Personal Finance Planning and Management in your Fifty's and Retirement

There are many Americans who are although in their 60s But have nothing in their savings and may have to work even after their official retirement, to meet their expenses, as it is very difficult to live a comfortable life after retirement, only on the Social security amount. If you are not conscious of your expenses, you may also be one of them. But in this regard you are not alone. According to a new survey from GoBanking Rates, twenty-eight percent of Americans have nothing in their savings accounts and another twenty-one percent don’t even have a savings account

  The Obsessed Thinking : –

In this regard, the people have various reasons to forward, like ;-

–” I get financial security. I don’t get the obsession with retirement

— “ My great grandfather worked until he died, so did my grandfather. I hope same happens with my father”.

  These and similar thinking is self-defeating absurd thinking, But the fact is that a lot of people are not able to work until they die, even if they want to do so. One must remember that this is not the economy of their grandfather’s era. The economic world has undergone a sea change, globally, in the past few decades, and so our needs, expectations, requirements and commitment

     Further such people forget to account for the fact that people are living much longer now after retirement, may be about 25 to 30 years,whereas, it was about 10 to 12 years earlier.,yet getting disabilities as they age at virtually the same rate as before. The average life of a male is now 78.6 years and it is 82.4 years for a female. The end result is that much of the population spends many of their elder years unable to work. You should not rely on being active and productive until your last day and then suddenly dropping dead. Working is something that can always be done like doing side jobs or operating one’s own business, but these things wouldn’t be viable sources of income. If the money comes in, great. If not, you should always have something to depend upon.

  Common Money Mistakes You May Make : –

 The common financial mistakes which is generally made by the people.are as under : –

— Not Planning : – Most of the people procrastinate . They have deadlines and then deadlines extensions. You can allow your credit-card debt to accumulate. You can pay higher taxes due to not planning your finances and also not setting your financial goals..

—– Overspending : –  As you have not set your financial goals and planned your finances, you may be tempted to spend on luxuries, vacations, restaurants and other such non-essential activities. Most Americans don’t plan for future and so don’t save much for their life after retirement.

— Buying With Consumer Credit : – Buying on credit encourages you to spend more than you can really afford. Carrying the credit-card balance, month-to-month, means that your future earnings are spent for debt repayment. You must know that most companies charge between 18- 21 percent on the credit-card balances.

— Delaying Saving For Retirement : – Some people may be under the illusion that they may work till their end and would never retire, and so why to save for life after retirement. But, in fact this may not happen. Your health may not allow you to actively work. Therefore, the longer you wait to start saving for retirement, the harder reaching your goal will be, to have a comfortable life after retirement.

— Not Doing Your Homework : –  With all the different financial products available, making informed financial decisions has become a difficult task. To avoid confusion, you have to shop around, read reviews, check references and do proper homework to avoid financial mistakes, which may land you in problems.

—Making Decisions Based On Emotions : – This is a common reason for landing most of us in financial overspending. You may undergo major life changes or you may feel under pressure and make decisions under emotions or distress. AVOID IT. Take your time and keep your emotions out of picture while taking key financial decisions..

— Exposing Yourself To Catastrophic Risk :  People without a savings reserve and support network can end up homeless. Many people lack sufficient coverage to replace their income. You’re vulnerable if you and your family doesn’t have insurance to pay for financially devastating losses.-

— Focussing Too Much On Money : – Money is not the first- or even -second- priority in happy people’s lives. Your health, relationships with family and friends, career satisfaction and fulfilling your interests are very significant and we must work for them.

  Developing GOOD Financial Habits : –

Various studies have indicated that Americans are by and large financially illiterate. The vast majority of survey respondents have “falling” scores- meaning that they answered less than 60 percent of the questions correctly. Most Americans don’t know how to manage their personal finances because they were never taught how to do so, neither in schools nor at home by their parents.

 But if you understand the basic concepts , regardless of your income, you can make your dollars stretch farther, if you practice good financial habits and avoid mistakes. In fact, the lower your income, the more important it is that you make most of your income and savings.

 Personal finances involves much more than managing and investing money. It also includes making all the pieces of your financial life fit together. You must strive to overcome temptations and keep control of your money rather let your emotions and money rule you.

  CONCLUSIONS : –

Money problems can be fixed overtime with changes in your behaviour. We have to be alive to the situation and face the reality. Day-dreaming is not going to help you to meet your goals, short-term as well as long-term. You must overcome the lure of easy credit as many attractive reasons would be forwarded by the dealers. You must have a strong desire to live within your means and discuss openly the details of your income with your spouse and grown -up children, so that they are aware of the facts and avoid having unrealistic desires. Wrong financial planning at your age of 50-55 years may result into serious financial and family problems in your future retired life, which is a fact and not a fiction.

 

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     Life is about experiencing every good bit of it throughout one’s lifetime, be it a walk in the park or building memories of playing with your little ones. But these experiences can be truly rejoiced ,when one lives a healthy life without having to worry about any unforeseen medical issues. For this purpose, the health insurance companies have floated various plans which help safeguard you & your family against financial risks arising out of a medical emergency. These “Healthcare Plans” assure you that while you’re unwell, they will take up all the hassles related to your treatment, so that you can stay worry free and focus only on your recovery.

          Comprehensive Health Insurance Plan : –

    A health insurance plan ,to meet everyone’s(individual and family) needs, should cover : –

  ___ In-patient Care

  —    Pre and post-hospitalization

  —    Room Rent And ICU cover

  —   Daily Allowances

  —   Ambulance cover

  —   Organ Donor Cover

  —   Lifelong Renewability

  —   Annual Health Checkup

  —   No-claim Bonus

  —   Tax-benefit etc.

         Average Cost Of Health Insurance : –

    Health insurance premiums have risen dramatically over the past decade. There are a number of factors that impact your health insurance costs. One of the primary factors in your health insurance costs depends on where you live. It also depends on the metal tier of the plan like bronze, silver, gold etc., and the Plan type adopted by you.

1. Average Health Insurance Rates By State : –

State                      Monthly Premium     Annual Premium

Florida                          $285                              $3,420

Illinois                           $244                               $2,928

New Jercy                     $307                            $3,684

Pennsylvania                $231                             $2,772

  2  (B) Average Health Insurance Premiums By Metal Tier : –

    The average rates paid for insurance plans are inversely related to the amount of coverage they provide.

             Type            Monthly Premium        Annual Premium

          Bronze                    $201                              $2,411

          Silver                      $247                               $2,961

          Gold                        $291                                 $3,487

           Platinum                  $363                         $4,360

     (C) Average Rate By Plan Types : –

      The insurance premium also depends on the type of network, the plan use like HMOs tend to be most restrictive about which doctors you can see and what you must do to see them.

                 Type      Monthly Rate          Annual Rate

                 HMO        $230                           $2,784

                 POS         $244                              $2,928

                 PPO         $251                              $3,019

                 EPO         $254                             $3,056

  How Much Does An American Family Pay For Health Insurance?

     According to eHealthinsurance, for unsubsidized customers in 2016, premiums for individual coverage averaged $321 per month, while premiums for family plans averaged $833 per month. The average annual deductibles for individual plans was $4,358 and for the average deductibles for family plans was $7,983.. Further every month, a family of four’s health care costs are going up $100 a month, on average, for more than a decade.

   Why Health Insurance Is So Expensive ?

  The U.S. is famous for over-spending on health care. The nation spent 17.8 percent of its GDP on healthcare in 2016, whereas, the average spending of 11 high-income countries like Canada, Germany, The U.K. and France etc. was only 11.5 percent. Percapita, the U.S. spent $9,403, which is nearly double what the others spent. In the U.S.the drugs are more expensive; Doctors get paid more; Hospital services and Diagnostic tests cost more. And a lot more money goes to planning, regulating and managing medical services and other Administrative charges.

     As far as the Quality of Health care is concerned, the U.S. fared comfortably to other countries. Long wait times for treatment are not as much an issue for Americans as they are elsewhere. In treating heart attacks and strokes, the U.S. actually had the Best record of any other country.

     Further, Americans also had the lowest rate of coverage. About 10 percent of the population did not have health insurance in 2016. In other countries, nearly everyone was covered. However, the percentage of population with health insurance has increased since the Affordable Care Act (ACA) was passed.

        Affordable Care Act (ACA) : –

    The Affordable Care Act , also known as “Obamacare” has helped millions of people get health care coverage. Before the ACA, health insurance was -unaffordable and unavailable for many. Now, with Obamacare, if you meet certain qualifications, the Government will help pay for your monthly premiums and out-of-pocket cost. And for those who have pre-existing medical conditions, you can no longer be denied coverage under Obamacare.

        Finding The Proper Health Insurance Plan : –

     Finding the right Health Insurance plan can be difficult. Each plan has its pros and cons , especially considering how costs can vary depending on the plan’s monthly premiums, deductibles and copays. But with Obamacare Plans.com, it is easy to compare your options and decide. Whether you prefer to lower your premiums with a Bronze or Silver plans, or need to lower your out-of-pocket cost with a Gold or Platinum plan- you can choose a plan, depending on your eligibility and qualifications; some plans can be as low as $50 per month.

         CONCLUSION: –

   Health Insurance coverage in the United States is now generally mandatory, and if you don’t have it, you can face hefty tax fines. The Affordable Care act(ACA) and Health Care and Education Reconciliation Act enacted by President Obama, in March 2010 have enacted comprehensive health care reforms in the United States. Medicare, the Government ran health insurance plan for the elderly, is a multi part major medical plan. Supplemental Insurance policies, known as Medigap Coverage, would help you paying for the costs that Medicare doesn’t pay.

 

Budgeting your Money and Budgeting your Time have more in common than you think. They are both precious resources that are easy to waste and worth saving, when you can. Some of the more basic principles of Time Management can be applied to your finances to make your budget more streamlined, efficient and productive. Further, to compete with the fast moving society, Time management is very crucial. The more time you have, the more you can plan and organize your Finances

   Some Important Time Management Techniques: –

The Goal of time management , for elderly people, is to reduce stress as they face many competitive activities and responsibilities simultaneously like increased office work/activities (as you may be at the peak of your career by this time); pressing domestic responsibilities of grown up children; arranging for their college education and also to manage your finances properly. All these activities demand a lot of your personal attention and time and may result into mental and physical stress. In this regard, the following Time Management Techniques may help you a lot : –

 TIME IS MONEY. Use this advice to get the most from every work you do.

1 Keep Things Varied : – Vary the sorts of work you do so you are able to jump between them when you’re fed up, otherwise, monotony will get you tiresome and productivity can drop.

2 Write Things Down : – Make To- Do lists- the more complete, the better. They will help you to organize your ideas and so the work and you’ll be much less stressed.l

3 Automate your Accounts : – Set an automated reminder and payment system. This will reduce your payment delays and so the late fee/ interest charges. Pay your Insurance premiums/ Mortgage installments and other Utility bills through Online automate system.

4 Don’t Mix Work And Home : – Approach your day in “Work Mode” even if you’re working from home (especially after your retirement). Avoid interruptions and reduce the use of phone, especially when dealing with finances.

5 Budget Realistically : – The fundamental of preparing your Monthly Budget is that it should be realistic and nothing , even petty amount, should be left out. For this, you may scan through last three months or six months expenses. The Budget should be prepared timely and correctly and then try to stick to it.

6 Be Prudent : – Value your money and have a positive and committed relationship with your money. It’s a good idea to practice a sensible spending so have time to hunt around for the best bargains, when it comes to purchasing especially high cost items.

7 Don’t Be Careless With Important Paperwork : –  It’s really important that you make sure you don’t lose any of your bank statements. Try to get them regularly and in time. File them away carefully and methodically as soon as they come through the post. This would help in filing your Tax returns,also.

8 Don’t Dismiss Insurance : – As impressed in earlier posts, review your insurance- Life Insurance, Medical/ Health insurance, Auto Insurance as well as home Insurance periodically and ensure it meets your as well as family requirements adequately. Make necessary changes, wherever, required.

9 Don’t Pay Your Tax Bills Late : – Timely payment of taxes, federal and State, will ease your burden and you will  not be unnecessary paying the late fee charges and fine and also avoid the correspondence. Mark some time in your calendar for this purpose.

10 Account As You Go : – Keep the details of the account on day-to-day basis so that your money/ finances and related paperwork are in order and are handy, when you need them. This habit would save you a lot of time.

11 Save As You Go : – To make sure you’re living within your means from month-to-month, keep your amount of savings and taxes separately ,although you may be making the payment on quarterly or yearly basis.

12 Don’t Fritter Your Time Away : – This is a very important point in Time Management, when you have a limited time for you various competitive activities.” Don’t do anything during your working day that doesn’t add value to your work”.

 Advantages Of Time Management In Finances : –

Much like money, time is both valuable and limited. It must be protected , used wisely and Budgeted. How you use that time depends on skills learned through self analysis, planning, evaluation and self- control. People who practice good management techniques often find that they : –

  — Are More productive.

  — Have More Energy for things they need to accomplish.

  — Feel Less Stressed.

  — Are able to Do Things they want.

  — Get More things Done.

  — Relate More positively to others and

  — Feel Better about themselves

   CONCLUSION : —

Prioritizing helps stretch it further. Prioritizing both your tasks and your spending allows you to accomplish more with what you have. Instead of just doing or spending without a purpose, prioritize what matters most so you feel better about how you spend both time and money, as the world of finance has evolved into highly competitive workplace. Therefore, effective management  is a competitive advantage for any finance professional. I can say with my own experience that if you inculcate the habit of Time Management throughout your career, the tasks which look insurmountable and stressful can be completed with ease and without stress.

 

  

    Numerous life changes come when we are getting older. Our approach to personal finance management also changes with time when we get experience and maturity.When we are in our fifties, just a decade away from our retirement or we may be retiring  much sooner , one has to be very careful with the finances. The right financial decisions could make or break your future plans, so don’t leave them to chance. You must have the best of information you need to make informed decisions regarding your investments, spending and how to best protect your wealth.

 Personal Finance Management Tips : –

Some of the important points , which the individuals in advanced age, must keep in mind are as under ; 

 First : – A life of constant competition with others like cars, home, holidays, children education/ career etc. should be stopped. Live your own life.

Second : – Stop obsessing about mastering the stock market, if you have not learned the skill of equity investment .

Third : – Make sure you have an investment philosophy. Write it down and make a plan to implement it.  

Fourth : – Do not brood over past mistakes and errors. FOCUS on making corrections. Save atleast 30 percent of your income.

Fifth : – Get some control over expenses. Live within your means and make choices that fit your income. STOP taking personal loans.

Sixth : – Get rid of DEBT. Save sufficient amount for your retirement as well as rainy days.

Seventh : – Get serious about long term goals. Make a detailed financial plan and set specific target.

Eighth : – Ensure that you have conversations about money with your family- spouse and grown up children about savings and wealth.

Finance Tips From Billionaires around the world : –

Many people instinctively look in amazement at the thought of getting personal finance tips from rich people, as they believe that it is more of a sermon. But there are some solid tips from very wealthy people that make sense regardless of your financial situation and age. Mr. Warren Buffet, considered to be the second richest man, has mentioned the following few points regarding Savings and Management of finances : 

1.    1 Our favorite holding period is forever.

   2 Price is what you pay; Value is what you get.

   3 Risk comes from not knowing what you are doing.

   4 I always knew I was going to be rich. I don’t think I     doubted it even for a minute.

   5 Someone’s sitting in the shade today because someone planted a tree a long time ago.

   6 Money is not everything. Make sure you earn a lot before saying such nonsense.

   7 Buy companies with strong history of profitability and with a dominant business franchise.

   8 We simply attempt to be fearful when others are greedy, and to be greedy only when others are fearful.

   9 You don’t need to be rocket scientist . Investing is not a game where the guy with  IQ 160 beats guy with IQ 130

   10 I try to buy stocks in businesses that are so wonderful that an idiot can run them.

   11 I have pledged…to always run Barkshire with more than ample cash.

   Similarly, other billionaires have some Important tips about the management of personal finances that can apply to just about everyone : –

  1 START Early : – Carlos Slim Helu is a Mexican businessman ,was ranked as the richest man in the world for few years. His basic tip is : START EARLY.If you’re 50 and struggling , the advise should be changed slightly to “START NOW”. The sooner, the better

  2 Find Your Passion : – Billionaire Oprah Winfrey said “ you become what you believe.” Change is possible whatever your situation, and the first step is believing in yourself.

    3 You Don’t Have To Game The System : – Warren Buffet says that he made his investment fortune on The FUNDAMENTALS. Whether you have $50 to invest or $5,000, sticking with the fundamentals is smart.

   4 Simplify Your Life : – Carlos Slim has lived in the same house for more than 40 years. Warren Buffet  lives in a house he bought in 1957. Constantly pursuing things you don’t need puts you on a financial treadmill, not an upward escalator.

   5 Cars Are Consumer Goods : – Don’t waste time on the idea that a car is a status symbol. Sure have a car, if you can afford to,. Many billionaires John Caudwell, David Cheriton, Chuck Feeney walk, ride bikes or use public transport for everyday getting around.

  Some Important Tips For Long-Term Money Making

1 “ Only buy something that you’d be perfectly happy to hold, if the market shut down for 10 years”.

2 “ It’s far better to buy a wonderful company at a fair price, than a fair company at a wonderful price.”

3 “ Diversification is protection against ignorance. It makes little sense if you know what you are doing.”

4 “ If past performance was all that is needed to play the game of money, the richest people would be librarians.”

5. “ Rule no. 1 – Never lose money.
6.       Rule no. 2 – Never Forget rule no. 2.”

    CONCLUSION: –

Some very wealthy people started from very humble backgrounds. Whatever your financial situation, you can improve it, and personal finance tips offered by the very wealthy can make sense in just about any situation. Buy low, sell high and don’t waste money. Find your passion and make time for it. These aren’t just tips for financial success, but for making the most of your life, and isn’t that money is supposed to help you do?.

 

   

 

Numerous Americans over 50 haven’t saved for retirement. Quite a few over 50 have little or no retirement savings. Generally , they delay retirement savings in favour of various other actions like pursuing debt reduction first, then children education loan, instead of accomplishing several goals simultaneously. The result, you are having less savings and also pay higher taxes. You pay a lot of money in taxes – probably more than you realize. Few people know just how much they pay in taxes each year. Your purpose/ objective should be – how to reduce your total tax burden. You must understand the tax system, both state and federal taxes. Your tax ignorance can lead to serious mistakes.

       Various Tax Saving Options : –

  Growing older qualifies you for a variety of tax perks that aren’t available to younger individuals. You must understand what is your taxable income as all the income is not taxable. Some deductions are available like mortgage interest and property taxes; contributions to qualified retirement plans etc. Once you turn 50, and especially after the age 65, you can qualify for extra breaks. Older people get a bigger standard deduction and they can earn more before they have to file a tax return at all. Workers over 50 can also defer or avoid taxes on more money using retirement and health savings accounts.

   Some of the Tax perks available to people over 50 are as under : –

      (i) Bigger Standard Deduction : – You can claim a larger standard deduction if you or your spouse is age 65 or older. The standard deduction amount for older taxpayers is $1,250 higher than the deduction for people under age 65. And if, a retiree is unmarried, the standard deduction is $1,550 higher than the younger taxpayers.

      (ii) Higher Tax- Filing Limits : – People age 65 and older can earn a gross income of up to $11,900 ($ 23,200 for couples both age 65 and older) before they are required to file a tax return. That is $1,550 more than the tax- filing limit for younger individuals.

      (iii) Property Tax – breaks ; – The tax rule vary from state to state . However, in some places people who are above a certain age and who earn below a specific income level qualify for property tax rebate.

       (iv) Credit For The Elderly Or Disabled : – If you or your spouse is age 65 or older and you have a low income, you could be eligible to claim a tax credit. Retirees who qualify may be able to reduce their tax bill by taking the credit

        (v) Additional IRA Deduction : – Workers age 50 and older can contribute an additional $ 1,000 to an IRA, or a total of $6,500.and by this way would save $1,625 on his current tax bill (if you are in 25 percent tax bracket).

        (vi) 401(K) Catch-up Contributions : – The tax saving is even bigger for older workers with access to a 401(K) plan. Employees age 50 or older can defer paying income tax on $6,000 more than younger workers, if they contribute that amount to a 401(K) plan, or a total of $24,000. Income tax won’t be due on this money until it is withdrawn from the account (explained in details in my earlier posts on 401(K) ).

         (vii) No More Early Withdrawl Penalty : – Younger workers have to pay 10 percent early withdrawl penalty unless the money is used for a couple of specific purposes. However, once you turn age 59 ½, you can withdraw money from an IRA for any reason without incurring the 10 percent tax. 

          (viii) Avoid Tax On Required Minimum Distributions : – Retirees aged 70 ½ and older who transfer any amount up to $100,000 directly from their IRA to a qualified charity will not owe income tax on the contribution.

         (ix) Higher HSA Contribution Limit : – Workers with high- deductible health plans can claim  tax deduction on contributions to a health savings account. Individuals who are age 55 or older by end of tax year are eligible to contribute up to $4,400 to a health savings account, $1,000 more than their younger counterparts.

         (x) Free Tax Help : – The tax counseling for the Elderly Program provides free tax assistance to those age 60 or older. IRS certified volunteers assist older taxpayers with basic tax return preparation and electronic filing between Jan 1 and April,15 each year.

         Deducting Miscellaneous Expenses : –

  A number of miscellaneous expenses are deductible on Schedule A. Some of these deductible expenses are : –

 (i) Educational Expenses : – Like cost of tuition, books; continuing education classes for professional may also be deductible.

 (ii) Job Searches And Career Counselling : – You can even deduct the cost of courses and trips for new job interview- even if you don’t change jobs.

 (iii) Expenses Related To Your Job That Aren’t Reimbursed : – Like your own subscriptions to trade journals related to your profession, cost of uniform, purchase of a computer for use outside the office at your own expense.

   (iv) Investment And Tax-related Expenses : – Investment and tax- adviser fees are deductible when paid from taxable accounts. Similarly, accounting fees for preparing your tax return or conducting tax planning during the year are deductible. Legal fees related to your taxes are also deductible

         Growing Your Savings : –

   The decade leading up to retirement is your last chance to build a significant nest egg. The decisions you make now will impact the retirement benefits you receive and how much you will be able to safely spend for the rest of your life. For this purpose, become a super saver and try your best to pay off your mortgage, debt and other loans before your retirement. Further, to minimize your tax bills, take advantage of as many tax breaks as possible, including deductions for saving for retirement and health care accounts.

      CONCLUSION : –

  Taxes are probably one of your largest- if not the largest- expenditures. Retirement savings plans are one of the best and simplest ways to reduce your tax burden. Unfortunately, most people can’t take full advantage of these pans because they spend everything they make. So not only they have less savings, but they also pay higher income taxes- a double loss. In order to take advantage of the tax savings that come through retirement savings plans, you must spend less than you earn. Only then can you afford to contribute to these plans. .

 

      

                

    

We have been discussing that one must take the minimum of debt and loan- it may be credit card balance, car loan, education loan or even mortgage of your home. But taking loan sometime becomes imperative especially in case of high value purchases. But the loan amount should be such which can be repaid in a period of ten years or before you retire, whichever is earlier. To achieve this, one must make a monthly Budget and try to control the expenses, so that you can save enough to repay your loan and also invest for your retired life. Unfortunately , most people don’t plan for their future and spend everything they make. When you are young, you could take that liberty with your money, but at the advanced age of 50 or so, you cannot ignore the fact that you are going to retire soon and you have to prepare for your comfortable retired life of 20- 25 years

    Save Money And Pay- off Debt : –

  Telling people how and where to spend their money is a risky undertaking because most people like to spend money. But there’s a world of difference between spending money carelessly and spending money wisely. Your savings dwindle, debts may accumulate and you can’t achieve your financial and personal goals. The four principles to control your spending are: –

  (i) Living within your means.

  (ii) Finding the best value i.e. evaluate the cost of a product or service before purchasing.

  (iii) Cutting excess spending like wasting money on branded products/ consumer items or purchase unnecessary items. And

  (iv) Rejecting consumer credit  and purchases to be reduced on credit cards to the bare minimum.

  50 – 20 – 30 Rule  

  If you are struggling to save money and pay off debt, the 50 – 20 – 30 rule can help you budget in accordance with your financial goals. This simple rule provides flexibility, whether you want to pay- off debt. Save , invest or all three. The rule splits your after- tax , take- home pay into three buckets : –

  “ Fifty percent is for Needs, thirty percent is for wants twenty percent is for saving “. The breakdown is as under :-

• 50 percent :- Includes rent, mortgage, food bills, minimum debt payment and other essentials.
• 20 percent : – Includes financial goals such as savings, investments etc.
• 30 percent : – Dining entertainment, outings etc.
• ( pl. Note- 20 percent savings is placed just next to essential expenditures of 50 percent but before non- essential expenses of 30 percent)

        5 Ways To Cut Your Spending On Credit Cards : –

   The purchases against the credit card/s becomes very expensive if you don’t pay the balance early. Generally, 18- 21 percent interest is charged on the balance amount. To reduce the credit card spending :

• Reduce your credit card limit;, to a level you’re comfortable with.

• Replace your credit card with a charge card , which requires you to pay your balance in full each billing period.

• Never buy anything on credit that depreciates in value like car, clothing, meals out etc.

• Think in terms of total cost- which includes sticker price, interest charges etc. which may become very high.

• Limit what you can spend – try to shop with a small amount of cash nd no plastic or checks.

         Think How Much You Can Save : –

    Before you begin saving to meet your financial as well as personal goals, think how much you can realistically save regularly. For example, someone with high expenses and high debt may need to adjust the rule to 80 – 10 – 10 until they have reduced debt and grown their savings. Take time to examine your spending habits. You got to focus on what you absolutely have to have and getting rid of everything you don’t have to have. You might be overspending money in ways you don’t realize. But you list down your expenses . You would be able to find out the areas which are non- essential and where you overspend. First look at your major expenses – rent, car payments, mortgage etc. You can think to purchase a used car instead of a new car.

     If it is not possible to cut back on major expenses, then you need to take a look at your smaller expenses. You ill also need to examine the expenses in your 30 percent bucket to see what you tend to waste money on the most. Create a mini- budget that will prevent you from overspending on your lifestyle habits like cloths, electronic gadgets or eating out etc. You don’t have to track every dime , you spend. Just pick those two or three categories that cause you the most problems and set a budget for those categories.

           Figure Out Your Savings Goals : –

   How you manage your 20 percent savings bucket will depend on your personal goals. First make an Emergency Savings fund which can be equal to 3 or 6 months of your current pay. Then if your goal is to pay- off debt, earmark a portion of your 20 percent bucket for pay- off the loan. Then, you can contribute part or all of the 20 percent to a retirement fund including your contribution to 401(K) and/ or IRA including catch- up amount.

       Follow Good Personal Finance Habits : –

Some of these habits can be as under : –

• Take advantage of your employer’s flexible spending account. These will reduce your tax liability and also act as a quasi saving plans.
• Tracking your income and expenses.
• -Being careful not to overspend on gifts.
•    – Paying attention to mortgage interest rates- even after you buy a home.
•     – Never buying anything on impulse. Stick to your shopping list.
•    – – Paying your bills online, when possible
•     – Ignoring credit card convenience checks that come in the mail.
•     – Saving part of your income for retirement, save atleast 10 percent of pay.
•      – Spending less than you earn every month.
•      – Never assuming past performance guarantees the future results, while investing.
•     – Reviewing your credit card statements for errors.
•     – Keeping a budget and faithfully following the budget
•       CONCLUSION : –
•      Saving enough for your retirement life, so that you can have a  comfortable and peaceful retired life , which can meet the expenses of at-least 20- 25 years (with inflation), and investing that amount properly is the key for a happy retired life. If you have not saved enough so far, don’t delay it any further as you are already 50 years old and the retirement is hardly a decade away. Don’t carry the burden of debt and loans after retirement. For this purpose, control your spending and try to save atleast 20 percent of your paycheck. Ensure your retirement needs  are taken care of prior to providing for your children’ future.
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Most Investors want to grow the value of their investment portfolio as much as possible. However, as you approach retirement, you might shift your thinking. The proper allocation for your investment will change over the course of your life. When you’re 50 years old, you are much closer to retirement than you were in your 20 s, and your investment allocation should reflect that. However, there is no “one- size- fits- all” way to diversify a portfolio, regardless of your age.

        When you invest your money, you need to decide how to proportion{allocate} it between risky, growth- oriented (such as stocks) whose value fluctuates , and more stable, income -producing investments (like bonds). But while allocating your investments, you should take into account your own personal needs, experience and personality i.e. risk taking capacity. How soon you’ll need the money and how tolerant you are of risk are two important determinants when deciding how to allocate your money.

   Risk Tolerance : –

 This factor is particularly true if you’re already retired or you are in the age of 50- 55 years. In this case you’re close enough to retirement and you don’t have time to recover from a massive market sell- off. To protect your retirement nest egg , at age 50 you should consider shifting at least part of your portfolio from riskier investments like stocks to more stable option, like bonds and CDs. Your asset allocation between stocks and bonds depends on your risk tolerance. Are you risk averse, moderate or risk loving?.

       Investments And Allocation : –

  One general rule of thumb when it come to portfolio allocation is to subtract your age from 100. The resulting number is approximate percentage you should allocate to stocks. For example, at age 50 you should allocate 50 percent( 100-50= 50)in equities whereas ,at age 70, this is approximately 30 percent (100-70=30). This will be further modified depending on your investment objective and risk tolerance.

     Your asset allocation also depends on the importance of your specific market portfolio. For example, most would treat their 401(K) or IRA as a vital part of their retirement strategy because it is or will become their largest portfolio.

        Sticking With Your Allocation : –

   Your goals and desire to take risk should drive the allocation of your investment dollars. As you get older, gradually scaling back on the riskiness (and therefore, growth potential and volatility) of your portfolio makes sense. But don’t play or tinker with your portfolio daily, weekly ,monthly or even annually as a practice. Don’t engage in Trading. Jumping on to a “winner” and dumping a “loser” may provide some short- term psychological comfort, but in the long- term, such an investment strategy often produces below -average returns. The closer you get to retirement, the more you’ll want to protect your funds, generally by shifting to more conservative allocation. In addition to funding your lifestyle with current income, you’re also reducing the number of years in retirement that you’ll need your saving to last. All of these factors should play a role in determining your allocation from age 50.

         Various Asset Allocation Models : –

    There are many asset allocation Models which have been developed by the financial experts. No one model can be recommended for all the investors as their objectives, goals, risk tolerance and personality differ. Some of these models are : –

(i) Conventional allocation model.

(ii) New Life allocation model

 (iii) Survival Allocation Model

 (iv) Nothing to lose allocation Model

 (v) Financial Samurai Model of Investment

These models cater to the need of various spectrum of individuals having different age, priorities, funds requirements, time horizon and risk tolerance. One of these models i.e. Conventional  Model of Asset Allocation is explained below. This model is suitable for the individuals who:-

 — Believe in conventional wisdom and don’t want to over complicate things.

 — Expect to live to the median age of 78 for men and 82 for women

 — Are not interested in the stock market, bond market or economics and would rather have someone manage their money instead.

          Proper Asset Allocation of Stocks & Bonds

               Age                   Stocks                       Bonds

        up to 25                    100 %                       0 %

                    30                     70 %                        30 %

                     35                    65 %                        35 %

                      40                   60 %                      40 %

                       50                  50 %                       50 %

                       60                  40 %                       60 %

                       70                   30 %                     70 %

                       75 +                25 %                      75 %

    Whereas, New life Asset Allocation model recommends an investment of 70% and 30% in stocks and bonds respectively for the personnel in the age of 50 years against 50: 50 given above.

       CONCLUSION: —

 Ideally, your asset allocation should let you sleep well at night and wake up every morning with vigor. When it comes to investing, you need to calculate your existing investment exposure and invest accordingly. Don’t let anybody force you into an uncomfortable situation. But take a proactive approach to your retirement portfolio and don’t be shy of taking moderate risk with your investments even at this age. Take the following into consideration while allocating your assets : –

  (i) What is your risk tolerance on a scale of 0- 10?

 (ii) How stable is your primary income source?  

  (iii) How many income streams do you have ?

  (iv) What is your money strength ?

  (v) What is your knowledge about stocks and bonds ?

  (vi) How long is your investment horizon ?

 

     

 

 

    In most of my posts, I have been discussing about the financial goals, short- term and long- term, which an individual must set for himself/ herself.I have also been mentioning that our savings should  be invested in such a way and for such a duration that we are able to meet our targeted goals in time and that too with comfort. Although everyone is aware of this, but most people don’t take it seriously and go on postponing setting goals, on one pretext or another. Reasons may be very many because everyone is different; you can have goals that are unique to your own situation. Further, accomplishing goals almost always requires saving money, whereas, most Americans spend all the amount, whatever they earn. They have almost nothing in savings even at an advanced age. But procrastinating the issue is not a solution. As one of the Chinese proverbs says “ Do not wait until you are thirsty to dig a well “. So don’t wait to save money until you are ready to accomplish a personal or financial goal.

      Prioritizing Your Savings Goals : –

 Now as you are already in your fifties, and retirement is just a decade away, your maturity is much better. So, instead of dreading it, update your financial life by hitting the targets and embrace the coming decade. Many people may have financial goals, although they may not be having a proper plan to achieve those goals. Most common financial goals are : –

1. Owning Your Home : – Most Americans dream of owning their own home as renting and dealing with landlords can be a financial and emotional drag.
2. Making Major Purchases : – Such as a car, living room furniture, vacations and so on.
3. Retiring ; – is a catch all term for full- time work and you have to plan for your comfortable and peaceful retired life.
4. Educating The Kids : – The college education is quite expensive and requires a detailed financial planning, much in advance, as you may want to help your children get a college education.
5. Owning Your Own Business : – Many employees want to take on the challenges and rewards that come with being the boss, but they are unable to do so as they lack the money to leave their primary job.

      Unless, you earn really big or have a large family inheritance, your personal and financial desires will remain a dream. So, you must prioritize your goals.

       How To Approach Your Goals : –

  Because you’re constrained by your financial resources (most common problem with salaried people) ,especially when you are in your fifties and your children are grown up, you need to prioritize your goals. The following strategy may be helpful in prioritizing the competing goals : –

1 Debt Tamed : – As impressed in earlier posts, take a debt/ loan which you can repay in ten years or before retirement, whichever is earlier. Pay credit card balances before interest is applied.

2. 2 Spending : Under Control : – In your fifties you may be in the peak years of your earning period. You can have fun with your money, but don’t short change retirement goals. Double down on savings, as retirement may last a long, long time.

3 Retirement Goals : Defined : – Set a concrete goal for your retirement. Some people save too much and they don’t enjoy life as they become addicted to their saving habits. The other extreme is spendthrifts who live only for today. Both the habits are not good . You have to perform a balancing act. It is said that a est egg of  $1 million will last 21 years if you withdraw $50,000 a year (assuming inflation is 2.5 percent and investments earn 3 percent after tax and inflation).

4 Retirement Contributions ; – You must value your retirement accounts. Where possible, try to save and invest in accounts that offer you a tax advantage like 401(K), 403(b), IRA and so on. These have the following advantages :

   – Contributions are usually tax- deductible.

• In some company retirement accounts, companies match a portion of your own contributions.

•        Returns on your investment compounds over time without taxation          

(Refer my post on contributions to 401(K) and IRA, for details)

5 Building Emergency Reserves : – Prepare for the unexpected , financially. Conventional wisdom says that you should have approximately six months of living expenses put away for an emergency. However, it depends on how expensive the emergency is, but this reserve will help you a lot.

6 Saving For Big Purchases : – Never buy these big purchases like car, plane tickets for vacations etc. with consumer credit. Get into the habit of saving for your larger consumer purchases and not through high- interest consumer credit.

7  Long Term Care : A Plan In Mind : – By our 50th birthday, it occurs to most of us that we really will get old and may require skilled nursing care. But how to pay for it? Long- term care insurance can be an excellent tool. So, plan for it.

8  Mortgage : Repay The Balances : –  Entering retirement with a paid- off mortgage is a small goal. But its advantages are very many. Try to repay all the mortgage balance before retirement. This will help you enjoy your retirement life with a lesser amount, when your paychecks stop.

9 Insurance : Reviewed and Adjusted : – Life changes, and so should your insurance. Stick with cheaper term insurance. When your children have grown up and are of their own, you may be able to drop life insurance. Similarly, take a look at you home and car/ auto insurance limits. As for health insurance, review your health insurance needs and costs and up-date your health insurance accordingly.

   Top Financial Goals : –

1 Have a well- stocked Emergency fund.

2 Get out of Debt- Completely.

3 Plan for early retirement- this will help you to review your savings.

4 Create multiple income streams – like starting your own side  business, dividend income or returns from investments.

5 Have enough insurance to cover contingencies.

6 Be able to live on less than you earn.

7 End any addiction to stuff that you may have.

8 Plan to Do work, that you love even after retirement.

9 Plan to leave your financial house in order upon your death- create an estate will.

       CONCLUSION : —

 Defining your goals, long-term and short – term would help you to live within your means. But your goals should be SMART.., properly defined which meets your needs, which generally differ from one individual to another. Good detailed planning, even at this advanced stage of your life, would help you live a comfortable, enjoyable and stress- free long life even after retirement. While establishing your financial goals, it is advisable to take the views of your spouse into consideration. This will make implementation of your goals easy and your family life harmonious.   

 

Planning Finance After 50 – Why Repayment Of Debt Early Is Important

   Usually, most of us, borrow money or take loan to meet our Urgent needs, which may not be possible to procure with our own savings or the money available with us at that time. This loan/ Debt is used by many corporations and individuals, as a method of making large purchases they could not afford under normal circumstances.

What Is A DEBT : —

  A Debt or loan can be something, usually money, owed by one party

( The borrower or debtor ), to a second party ( the lender or creditor). Debt is a deferred payment , or a series of payments, that is owed in the future, which is what differentiates it from an immediate purchase.

     Debt is a double -edged sword. Borrow wisely and you may create the opportunity to build equity – for instance in a house, or may be even in yourself, with an education. But rack up too much Debt, and financial distress could be around the corner. Like many Americans, who own a home were able to do so, thanks to a mortgage. Many college Graduates got their degree thanks to a student loan.

       But too much Debt can lead to financial distress and may lead to foreclosure on your home or repossession of your car and may result in low credit score, which can lead to high interest rates and difficulty in borrowing in future.

       So, to avoid bogged down by Debt, know the details of your income and expenses before borrowing. Think carefully about how much Debt your monthly budget can reasonably accommodate.

Types Of DEBT : —

         There may be many different types of consumer Debts. The most common Debt can be :-

      — Credit Card Debts

      — Student Loan Debt

      — Personal Loans/ Debts

    — Auto Loans

   — Medical Debts

   — Utility Bills, Bank Overdraft Charges etc.

   — Home Loan/ Mortgage Debt etc., to name a few.

 Which Debt Should Be Paid Off First : —

      Cut down the credit card or ditch the student plan ? Knock off the house equity line or get a jump in the car loan ? Paying off money you owe is always better- but ditching some Debts will benefit you far more than erasing others. The Debts can be categorized as “ Good Debts” and “ Bad Debts “.

   GOOD Debts : — Money you borrow for a home or an education is considered “ Good Debt “. Some home and student loan/ Debts may be Tax- deductible. There is no need to put pressure on yourself to repay these loans as long as you can continue making regular installment payments. But these are also to be cleared before your retirement, better in your 50’s. And not carry them farther.

   BAD Debts : —   These include anything that doesn’t improve your financial position and that you can’t pay far in full within a month or two. Bad Debt is usually in the form of credit cards Debt or a personal bank loan. You should tackle Bad debt first.

How To Get Out Of Debt Of Your Own : —

        It is always advisable to get out of Debt/ loan at the earliest. The Bad Debts must be paid off by the age of 50- 55 years and all other loans,

including home loan, should be re-payed before you retire so that your retirement life is comfortable. To get out of Debt/ loans of your own and that too fast, the following Important steps will be of great help ; —

1 You must confront your Debt by calculating your Debt ratio. Debt ratio can be defined as the amount of total Debt ( excluding mortgages- which is considered a Good Debt as its payment is tax deductible ) as a percentage of gross annual income.

Example – You earn $50,000 a year and you have $25,000 in debt; your Debt Ratio = 0.50

Example –  You earn $100,000 a year and have $250,000 in Debt; your Debt Ratio = 2.50

2.Permanently change the behavior that got you into Debt

3. You must make enough money to repay the Debt.

Follow These Easy Steps To Set Up A Debt Repayment Plan : —

       To repay the loan early and that too with your own resources, the plan should consist of the following steps : —

1. Make a list of your Debts. First, you need to make a list of all your loans and borrowings, whether good or Bad..
2. Rank your Debts. This is based on the rate of Interest  the Debt carries.
3. Find extra money to pay your Debts. In this regard your monthly Budget would be of great help.
4. Focus on One Debt at a time. The highest interest carrying loan/ Debt must be paid First.
5. Move on to the Next Debt on your list. Bad Debt must be cleared First
6. Build up your Savings. This is required to repay the Debt of your own, with your own resources.

   Rank your Debts and Prioritize Their Repayment : —

        From a financial perspective, it’s smart to pay off your highest rate Bad Debt first. For example, putting $500 towards a $3,000 credit card bill with an 18 percent interest rate will save you far more than paying off a $500 bill at 6 percent.

          Further, if you’re planning to buy a home or a car in the near future, it may be worth paying down any credit cards that are  near their credit limits as it will have a positive impact on your Credit Score and may qualify you for lower interest rates.

   Conclusions : —

   Regardless of how you deal with paying off your Debts, you’re in real danger of falling back into old habits. It becomes a chronic problem with some, that starts to interfere with other aspects of their lives and can lead to problems at work and with family and friends. It is always better and advisable to resist the temptation of making the purchasing on credit, especially of utility articles which are not that Urgent. Further, never buy anything on credit that depreciates in value like meals out, clothing, furniture and even cars. Borrow money only for sound investments- education, real estate, or your own business etc.

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Limited savings but numerous responsibilities. That’s the life. But some of these responsibilities will run parallel to each other. For example, at the age 50 years or so, while you can’t delay saving for your retirement, you can’t afford to ignore our child’s future either, may be his/ her college education or the impending marriage. Further at this phase of your life, you don’t want financial mistakes to derail your retirement game plan. But these financial dilemmas and the responsibilities change during the different stages of life and accordingly the financial priorities also change. To restrict ourselves to the life after 50s, the financial dilemmas can be : —

50s : Child’s Higher Education And Retirement : —

         The deadlines of these two big goals may collide. While neither can be ignored, financial planners say that your retirement corpus is the Priority. Your child can get a scholarship or take a loan. However, the bank won’t extend you a credit because you don’t have sufficient savings post retirement. Even if they do, a personal loan will always be costlier than the education loan.

        “ An education loan creates a sense of financial responsibility in the child; allows you to keep your assets and gives you additional tax benefits”Some may also argue it is better to work longer and save more than depend on an educational loan. But it all depends on your health and other circumstances.

 60s : How And Where To Keep Your Kitty : —

        At this age, this is the big financial dilemma. Your financial resources are getting limited and you have to meet responsibilities after meeting the adverse effect of Inflation and various taxes( federal and state ). So, you may keep moving your investments earmarked for retirement towards debt fund as you near 60s. However, that should not stop you from re-investing your kitty in equity options. Considering they are your best chances to beat inflation, most experts recommend keeping a portion of the nest egg in equities. Depending on your Risk taking capacity and availability of fund, you can invest 15- 25 percent in equities to beat inflation and tax liabilities.

Important Money Moves : —

     To manage your finances and savings as well as plan for your future post retirement is very important at the age of 50 years or so. If you’ve been procrastinating on money matters so far, now is the take- control moment for you and your finances. Some of these financial moves or steps which would help you to keep your next years of life financially sound are as under : —

1 Speed Up Paying Down Debt/ Loan :–

    Repaying of your debt, especially high interest carrying loans or debts like credit card balances, car loans etc. has been emphasized repeatedly in my earlier posts. You don’t want to be dealing with mounds of debt as you work those last few years before retirement. Calculate your current debt load and start paying off larger debts as soon as you can. This includes any includes any car loan, large credit card balances , personal loans and mortgages, that you’ve been carrying around for a while. Most retirees who own their homes free and clear will tell you living without a mortgage is financially liberating. The higher the interest rate, the stronger argument for paying the debt off sooner.

2  Look At Your Life Insurance : —

     The American Council of Life Insurers recommends having life Insurance coverage of seven to ten times your salary. But this is a broad rule of thumb. Actually your life insurance coverage depends on your own individual financial needs which may vary greatly based on various factors like : —

 _ The amount of Debt/ Loan you would want paid off

 _ How much money you’d want to leave for your dependents

 _ Any other financial commitment .

    But the need for life insurance doesn’t end when you attain the age of retirement/ superannuation.

 3 Long – Term Care Coverage : —

       Buying long term care while you’re healthy is way easier at age 50 than, say, at age 70 or 75 years. For example , a man or woman buying a long term care policy at age 50 could pay an annual premium of $3,302. But delaying the purchase for a decade would cost the same person $6,678 annually which would become $17,760 annually if you buy at the age 70 years. As with life insurance, long term care coverage can vary greatly based on where you live, family history and  the duration of the coverage.

4 Don’t Put All The Eggs In One Basket : —

        At this phase of your life, you don’t want financial mistakes and which are related to your Investments– to derail your retirement game plan. Better diversify your portfolio. Make sure you’re not investing all of your savings in just a single account or investment vehicle.

  If you have investments, review them now- or have a money manager do it- to make sure you have a truly diversified portfolio. After age 50, you also want to reap the greatest possible return from your investments as these may be your highest income earning years and the time when you have the most potential to stock away money.

             Ahead of retirement, the goal is to start adjusting your investment risk a bit, while maintaining the opportunity for steady growth in the upcoming years. As you get closer to retirement, the diversification of your portfolio becomes even more important. So, having the right mix of stocks, bonds and cash is essential. In this regard, the investment professionals offered general rule of thumb like “ Take the number 100 and subtract your age” . The remaining number would suggest how much of your portfolio should be invested in stocks.

 5 Finalize Your Will, NOW : —

 It is time to create or update your last Will. This can be done in many ways _Pay a lawyer to create a Will.

_ Use Online software like Legalzoom.com or Nolo.com

_ Use store- bought forms that contain pre-printed Wills.

    Unfortunately, nearly half of all the Americans over the age of 50 don’t have a basic Will, according to various survey reports.

   CONCLUSION  : —

Getting the help of a financial professional can get you on the right track and help ensure that you take care of these essential financial tasks. But we must not delay to plan our finances any further. Having sufficient Insurance coverage, both Life as well as Medical, is of utmost importance.