015/07/debt-f...
June 20, 2015
Going It Alone: What Young Adults Need to Know About Credit and Personal Finance
As a 20-something handling your finances alone for the first time, you can set yourself up for either success or struggles. As for me, stupid is as stupid does. Many years ago, when I was in my 20s, I made my fair share of financial mistakes. Following are a few of the lessons I learned the hard way:
More money in your paycheck does not equal more money in savings
It took me years to understand that it didn’t matter how much money I made, it was how much I spent that determined what I had left at the end of the month. In my 20s, I expected my next pay raise, tax refund, or other financial windfall would somehow fix all of my financial issues. My pay increased periodically, but my savings account didn’t.
If you think that making more money means having more money, think again. I found that the best way to spend less was to develop a spending plan. I hate using the word “budget” because it sounds a lot like the word “diet,” and you know as well as I do that people find it hard to stick to those.
So how did I turn my struggles into success? The first step was I wrote down how much I made. The next step was I determined how much I wanted to pay myself—in other words: How much did I want to save? I set a goal of saving at least 10 percent of my income. The goal was to save something before I spent my money on anything else.
What about the rest of my money? I learned that the most important part of a spending plan is how much you put away in savings to pay for emergencies and to build wealth to fund retirement. I allocated the rest of my money toward food, housing, and transportation. (But I also didn’t forget to set aside a little money for fun stuff, too.)
More money does not mean more happiness
Understanding in your 20s that more money won’t buy you long-term happiness will set you up for a happier and more fulfilling life in your 30s and beyond. A great example is taking a higher-paying job without factoring in how happy you will be working at that job. You will spend more time at work than anywhere else, so even if you are making a ton of money, if you don’t also enjoy your job, you will still be miserable. I am not saying work has to be fun; it is called work, after all. But eventually, you should start weighing your quality of life against how much money you are making.
More credit card debt means paying more in interest
You don’t need a finance degree to understand this equation. However, many people—and not just those in their 20s—forget that buying things on credit, carrying a balance, and making only the minimum payment will cost them more in the long run. In my 20s, as soon as my credit limit increased, I used my credit cards more and ran higher balances. When I was fortunate enough to get a raise, it was usually spent to cover the increasing minimum payments.
There is nothing wrong with wanting things, as long as you don’t rely solely on credit to buy them. Once I got older and a little wiser, I opened savings accounts for things I wanted. For example, I opened a vacation savings account and put money into it each month. When vacation time came around, I was able to spend without having to rely only credit cards. You can use the same strategy for buying a car, furniture, or any other big ticket item.
I had to learn the hard way because of the many financial mistakes I made in my 20s. If I had to do it all over again, I would: spend less money than I earned; pay myself before I paid anybody else; would not rely on money to make me happy; and would have strived to earn interest rather than pay interest to someone else.
article courtesy of http://blog.equifax.com/family-money/...
More money in your paycheck does not equal more money in savings
It took me years to understand that it didn’t matter how much money I made, it was how much I spent that determined what I had left at the end of the month. In my 20s, I expected my next pay raise, tax refund, or other financial windfall would somehow fix all of my financial issues. My pay increased periodically, but my savings account didn’t.
If you think that making more money means having more money, think again. I found that the best way to spend less was to develop a spending plan. I hate using the word “budget” because it sounds a lot like the word “diet,” and you know as well as I do that people find it hard to stick to those.
So how did I turn my struggles into success? The first step was I wrote down how much I made. The next step was I determined how much I wanted to pay myself—in other words: How much did I want to save? I set a goal of saving at least 10 percent of my income. The goal was to save something before I spent my money on anything else.
What about the rest of my money? I learned that the most important part of a spending plan is how much you put away in savings to pay for emergencies and to build wealth to fund retirement. I allocated the rest of my money toward food, housing, and transportation. (But I also didn’t forget to set aside a little money for fun stuff, too.)
More money does not mean more happiness
Understanding in your 20s that more money won’t buy you long-term happiness will set you up for a happier and more fulfilling life in your 30s and beyond. A great example is taking a higher-paying job without factoring in how happy you will be working at that job. You will spend more time at work than anywhere else, so even if you are making a ton of money, if you don’t also enjoy your job, you will still be miserable. I am not saying work has to be fun; it is called work, after all. But eventually, you should start weighing your quality of life against how much money you are making.
More credit card debt means paying more in interest
You don’t need a finance degree to understand this equation. However, many people—and not just those in their 20s—forget that buying things on credit, carrying a balance, and making only the minimum payment will cost them more in the long run. In my 20s, as soon as my credit limit increased, I used my credit cards more and ran higher balances. When I was fortunate enough to get a raise, it was usually spent to cover the increasing minimum payments.
There is nothing wrong with wanting things, as long as you don’t rely solely on credit to buy them. Once I got older and a little wiser, I opened savings accounts for things I wanted. For example, I opened a vacation savings account and put money into it each month. When vacation time came around, I was able to spend without having to rely only credit cards. You can use the same strategy for buying a car, furniture, or any other big ticket item.
I had to learn the hard way because of the many financial mistakes I made in my 20s. If I had to do it all over again, I would: spend less money than I earned; pay myself before I paid anybody else; would not rely on money to make me happy; and would have strived to earn interest rather than pay interest to someone else.
article courtesy of http://blog.equifax.com/family-money/...
April 28, 2015
Retirement Savings or Emergency Fund? How to Prioritize When Saving Money
As you work to build your retirement savings account, you might wonder whether you should fund other accounts as well. After all, if your end goal is to retire on a tropical island, shouldn’t you put every dime you can into your retirement savings?
While saving for retirement is important—it’s one of my “big three” savings priorities—it’s also important to ensure you’re funding two other accounts: a rainy day fund and an emergency fund (which are, in fact, different). How much you choose to allocate to each account is up to you and will likely change over time, but here’s what to think about as you budget for your savings contributions.
The big three savings priorities: Rainy day, emergency, and retirement
Priority #1: Rainy-day savings
Your first priority should be setting up a rainy-day fund that can cover anything unexpected for which you have not budgeted: a minor car accident, a home repair, or a trip to the ER or the vet, for example. According to Bankrate’s Money Pulse poll, fewer than 4 out of 10 Americans have savings for non-budgeted expenses such as these. Without a sufficient rainy-day fund, even the most budget-conscious person can be hit hard by an unexpected expense.
Even a manageable amount, like $1,500, is a good place to start for a rainy-day savings account. The account should be readily accessible—for example, in a savings or money market account—FDIC insured, and not comingled with your retirement accounts. The funds in this account should be enough to help you get by in a pinch.
Priority #2: Emergency savings
Once you have funded a rainy-day account, your next priority should be your emergency savings. Whether you experience a job loss, a major illness, or some other significant life event, you’ll need savings to help get you through the drought.
Unlike a rainy-day fund, your emergency savings needs to be a substantial amount of cash. For example, if you are single, you should be saving enough money to cover three months of your non-discretionary expenses, including food, rent, health insurance, and utilities—the things you need to survive. If you are married, or if others are depending on you, consider setting aside at least six months of your non-discretionary spending. This account should be readily available—if you need to withdraw the funds, you should not be penalized. Just as with your rainy-day fund, your emergency savings account should also be FDIC insured and not comingled with your retirement accounts.
Always a priority: Your retirement savings
At the same time that you are allocating part of your savings for emergencies, you should also be saving for retirement. Both are extremely important for your overall financial well-being.
For example, if you were to lose your job and you did not have emergency savings, you could potentially have no choice but to withdraw money from your retirement account, which could result in penalties, taxes, and other negative consequences. At the same time, if you don’t have enough money saved for retirement, you may not be able to retire when you want, or you might have to radically change your lifestyle when you do. You might also have to dip into your emergency fund. Contribute to your 401(k), 403(b), or other retirement savings plan regularly. You may want to set up automatic withdrawals to make this easier.
Other savings goals
Once you have your rainy-day, emergency, and retirement savings in place, then it’s time to start prioritizing your other savings goals, such as paying for college for your children or grandchildren, buying a house or vacation home, or buying a new car. You might think that saving for your child’s college education needs to be a top priority—and it is important. But if the time comes and you don’t have those funds, there are options, like student loans, to help you out. On the other hand, the only one who can pay for your retirement is you.
article courtesy of Equifax Finance Blog http://blog.equifax.com/retirement/re...
While saving for retirement is important—it’s one of my “big three” savings priorities—it’s also important to ensure you’re funding two other accounts: a rainy day fund and an emergency fund (which are, in fact, different). How much you choose to allocate to each account is up to you and will likely change over time, but here’s what to think about as you budget for your savings contributions.
The big three savings priorities: Rainy day, emergency, and retirement
Priority #1: Rainy-day savings
Your first priority should be setting up a rainy-day fund that can cover anything unexpected for which you have not budgeted: a minor car accident, a home repair, or a trip to the ER or the vet, for example. According to Bankrate’s Money Pulse poll, fewer than 4 out of 10 Americans have savings for non-budgeted expenses such as these. Without a sufficient rainy-day fund, even the most budget-conscious person can be hit hard by an unexpected expense.
Even a manageable amount, like $1,500, is a good place to start for a rainy-day savings account. The account should be readily accessible—for example, in a savings or money market account—FDIC insured, and not comingled with your retirement accounts. The funds in this account should be enough to help you get by in a pinch.
Priority #2: Emergency savings
Once you have funded a rainy-day account, your next priority should be your emergency savings. Whether you experience a job loss, a major illness, or some other significant life event, you’ll need savings to help get you through the drought.
Unlike a rainy-day fund, your emergency savings needs to be a substantial amount of cash. For example, if you are single, you should be saving enough money to cover three months of your non-discretionary expenses, including food, rent, health insurance, and utilities—the things you need to survive. If you are married, or if others are depending on you, consider setting aside at least six months of your non-discretionary spending. This account should be readily available—if you need to withdraw the funds, you should not be penalized. Just as with your rainy-day fund, your emergency savings account should also be FDIC insured and not comingled with your retirement accounts.
Always a priority: Your retirement savings
At the same time that you are allocating part of your savings for emergencies, you should also be saving for retirement. Both are extremely important for your overall financial well-being.
For example, if you were to lose your job and you did not have emergency savings, you could potentially have no choice but to withdraw money from your retirement account, which could result in penalties, taxes, and other negative consequences. At the same time, if you don’t have enough money saved for retirement, you may not be able to retire when you want, or you might have to radically change your lifestyle when you do. You might also have to dip into your emergency fund. Contribute to your 401(k), 403(b), or other retirement savings plan regularly. You may want to set up automatic withdrawals to make this easier.
Other savings goals
Once you have your rainy-day, emergency, and retirement savings in place, then it’s time to start prioritizing your other savings goals, such as paying for college for your children or grandchildren, buying a house or vacation home, or buying a new car. You might think that saving for your child’s college education needs to be a top priority—and it is important. But if the time comes and you don’t have those funds, there are options, like student loans, to help you out. On the other hand, the only one who can pay for your retirement is you.
article courtesy of Equifax Finance Blog http://blog.equifax.com/retirement/re...
March 29, 2015
Four Ways to Prep Your Finances for Retirement
You’ve been working hard toward retirement, and by taking a few last steps, you can help ensure you’ll be on the right track in your Golden Years. If you’re nearing the end of your career, here are four steps you can take now to get your finances ready.
1. Calculate your retirement needs.
If you want to be able to maintain your current standard of living in retirement, you should understand whether you will have enough income. Calculate how much you’ll receive from all sources, such as Social Security and pensions, and figure out how much you’ll be withdrawing each month from your IRA or 401(k). If you do not have enough income to maintain your standard of living, you might have to prolong retirement until you have enough funds, supplement your income with a part time job, lower your standard of living, or all of the above.
2. Make a plan for health care costs.
A 2014 study from Fidelity Benefits Consulting reveals that a 65-year-old couple retiring this year will need an average of $220,000 to pay for healthcare costs through retirement. It’s important to figure out whether your retirement savings will be enough to cover your monthly bills plus your healthcare costs.
According to AARP’s Health Care Costs Calculator, a single 55-year-old female in perfect health who plans to retire at 65 and live to age 85 may need about $163,000 to pay for healthcare costs. Medicare will cover roughly $98,500, but the rest—more than $64,000—will have to come out of the retiree’s pocket. If the retiree’s health changes and she develops high blood pressure, for example, her total costs could increase to more than $188,000. With Medicare only covering about $118,000, she would be left to come up with more than $70,000 out of pocket to pay for healthcare costs.
Medical bills are one of the largest causes of bankruptcy, and medical bankruptcy doesn’t just happen to the uninsured. There are many people with health insurance benefits who still wind up filing for bankruptcy. You can help avoid this situation by using an online calculator to project your healthcare costs. You also need to consider whether you can save enough before you retire to make up a shortage in your savings, if one exists.
3. Review and update your legal documents.
A common misconception is that estate planning is just for the rich and famous, but anyone can become physically or mentally unable to manage his or her affairs. Getting help from an attorney to plan for incapacity is something you might want to consider. Additionally, laws frequently change, so you may find it worthwhile to sit down with an attorney who specializes in estate planning. He or she can help you draw up your basic estate planning documents.
Some of the documents you’ll need are: a basic will, which indicates who gets what when you die (otherwise the state can decide); updated investment account beneficiary forms, which outline who will receive the funds in the accounts; and a healthcare power of attorney, which authorizes someone else to make decisions about your healthcare should you become unable to do so.
4. Decide on where you are going to live.
Are you considering downsizing or moving closer to family, friends, or loved ones? Before you make your move, consider the risks and benefits.
Selling your family home and downsizing might make financial sense, but you may not have enough room for overnight guests. Moving to another location might be great for tax purposes—some locales have very low state and local taxes—but if you are a social butterfly, you might miss your friends. Don’t forget to consider the healthcare options in your new location.
As you prepare to leave the workforce, the aforementioned four steps can help you start to assess where you stand financially. There are other considerations to factor into your decisions and planning, but these are good starting points.
article courtesy of Equifax Finance Blog http://blog.equifax.com/retirement/fo...
1. Calculate your retirement needs.
If you want to be able to maintain your current standard of living in retirement, you should understand whether you will have enough income. Calculate how much you’ll receive from all sources, such as Social Security and pensions, and figure out how much you’ll be withdrawing each month from your IRA or 401(k). If you do not have enough income to maintain your standard of living, you might have to prolong retirement until you have enough funds, supplement your income with a part time job, lower your standard of living, or all of the above.
2. Make a plan for health care costs.
A 2014 study from Fidelity Benefits Consulting reveals that a 65-year-old couple retiring this year will need an average of $220,000 to pay for healthcare costs through retirement. It’s important to figure out whether your retirement savings will be enough to cover your monthly bills plus your healthcare costs.
According to AARP’s Health Care Costs Calculator, a single 55-year-old female in perfect health who plans to retire at 65 and live to age 85 may need about $163,000 to pay for healthcare costs. Medicare will cover roughly $98,500, but the rest—more than $64,000—will have to come out of the retiree’s pocket. If the retiree’s health changes and she develops high blood pressure, for example, her total costs could increase to more than $188,000. With Medicare only covering about $118,000, she would be left to come up with more than $70,000 out of pocket to pay for healthcare costs.
Medical bills are one of the largest causes of bankruptcy, and medical bankruptcy doesn’t just happen to the uninsured. There are many people with health insurance benefits who still wind up filing for bankruptcy. You can help avoid this situation by using an online calculator to project your healthcare costs. You also need to consider whether you can save enough before you retire to make up a shortage in your savings, if one exists.
3. Review and update your legal documents.
A common misconception is that estate planning is just for the rich and famous, but anyone can become physically or mentally unable to manage his or her affairs. Getting help from an attorney to plan for incapacity is something you might want to consider. Additionally, laws frequently change, so you may find it worthwhile to sit down with an attorney who specializes in estate planning. He or she can help you draw up your basic estate planning documents.
Some of the documents you’ll need are: a basic will, which indicates who gets what when you die (otherwise the state can decide); updated investment account beneficiary forms, which outline who will receive the funds in the accounts; and a healthcare power of attorney, which authorizes someone else to make decisions about your healthcare should you become unable to do so.
4. Decide on where you are going to live.
Are you considering downsizing or moving closer to family, friends, or loved ones? Before you make your move, consider the risks and benefits.
Selling your family home and downsizing might make financial sense, but you may not have enough room for overnight guests. Moving to another location might be great for tax purposes—some locales have very low state and local taxes—but if you are a social butterfly, you might miss your friends. Don’t forget to consider the healthcare options in your new location.
As you prepare to leave the workforce, the aforementioned four steps can help you start to assess where you stand financially. There are other considerations to factor into your decisions and planning, but these are good starting points.
article courtesy of Equifax Finance Blog http://blog.equifax.com/retirement/fo...
March 25, 2015
When Can I Retire? How to Know When to Quit Working
You may be physically and mentally ready to retire, but are you financially ready? The answer depends on a number of factors, including your health, your debts, and how well you’ve planned for retirement.
When can I retire?
There really is no “right” answer to this question as there is no magic number or dollar amount that you should have. That may not be the answer you were hoping to hear, but you must weigh the risk of quitting work and no longer receiving a paycheck against the real possibility that you may run out of money. That can be a scary proposition, but it is a real fact that you must take into consideration when you finally decide to retire.
Though you may not be able to escape every risk that you may encounter during your lifetime, there are some steps you can take in planning for retirement that may help reduce the risk of running out of money before you die.
Here are a few things you should consider as you try to decide whether you are financially ready to retire.
The amount of debt you have
Having no mortgage, no credit card debt, and no car payments may help reduce the risk of you running out of money. When living on a fixed income, the less money that is leaving your checking account, the better. The goal of having no debt by the time you retire should be at the top of your list.
Your health
Medical bills can wipe you out. In 2013, NerdWallet Health said rising medical bills were expected to push 1.7 million American households into bankruptcy. Healthcare costs typically increase as you age, and it might be in your best interest to get a second opinion to ensure your future healthcare needs are not overlooked. Consider visiting www.letsmakeaplan.org and sitting down with a Certified Financial Planner™ (CFP) to evaluate all of the options you have to save money for and manage these costs.
The amount of money you have in savings
In addition to the money in your retirement savings accounts, you should have enough money to cover 18 to 24 months of non-discretionary spending. For example, if your monthly non-discretionary spending is $1,000, you should have at least $18,000 to $24,000 in savings, separate from the money that you have in your retirement accounts. When I say savings, I mean that this money needs to be in something that is safe, FDIC insured, and readily available with no penalties if you should need it.
You might ask, why so much? Let’s assume that there is a downturn in the economy that causes your retirement assets to go down in value. With this type of savings established, you would then have somewhere else from where to draw money—with the hope that your retirement accounts might have time to recover their losses.
Consider a practice run
Since practice makes perfect, consider making a “practice run” a year or two prior to retirement. Live only off the income you will be receiving from retirement, instead of your regular salary. To do this, calculate your Social Security benefits and add in any income you’ll receive in the form of a pension or retirement savings withdrawals. See if you can do it for an entire year.
If each month you are cutting it close, or you find that you cannot live on that income, you have two choices. You can either lower your standard of living, or you may have to take a part time job in retirement to supplement your income. It’s better to find that out beforehand rather than six months after you have retired.
When it comes to planning for retirement, I have always said that it is better to plan for the worst and hope for the best and to not leave major decisions to chance. While there are many other risk factors to consider when planning for retirement, if you begin by considering those discussed above, you will be well on your way to understanding your financial readiness.
article courtesy of http://blog.equifax.com/retirement/wh...
When can I retire?
There really is no “right” answer to this question as there is no magic number or dollar amount that you should have. That may not be the answer you were hoping to hear, but you must weigh the risk of quitting work and no longer receiving a paycheck against the real possibility that you may run out of money. That can be a scary proposition, but it is a real fact that you must take into consideration when you finally decide to retire.
Though you may not be able to escape every risk that you may encounter during your lifetime, there are some steps you can take in planning for retirement that may help reduce the risk of running out of money before you die.
Here are a few things you should consider as you try to decide whether you are financially ready to retire.
The amount of debt you have
Having no mortgage, no credit card debt, and no car payments may help reduce the risk of you running out of money. When living on a fixed income, the less money that is leaving your checking account, the better. The goal of having no debt by the time you retire should be at the top of your list.
Your health
Medical bills can wipe you out. In 2013, NerdWallet Health said rising medical bills were expected to push 1.7 million American households into bankruptcy. Healthcare costs typically increase as you age, and it might be in your best interest to get a second opinion to ensure your future healthcare needs are not overlooked. Consider visiting www.letsmakeaplan.org and sitting down with a Certified Financial Planner™ (CFP) to evaluate all of the options you have to save money for and manage these costs.
The amount of money you have in savings
In addition to the money in your retirement savings accounts, you should have enough money to cover 18 to 24 months of non-discretionary spending. For example, if your monthly non-discretionary spending is $1,000, you should have at least $18,000 to $24,000 in savings, separate from the money that you have in your retirement accounts. When I say savings, I mean that this money needs to be in something that is safe, FDIC insured, and readily available with no penalties if you should need it.
You might ask, why so much? Let’s assume that there is a downturn in the economy that causes your retirement assets to go down in value. With this type of savings established, you would then have somewhere else from where to draw money—with the hope that your retirement accounts might have time to recover their losses.
Consider a practice run
Since practice makes perfect, consider making a “practice run” a year or two prior to retirement. Live only off the income you will be receiving from retirement, instead of your regular salary. To do this, calculate your Social Security benefits and add in any income you’ll receive in the form of a pension or retirement savings withdrawals. See if you can do it for an entire year.
If each month you are cutting it close, or you find that you cannot live on that income, you have two choices. You can either lower your standard of living, or you may have to take a part time job in retirement to supplement your income. It’s better to find that out beforehand rather than six months after you have retired.
When it comes to planning for retirement, I have always said that it is better to plan for the worst and hope for the best and to not leave major decisions to chance. While there are many other risk factors to consider when planning for retirement, if you begin by considering those discussed above, you will be well on your way to understanding your financial readiness.
article courtesy of http://blog.equifax.com/retirement/wh...
March 14, 2015
Death & Taxes
Romans 13:7 (NIV) Give to everyone what you owe them: If you owe taxes, pay taxes; if revenue, then revenue; if respect, then respect; if honor, then honor.
With the tax season upon us, I am reminded of an old saying that goes “you can plan on two things in life and they are death and taxes.” That said, this year I had the privilege to participate in the Military Saves campaign at Rose Barracks in Grafenwoehr, Germany. Military Saves takes place during the last week of February throughout all branches of service on installations all over the U.S. and overseas. The campaign encourages military families to build wealth, not debt. The Service members and their families have the opportunity to take classes throughout the week to help them learn how to be better prepared financially. Mission readiness equals financial readiness. This year’s message was “set a goal, make a plan, and automate your savings”. I really love the concept of automating your savings because it doesn’t take much time or effort and it gets you saving consistently.
Romans 13:7 says that we are to give to everyone what we owe them, whether that be taxes, respect, or honor. As I was thinking to myself, I wondered how can you pay taxes and respect or honor others if you are not doing those things for yourself.
For example, respecting and honoring yourself. If you don’t respect or honor yourself, you will not respect or honor others.
Keep in mind that honoring yourself is very different depending if it is worldly honor or Godly honor. When our culture honors themselves or others, they heap worldly praise and admiration on people such as celebrities, politicians, or the super-wealthy because of status. Biblical honor comes from God and His Son and our commitment and devotion to be a Christian which translates to Christ like or being like Christ. If we are to honor ourselves the way the Bible intends we would demonstrate that with obedience to God not just by sharing the fruits of our labor but also through taking care of ourselves, physically, spiritually, and financially.
I have always shared with others the 10-10-80 rule where you give the first 10% of what you make, you save the next 10%, and then you can spend the rest. One of the easiest ways to accomplish the rule is by automating it. For example, instead of putting cash in the collection basket at church, consider setting up an automatic bill pay so you are always paying God first. If you miss a week or two at church, you won’t be missing the joy of giving. As for saving 10%, you should automate that too. If you follow the 10-10-80 rule and automate your giving and your saving you won’t escape death or taxes, but you are honoring God.
article courtesy of http://nicoleodell.com/2015/03/death-...
With the tax season upon us, I am reminded of an old saying that goes “you can plan on two things in life and they are death and taxes.” That said, this year I had the privilege to participate in the Military Saves campaign at Rose Barracks in Grafenwoehr, Germany. Military Saves takes place during the last week of February throughout all branches of service on installations all over the U.S. and overseas. The campaign encourages military families to build wealth, not debt. The Service members and their families have the opportunity to take classes throughout the week to help them learn how to be better prepared financially. Mission readiness equals financial readiness. This year’s message was “set a goal, make a plan, and automate your savings”. I really love the concept of automating your savings because it doesn’t take much time or effort and it gets you saving consistently.
Romans 13:7 says that we are to give to everyone what we owe them, whether that be taxes, respect, or honor. As I was thinking to myself, I wondered how can you pay taxes and respect or honor others if you are not doing those things for yourself.
For example, respecting and honoring yourself. If you don’t respect or honor yourself, you will not respect or honor others.
Keep in mind that honoring yourself is very different depending if it is worldly honor or Godly honor. When our culture honors themselves or others, they heap worldly praise and admiration on people such as celebrities, politicians, or the super-wealthy because of status. Biblical honor comes from God and His Son and our commitment and devotion to be a Christian which translates to Christ like or being like Christ. If we are to honor ourselves the way the Bible intends we would demonstrate that with obedience to God not just by sharing the fruits of our labor but also through taking care of ourselves, physically, spiritually, and financially.
I have always shared with others the 10-10-80 rule where you give the first 10% of what you make, you save the next 10%, and then you can spend the rest. One of the easiest ways to accomplish the rule is by automating it. For example, instead of putting cash in the collection basket at church, consider setting up an automatic bill pay so you are always paying God first. If you miss a week or two at church, you won’t be missing the joy of giving. As for saving 10%, you should automate that too. If you follow the 10-10-80 rule and automate your giving and your saving you won’t escape death or taxes, but you are honoring God.
article courtesy of http://nicoleodell.com/2015/03/death-...
February 14, 2015
RETIREMENT IS JUST AROUND THE CORNER
Psalm 90:12 (NIV) “Teach us to number our days that we may gain a heart of wisdom.”
As we reflect on Psalms 90:12, we need to really understand that our days are numbered and we all are running out of time. It is not a hard concept to grasp, so why do so many people fail to plan for retirement? Our days are definitely numbered and to state the obvious, the older we get the less time we have left, so we need to start saving money now so we won’t have to work well past our planned retirement age. While this may sound harsh, it is a stark reality and if you continue putting off saving for retirement because you think you will live forever, you won’t be able to retire.
I want to share with you three things to think about so you have at least a fighting chance of retiring one day.
1. Picture what retirement looks like for you
I have found that when people visualize their dreams, goals, etc., they are more inclined to do something about it. If I told you to save X amount every month for X number of years, that very likely wouldn’t motivate you to start saving. But picturing yourself traveling the world or maybe doing that hobby you have always wanted to do, that is the stuff that will move you to take action. Go find a quiet place and close your eyes for a few moments and picture what retirement looks like for you!
2. Get your retirement number
There are many retirement calculators you can search for on the internet. One of my personal favorites is www.choosetosave.org/ballpark/. I am not affiliated in any way with the site, but I like to share this resource with others because it is an easy to use tool that can tell you how much you need in savings to fund a comfortable retirement.
3. Seek advice from a professional
For the non-DIY folks out there, I would recommend that you visit www.letsmakeaplan.org/. You can find some very useful articles and more importantly you can search for a Certified Financial Planner that can help you put together your financial roadmap to retirement.
I understand that there are any number of circumstances that make it difficult to save. Having kids, especially teens, can make putting money away very difficult. Some of you reading this might be facing significant medical expenses. All I can tell you is that putting something away now is better than saving nothing and circumstances change. Start saving today, and if you are already saving, consider saving more.
Article courtesy of ChooseNOW Ministries
http://nicoleodell.com/2015/02/retire...
As we reflect on Psalms 90:12, we need to really understand that our days are numbered and we all are running out of time. It is not a hard concept to grasp, so why do so many people fail to plan for retirement? Our days are definitely numbered and to state the obvious, the older we get the less time we have left, so we need to start saving money now so we won’t have to work well past our planned retirement age. While this may sound harsh, it is a stark reality and if you continue putting off saving for retirement because you think you will live forever, you won’t be able to retire.
I want to share with you three things to think about so you have at least a fighting chance of retiring one day.
1. Picture what retirement looks like for you
I have found that when people visualize their dreams, goals, etc., they are more inclined to do something about it. If I told you to save X amount every month for X number of years, that very likely wouldn’t motivate you to start saving. But picturing yourself traveling the world or maybe doing that hobby you have always wanted to do, that is the stuff that will move you to take action. Go find a quiet place and close your eyes for a few moments and picture what retirement looks like for you!
2. Get your retirement number
There are many retirement calculators you can search for on the internet. One of my personal favorites is www.choosetosave.org/ballpark/. I am not affiliated in any way with the site, but I like to share this resource with others because it is an easy to use tool that can tell you how much you need in savings to fund a comfortable retirement.
3. Seek advice from a professional
For the non-DIY folks out there, I would recommend that you visit www.letsmakeaplan.org/. You can find some very useful articles and more importantly you can search for a Certified Financial Planner that can help you put together your financial roadmap to retirement.
I understand that there are any number of circumstances that make it difficult to save. Having kids, especially teens, can make putting money away very difficult. Some of you reading this might be facing significant medical expenses. All I can tell you is that putting something away now is better than saving nothing and circumstances change. Start saving today, and if you are already saving, consider saving more.
Article courtesy of ChooseNOW Ministries
http://nicoleodell.com/2015/02/retire...
February 5, 2015
Estate Planning Not Just for the "Rich & Famous"
Most people think that estate planning is only for the rich and famous. While you may think that you do not fall into that category, contrary to popular belief those who are not rich and famous should also consider having their estate planning documents in order prior to death or incapacity, and this is especially true if you are a single mom!
Planning for death or incapacity might not be something you ever thought of, but if you fail to plan for it, there is a possibility that someone you haven’t selected might be making decision on your behalf that could possibly affect the care of your children.
Before I go any further I want to point out that while the following information deals with legal subject matter, it is not legal advice or legal representation. Because of the rapidly changing nature of the law, neither the author of this article nor the staff of the Life of Single Mom Ministries makes any warranty or guarantee of the accuracy or reliability of information contained in this article, therefore we assume no responsibility for any information provided.
I need to stress that this article is for informational purposes only and does not constitute legal advice. No one should rely upon the information as constituting legal advice. Please consult an attorney for advice pertaining to your individual circumstances.
With the disclaimers out of the way, why as a single mom should you consider having an estate plan?
When you die, your property will go somewhere
No matter if you have estate planning documents or not, your property will go to someone else, it just might not go where you want it to go. For example if you do not have your property or accounts titled/registered in the correct way, if you have out of date beneficiaries on your contracts (life insurance or retirement accounts for instance), or you die intestate (which means dying without a Will), the person or persons who might be relying on those assets after you die could face a financial burden because those resources might not be available or their distribution may be significantly delayed.
Make your wishes known NOW while you are competent
Nobody ever plans on becoming ill or being involved in an accident that may leave them physically or mentally unable to manage their affairs. If you become unable to communicate or make rational decisions, especially regarding your health, money or the care of your children, not only could it leave you in a bind but also the people who might have to take care of you.
Try to protect your children as much as possible
You might consider having an attorney help you create a Testamentary Trust. A Testamentary Trustis established by your Will and in it you can appoint a responsible representative or guardian to help oversee your assets and also make specific instructions regarding the health and welfare for your children if they were ever to be orphaned.
Pay now or someone else may pay more later
How much will this cost you? Sitting down with an attorney that specializes in estate planning may cost you some money now, but it might be worth it in the long run. There are low cost and pro bono legal services available for low income single moms for those who qualify.
What could happen if I don’t have an estate plan?
State law will decide who gets your property, not you! A judge will determine who gets custody of your children, not you! There are many other things that could happen such as additional expenses, fees, taxes, etc. but no matter how much money you might or might not have, it is important to have your estate planning documents in place and in order because not doing so can bring about much emotional and financial pain for the people you leave behind!
article courtesy of http://thelifeofasinglemom.com/estate...
Planning for death or incapacity might not be something you ever thought of, but if you fail to plan for it, there is a possibility that someone you haven’t selected might be making decision on your behalf that could possibly affect the care of your children.
Before I go any further I want to point out that while the following information deals with legal subject matter, it is not legal advice or legal representation. Because of the rapidly changing nature of the law, neither the author of this article nor the staff of the Life of Single Mom Ministries makes any warranty or guarantee of the accuracy or reliability of information contained in this article, therefore we assume no responsibility for any information provided.
I need to stress that this article is for informational purposes only and does not constitute legal advice. No one should rely upon the information as constituting legal advice. Please consult an attorney for advice pertaining to your individual circumstances.
With the disclaimers out of the way, why as a single mom should you consider having an estate plan?
When you die, your property will go somewhere
No matter if you have estate planning documents or not, your property will go to someone else, it just might not go where you want it to go. For example if you do not have your property or accounts titled/registered in the correct way, if you have out of date beneficiaries on your contracts (life insurance or retirement accounts for instance), or you die intestate (which means dying without a Will), the person or persons who might be relying on those assets after you die could face a financial burden because those resources might not be available or their distribution may be significantly delayed.
Make your wishes known NOW while you are competent
Nobody ever plans on becoming ill or being involved in an accident that may leave them physically or mentally unable to manage their affairs. If you become unable to communicate or make rational decisions, especially regarding your health, money or the care of your children, not only could it leave you in a bind but also the people who might have to take care of you.
Try to protect your children as much as possible
You might consider having an attorney help you create a Testamentary Trust. A Testamentary Trustis established by your Will and in it you can appoint a responsible representative or guardian to help oversee your assets and also make specific instructions regarding the health and welfare for your children if they were ever to be orphaned.
Pay now or someone else may pay more later
How much will this cost you? Sitting down with an attorney that specializes in estate planning may cost you some money now, but it might be worth it in the long run. There are low cost and pro bono legal services available for low income single moms for those who qualify.
What could happen if I don’t have an estate plan?
State law will decide who gets your property, not you! A judge will determine who gets custody of your children, not you! There are many other things that could happen such as additional expenses, fees, taxes, etc. but no matter how much money you might or might not have, it is important to have your estate planning documents in place and in order because not doing so can bring about much emotional and financial pain for the people you leave behind!
article courtesy of http://thelifeofasinglemom.com/estate...
January 14, 2015
A New Year and a New You
Luke 13:3 (ESV) “No, I tell you; but unless you repent, you will all likewise perish.”
As I think of the word repent, terms that come to mind are “to see the error of my ways”, “to feel regret”, “to atone for”. If you really want to transform into a “New You” there really isn’t a choice but to change the way you think, the way you feel, and most importantly the things you do. Before I go on about change as it relates to finances, I want to let you know that I would rather you be spiritually rich and financially broke than vice versa but I also believe that God wants you to be a good steward of what He has given you no matter how much or maybe not so much it may be. My intentions for the article are not to make you feel bad, imply that you are a bad person or make you think that you are doing anything wrong. My intentions are to be brutally honest and my desire is to motivate change so you are able to look honestly at your financial situation and do things differently. I am not without sin and I am not casting stones because if you know about my past, you know I had over $32,000 of credit card debt. I am speaking from experience.
See the error of our ways
For any type of change in your life, you have to acknowledge you are doing something wrong. If you are not using a spending plan, not saving for retirement, or as in my case racking up a tremendous amount of credit card debt, you have to acknowledge that you are making mistakes in order to start changing behavior. For me, I would always lie to myself and say my friends have credit card debt so it is okay that I have it. It wasn’t until I was honest with myself that credit card debt was harmful to my financial health that I took the first step towards getting out of debt – I stopped charging.
Feel regret
You have to feel bad for things to change. A great example for me is during the holidays I eat a lot more junk than I do the rest of the year. I feel bad and I always regret doing it but afterwards that feeling of regret motivates me to get back on track. Financially for me I regretted getting into so much debt and I felt bad because I was paying interest to someone else instead of earning interest on my own money. Unless you feel bad or have regrets about something you are doing, you will not change the behavior.
Atone
Once you admit to yourself that you have made mistakes and you feel bad about them, the most important step is to start doing things right. As in my situation when I was younger with all of that credit card debt, I had to start following a budget. I had to build my savings and at the same time follow a plan to pay it off. What will you do differently this year with your finances? Do you need to make a spending plan? Do you want to start saving for retirement or cutting back your spending so you can start saving more? I have no idea what you need to repent for when it comes to your money but I do pray that by the end of next year you are better off financially than you are today!
Wishing you much peace, happiness and good health in 2015!
via @ http://nicoleodell.com/2015/01/new-ye...
As I think of the word repent, terms that come to mind are “to see the error of my ways”, “to feel regret”, “to atone for”. If you really want to transform into a “New You” there really isn’t a choice but to change the way you think, the way you feel, and most importantly the things you do. Before I go on about change as it relates to finances, I want to let you know that I would rather you be spiritually rich and financially broke than vice versa but I also believe that God wants you to be a good steward of what He has given you no matter how much or maybe not so much it may be. My intentions for the article are not to make you feel bad, imply that you are a bad person or make you think that you are doing anything wrong. My intentions are to be brutally honest and my desire is to motivate change so you are able to look honestly at your financial situation and do things differently. I am not without sin and I am not casting stones because if you know about my past, you know I had over $32,000 of credit card debt. I am speaking from experience.
See the error of our ways
For any type of change in your life, you have to acknowledge you are doing something wrong. If you are not using a spending plan, not saving for retirement, or as in my case racking up a tremendous amount of credit card debt, you have to acknowledge that you are making mistakes in order to start changing behavior. For me, I would always lie to myself and say my friends have credit card debt so it is okay that I have it. It wasn’t until I was honest with myself that credit card debt was harmful to my financial health that I took the first step towards getting out of debt – I stopped charging.
Feel regret
You have to feel bad for things to change. A great example for me is during the holidays I eat a lot more junk than I do the rest of the year. I feel bad and I always regret doing it but afterwards that feeling of regret motivates me to get back on track. Financially for me I regretted getting into so much debt and I felt bad because I was paying interest to someone else instead of earning interest on my own money. Unless you feel bad or have regrets about something you are doing, you will not change the behavior.
Atone
Once you admit to yourself that you have made mistakes and you feel bad about them, the most important step is to start doing things right. As in my situation when I was younger with all of that credit card debt, I had to start following a budget. I had to build my savings and at the same time follow a plan to pay it off. What will you do differently this year with your finances? Do you need to make a spending plan? Do you want to start saving for retirement or cutting back your spending so you can start saving more? I have no idea what you need to repent for when it comes to your money but I do pray that by the end of next year you are better off financially than you are today!
Wishing you much peace, happiness and good health in 2015!
via @ http://nicoleodell.com/2015/01/new-ye...
