Tips for Successful Personal Finances
It’s never too late to invest in your future. Whether you are starting out now or picking up where you left off, make a plan.
Real Simple Magazine has information on investing from $5.00 to $50,000. A new year and it’s time to invest in your future.
As we get older one of the things that is always on my mind is retirement. What does it look like for me? Where do I want to live – stay where I am or move? Stay in my current house or downsize (maybe condo)? The list of questions goes on and on for me.
Wallet Hub has come out with a list of 2018 Best and Worst States to Retire To. Where is your state? This might be something to take into consideration in your planning.
We all want to save for retirement, but there never seems to be enough money left over to save. Does this sound familiar?
The first rule of saving for retirement is, if you are offered free money take it. If your employer sponsored retirement plan offers you matching funds, take it. Contributing to a retirement plan through your paycheck is a great way to get started on the path of regular automatic saving. The earlier you start this habit the better off you will become. On the other side if you haven’t done this, it’s never too late to start now. In this case, free money is a good thing
Next you want to manage your debt. Debt is the enemy to your budget, so you want to avoid it at all cost. I am not saying don’t borrow or use credit, what I am saying is to use it wisely. Don’t become a slave to your debt and that you live paycheck to paycheck trying to keep up with your debt payments.
Charge wisely and only amounts that you can pay off easily. If you find yourself with an emergency and you have to borrow money, evaluate your options and make the choice that is best for you and your budget. Pay back the debt as quickly as possible to avoid as much of the finance / interest charges as possible.
Lastly, gratification – are you someone who needs instant gratification? Do you buy without a payback plan? Look at the food cost (groceries, dining out, take out etc.), shopping, memberships, entertainment etc. These are the expenses, that where the instant gratification that can harm your budget. These are the first defense against the leaks in your budget. Plug those holes to have more money for your retirement.
Think about your finances then make a plan to implement these strategies one by one. Once you master one, start the next. Remember that your finances will not change overnight, be patient and remember it takes time.
Remember these?
You used to receive one in the mail around your birthday. If you are younger than 50, you probably threw it directly into the trash. (It’s much more interesting the closer you get to retirement.)
Now you can just go online
To see your Social Security statement, go to www.SSA.gov (If you have trouble remembering it, just think “ass backwards” then “gov”). You’ll need to set up an account with the typical personal details plus security questions to verify your identity. If you want added security, you can take it a step further and use information from a prior year’s W-2.
Why do you want to see it?
Protecting your account
You can add extra security by having them text you a unique code every time you want to sign in online. In a surprise twist, setting this up initially involves them sending you a letter in the mail. It’s a process that takes 5-10 business days, but once it’s done, you can rest a little easier. I recommend taking this extra step, since everyone’s had their information compromised at least once or twice in the last few years.
I would suggest that you check your Social Security statement annually – either a month or so after you file your income tax or around your birthday. The important thing to do is to check it.
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You may not be thinking about Social Security for yourself yet, but if you, or someone you know, has reached age 50 or beyond, there are some things that you might want to consider before making your choices.
When can you receive your full social security benefits?
It used to be that everyone was eligible at age 65. Now, anyone born between 1938-1959 has to use the Social Security retirement age chart to find their exact retirement age. Why? Because in the early 1980’s they decided to increase the age to 67 but didn’t want to hold out on those close to retirement. Instead, they gradually increased the retirement age by tacking on an extra 2 months for each year by birth year.
Based on our birth years, my husband Dave can retire at age 66, but I need to wait until I’m 66 and 10 months. It finally evens out for those born after 1960 – they’re currently holding at age 67.
Of course, to qualify for Social Security you have to meet the required credits. If you work and pay taxes, you will earn social security credits (typically 4 credits per year worked). You need to work at least 10 years (40 credits) to receive your own retirement benefits. Other types of benefits are available depending on your circumstances.
What happens if you start early and take partial benefits?
During the holidays, a group of us were talking about social security and what age we planned to start taking benefits. The group consensus was to start with partial benefits at age 62. Yes, for some that makes sense, but not for everyone.
Consider this: If you take your benefits before your full retirement age, you’ll receive reduced benefits for life (by as much as 25% less). In addition, if you’re still working and collecting social security, you’ll have income limitations each year.
On the other hand, if you delay your benefits past your full retirement age, your benefits will increase both for delaying and by annual cost of living.
The bottom line: What your family and friends do may not be what is right for you. Our family conversation brought up some interesting questions. We decided to speak with one of our investment advisors to understand what was best for us. He had a novel option that worked really well for our situation. You see, the best choice for us wasn’t to take the benefits at 62… or to wait. When Dave turns 62, we’ll be using that advice to start our golden years in the best way possible.
Do your research and make a plan that is right for you and your family.
P.S. This important advice came courtesy of our readers. Thank you, Betsy!
Jill,
Another bit of information is that a wife can collect on her husband (or visa versa) at age 62 and then collect on themselves at full retirement age and not have the reduced benefits for life.
Betsy Thomas
Have you struggled to save money because there never seems to be anything left over? Big surprise! We tend to spend the money we have in front of us. Getting a raise never seems to help, because that money disappears, too. There’s always something we think we need right now.
The best way to grow the money in your savings account is by setting up an automatic deposit from your paycheck. That way you never see it to spend it. If your company doesn’t offer this, that’s not a problem. Have an amount set up to be transferred automatically from your checking account to savings on a regular basis. The benefits here are that you are saving without any effort on your part and the money isn’t in your checking account to tempt you.
Making payments towards retirement doesn’t have to be difficult. Remember what you’re saving money for. You want to retire some day, so you can enjoy some golf and vacations when you get older without having to work.
There are few ways to fund your accounts. If you receive large bonuses, you could simply deposit them into your IRA or 401K and just live within your regular paycheck. That won’t be possible for everyone. Most of us calculate the amount to pay by dividing our maximum contribution amount by the number of pay periods per year. Basically, we’re taking the money out of our paychecks.
The key is to act like it’s not yours to spend. This is your fun money, so you can take the grandkids to Disneyworld and finally take the European cruise, without having to worry about where you’re going to live or how.
Opening your own IRA is a great idea, but do your research first.
Make a few appointments to interview banks and investment companies. What are their fees? What types of investments do they offer? There are many options to choose from.
If your company doesn’t have a retirement plan, then you should start an IRA or a ROTH IRA.
Talk with your investment person or tax preparer to determine what is best for you. Discuss the income limits and the maximum contribution amounts you can contribute based on your age. Have this discussion today.
I can hear you saying… “I don’t have enough money to live today, so how can I think about saving for retirement?” Yes, that might be true, but look at it another way… you will get older and you will want to retire some day. If you don’t start now you’ll have to work the rest of your life.
If you work for a company that offers a 401K or 403B, take advantage of it. If your company offers you matching funds and you haven’t taken advantage of it, then you are turning down FREE money. As an added benefit, the money you contribute is tax free today, and any growth in your account is not taxed until you withdraw it.
Talk to your company benefits person and start an account as soon as possible. If you need to wait for open enrollment, mark that date in your calendar.
If you already have a retirement savings with your company, increase the amount you contribute so you’ll have more later when you really need it.