Life insurance companies are more willing to offer lower premium life insurance policies to young, healthy people who will likely not need the death benefit payout of their policy for a while. (Keep in mind that exceptions for pre-existing medical conditions or certain careers exist – think “skydiving instructor”. But in many cases, the odds are more in your favor for lower premiums than you might guess.)
At this point you might be thinking, “Well, I am young and healthy, so why do I need to add another expense into my budget for something I might not need for a long time?”
Unlike a financial goal of saving up for a downpayment on your first house, waiting for “the right moment” to get life insurance – perhaps when you feel like you’re prepared enough – is less beneficial. A huge part of that is due to getting older. As your body ages, things can start to go wrong – unexpectedly and occasionally chronically. Ask any 35-year-old who just threw out their back for the first time and is now Googling every posture-perfecting stretch and cushy mattress to prevent it from happening again.
With age-related health issues in mind, remember that the premium you pay at 22 may be very different than the premium you’ll pay at 32. The reason is simple—most people physically peak by the time their 30.¹
If you’re feeling your mortality after reading those numbers, don’t worry! You’re probably not going to go to pieces like fine china hitting a cement floor on your 30th birthday. But there is one certainty as you age: your premium will rise an average of 8-10% on each birthday.² Combine that with an issue like the sudden chronic back problems from throwing your back out that one time (one time!), and your premium will likely reflect both the age increase and a pre-existing condition.
If you experience certain types of illness or injury prior to getting life insurance, it often goes in the books as a pre-existing condition, which will cause a premium to go up. Remember: the less likely a person is going to need their life insurance payout, the lower the premium will likely be. Possible scenarios like the recurrence of cancer or a sudden inability to work due to re-injury are red flags for insurance companies because it increases the likelihood that a policyholder will need their policy’s payout.
A person’s age, unique medical history, and financial goals will all factor into the process of finding the right coverage and determining the rate. So taking advantage of your youth and good health now without bringing an age-borne illness or injury to the table could be beneficial for your journey to financial independence.
¹ “A map of the ages when you peak at everything in life,” Digital Information World, March 16, 2021, https://www.digitalinformationworld.com/2021/03/a-map-of-ages-when-you-peak-at.html#
² “How Age Affects Life Insurance Rates,” Investopedia, June 29, 2021, https://bit.ly/2L7P0x6.
That’s because no single source of income or wealth is perfect. They’re all subject to ups and downs, highs and lows.
Think of it like going to the golf range and handing the caddie an armful of drivers. You’ll make powerful drives every time, but what happens when it’s time to putt? Even worse, how will you escape bunkers?
It’s a classic case of too much of a good thing. If you’re a serious player and plan to play for the long run, your golf bag needs a variety of clubs—a few different irons, wedges, and putters—to handle whatever challenges you’ll face during the game.
The same is true of building wealth.
It’s not a silver bullet. But diversification can offer a layer of protection against the ups and downs of the economy. It can also provide you with supplemental income during lean times.
So how can you start diversifying today? Here are two ideas…
Start a side hustle. This simple strategy can diversify your income sources. Regardless of what’s happening at your 9-to-5 job, you can count on your side hustle to help generate cash flow.
Meet with a financial professional. A licensed and qualified financial professional can help you implement diversification in your savings. This could make a huge difference in protecting your wealth from the ups and downs of a changing economy.
Contact me if you want to discover what this strategy would look like for you. We can review what you’ve saved thus far and check your opportunities for diversification.
But by definition, your job ceases to become your source of income once you retire.
Instead, you’ll need to tap into new forms of cash flow that, most likely, will need to be prepared beforehand.
Here are the most common sources of retirement income. Take note, because they could be critical to your retirement strategy.
Social Security. It’s simple—you pay into social security via your taxes, and you’re entitled to a monthly check from Uncle Sam once you retire. It’s no wonder why it’s the most commonly utilized source of retirement income.
Just know that social security alone may not afford you the retirement lifestyle you desire—the average monthly payment is only $1,543.¹ Fortunately, it’s far from your only option.
Retirement Saving Accounts. These types of accounts might be via your employer or you might have one independently. They are also popular options because they can benefit from the power of compound interest. The assumption is that when you retire, you’ll have grown enough wealth to live on for the rest of your life.
But they aren’t retirement silver bullets. They often are exposed to risk, meaning you can lose money as well as earn it. They also might be subject to different tax scenarios that aren’t necessarily favorable.
If you have a retirement savings account of any kind, meet with a licensed and qualified financial professional. They can evaluate how it fits into your overarching financial strategy.
Businesses and Real Estate. Although they are riskier and more complex, these assets can also be powerful retirement tools.
If you own a business or real estate, it’s possible that they can sustain the income generated by their revenue and rents, respectively, through retirement. Best of all, they may only require minimal upkeep on your part!
Again, starting a business and buying properties for income carry considerable risks. It’s wise to consult with a financial professional and find experienced mentorship before relying on them for retirement cash flow.
Part-time work. Like it or not, some people will have to find opportunities to sustain their lifestyle through retirement. It’s not an ideal solution, but it may be necessary, depending on your financial situation.
You may even discover that post-retirement work becomes an opportunity to pursue other hobbies, passions, or interests. Retirement can be about altering the way you live, not just having less to do.
You can’t prepare for retirement if you don’t know what to prepare for. And that means knowing and understanding your options for creating a sustainable retirement income. If unsure of how you’ll accomplish that feat, sit down with your financial professional. They can help you evaluate your position and create a realistic strategy that can truly prepare you for retirement.
This article is for informational purposes only and is not intended to promote any certain products, plans, or policies that may be available to you. Any examples used in this article are hypothetical. Before enacting a savings or retirement strategy, or purchasing a life insurance policy, seek the advice of a licensed and qualified financial professional, accountant, and/or tax expert to discuss your options.
¹ “How much Social Security will I get?” AARP, https://www.aarp.org/retirement/social-security/questions-answers/how-much-social-security-will-i-get.html
The typical household budget that covers the cost of raising a family, making loan payments, and saving for retirement usually doesn’t leave much room for extra spending on daydream items. However, occasionally families may come into an inheritance, you might receive a big bonus at work, or benefit from some other sort of windfall.
If you ever inherit a chunk of money (or large asset) or receive a large payout, it may be tempting to splurge on that red convertible you’ve been drooling over or book that dream trip to Hawaii you’ve always wanted to take. Unfortunately for many, though, newly-found money has the potential to disappear quickly with nothing to show for it, if you don’t have a strategy in place to handle it.
If you do receive some sort of large bonus – congratulations! But take a deep breath and consider these situations first – before you call your travel agent.
Taxes or Other Expenses. If you get a large sum of money unexpectedly, the first thing you might want to do is pull out your bucket list and see what you can check off first. But before you start spending, the reality is you’ll need to put aside some money for taxes. You may want to check with an expert – an accountant or financial advisor may have some ideas on how to reduce your liability as well.
If you suddenly own a new house or car as part of an inheritance, one thing that you may not have considered is how much it will cost to hang on to them. If you want to keep them, you’ll need to cover maintenance, insurance, and you may even need to fulfill loan payments if they aren’t paid off yet.
Pay Down Debt. If you have any debt, you’d have a hard time finding a better place to put your money once you’ve set aside some for taxes or other expenses that might be involved. It may be helpful to target debt in this order:
Fund Your Emergency Account. Before you buy that red convertible, put aside some money for a rainy day. This could be liquid funds – like a separate savings account.
Save for Retirement. Once the taxes are covered, you’ve paid down your debt, and funded your emergency account, now is the time to put some money away towards retirement. Work with your financial professional to help create the best strategy for you and your family.
Fund That College Fund. If you have kids and haven’t had a chance to save all you’d like towards their education, setting aside some money for this comes next. Again, your financial professional can recommend the best strategy for this scenario.
Treat Yourself. NOW you’re ready to go bury your toes in the sand and enjoy some new experiences! Maybe you and the family have always wanted to visit a themed resort park or vacation on a tropical island. If you’ve taken care of business responsibly with the items above and still have some cash left over – go ahead! Treat yourself!
There’s no way to guarantee that it’ll pay off because there are so many unknowns that go into starting a business. But one thing is for sure: If you’re the adventurous type and aren’t afraid to give it your all, you won’t be able to resist the urge to try!
So if you’re thinking about entrepreneurship, here are some factors to consider…
Do you have enough experience in your field?
It’s a fact—entrepreneurs with at least three years of experience in their industry are 85% more likely to succeed.¹ If you haven’t met that threshold, you might not be ready for entrepreneurship just yet! Are you equipped to handle the stress?
Entrepreneurship can be intense. You’re going to be the one who has to problem solve payroll, bookkeeping, marketing, sales, customer service…the list goes on and on.
If you aren’t ready for this kind of pressure, entrepreneurship might not be for you. It may be better to begin developing stress coping strategies now that could serve you well if you pursue entrepreneurship in the future.
Have you developed a professional and personal support network?
Starting your own business is tough. Having a support network can make it easier. Without a positive, supportive circle (in person and online), you run the risk of…
People you know who have already started businesses are great contacts for advice. And if they’re extremely successful, they may even be willing to mentor you as well.
It’s also critical to surround yourself with inspired individuals who can support you in your moments of self-doubt or when you’ve had a failure. These are the people that can help you keep going when things get tough!
Are your personal finances in order?
If you’re paying off massive amounts of debt, have no savings, and are living paycheck-to-paycheck (or worse…borrowing from friends or family), entrepreneurship would likely stress your finances even more. How would you pay your rent or put food on the table if your business underperformed? That’s why it’s best to discover how money works before—not after—you start your business.
This article isn’t meant to discourage you from going out on your own and forging your own business path—entrepreneurship is an incredible opportunity to chase your dreams and build wealth! Rather, it’s supposed to help you succeed. The sooner you start addressing the factors in this article, the sooner you can start building the business you’ve always wanted!
¹ “The Average Age Of A Successful Startup Founder Is 45,” Entrepreneur Middle East, George Hojeige, Feb 5, 2020, https://www.entrepreneur.com/article/345884
There’s a significant financial mistake people in their 20s and 30s make. It’s simple, but if you’re young, it could change your financial future…
Have you made this mistake? Think you know what it is?
Young people don’t save enough. Not by a long shot. On average, Millennials have only saved $23,000 for retirement.¹ And a recent survey revealed that 65% of 50 year olds felt the greatest financial mistake of their 20s and 30s was not saving.² It’s no wonder, then, that the same group feels they have under-saved and under-prepared for retirement.
So what can you do if you’re a young person seeking to build wealth? Here are three ideas…
Automate saving every month. The power of automation makes saving easy. Saving stops being a conscious decision with which you may or may not follow through. Instead, it’s a background process you can set and forget.
Meet with a financial professional. They’re the guides you need for navigating the world of budgeting, saving, and building wealth. They can help you identify the goals and strategies you need to inspire your savings.
Focus on your own financial growth. Comparing your lifestyle to your peers is tempting, especially when you’re young. But it can be dangerous, especially if it causes you to spend more than you earn. Just remember—you may not really know the financial situation of your friends as presented on social media. People tend to just show the good and not the bad. Orient yourself towards improving your own situation and building your future.
So don’t make the mistake that so many have made. Follow the tips in this article and start laying the foundation of your financial future.
¹ “Retirement Security Amid COVID-19: The Outlook of Three Generations 20th Annual Transamerica Retirement Survey of Workers,” Transamerica Center For Retirement Studies, May 2020, https://transamericacenter.org/docs/default-source/retirement-survey-of-workers/tcrs2020_sr_retirement_security_amid_covid-19.pdf
² “Money Mistakes: Exploring the financial situation of people over 50,” Caring Advisor, https://caringadvisor.com/money-mistakes/
There are a lot of reasons why. It takes planning and self-control. You’ll have to ask yourself if you can fit every purchase into your budget. It means giving up something today in order to benefit tomorrow.
These are all true, but saving doesn’t have to be hard work. One way to make it easier is to automate your savings and then watch your balance grow!
Automation is such a powerful tool because it makes saving effortless. With automation, saving is now a default, as opposed to a decision—you’re always saving in the background.
For example, you might have a goal to save $1,000 for a vacation. If you’re saving $20 per week, that would take less than a year. And the same logic applies to larger goals—it’s a key strategy for creating retirement wealth.
First, decide how much money you can afford to save each month. Then set up automatic deposits from your main bank account into your savings account. That’s it! Every month, money will go straight from your paycheck to your wealth building efforts.
Now, you’re positioned to go about your daily business, confident that you’re preparing for the future. And it only takes a few minutes to do! If you want to discover more wealth building strategies, contact me. We can review your financial situation and create a game plan.
But that doesn’t stop “budget” from being an intimidating word to many people. Some folks may think it means scrimping on everything and never going out for a night on the town. It doesn’t! Budgeting simply means that you know where your money is going and you have a way to track it.
The aim with budgeting is to be aware of your spending, plan for your expenses1, and make sure you have enough saved to pursue your goals.
Without a budget, it can be easy for expenses to climb beyond your ability to pay for them. You break out the plastic and before you know it you’ve spent fifty bucks on drinks and appetizers with the gang after work. These habits might leave you with a lot of accumulated debt. Plus, without a budget, you may not be saving for a rainy day, vacation, or your retirement. A budget allows you to enact a strategy to help pursue your goals. But what if you’ve never had a budget? Where should you start? Here’s a quick step-by-step guide on how to get your budgeting habit off the ground!
Track your expenses every day. Start by tracking your expenses. Write down everything you buy, including memberships, online streaming services, and subscriptions. It’s not complicated to do with popular mobile and web applications. You can also buy a small notebook to keep track of each purchase. Even if it’s a small pack of gum from the gas station or a quick coffee at the corner shop, jot it down. Keep track of the big stuff too, like your rent and bill payments.
Add up expenses every week and develop categories. Once you’ve collected enough data, it’s time to figure out where exactly your paycheck is going. Start with adding up your expenses every week. How much are you spending? What are you spending money on? As you add your spending up, start developing categories. The goal is to organize all your expenses so you can see what you’re spending money on. For example, if you eat out a few times per week, group those expenses under a category called “Eating Out”. Get as general or as specific as you wish. Maybe throwing all your food purchases into one bucket is all you need, or you may want to break it down by location - grocery store, big box store, restaurants, etc.
Create a monthly list of expenses. Once you’ve recorded your expenses for a full month, it’s time to create a monthly list. Now you might also have more clarity on how you want to set up your categories. Next, total each category for the month.
Adjust your spending as necessary. Compare your total expenses with your income. There are two possible outcomes. You may be spending within your income or spending outside your income. If you’re spending within your income, create a category for savings if you don’t have one. It’s a good idea to create a separate savings category for large future purchases too, like a home or a vacation. If you find you’re spending too much, you may need to cut back spending in some categories. The beauty of a budget is that once you see how much you’re spending, and on what, you’ll be able to strategize where you need to cut back.
Keep going. Once you develop the habit of budgeting, it should become part of your routine. You can look forward to working on your savings and developing a retirement strategy, but don’t forget to budget in a little fun too!
¹Jeremy Vohwinkle, “Make a Personal Budget in 6 Steps: A Step-by-Step Guide to Make a Budget,” The Balance (March 6, 2020).
The good news is, you don’t need a perfect relationship or perfect finances to have productive conversations with your partner about money, so here are some tips for handling those tricky conversations like a pro!
Be respectful. Respect should be the basis for any conversation with your significant other, but especially when dealing with potentially touchy issues like money. Be mindful to keep your tone neutral and try not to heap blame on your partner for any issues. Remember that you’re here to solve problems together.
Take responsibility. It’s perfectly normal if one person in a couple handles the finances more than the other. Just be sure to take responsibility for the decisions that you make and remember that it affects both people. You might want to establish a monthly money meeting to make sure you’re both on the same page and in the loop. Hint: Make it fun! Maybe order in, or enjoy a steak dinner while you chat.
Take a team approach. Instead of saying to your partner, “you need to do this or that,” try to frame things in a way that lets your partner know you see yourself on the same team as they are. Saying “we need to take a look at our combined spending habits” will probably be better received than “you need to stop spending so much money.”
Be positive. It can be tempting to feel defeated and hopeless that things will never get better if you’re trying to move a mountain. But this kind of thinking can be contagious and negativity may further poison your finances and your relationship. Try to focus on what you can both do to make things better and what small steps to take to get where you want to be, rather than focusing on past mistakes and problems.
Don’t ignore the negative. It’s important to stay positive, but it’s also important to face and conquer the specific problems. It gives you and your partner focused issues to work on and will help you make a game plan. Speaking of which…
Set common goals, and work toward them together. Whether it’s saving for a big vacation, your child’s college fund, getting out of debt, or making a big purchase like a car, money management and budgeting may be easier if you are both working toward a common purpose with a shared reward. Figure out your shared goals and then make a plan to accomplish them!
Accept that your partner may have a different background and approach to money. We all have our strengths, weaknesses, and different perspectives. Just because yours differs from your partner’s doesn’t mean either of you are wrong. Chances are you make allowances and balance each other out in other areas of your relationship, and you can do the same with money if you try to see things from your partner’s point of view.
Discussing and managing your finances together can be a great opportunity for growth in a relationship. Go into it with a positive attitude, respect for your partner, and a sense of your common values and priorities. Having an open, honest, and trust-based approach to money in a relationship may be challenging, but it is definitely worth it.
Parents, you may be better positioned to build a legacy for your children than you think. That’s because if you leverage basic financial concepts and strategies, you might be surprised by how attainable a sizable inheritance is! Here are four ways you can help your child build wealth.
Save a nest egg for your child’s retirement. Do you have a million dollars lying around to give to your child? Probably not. But you have something that’s even more valuable—time.
What if the moment your child was born you put $13,000 in an account earning 6.5% interest? By the time they turn 67—even if you don’t add anything else to that account—it would be worth $1,000,000. That cash could make all the difference for your child’s financial future. To make the most of this strategy, meet with a licensed and qualified financial professional before your child is born. They can help you make the preparations to put it into place.
Start saving for college. A college education is a huge expense, and it’s one that will only increase in cost. So what should you do to prepare for this future burden?
Start saving as soon as your child is born! The same principle applies—the sooner you start saving, the greater your potential for growth. Once again, collaborate with a financial professional before your child is born to maximize this strategy.
Adjust your emergency fund. Nothing can derail well-laid financial plans quite like an unforeseen emergency. And nobody seems to attract unforeseen emergencies quite like kids!
That’s why it’s important to create an emergency fund to cover 3-6 months of income. It’s a time-proven line of defense that can protect you from dipping into your savings or going into debt to cover home repairs or midnight ER visits!
Create a will. Finally, it’s important to consider estate planning. Why? Because it ensures that your wealth and assets are passed down to your children. It’s a final and meaningful way to provide for your family, even if you’re not with them physically. Proper planning can also help shield them from the complexity of estate taxes and the burden of the probate system.
Leaving a financial legacy is far more doable than you may have imagined, and the time to start preparing is NOW. Collaborate with a licensed and qualified financial professional as soon as possible. They’ll point you towards practical steps you can take to start building wealth for your children today.
And – perhaps the most difﬁcult to believe of them all – the world hotdog eating record stands at 75 dogs in 10 minutes.⁴ I apologize ahead, but just visualize that. Seven hotdogs down the hatch every minute.
Here’s another number that’s almost beyond comprehension: 64% of Americans have less than $10,000 in retirement savings.⁵ You read that correctly. Substantially over half of Americans will reach what should be the finish line of their careers and have almost nothing to show for it. They’ll be forced to either downsize their dreams or trade a retirement on a beach for more hours in a cubicle.
Why share these hard to believe numbers? To motivate you – at whatever age you are today – that you can start saving more right now. If you want to have a million dollars at the age of 65, how much do you need to start saving every month? That depends on your current age. If you’re 25, you’ll need to save a minimum of $158.12 per month. At 35, the amount jumps to $442.00 per month. At 45, it’s $1,317 monthly. At 55, you’ll have to save $4,882.00 per month. And at 60, you’d have to save $12,913.00 every month.
How much do you need to save to hit your goals? What’s the right ﬁnancial vehicle to help you do it? Getting the answers to these questions right is absolutely critical. Don’t wait to ﬁnd the answers. Contact me, and let’s get to work on a strong insurance strategy.
¹ “The Top 20 Valuable Facebook Statistics – Updated October 2020,” Dan Noyes, Zephoria, https://zephoria.com/top-15-valuable-facebook-statistics/
² “How Many iPhones Have Been Sold Worldwide? – iPhone Sales Analyzed,” Damjan Jugovic Spajic, Kammando Tech, February 11, 2020, https://kommandotech.com/statistics/how-many-iphones-have-been-sold-worldwide/#:~:text=The%20latest%20data%20shows%20that,have%20been%20sold%20so%20far.
³ “Marketing Metrics: Daily Searches on Google and Useful Search Metrics for Marketers,” Kenshoo, Feb 25, 2019, https://kenshoo.com/monday-morning-metrics-daily-searches-on-google-and-other-google-facts/#:~:text=Although%20Google%20does%20not%20share,That’s%20a%20lot%20of%20searches!
⁴ “Hall of Fame,” Nathan’s Famous, https://nathansfamous.com/hot-dog-eating-contest/hall-of-fame/
⁵ “21+ American Savings Statistics to Know in 2021,” Milan Urosevic, SpendMeNot, Mar 25, 2021, https://spendmenot.com/blog/american-savings-statistics/
It can help you save money, stay on top of your finances and even reach financial goals. But how do you know if your budget will work for you? To help determine that, you’ll need to consider two things: if category groupings make sense for your family, and whether the amounts allotted for those categories are reasonable.
For instance, is your entertainment category too inclusive and/or is the amount too high? Does it include money to cover gifts for friends’ birthdays or other events, or just what’s needed for your own entertainment, like streaming services or concerts? Having categories that are too inclusive or vague may tempt you to overspend on certain items.
And there’s another danger—maybe the amount assigned to your entertainment category is too low and you’ve budgeted all the fun out of your life! If your budget is too strict, you may not feel like you can enjoy going out to eat or buying something special for the kids once in a while. You may feel like you’re always saying “no” to your friends and family.
But if you have too many “nitpicky” categories, you may feel overwhelmed and frustrated trying to keep up with all of them each month.
It’s important that your budget is realistic and works for you and your family’s unique situation. If it doesn’t, you may find yourself getting discouraged and giving up!
So when you’re creating your budget, keep in mind there are other alternatives to spending a lot of money. For entertainment for example, explore creative and cheap ways to have fun with your family. Organize a park day, go on a hike, or visit a free museum.
It’s also important to be flexible. If you’re going out with friends, don’t feel like you have to buy the cheapest item on the menu! And when someone suggests doing something that isn’t on budget but sounds fun, don’t say no right off the bat—see if you can work within your limitations or cut back somewhere else.
In conclusion, definitely budget! Just don’t make your budget a chore or painful to stick with.
You have a chance to make your life even better with this gift. However, it’s important to handle it wisely so you don’t create any regrets down the line!
Pay down debt. Receiving a sudden windfall is the perfect opportunity to take a chunk out of any credit card debt or student loans that are hanging over you. You may even be able to pay off your car or house!
The simple fact is that debt wears down your ability to build wealth. Using your inheritance to help pay off your loans can position you to start building wealth sooner rather than later.
Build your emergency fund. Having cash on hand can be a game-changer. It empowers you to tackle emergencies like a child’s broken arm, an unexpected car repair, or even short-term unemployment—without turning to debt.
If you don’t have three months of expenses saved, consider using your inheritance to create some financial peace of mind for your family by setting up an emergency fund.
Save for retirement. Now that you’ve covered your bases, you can start using your inheritance to start building wealth for the future. As soon as you can, meet with a licensed and qualified financial professional to start developing a strategy that will make your money work for your future!
Fund your kids’ college education. College is pricey. Whether your children are very young or almost at university age, now is a good time to start saving for college. Once again, it’s best to meet with a financial professional to decide the best way to go about funding your child’s education.
Finally, have fun! You’ve done the hard work of getting rid of debt and building your emergency fund. Now that you have a college education and/or your retirement savings strategies in place, there’s no reason not to splurge on something fun with your inheritance! Just be sure that your fun doesn’t send you back into debt or dip into your emergency fund!
And that’s normally when your emergency fund would kick in. But what if you don’t have an emergency fund? Or what if there isn’t enough money in it to cover your current catastrophe? If you find yourself in this situation, you might consider applying for a personal loan to close the gap—but should you?
The simple answer? Probably not.
Starting with the basics—what is a personal loan? A personal loan is an unsecured debt that allows people or companies in need of money to borrow funds from lenders for any reason including but not limited to…
- Home improvements - Medical expenses - Debt consolidation
These loans are often set up for a short period of time with fixed monthly payments.
There are pros and cons to any form of debt. Personal loans are no different—they have their own set of benefits and drawbacks.
Personal loans can offer lower interest rates than credit cards, which can help you save money on interest payments. That can make them useful for consolidating other high interest rate loans.
However, personal loans can come with higher fees and significant interest rates. And for most financial emergencies, personal loans simply aren’t your best option. For instance, if you’re struggling with medical debt, you should first consider negotiating with your doctor’s office for more favorable payment terms first.
It’s not advisable to use a personal loan to make a large purchase, like a new TV, either. If you’re using the money for anything other than a last resort for emergencies or debt consolidation, it’s probably not worth it and could end up costing you more in interest payments down the road.
In conclusion, personal loans can be useful in specific circumstances or if you’re at the end of your financial rope. But they shouldn’t be your first option. Making sure you’ve got a sufficient emergency fund in place, a well-thought-out budget, and a solid savings strategy set up as soon as possible may help avoid the need for a loan and create more debt.
It’s a natural instinct to avoid tasks that seem overwhelming. But not preparing adequately for retirement can have serious consequences—you may find yourself rapidly approaching that time in your life with little saved!
Here are two simple, actionable steps that can help you overcome the intimidation of saving and move you closer towards your financial goals.
Save 15% of your income. This is a good rule to follow for the long term, but it may not be realistic all the time. Elderly parents living with you? A child going through college? If saving 15% feels impossible or overwhelming, start by setting aside something more manageable. Saving 1% of your income may not feel like much, but it’s far better than putting away nothing! And once you get used to saving, you might be surprised by how eager you are to increase that percentage.
Automate savings so they happen without any effort on your part. Set up an automatic monthly transfer from your checking into your savings accounts. This way, you’ll never have to worry about forgetting or neglecting your savings. It’s helpful to schedule the transfer right after you get paid. This technique, called “paying yourself first”, results in your paycheck helping to build wealth for you, and not someone else!
It’s never too early–or too late–to start saving for retirement. The earlier you begin, the more time your money has to grow and compound over a lifetime. And even starting closer to retirement is still better than never starting at all! Begin with these two techniques, and develop your strategy from there.
If something unexpected were to happen, do you have enough savings to get you and your family through it and back to solid ground again?
If you’re not sure you have enough set aside, being blindsided with an emergency might leave you in the awkward position of asking family or friends for a loan to tide you over. Or would you need to rack up credit card debt to get through a crisis? Dealing with a financial emergency can be stressful enough – like an unexpected hospital visit, car repairs, or even a sudden loss of employment. But having an established Emergency Fund in place before something happens can help you focus on what you need to do to get on the other side of it.
As you begin to save money to build your Emergency Fund, use these 5 rules to grow and protect your “I did not see THAT coming” stash:
1) Separate your Emergency Fund from your primary spending account. How often does the amount of money in your primary spending account fluctuate? Trips to the grocery store, direct deposit, automatic withdrawals, spontaneous splurges – the ebb and flow in your main household account can make it hard to keep track of the actual emergency money you have available. Open a separate account for your Emergency Fund so you can avoid any doubt about whether or not you can replace the water heater that decided to break right before your in-laws are scheduled to arrive.
2) Do NOT touch this account. Even though this is listed here as Rule #2, it’s really Rule #1. Once you begin setting aside money in your Emergency Fund, “fugettaboutit”… unless there actually is an emergency! Best case scenario, that money is going to sit and wait for a long time until it’s needed. However, just because it’s an “out of sight, out of mind” situation, doesn’t mean that there aren’t some important features that need to be considered for your Emergency Fund account:
You definitely don’t want this money to be locked up and/or potentially lose value over time. Although these two qualities might prevent any significant gain to your account, that’s not the goal with these funds. Pressure’s off!
3) Know your number. You may hear a lot about making sure you’re saving enough for retirement and that you should never miss a life insurance premium. Solid advice. But don’t pause either of these important pieces of your financial plan to build your Emergency Fund. Instead, tack building your Emergency Fund onto your existing plan. The same way you know what amount you need to save each month for your retirement and the premium you need to pay for your life insurance policy, know how much you need to set aside regularly so you can build a comfortable Emergency Fund. A goal of at least $1,000 to three months of your income or more is recommended. Three months worth of your salary may sound high, but if you were to lose your job, you’d have at least three full months of breathing room to get back on track.
4) Avoid bank fees. These are Emergency Fund Public Enemy No. 1. Putting extra money aside can be challenging – maybe you’ve finally come to terms with giving up the daily latte from your local coffee shop. But if that precious money you’re sacrificing to save is being whittled away by bank fees – that’s downright tragic! Avoid feeling like you’re paying twice for an emergency (once for the emergency itself and second for the fees) by using an account that doesn’t charge fees and preferably doesn’t have a minimum account balance requirement or has a low one that’s easy to maintain. You should be able to find out what you’re in for on your bank’s website or by talking to an employee.
5) Get started immediately. There’s no better way to grow your Emergency Fund than to get started!
There’s always going to be something. That’s just life. You can avoid that dreaded phone call to your parents (or your children). There’s no need to apply for another credit card (or two). Start growing and protecting your own Emergency Fund today, and give yourself the gift of being prepared for the unexpected.
¹ “Nearly 25% of Americans have no emergency savings,” Quentin Fottrell, MarketWatch, Jun 9, 2020, https://www.marketwatch.com/story/nearly-25-of-americans-have-no-emergency-savings-and-lost-income-due-to-coronavirus-is-piling-on-even-more-debt-2020-06-03
There are plenty of extravagant solutions—a gambling spree in Vegas, buying a boat, or shopping only at designer stores would probably do the trick!
But there are less obvious ways to retire with less. There are subtle misteps that may not lead to financial trainwrecks, but may still result in retiring with less. Here are a few!
Never start saving for retirement. The same is true for every undertaking. The easiest way to torpedo your music career? Never practice. It’s unwise to expect your retirement to be financially sound if you don’t start preparing and saving for it today. Starting is the most important step in your journey!
Buy a house you can’t afford. Few things will consume your cash flow and ability to build wealth more than a house that’s out of your budget. Mortgage payments, emergency repairs, and renovations can be costly even after extensive planning and saving. These expenses can scuttle your ability to build wealth if you end up becoming “house poor”.
Buy things you don’t need. Make no mistake—there’s a place for splurging and treating yourself. But there’s a point where buying more stuff simply weighs you down, both emotionally and financially. And if you’re using debt to keep shopping, you might be setting yourself up for less in retirement.
Be afraid of change. It’s incredibly difficult to pursue better opportunities if you fear change. Improving your financial situation, by definition, requires you to do something different, whether it’s spending less or changing careers. Unless you’re already on track for retirement, a fear of change can hinder your ability to reach your goals and live your dreams.
Never learn how money works. This is the easiest item on the list to avoid. Most people are never taught what their money can actually do and how to build wealth. But it can have serious consequences for your future. Not knowing how money works can prevent you from using critical tools like the Rule of 72 and the Power of Compound Interest to detect both bad deals and wealth building opportunities.
If any of these rung a bell with you, contact me. We can discuss strategies to start preparing for retirement, cut your spending, and find opportunities to increase your income!
Your degree is in your hands and the world is now your oyster. If there’s one thing you should know, it’s that life after graduation isn’t all about partying with friends and family until next summer rolls around again. No, it’s time to start building wealth!
That’s because you have a secret weapon at your disposal—time.
Your money has the potential to grow via the power of compound interest. The longer your savings accrue interest, the more potential they have to grow.
Let’s say you’re 22 and fresh out of college. You’re able to save just $160 monthly in an account earning 9% interest. After 45 years, you would have grown over $1 million!
And, as your income rises, you can increase your savings rate and level up your goals.
But how can you save $160 per month?
It’s pretty straightforward—you should at least implement a budget ASAP, and maybe even start up a side gig. These are simple ways to decrease unnecessary spending and earn more money that can go towards wealth building.
If you want to learn more about building wealth reach out to financial professional you trust and schedule an appointment! They may have the knowledge and expertise to help you start on the path towards financial indepedence.
You get to relax and do whatever you want, whenever you want, with whomever you want. But it’s important not to forget about your finances AFTER retirement; here are wise financial moves that retirees should consider once they decide to quit working for good.
Get your will in order. You’ll be ahead of the game if you do—68% of Americans have no estate plan in place!¹ The simple truth is that preparing a will can help ensure that your money goes where you want it to go and save your family a financial headache. If you’re retired and haven’t created a will, do it today!
Plan for long-term care expenses. Why? Because there’s a strong chance you’ll need it—60% of people will need some form of LTC in their lives.² And it can be costly, possibly running into the tens of thousands of dollars. If you’re about to retire or have already retired, consult with a licensed and qualified financial professional about your options for this critical line of financial defense.
Pay off your mortgage! And, if you’ve played your cards correctly, you should be close to paying off your mortgage by the time you retire. Eliminating your home payments may free up a considerable amount of cash for you to spend on your other bills and your retirement lifestyle.
Consider downsizing your home to a smaller property or RV. That is of course, unless you have a huge family you regularly plan on entertaining! But for many, retirement is a perfect opportunity to move into a smaller, easier to manage home.
And if you’re the adventurous type, why not buy an RV? It’s a great way to travel and explore the country now that you’re moving into a new phase of life.
If you’re retiring, it doesn’t mean there aren’t a few key money moves left to be made. Consider these suggestions to be the cherry on top of your years of diligent work and savvy saving!
¹ “68% of Americans do not have a will,” Reid Kress Weisbord, David Horton, The Conversation, May 19, 2020, https://theconversation.com/68-of-americans-do-not-have-a-will-137686
² “What is Long-Term Care (LTC) and Who Needs it?,” LongTermCare.gov, Jan 4, 2021, https://acl.gov/ltc
These mistakes are often avoidable. But a parent who has the best intentions and lacks the knowledge needed to properly manage their finances may not recognize these errors until the damage has been done.
Here are 5 common financial mistakes every parent should be aware of!
1. Not saving for their children’s education. You know the numbers—it seems higher education is growing more and more expensive every year. So the time to start financially preparing for your child’s university years is today. Meet with a financial professional to discuss how you can pay for college without resorting to student loans!
2. Not saving for retirement. Skimping on your long-term savings might be tempting, especially if your budget feels stretched to the breaking point by the basic expenses of providing for your family!
But saving can support your long-term financial position. It gives you a shot to pay for your own retirement, it can reduce the impact of long-term care on your family, and it might even create a financial legacy to leave to your children.
3. Spending too much on credit cards. It’s not just parents. Many Americans overuse their credit cards. But it can be a little too easy to do for parents on tight budgets. Don’t have enough in cash to buy your child a new toy? Just put it on the card!
Unfortunately, credit cards can become a significant drain on your cash flow. And the less available cash you have on hand, the less you’ll be able to save for your other financial goals!
4. Buying a house they can’t afford. Make no mistake—your family needs space. You need space! Just make sure that the house you buy is actually within your budget. Mortgage payments can chip away at your cash flow and reduce your wealth building and education funding power. And don’t forget to factor in the cost of house maintenance before you move in.
5. Buying things they don’t need to impress other parents. You love your kids and want the best for them. That’s what makes you a great parent!
But be mindful of why you buy things for your family. Are you providing for your kids? Or are you simply trying to impress your friends and neighbors? Take care that you put the wellbeing of your family first, not the opinions of others.
If you need help navigating your financial responsibilities, contact me! We can discuss strategies that might give your family the upper hand they need to thrive.