Plan for the Future

How to Prepare for Retirement

Will you have enough money to live the lifestyle you want when you retire? That’s a hard question for most people to answer I usually hear that I don’t have enough money to live today, so how can I possibly save for my future?

Let me start by giving you some history of how retirements worked When our parents were working, they worked for one company their entire career For that loyalty, the company took care of them in their retirement Once your parents retired, they would collect a monthly pension from the company for the rest of their lives That, with the added benefit of social security, paid for their life style.

Then companies changed and 401K’s and 403B’s were introduced These are savings plans that are offered and sponsored by the company you work for You, as the employee would designate a portion of your income to go into this account pre tax and the company would match a certain percentage An example of this would be for each dollar the employee put into the account, the company would match that at a percentage up to a maximum amount Companies have almost eliminated the pension in favor of this savings plan.

This has altered your retirement and your financial future, along with the fact that employees don’t typically stay with one company for the entire career Instead of being set with a pension, you now have to be proactive and plan for your own retirement.

If you want to live the lifestyle that you are accustomed to, you have to do two things prior to retirement First, you need to save for your future by making funding your retirement a priority You need to find the money to be able to save for your future Second, you need to enter into retirement with minimal of no debt Someone who is living in a home that has no mortgage and has no other debt (car payment, credit cards etc), will need far less money per month, than someone who does.

Bottom line, you need to find the money today to save for tomorrow.

A Mortgage and A Divorce: Not a Love Story

In a divorce, the best way to handle the mortgage is to refinance. This is to protect both parties. If you’re making the payments, the loan should be in your name. If your ex is making the payments, then take your name off the loan.

Why is it so important? Because your mortgage company considers a divorce decree to be a personal matter – not a legal matter. A divorce agreement can’t prevent foreclosures or repossessions. It also can’t prevent your ex from ruining your credit if he or she refuses to make payments. The loan document is all that matters.

What if the divorce decree put your ex in charge of mortgage payments, but he or she is refusing to make payments or agree to a refinance. You could always make the payments yourself. That would save the home and your credit. The courts will (eventually) order your ex to reimburse you, just don’t expect it to happen anytime soon.

Sometimes, the biggest income earner is ordered to pay the mortgage even if that person no longer lives in the home. This is more common when children are involved. In that case, both parties may be reluctant to refinance the mortgage, because they feel the original mortgage agreement gives them control over the other person or the home. This is a bad situation for everyone. If the person left in the home can’t afford the payments, and the person out of the home refuses to pay… then you could lose your biggest investment.

If you can’t agree to refinance, then sell the house and move. Regardless of how much you love the home, or the idea of your kids living in it, it is best if both parties move to a more affordable home than to endure the continued heartache of credit problems and payment disputes.

Finances: Choose the Right Relationship for Your Money Type

When people are looking to get into a relationship, they usually look for someone with similar interests and values. But, their shared interests rarely go as far their wallets.

People tend to attract opposites when it comes to money. Spenders attract savers and savers attract spenders.

With Valentine’s Day this weekend, let’s look at what you should be asking yourself so you can attract someone with similar money values.

First, you need to know what money type of person you are.

Are you someone who…

Has a budget or spending plan?
Maps out what your financial goals are and how to get there?
Carefully considers whether you need an item before buying?

Are you a spender or a saver? An impulse buyer or comparison shopper? Are you somewhere between the two extremes? You need to figure this out before you get into a relationship with someone. Then, you need to find out the other person’s money type.

If you don’t, you’ve doomed your relationship to endless arguments about money. If one of you has come into the relationship with great credit, no debt and their finances well thought out, and the other person has substantial debt with past due accounts and no savings, then that is a sign that you have very different philosophies about money.

Money arguments can destroy a relationship no matter how many similar interests you share. You need to add “money philosophy” to the list of qualities you’re looking for in a relationship. Money and credit will often be the determining factor in whether you can reach your dreams and survive unexpected emergencies.

Good Credit Marrying Bad

Reader Question: I have excellent credit and have worked to keep it that way. I will be getting married to someone who has debt and past tax liens, will this affect my credit?

Fortunately, credit reports are by individual. A person with good credit will not be affected by their spouse’s bad credit UNLESS they have joint accounts.

For example, if you purchase a home together, the mortgage will be a joint debt. If your new spouse is handling the bills and often forgets to pay your joint mortgage on time, then his late mortgage payments will show up as late payments on your credit report. This applies to any other debts that have in both names. Any activity will reflect on both of your credit reports (good or bad).

Could his older tax lien prior to your marriage and mortgage come back and hurt you? Yes, I believe it could. If you purchase a new home together as I described above, your spouse’s old tax lien could be put onto your new house. This would definitely affect you. I strongly advise that you check with a real estate attorney before purchasing a home together.

Married Finances: Should Two Become One?

Weddings are an emotional celebration. We love the idea of a bride and groom starting a new life together. We use words like “two becoming one” or “sharing your lives as one,” meaning that everything will be shared as though the couple are no longer individuals. I believe this puts a lot of unnecessary sentimental pressure on a couple to share all their finances even though it’s not always necessary, or even wise, to do so for every single account or property.

So, how do you merge two separate financial lives? There are many successful ways to do this. Some couples keep their individual incomes and expenses separate by having separate bank accounts, credit cards etc. Then, they have a joint expense account for their household bills that they each put money into. Sharing the joint account can be as simple as having each person responsible for different bills, or figuring out the bill totals and having each put in their half. Some people base the joint account total on a salary percentage (this works great when one spouse earns more money that the other). And, of course, some people merge everything and all accounts are joint.

You need to think about what type of financial people you are. Here are 3 questions to think about that will help you decide (and could possibly save some financial squabbles):

Are you a saver and your spouse a spender? Having one person be the fall back for financial emergencies can be challenging financially and to the marriage.
Are you both spenders? What will happen when there are no reserves for emergencies?
How do you each handle bill payment? Are all your bills paid on time? Do you have bills that have slipped through the cracks?

Answers to these questions can be tricky, but worth the discomfort. Proactive thought can be a financial life saver for your future. Double check your answers by looking at your account statements and credit reports. You may not be as good at finances as you think you are, or you might be better than you thought. Discuss your habits with each other, as well as any outstanding issues that could affect you both.

I am a firm believer that you both should participle in your finances. You have joint goals in your future, so you should do the financial planning for this together as well. Don’t let the responsibility fall to one person. If something were to happen to the “responsible” one, then the other party would be left completely in the dark, not knowing anything about the accounts or how to deal with them. I have seen many situations like this. It may seem kind, or convenient, to handle the money if your partner doesn’t know how, but it’s not.

Whichever way you choose to handle your finances as a married couple, make sure it’s a mutual decision based on real knowledge of your habits and goals.