With rising prices and ever increasing consumer demands, it becomes more challenging for many individuals to live below their means. Credit card bills, keeping up with the Joneses, and other unnecessary expenses are among some of the reasons it is exceedingly hard to stick to a budget. Some find themselves unable to spend less than the amount of money they are able to make each month. Here are a few suggestions to help you live below your means and improve your financial health.
The sad truth is that most Americans are not properly prepared for retirement. According to a 2019 survey, 64% of Americans expect to retire with less than $10,000 in their accounts. Whether this is a result of medical expenses, poor investments, or outstanding debts, you must remember it is never to late to plan for retirement. It is also possible to start over and rebuild your nest egg. Here are five things you can do to get back on track when you have lost your savings.
5 Ways to Help You Plan for Retirement
1. Ramp Up Your Savings Plan for Retirement.
While it may seem obvious, the first step to plan for retirement after you have lost your savings is to begin again. You must also be realistic and admit that your current savings plan is likely not enough to rebuild your nest egg. It will require a great deal of sacrifice, discipline, and lifestyle changes to regain what you lost.
First, carefully evaluate your monthly budget and see what you can do without. This means cutting out unnecessary expenses like entertainment expenditures, buying the latest electronics, and going out to eat. Create a minimum budget where you are only spending money on what you need to survive. Once you know what you need to meet your monthly bills, put every extra penny towards your retirement funds. Additionally, utilize employer-sponsored 401k plans and max out your IRA contributions. This includes catch-up contributions for those over 50. Make no mistake; it is difficult to do without the things you enjoy. However, supporting yourself after retirement is a much more important goal.
2. Delay Your Retirement.
Another option is to delay your retirement date. Not only does it allow more time to save, but also to see more gains on your investments. If you are still living off your wages, it will postpone when you must begin drawing from your retirement funds. Furthermore, it reduces the number of years that your savings must sustain you. Working a few more years may prevent you from running through your savings too early.
Prolonging your retirement also increases your Social Security benefits. You are able to claim retirement benefits from 62, but you can maximize the amount if you work until 70. Your monthly check increases approximately 7-8% every year you hold off retiring. The income you earn during those years is also calculated into your monthly benefits which could increase the amount you receive. Unfortunately, there are no increases beyond age 70. Keep in mind that most workers retire sooner than expected due to layoffs, health issues, or caring for a family member or spouse. Although this is a good strategy to help plan for retirement, don’t bank on working till 70. You never know what surprises life may throw you that could put your savings plan off course.
3. Adjust Your Retirement Lifestyle.
Another hard pill to swallow after losing your savings is that you may not be able to live as lavishly as you had planned for retirement. You must create a new retirement budget by trimming the fat. This means tightening the purse strings and finding ways to lower monthly expenses after you retire. Some suggestions would include downsizing your home, eliminating travel plans, or moving to an area with a lower cost of living. Living on a restricted budget will help you stretch your savings and catch up to your retirement goals.
4. Understand How You Lost Your Savings.
Another important step when starting over is to understand where things went wrong. Some matters are beyond your control, but other lost their retirement savings due to poor investing decisions. If this includes you, you should evaluate your investing strategy and examine why your portfolio suffered such extensive losses. If you invested too heavily in one area, diversifying will reduce future market exposure and personal risk. Many are tempted to invest more aggressively to regain their savings, but this could backfire and cause a second major loss.
5. Seek Professional Advice.
The most important thing is to remember there is always hope. However, if you are unable to find your own solution it is very easy to fall into despair. If you feel like there is no way out, seek professional advice from a financial planner. They will assess your situation, explain the options available to you, and find solutions you may have overlooked. Also, choose someone who is fee-only. This means they only earn a commission if you make money. It may eliminate any concerns over conflicts of interest or doubts that they are making the best decisions for you. Even when you must go back to square one, there is always a path forward.
When seeking to continue to build your financial portfolio, adding investments is one idea that many choose to pursue. One way that such investments are typically made is by buying part of a business. Buying into an existing business means that you become one of the main stakeholders, owning a portion of the business itself. While this is something that is done frequently, business owners are often unaware of the many factors that are related to making this significant financial decision. Here are a few serious considerations before buying part of a business.
The Rewards of Buying a Business
Of course, buying part of a business may sound overwhelming, but there are many factors that make it a beneficial decision.
- There is an established company client base. One of the benefits of owning part of an established business is that the client base is already set. A new business has to attract customers and build a group of returning clients. However, one that is already functioning will have this taken care of. This will allow the business owners to focus more on customer service, client retention, and increasing the number of clients.
- You have greater ease of expansion. If you happen to buy part of a business that is looking to expand, it will be much easier with a company that has already made a name for itself. Look to see if the company has a good reputation and gets good feedback from its clients. It’s also easier to get an unsecured small business loan for expansion when the company has a proven track record of sales.
- You can focus on business improvements. You may like challenges and, thus, purchase part of a business that requires a few changes to improve. Luckily, the company should have a plan of operation in place. Then, you can focus on how to improve it for the company’s overall success.
- You have access to current owners’ knowledge. One of the greatest advantages of buying part of a business is that the current owners will be very familiar with the company. They can show you what has and hasn’t worked for business operations thus far. You, equipped with this knowledge, can then come up with innovative ideas to benefit the business.
The Risks of Buying a Business
As there are many pros to buying part of an existing business, there are just as many risks of shared ownership of a company. It is best to keep these factors in mind as you make your decision.
- You disagree with the current owners’ practices. It would be an absolute nightmare to purchase part of a business where the owners mismanaged funds. Upon learning more about a business you may want to purchase part of, be sure to research all financial records.
- The company has a bad reputation. Good use of customer feedback is to learn how the company fares amongst past clients. A company with a bad reputation will likely struggle with being successful.
- It has high turnover. In addition to clients being indicative of a company’s progress, the employees can serve the same purpose. It is a red flag if there have been numerous employees during the business’ lifespan, especially due to multiple resignations. This would be something to keep in mind as a problem area if you decide to take on the company.
- There are differences between owners. If the current owners are not open to change or new ideas, you could run into difficulties. You may meet resistance trying to take the company to the next level in terms of expansion, increasing profits, or employee and client satisfaction.
Checklist Before Buying Part of Business
Before you make any large purchases or investments, you should always do your homework. The Westmoreland Checklist of Due Diligence provides a great set of guidelines as you vet out potential investment options.
First and foremost you want to make sure the company is in good standing with government, financial, and community organizations. This includes issues about all the companies operations. It means you should look at all the company’s financial information. This includes everything from permits and tax compliance to its reputation with employees and clients.
The choice to buy part of a company should only be made after carefully considering all factors, good and bad, that are involved. It can also be helpful to seek the help of a business adviser who can answer your questions and give guidance as you take this big step.
We live in an on-demand world. We expect everything instantly, whether a WiFi connection or a wire transfer. More than ever, institutions are surging to meet the demand for fast and friendly financial services with digital banking. Continue reading
Becoming wealthy is a goal many of us hope to achieve in our lifetime. Some want to be wealthy to have unbelievable lifelong experiences or to validate success or afford anything they want like expensive cars and gucci sunglasses. However, the goal is often dreamed of but rarely achieved. Ken Fisher, the author of The Ten Roads to Riches, discusses the many ways people can achieve wealth throughout their lifetime, ten to be exact. All of these roads have proven to make someone independently wealthy in their lifetime. Some are more common than others. So, if the question of how to become independently wealthy has crossed your mind, I will discuss two of the ten roads Ken illustrates in his book.
What Does It Mean to Be Independently Wealthy?
To determine whether you are independently wealthy, you must ask yourself a few basic questions. First, do you rely on financial support from anyone? If not, then consider yourself financially independent. Second, do you depend on your employment income? If you answer no to the second question, you would be considered independently wealthy. When you have become independently wealthy, you have either saved enough or earn sufficient passive income to give up your day job.
How to Become Independently Wealthy: Save and Invest Wisely
I usually sign off my posts with a simple phrase: Budget Smart, Invest Wise. Budgeting allows you to allocate your funds to various categories. Hopefully one of those categories is savings. Whether your savings vehicle is an IRA, Roth IRA or other type of investment, saving money is critical to building wealth. However, saving is only half of the battle to building wealth this way.
The other key ingredient is investing wisely. Investing wisely means creating a smart investment plan. This may be with a financial advisor or through acquired knowledge that creates a return on your investment. For example, I have found that investing on a monthly basis in a mutual fund is of most benefit to me because it covers the broad range of the U.S. Stock Market. This investment, although it has risk involved, prevents me from being susceptible to the failure of one company or one sector of the market. Saving and investing wisely is the road most traveled. But, it also provides the greatest chance of reward.
How to Become Independently Wealthy: Invent Income
Inventing income can cover a wide spectrum of earning additional money. For example, if you are a songwriter or musician, you can create an ongoing stream of royalties from your lyrics or music. If you purchase a rental property, you could turn it into a cash flow positive stream of income. The possibilities are endless. Maybe you have a specific skill that people are willing to pay you to teach them. Perhaps your area of expertise at work can lead to consulting other companies on the side. Do you have something you’re passionate about that you can create into a blog or website and charge for ad revenue? Many of us have the tools, knowledge, and talent to create additional income. However, do you have the drive to reach your goal?
Becoming independently wealthy or successful all boils down to the level of commitment. If you are committed to becoming independently wealthy, then you can find a way. Some individuals, like Bill Gates or Mark Zuckerberg, created an enormous amount of wealth. Maybe you want billions like these company creators. On the other hand, maybe you will be satisfied with millions or even a million. Only you can determine what being wealthy is to you.
- Personal Finance: Reasons To Start Investing
- How to Start Investing When You Aren’t Rich
- How America’s Wealthiest Families Lost Their Money
From an early age, there are several myths and lies about growing wealth that are drilled into our memory. However, some of these misconceptions are based on outdated ideas and limited perspectives. Here is a look at some of the most common lies still being circulated.
5 Common Lies About Growing Wealth
1. Businesses Break Even in the First Year.
There is a common misconception among new business owners that you will be an instant success. However, in reality plans get delayed, unexpected expenses arise, and it takes time to create a market presence. According to Forbes, the timeline to achieve profitability is closer to 18-24 months. Furthermore, 25% of new business ventures fail in their first year.
The truth is that instant success is very rare. While entrepreneurs are waiting for their breakthrough moment, you must be willing to wait it out, lose money or even walk away from a failed venture. Many successful businessman will tell you that had several failures before they finally prospered.
2. All You Need Is a Good Idea.
This mantra lies at the heart of the American Dream that anyone can get rich with the right idea. This is one of those lies about growing wealth that perpetuates itself because there is some truth in it. Unfortunately, not every great idea meets a market need or consumer demand. Not only must the idea be feasible and practical, but it most importantly it must be profitable.
The execution and timing of your business’s launch are also crucial. When you are first finding your legs, expect to invest a ton of man hours to get it off the ground. You should also make sure you have enough savings to cover your bills and give yourself a cushion. This will allow you to breathe a little as you wait to gain a foothold and break even.
3. You Need High Returns and Savings to Grow Money.
Another myth about growing wealth is that you need high returns and savings to grow your wealth. However, most financial planners will tell you that making steady contributions is a more efficient strategy. Consistent savings is more important than stumbling upon a good investment opportunity. But, don’t ignore a good opportunity when it comes around.
This is also a great lesson to pass on to the next generation. Remember, it is never too early to begin saving and investing. Time is a valuable asset; the sooner you begin the more money you earn from compounding interest. Even if you start small, you can let your money begin working for you.
4. You Need a Loan to Start a Business.
One of the greatest pitfalls for potential business ideas is this idea that you need a loan to start a business. While some entrepreneurs have a significant amount of startup capital, most just start where they are at and build from there. Instead of quitting your job and focusing solely on the new business, perhaps it is wiser to keep your day job. This will provide a safety net while you establish yourself. Once your business can sustain itself, then it may be time to consider making it your sole source of income.
5. You Can’t Get Rich Off Your Salary.
Another lie about growing wealth is that you will never get rich just off your salary. Although it may be difficult to build enough savings for retirement on your salary alone, you can begin using it for steady investments from an early age. If you invest small portions of salary, over time it will grow exponentially. The key is to make consistent contributions at regular intervals to ensure steady, continued growth. Diversification will also protect your nest egg and mitigate long-term risks.
Final Thought About Growing Wealth
When you are making important decisions about your finances, consider your sources. Advice is freely offered with the best of intentions. However, you should take time to do your research and learn to decipher fact from fiction. And remember, when in doubt you can always seek out professional advice to find the best ways to grow your personal wealth.
- How to Use Your Home to Start Building Generational Wealth
- One Year to a Higher Wealth
- Loans for Small Businesses; How Entrepreneurs Can Grow Their Businesses While Maintaining Ownership
Many people ask themselves if they need someone to help them manage their finances. This is a very personal decision with no universally correct answer. However, there are some advantages to hiring a financial advisor vs managing your own money. Conversely, there are also benefits for those handling their own portfolios. If you are uncertain which route is best for you, consider seeking some professional expertise.
What Do Financial Advisors Do?
“Financial advisors play a key role in helping you plan and attain your future financial goals. They will help you determine how much to save for retirement or family planning and choose the best accounts for you. Furthermore, a good financial advisor will ensure you have appropriate insurance coverage and coach you through estate and tax planning. Accounting help is what you might get as well.
The reason for hiring a financial advisor is to provide a wealth of information no matter what financial quandary you find yourself in. Part of their job is to educate you in areas where you are unfamiliar. Your financial advisor can help you understand complex issues and lead you to the best solution.
Before they take you on as a client, financial advisors first assess your risk tolerance and goals. Next, you will create a financial plan and a timeline to enact it. Once your portfolio is established they will also make and manage your investments. The greatest benefit of hiring a financial advisor is regular monitoring and updates. This means you will not need to be actively involved unless you want to be.
What are the Benefits of Managing Your Own Money vs Hiring a Financial Advisor?
However, if you prefer to take a more hands approach, there are several benefits to managing your own money. It’s true that not everyone needs an advisor. According to Vanguard about 25% of private investors are considered ‘self-directed.’
Managing your own money helps you take a long-term view of your finances. Since there are no advisors needing to justify your portfolio’s short-term performance, you can ignore the short-term fluctuations. Second, it allows you greater control. Self-directed investors can create specialized plans and make quicker decisions. You will also save a significant amount of money in fees if you don’t have to pay a middleman. When you don’t see the returns you expect, it may be difficult to justify the expense.
Should You Hire a Financial Advisor or Manage Your Own Money?
As mentioned above, hiring a financial advisor vs managing your own money is a very personal decision. Although, it never hurts to do some research or reach out to a professional when you are confused, overwhelmed or afraid of making a serious financial mistake. It’s also not a bad idea to approach advisors when you are stable to make sure you are on course. Perhaps they could suggest new strategies or ways to fine tune your plan.
However, if you are a competent investor and feel you could produce better results, managing your own money may be the better option. You can always reach out with specific questions as well when you need expertise or advice. This is a decision only you can make. Weigh your options carefully and do your research with all your important financial decisions.
A recent study conducted by the Pew Research Institute reported that more young Americans are living with their parents than ever before. While there are a myriad of reason why children move home, the Covid-19 pandemic and rising unemployment rates have been important contributing factors. With no clear end in sight and our financially stability in question, many young adults are looking to save money any way possible.
The Lost Generation
Let me begin by stating that I am a Millennial, born between 1981 and 1996. Let me then preface this first statement by debunking the stereotypes associated with my generation. Many call us lazy and self-righteous, soft and coddled children. We are not ungrateful or demanding. On the contrary, many of us are just trying to survive.
Some have dubbed us “the lost generation.” We grew up in the age before cell phones, witnessed the birth of the internet, and lived through a terrorist attack on home soil all before we graduated high school. Then, we were forced to take expensive loans in order to get a college education only to graduate in the midst of the mortgage crisis. We are now facing a second economic downturn just as we are reaching our prime earning years.
The promises we had been fed about working hard and getting a good education have fallen short. However, living through such adversity has taught us to adapt and be resilient. The majority of us are simply getting by. Like most Americans, we live paycheck to paycheck, and pray not to get sick or lose our jobs right now.
How Covid-19 Has Affected Employment
Although we are better educated than previous generations, we are the first generation to be worse off than our parents. Most young adults have little savings and fewer investments. Few of us can afford our own homes because we have outstanding debts to pay off first. The only thing that keeps this precarious boat afloat is a steady income. Unfortunately, recent closures and quarantine measures have left thousands of people out of work.
During the Covid-19 pandemic, American unemployment rates have skyrocketed. Millennials have been hit especially hard since many hold jobs in the service industry. The reported job losses in the wake of the economic downturn are the highest ever since the Great Depression. These conditions have forced many young adults to move back in with their parents. According to the Pew Research Center, 52% of Americans ages 18-30 live with one or both of their parents. While unemployment is not the only reason for children moving home, it is a significant factor. Furthermore, no one is certain how long conditions will continue or an economic recovery will take.
Financial Stability of Young Americans
Another intangible mark this has left on our generation is an attitude of pessimism and lack of trust in financial institutions. Paying monthly bills has become a challenge with reduced hours and widespread layoffs. The first stimulus check issued by the government offered some temporary relief, but when rent comes due many tenants will be unable to pay. It’s no wonder why many young Americans are living with their parents. Cutting out a monthly rent payment offers a huge financial relief.
The uncertainty of just how long conditions will persist only exacerbates these negative feelings. Conservative predictions estimate that it will take the better part of a decade for the economy to fully recover. This further complicates any plans to pay off debt, purchase homes, invest and retire. I can only speak for myself, but I think it’s safe to say that most young adults do not want to live with their parents. Unfortunately, with little savings and job opportunities it is becoming more of a necessity until we can better understand the full and lasting economic impacts of the coronavirus.
Summer is in full swing. While weddings occur all throughout the year, summer seems to be a popular time for two people to tie the knot. Many of us attend a wedding with the assumption that we are celebrating friends or family. But do we really know the costs behind it all? Weddings have been getting more and more expensive each year. Today, the average American wedding costs approximately $33,900. You may be asking yourself “How is this possible?” I can tell you 3 reasons why weddings are so expensive.
Whether you’re a small business owner or a freelancer, you might find yourself overwhelmed with various aspects involved in running a business. Accounting and invoicing are known for being time-consuming and making managing business less fun. Fortunately, it’s not impossible to keep your accounts in order. Continue reading