It’s a fact that most of us could probably be better at managing our finances. For example, maybe you don’t need to buy that latte every day when you could just as easily make coffee at home. That said, there are small bad decisions like the latte and there are much larger bad decisions. This blog is about making better choices so that you don’t regret it later in life. LiveWell Placements wants you to be prepared to not only enjoy your retirement but also to avoid that worry bubble hanging over your head.
1. Save more
We know that’s not a revolutionary concept but it’s a fact that you will have more if you save more. Many of us don’t have a lot of discretionary income but that doesn’t mean that we can’t find a few dollars to put away every week. Even if you have to start small, do it. That means put your money in a company sponsored 401k plan or start an IRA. And if you’re 50 or over, you can put more aside i.e., $7,000 total in traditional and Roth IRAs ($1,000 more than younger workers) and up to $26,000 in a 401(k) or similar employer-sponsored retirement account ($6,500 more than younger workers).
2. Don’t ignore long term care
While it may not be sexy, you will definitely regret it if you don’t have a plan. Unfortunately, Medicare doesn't cover long-term care. So, if you have to go into a retirement community or need home healthcare, how are you going to pay for it? Homecare runs an average of $4,290 per month (depending on amount of care required) and a private room in a nursing home averages $102,200 annually, according to insurance company Genworth. So, the sooner you can start planning for long-term care, the more time you will have to weigh your options.
Although it might seem risky at times, the stock and real estate market long-term outperform many other wealth building strategies. You don’t need to simply invest in individual stocks because there are other options to consider such as mutual funds, real estate funds, annuities etc. It’s possible to do all the research on your own but it’s usually more efficient to hire a financial planner. Ask for suggestions from friends or family as you want to make sure you find the most qualified person. If you do find someone on your own, ask for references and check them. Speak with some of their clients and get the straight scoop before you entrust them with your money.
4. Don’t spoil the kids (too much)
Look, it’s normal for you to want the best for your children but if you are just scraping by, you absolutely should expect your children to help out when they are old enough. Whether it’s getting a part-time job after school or working in the summer, they can contribute by starting to save money for college or other big-ticket items. It’s almost a guarantee that they will appreciate the value more when they start having to earn it themselves.
5. Create a budget
As boring as it sounds, this is the best way to live within your means. Sit down as a family and go through every one of your non-negotiable expenses like rent or mortgage, electricity etc., then discuss your savings strategy and miscellaneous expenses. It will be challenging at first but eventually it will get easier and you’ll feel better that you know exactly how much is coming in and going out each month.
6. Pay your credit card in full each month
We know this is easier said than done, but when you look at the amount of interest you pay even for carrying a balance for one month, it will make you sick. One of the easiest ways to set a limit is to use only one card. And, shop around and pick a card that has the most advantages whether it’s cash back, a great rewards program, or lower fees. Using multiple cards is the fastest way to get yourself in trouble because it’s easy to overspend when you are using more than one.
7. Monitor your credit scores
A lower credit score can mean paying higher interest rates on credit cards, mortgages, other types of loans etc. Sign up for a credit monitoring service so that you can spot a problem quickly. Sometimes a really simple mistake like forgetting to pay a bill can take a big toll on your score. There is no reason that you should not be taking advantage of the record low interest rates right now.
8. Don’t buy just to buy
It’s really easy to make useless purchases. Why do you think most people don’t have room in the garage for their car anymore? Use the one in/one out rule. If you buy something for yourself such as clothes or something for your home, only buy it after you have decided what you will eliminate through a charitable donation. First of all, it will prevent you from accumulating too much stuff, but it will also force you to think about the purchase long enough to determine if you really need it or not. Sometimes, the fun can be just in the looking. For example, if you’re shopping online, put the item(s) in your cart and keep them there for a few days. If after that time, you still really feel that you need it (and it’s within your budget) then buy it. More often than not, you’ll talk yourself out of it before you make the purchase.
9. Buy a used car
It’s a fact that most cars are worth less the minute that you drive them off the lot. Very few vehicles will ever appreciate so why buy a brand-new car when you can often get a certified used car that will be just as nice but a lot more affordable. The difference in buying new vs. buying a two or three year old used vehicle can often be thousands of dollars in savings. It doesn’t mean that you have to buy a clunker either. Most luxury brands have certified pre-owned vehicles that you can get with some sort of warranty attached.
10. Make sure you’re adequately insured
It’s hard to think about investing in a life insurance policy if you are younger and healthy but that’s the precise time that you should do it. You will get a much better rate by buying one early as the insurance company has much more time to make back their money. It can also be viewed as an investment because you can often cash in an insurance policy or even start getting monthly or yearly dividends if you have paid it off. Check to see if your employer has a plan as well because that could cost less, and you might be able to take it with you if you leave the company.
The bottom line is that most of us will not be able to retire on social security alone. Therefore, it’s important to think about your options and how you want to live in your retirement years. You don’t want to be a burden on your kids and you also probably want to maintain the same lifestyle that you had prior to retirement. So, take these tips to heart and you actually may just be the next millionaire next door!