Major Expenses that Happen During Retirement and How to Prepare

What do you need to include in the retirement expenditure budget? This is a daunting question every retiree must ask themselves. The future remains uncertain, and consequently, plans may not be relevant by the time you retire. Employee Benefit Research Institute (EBRI) found that many people do not try to calculate how much they will need in retirement.

Therefore, it is of paramount importance to prepare early. There are several expenses you need to budget for in retirement. The Bureau of labor statistics (BLS) lists the following as the significant annual expenses for older families.

• Housing
• Transportation
• Food
• Pension and social security
• Healthcare
• Entertainment
• Other expenditures – include personal care products, alcohol, tobacco, education, life and personal insurance, reading among others.

Note that old people from the age of 55 to 64 years tend to spend more than older people from the age 65 to 74 years of age.

How to prepare

There are five steps needed to get your retirement plan on track. Additionally, there are unknowns in the retirement plans, but it should not scare you from making one anyway. It is better to be prepared than to be caught off-guard without a working plan in your old age.

1. First of all, consider your current budget

This is the most challenging step in preparation. However with a current budget then its easier to use it for future projections. If you do not have an existing monthly budget, then make one by recording your monthly expenditure.

For variable expenses, like electricity bills, use the average yearly bill by adding up all monthly bills and dividing the total amount by 12 months. For bills requiring payment other than monthly subscription, like auto insurance payment, divide the total amount by 12 to get monthly expenditure.

2. Secondly, establish your likely expenditure in retirement

Write down the expenses you might incur during retirement. Deduct paid off debts. Be as real as possible. You should include fun items like golfing, eating, travel, ballroom dance lessons, and many more. Then, add up these expenses to your monthly bill. Additionally, you need to use projected spending to calculate estimated expenditure during retirement.

In projected spending, multiply your current income with a certain percentage to give you the retirement needs. However, it is not accurate, but it gives you a rough estimate of your needs during retirement.

Moreover, you should also consider the 80 percent rule which states that you should have a plan of replacing 80 percent of your current income in retirement. You can be more conservative by using the 90 percent rule or 70 percent rule if you feel won’t spend as much.

Further, with your retirement money stashed away you can use the four percent rule which states that you can withdraw four percent of your saving yearly without running it dry.

Finally,
3. Evaluate your retirement planning progress – by instituting benchmarks.
4. Once you decide what to do, Create your plan and make changes if necessary.
5. Revisit your plan often, like yearly, by monitoring your finances.

Lending a Friend Money Can Ruin Relationships

Some would say, lending money should be left to the banks and other financial institutions. However, when a friend or family member is in need, it is oftentimes difficult to turn them away. As a friend, or a genuinely caring and generous person, you may be the type who have no problem helping people out with money in cases of emergency with a promise to pay it back in a reasonable period.

Lending money to friends can become a volatile situation. Once you cross the line and begin to lend money to your friends, you can ruin the relationship altogether, depending on the circumstances of course. There are many scenarios where it may not affect the relationship at all, specifically, if the money is paid back each time, in the exact amount, and the agreed upon date. However, the relationship may begin to suffer if these deal breakers begin to occur over time, more frequently, and with no respect or regard for the agreement to pay the money back.

A friendship is generally based on trust, honesty, support, and reliability. You want your friends to listen well, be there for you in times of stress, need, or simply as a companion. Friends who run into money issues occasionally are easier to lend to than those who seem to always have problems. There’s also other factors such as the type of money issues your friend encounters. Is it the same issue over time? Perhaps, they overspend, or shop too much and end up short and can’t pay their bills? Did they lose a job, go through a divorce, or became ill and lose work wages? You see, there are many legitimate financial issues that can occur at any given time, to literally anyone.

However, if you are constantly bailing your friends out and the money is not paid back in a timely fashion or even with a good explanation, then this is when the relationship may suffer. You may begin to feel used or disrespected. After a long time of waiting to be paid back, your communication with your friend may even suffer, now with the added tension of trying to avoid the “money” topic. The friend who borrowed the money may feel guilty and start avoiding you if they can’t pay you back as promised. They no longer return calls, texts, or emails. The trust in the relationship is now gone and until the money situation is resolved, or until that strain no longer exists, the contact with your friend, soon decreases.

Finally, before lending money to a friend and possibly ruining your relationship, consider two simple things; can you afford to simply just give them the money instead of loaning it? Think about it as charitable giving. If you will not need the money back anytime soon, no matter how much your friend promises to return it, why not just let them have it as say, a gift? The second thing to consider, is a contract the better way to handle the loan? This is ideal for large amounts and for those friends who need an agreement to keep them honest and on track. For example, a loan agreement is the best of action for a business venture or partnership that relies on future earnings or income in order to pay the loan back in full.

Always remember that lending money to a friend falls into a different category then say paying for lunch or for concert tickets. Basically, it can be a bad idea and destroy your relationship once you realize you made a financial mistake and that the loan itself, indicates that the person is now indebted to you and has made a promise to pay it back. When it doesn’t happen as planned, the next step or how you communicate will determine the path of your relationship.

Most Important Pillars of Managing Personal Finances

For many people, money is a difficult area to navigate. Sometimes it’s good to step back and take a hard look at the basics. In order to do so, we’re going to break down three of the most important pillars of personal finance. They include monitoring, educating, and saving. These three areas are at the core of everything to do with money and can help you get into a money-savvy mindset.

Keep a Watchful Eye

The only good way to know what’s happening with your finances is to monitor them. It’s very easy to lose track of spending when not checking in on your accounts. Luckily, most financial institutions make it simple to access accounts and monitor your activity. Online banking services and smartphone applications are a vital tool for everyone’s personal finance. The more you know about your money, how you’re spending it and identifying problem areas, the better equipped you are to improve your financial status.

Stay Educated

Achieving personal finance goals takes a fair amount of planning, understanding of the market, and general know-how. In order to reach a place of stability, it’s imperative to soak up as much knowledge as possible. Learning everything from effective budgeting to best investing practices will only help you succeed. Devoting time and energy to increase your knowledge is one of the best things you can do for yourself and your wallet.

Save Aggressively

Increasing personal wealth comes down to how aggressive of a saving plan you have. There are two things to keep in mind when it comes to saving. The first thing is to save as much of your income as possible. If this means you live like you’re broke – do it! Surviving on less money is excellent motivation to continue building up your savings. The more you save, the easier it becomes to reach financial independence. The second thing to keep in mind is how you save. The best option is using an account that makes it difficult to withdraw money from unless you absolutely need it. Having an account like this will remove the temptation of dipping into savings for unnecessary spending.

Staying Financially Fit

You might not think that you need to check in on your financial status when you’re just starting out in your career. But looking at where you stand financially can have both immediate and long-term benefits. This blog post will give you a few tips for staying financially fit.

Go Over Your Statements
Go over your statements whenever you receive your bills in the mail, immediately review them. By doing this, you’re taking one of the few opportunities you have to catch mistakes and fraudulent activity. You should never just pay your creditors without going over your bills with a fine tooth comb. Since most banks have stopped mailing statements to their customers, this bit of advice goes for your electronic statements, too.

Know Your Assets and Liabilities

The items and property you own, or assets, and your debts, or liabilities, together determine your individual net worth. Assets could include some of the following:

  • Bonds
  • Cars
  • Cash
  • Collectibles
  • Real Estate
  • Retirement Accounts
  • Savings
  • Stocks

Liabilities might include some of the following:

  • Auto loans
  • Credit card debt
  • Mortgage
  • Other bills
  • Student loans

On an annual basis, calculate your net worth by adding up all of your assets and subtracting your liabilities. If you just left college with student loan debt, your net worth is negative. It’s not necessarily something for which you need to be ashamed. You’ll just have to work hard to pay down the debt.
Balance Your Checkbook
Balance Your Checkbook Even though most of us rarely write checks anymore, we still need to reconcile every cent that we spend on our credit and debit cards. Prevent those nasty overdraft fees by doing the math as often as possible.

Look Over Your Credit Report
Look Over Your Credit Report In your credit report, you will find information about your credit accounts and your payment history. If you want to qualify for loans at great rates, you will need a high credit score. Experts recommend that you look at your credit report at least once a year to ensure that all of the information on it is correct. You should do another check before you apply for big purchases like vehicles and houses. You can ask for a free credit report from each of the three credit reports – Equifax, Experian, and TransUnion – once every 12 months.

How to Become Financially Stable In College

As soon as many college students begin classes, a number of their student loans hangs over them like a cloud. Constantly thinking about the debt that you are building up can lead to a number of negative consequences. To reduce your stress, here are several tricks that you can use to become stable financially while pursuing your education.

Look For Discounts

As a college student, you are probably going to be on a budget. You should pursue every coupon and discount option is available to you. You may find some valuable deals if you do your research.

Manage Your Time Wisely

This strategy can help you save money. Setting up an organized routine for when to complete your schoolwork will give you more time to apply for jobs. Managing your time wisely will allow you to balance your schoolwork, employment responsibilities, and your social life.

Try To Cut Down On Your Cafeteria Trips

The eating expenses will quickly add up before you know it. You can save money by pre-packing a lunch or pursuing cheaper eating options. It may be in your best interest to avoid purchasing that expensive pizza every few days.

Stick To Your Budget

Create a budget that gives you room to spend some money, but still allows you to save money as needed. You should have the freedom and flexibility to decide how much money you would like to spend.

Apply For Side Employment

With the tight time management strategy in place, you should be able to find some time throughout the week to work. Take some time to do your research. You can find part-time employment and still adhere to a strict study schedule. It just depends on what you are looking for and your skill set.

Think Of Non-Traditional Strategies

There are plenty of success stories about college students creating their own businesses and becoming successful. You should also look at selling some of your old items, whether it’s movies, games, or any other electronics.

Don’t Give Up

You should remain positive no matter what the outlook is. Being a college student brings different financial challenges. More than likely, you don’t have enough money for food and all of your finances are tied up in paying for your education. While things may get tough, never allow your situation to overwhelm you. There is always a solution to your problems. Don’t be afraid to ask for help while you are trying to figure out how to manage your finances.

Hybrid Advisors Making a Big Shift

Online Financial Advisors

The world of personal finance is changing rapidly. Many people want better financial help with the issues that they have in life. One of the most important things to plan for is retirement. Few people are saving up enough money for retirement, and you need to make sure you have a plan in place to do so. There is a huge shift going on in the industry today. In the past, financial advisors were in your local area and you went to meet them in person. As technology continues to increase in this area, a lot of financial advisors are going online. This trend is expected to increase over time.

Financial Advice

A lot of financial advice is really simple. The issue for many people is actually following the advice. Over the years, a lot of people have had issues with their finances for a variety of reasons. If you have a lot of debt, it is going to be really hard to invest money for the future. Some people are having to work multiple jobs just to pay the bills. Whatever your situation is, you need to have a plan that makes sense for your future. Working with a financial advisor can be a great way to have success in this area over time.

Robot Advisors

A new trend that is emerging in the industry is robot financial advisors. Although this sounds like something out of a fiction novel, this is actually happening across the industry. Financial advice usually comes down to a calculation, and this is something that computers are great at. Need to know how long it is until you can retire? A computer can spit that information out for you quickly. This is one of the reasons that the industry is starting to move in this direction. In the coming years, it is expected that robot advisors will continue to gain market share from typical investment advisors.

Final Thoughts

Overall, your personal finances are an essential part of your life. If you struggle with your finances, it is hard to accomplish the things that you want to in life. In addition, planning for retirement is difficult if you do not have a professional on your side. One of the biggest trends in the industry is the rise of automated online advice. A lot of people really like the simplicity of working with a person or robot online with their financial plans.

How to plan an inheritance

When you think about providing an inheritance to your loved ones after your passing, you may have high hopes that the funds will improve their quality of life for many long years or even decades. However, cases of people obtaining a windfall of cash, such as through lottery winnings or an inheritance, have been well-documented. There are numerous instances where individuals have blown through millions of dollars in a very short period of time and who are left in dire straits for the remainder of their lives. There are a few steps you can take as you plan an inheritance that will prevent this from becoming an outcome for your loved ones.

Determine Your Intentions

As a first step in planning an inheritance, it is important to determine who the funds will go to and what goals you want to achieve by giving them the money. For example, you may have adult heirs who have proven their ability to manage their finances, and you may be comfortable giving them a lump sum of cash. Perhaps you have younger heirs who have been frivolous with their money. Consider taking your heirs to financial planning meetings so that they are aware of your intentions and can learn how to use the money once they receive it.

Set Up an Inheritance Structure in Line With Your Plans

With each heir, you may have a different financial plan. Some heirs may receive a lump sum of cash. Minor heirs may receive funds through a trust that is established under the supervision of a parent. Others may receive an inheritance through an annuity that doles out cash on a monthly or quarterly basis.

Create Financial Guidelines

There may be no requirement for your loved ones to follow your guidelines after they have access to the funds you provide to them. However, you can create guidelines with the best intentions, and some heirs will follow your instructions. For example, you can instruct a younger heir to invest at least a portion of the funds they receive each month from an annuity. Explain that the investment will provide additional wealth after the inheritance payments have ceased.

You may not be able to fully control how your loved ones spend their inheritance after your passing. However, you can create safeguards and controls through how the inheritance is provided to them. You can also educate them about finances in your living years and provide instructions for the funds after your passing. By taking these steps, you can create an effective inheritance plan.

How to be an Innovative Advisor

Financial advisors who are innovative in their approach are the ones who makes the biggest impact for their clients. The reason being is that creative solutions often make for greater returns and a more efficient way of working. Staying ahead of the curve is also refreshing for clients. Keep your business growing by learning how to implement these innovative practices.

Adapt to Current Technology

More financial advisors are integrating the newest technology into their firms. It’s important to keep up with technology because consumers are have come to expect it. New technology is also a way to increase how efficient the business is overall.

Stay on Top of Changes

It’s one thing to come up with innovative solutions, but it’s a whole different ball game to actually implement them. Stay on top of the changes you commit to because your clients will thank you. All the good ideas in the world won’t bring in more clients and reduce churn unless they are acted on.

Restructure Messaging

The market and consumers will be the ones to signal a need to restructure the messaging of your company. For instance, a few years ago when the market was in a different place, clients needed to be reassured of the safety of investments and the importance of protecting wealth. Today, it’s not the same way. Customers would rather hear about how a firm can secure and grow their wealth.

Prepare for the Future

Being innovative means you’re always looking forward. If you can do that, you’ll be able to prepare for the future much easier. The financial world is at the beginning of a major transfer in wealth across two very different generations. In order to keep up with the changing landscape, it requires you to prepare for the future before it’s here.

How to Spend Your Tax Return Wisley

Tax season is finally here, which means you probably have a long list of things you’re going to buy once you get your return, right? If your resolution this year is to be more confident and wise with your money, then you may want to make sure you’ve done these things before you actually go blow your cash. By all means, we all deserve to treat ourselves, however, make sure you don’t go on a spending spree. Here are the best ways to spend your tax return after this season.

Pay Down Debt

Your tax return most likely won’t be able to cover all of the student loan debt or mortgage amount you have out, however, high-interest, short-term debt, such as credit cards, could be what’s keeping you down in the dumps. One of the best things you can do to help save your credit score and lift some weight off your shoulders is to pay off your credit card debt. Credit cards are sneaky little creatures as they tend to have a high interest rate that could be what’s keeping you from paying off your total balance and lowering your credit score each month. If you have multiple cards, begin by writing out your balances for each one, along with the interest rate. The cards you should be paying off first are the ones with the highest rate. You can also use your tax return to split it up in multiple monthly payments to show that you are consistent each month.

Open Emergency Funding

Over 66 million Americans don’t have an emergency savings account. This is quite possible the most critical point in the U.S. debt crisis. Many believe that a small amount of cash, won’t help them when a true emergency comes along, however this is wrong. The slightest bit of savings could help you cover emergency expenses in such a case. Starting an emergency account with your tax return can actually help you save more money each paycheck, compared to trying to open an account with no money. By using your tax return to open a cash account, you’ll inspire yourself to contribute more, and you’ll be very thankful for doing this when life decides to take a turn. Although taxes are technically your money being deducted to the IRS, think of it as a yearly bonus that you weren’t expecting to get.

Invest

If you’ve already paid off your credit card debt and have an emergency fund already established, spending your money on investments is a great way to ensure you’re being wise. For example, maybe you’ve been saving for a home and can afford the monthly payments, but not the huge wad of cash that you need for a down-payment. Using your tax return could be the solution to your predicament, only if you’re really ready for the purchase. If you don’t already have a retirement plan set in place, taking this extra amount of cash could also be a great way to start one. Just like starting an emergency savings plan, starting a retirement plan with cash will convince you to contribute more money each month. Another way to invest your hard earned return is in yourself. Maybe there’s a skill or class you really want to take, but it’s too costly. You can never go wrong in investing into experiences, as if will help you grow into a better person.

Discussing Family Wealth

The topic of family wealth often brings a fair amount of apprehension with it. Openly discussing wealth feels like a taboo subject and one that should be avoided at all costs. The talk may feel daunting, but it’s an important one to have with your kids. If they are not prepared to inherit a large sum of money, then they are bound to make mistakes. Here’s a few tips on starting the conversation and what the younger generation needs to know about the family’s wealth.

Rip off the Band-Aid

The first step to opening a money dialogue is initiating the conversation. It may be uncomfortable and family opinions may vary, but no matter what, the discussion needs to happen. It will be easier on everyone if the topic is laid out on the table at once and intelligently discussed. At the end of the day, you will feel better for speaking about it and your children will feel much more prepared for the future.

Use Teachable Moments

The inheritance and financial planning conversation will not feel as daunting if your children are exposed to the idea in small, real life increments. These teachable moments will feel less like a hard and fast talk about the family money and much more about the idea of money. For instance, the birth of a new family member is the perfect time to organically discuss inheritance. Your children will understand inheritance, but may not directly apply it to themselves yet. That’s perfectly okay! At the very least, the building blocks will be there come time for the “big talk.”

Keep the Dialogue Open

The money talk should not be an open and closed conversation. Family wealth is complex and evolves over time – so should your conversation. Closing the door after the initial conversation will cause confusion and potentially leaves a lot of questions unanswered. The transition of wealth is a delicate matter and should be treated as such. Be an open book for your children and let them openly discuss wealth. They will develop ideas on their own about how to best use the family wealth and you need to be open to that. By doing so, you ensure that less mistakes are made down the line. Trial by fire, especially with money, is not always the best way to learn.