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10 Tips for Improving Your Finances

10 Tips for Improving Your Finances

The vast majority of Americans are only one $500 emergency bill away from being financially destitute. In fact, a survey indicated that 62 percent of U.S. adults could end up homeless if they skipped even one paycheck. Out of this group, only 58 percent believe that they could make up for an unexpected $500 expense by reducing their other expenses, using a credit card or borrowing money from a family member or friend. In other words, there are far too many people who currently do not have any type of safety net.

To help prevent yourself from remaining or falling into this trap, it is imperative to take a close look at your finances and make a few lifestyle changes. Fortunately, this does not need to be nearly as drastic as most people fear. By implementing even a few of the following suggestions, you should be able to build your savings account and begin more effectively planning for retirement.

1. Do an Audit of Your Bills

When was the last time you sat down and thoroughly looked through all of your bills? If you are like most people, you pay the minimum due amount on each bill without paying much attention to errors or interest rates. Auditing your bills can help you make sure that billing mistakes are not unnecessarily increasing your expenses. Additionally, a bill audit will enable you to learn how much money you would save in the long run by adding $10 to each of your credit related payments.

2. Purge Unnecessary Expenses

We all make choices regarding how to spend our money, and most of us have developed at least one or two unfortunate blind spots. For example, you may really like the version of yourself that goes to the gym once a month and continuously pledges to go more often, but this does not mean that you are making a wise financial decision by paying that monthly fee. Unless you are regularly utilizing something, it is best to purge the unnecessary expense.

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It is also smart to look at unrealistic expenses such as a beer budget that outweighs what you pay for electricity. If you are struggling to build a savings account or pay your bills on time, you must make difficult choices that will include cutting back or eliminating things that serve no practical purpose.

3. Contact Creditors to Renegotiate Your Repayment Terms

Many people erroneously assume that their interest rates and repayment terms are set in stone. However, the truth is that you always have the ability to call and attempt a renegotiation. In some cases, this technique may not get you anywhere. Overall, though, creditors are usually willing to work with people who have kept their payments up and express a need for a temporary or permanent alteration to their repayment terms in order to continue paying everything off on time.

4. Carefully Explore Your Trading Options

There are numerous trading options that can help you save for retirement, but you need to carefully examine everything before you make any large investments. The stock market can be very volatile, but there are some stocks that tend to stay more stable or have a better chance of rebounding quickly. Studying trends and talking to an experienced stock broker will help you make a better choice.

Binary options are another robust possibility that many people are not very familiar with. In a nutshell, binary options allow you to not only get involved in trading stocks, currency pairs, commodities and indexes but to also make predictions about how well they will do within a specified time period. If your predictions are accurate, you can earn a nice return on your investment. You can also use loss protection to prevent yourself from losing a lot of money when your guesses are inaccurate. In other words, binary options can be a viable way to earn some extra money for your savings account.

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5. Utilize High-Yield Investments

High-yield investments do come with a bigger risk factor than turning to treasury bills that have an almost non-existent return rate, but this does not mean that you cannot use them to your advantage. The younger you are, the safer it is to gamble on truly high-yield investments because you will have more time to recover any losses.

Please note that it is not wise for people who have a minimal savings account to invest everything they have into these investments. But if you put 10 to 20 percent of your savings into an investment that has high-yield results and a relatively solid history, you could end up cashing out with a significantly higher amount of money that can then be rolled into a safer opportunity.

However, if you want to play it safe altogether, a money market account should help you earn at least 1 percent annually on your savings. Once you achieve a savings of $50,000, this would provide you with a free $500 bonus after one year.

6. Optimize Your 401k

Your 401k options are probably diversified and very confusing, especially if your employer has put a few plans in front of you that do not come with a detailed description. When you add the recent turbulence of the stock market into the picture, it can become quite terrifying to invest money in this way.

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Instead of running away from this investment opportunity, take the time to more carefully examine your choices. You may find that the plans that are being pushed toward people in your age range are not right for you. After all, a conservative plan will not accrue much money, but it will also minimize your risk of losing everything you have contributed to your 401k.

7. Make a Weekly Savings Plan

In just one year, you can put together a savings account that will enable you to avoid any $500 financial disasters. $10 a week is all it takes to build up a savings account with $520 in it. It may seem unrealistic for people who live paycheck to paycheck to set aside $10 weekly, but you should be able to find this money by prioritizing your expenses and purging anything that is not necessary.

8. Build a Precise Budget

According to a Gallup poll, 68 percent of Americans do not build or use a detailed budget to help them manage their expenses. This is a major mistake that could seriously hinder your ability to get your finances on track. Instead of allowing yourself to spend money without having any idea if you can afford it, you need to sit down and build a precise budget every month. This budget should include everything from your major expenses to minor purchases.

By doing this, you will be able to see how your money is really being used, and this will make it easier to cut out unwise expenditures. Looking at this budget regularly and updating your check register daily is the absolute best way to keep yourself from spending money you do not have.

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9. Take Advantage of Free or Inexpensive Hobbies

We all need hobbies or a way to blow off steam. For some of us, this comes in the form of televised entertainment. The average cable bill has reached an astounding $99, though, so this is not a good way to scale back your expenses. Instead, you should consider cord-cutting measures such as Netflix or Hulu. For a fraction of the cost, you will be able to enjoy countless movies and TV shows.

Walking and many other physical activities are another free or inexpensive way to fill up your spare time, and they come with the added bonus of being good for your health. If you prefer to stay in and do something quiet, Scribd provides readers with unlimited access to eBooks and comic books for less than $9 per month. Adult coloring is another popular trend that has an initial cost due to acquiring the necessary supplies but will ultimately provide many hours of cheap entertainment.

10. Prioritize Your Personal Goals

We all have personal goals aside from the desire to not fall into bankruptcy over one medical bill. Prioritizing these goals can help ensure that you spend your money as wisely as possible. A good example is that some people buy a daily latte from Starbucks but then bemoan the fact that they cannot afford a monthly wellness massage.

If reducing stress and improving your health is your top personal goal, then it makes sense to skip your daily latte so that you can save up for a massage instead. Keep in mind that you could always make coffee at home for a smaller fee. This will give you a personal daily indulgence without derailing your goals. No matter what your personal goals are, you can achieve them in this same way by being smarter with your daily expenditures.

Now that you have access to several actionable tips, it is time for you to put some of them to work! You may also want to download some handy expense apps to make it easier to monitor your spending. With a little practice and some dedication, you can reach your goals and build a savings account that will allow you to avoid financial disaster during an emergency.

Featured photo credit: Piictures of Money via flic.kr

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Holly Chavez

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Published on May 7, 2019

How to Invest for Retirement (The Smart and Stress-Free Way)

How to Invest for Retirement (The Smart and Stress-Free Way)

When it comes to stocks, I bet you feel like you have no idea what you’re doing.

Everyone who’s not a financial expert has been there. I’ve been there. But, time is passing and you need to be crystal clear with how you’re investing for your retirement.

Otherwise, it’s back to work until you can afford not to. So, how can you invest for retirement when you’re not a financial expert?

You take the time to learn the fundamentals well. If you do, you can grow your wealth and retire happy. The best part is that you don’t need to be a financial expert to make smart investment decisions.

Here’s how to invest for retirement the smart and stress-free way:

1. Know Clearly Why You Invest

Odds are you already know why should invest for retirement.

But, maybe you know the wrong reasons. It’s time you get clear on why you’d like to retire. Here are some questions to help you get started:

  • Will you spend more time with your family?
  • What does retirement mean to you?
  • Are you looking to launch that business you’ve been holding off for years?

Everyone wants to retire but not for the same reasons. Once you’re clear for why retirement is important for you, you’ll focus on making it happen.

Investing in the stock market allows you to take advantage of compound interest.[1] All this means is that your money earns money on top of its interest. A reason why investment in the stock market is one of the best ways to plan for retirement.

2. Figure out When to Invest

“The best time to plant a tree was 20 years ago. The second best time is now.”– Chinese Proverb

It’s true if you’d had started investing when you were 10 years old, you’d have a lot more money than you do today.

The reality is that most people don’t start investing until it’s too late. So, if you’re currently waiting for the perfect time to start an investment, it would be today. Open your calendar and block out 2 to 3 hours to choose how you’ll invest for retirement.

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A quick way to get a snapshot of where you stand is to use Personal Capital. Input all your personal information and spend some time setting your retirement goals. Once completed, you’ll know where you stand with your retirement.

Having a savings account for retirement isn’t planning for retirement. Why? Your money loses value when you factor in US inflation.[2]

3. Evaluate Your Risk Tolerance to Create the Perfect Portfolio

Investing your money well depends on your emotions.

Why?

Because when the market drops most people panic and withdraw their money. On average, the US stock market yields an annual 6% to 7% ROI (return on your investment.) But, this won’t happen if you’re worried about short-term loses.

Before you invest your next dollar, know your risk tolerance.[3] Your risk tolerance determines the number of risky and safe investments you’d have.

Regardless of your investing style, you need to view investing for retirement as a long term game. Know that some years you’ll lose money but recoup this in the long-term.

Avoid watching market-related new. Also, create a double authentication to log in your investment account. This way you’re less likely to withdraw your money.

4. Open a Reliable Retirement Account

Depending on your circumstance, you may need to open a new brokerage account. This is the account is where you’ll invest your money.

If you’re currently working for a company, odds are that they offer a 410K investing account. If so, here’s where you’ll invest most of your money. The only problem with this is that you’re limited to the stock options that are available.

You do have the option to open a separate IRA (individual retirement account.) Here are some of the best brokers:

  1. Vanguard
  2. TD Ameritrade
  3. Charles Schwab

5. Challenge Yourself to Invest Consistently

Committing to invest for retirement is hard, but continuing to do so is harder.

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Once you’ve started investment for your retirement, you run at risk from stopping. Often you’ll want to contribute less, so you’d have more money in your pocket.

That’s why it’s important that you create a budget that allows you to invest each month. If you’re working for a company, you can set a percentage for the amount you’d like to contribute each month. Most people by default contribute 1% but aim to contribute 10% to 15%.

Be the judge for how much you can afford to contribute after covering important expenses. To stay motivated, use Personal Capital to view your net worth.

A benefit to contributing money to your retirement account is not taxed. For example, if you earn $100 and invest 10%, you’d contribute $10, then get taxed on the remaining $90. As of 2019, the most you’re able to contribute towards your 401K is 19K but this can change.

6. Consider Where to Invest Your Money

The most common way to invest your money is in stocks, but it’s not the only way. Here are other ways to invest:

Robo Advisors

Robo-advisors[4] are fancy algorithms that’ll choose the best investments for you. Sites like Wealthfront make it easy for first-time investors to invest their money. You’d input information about yourself and set your risk tolerance.

Then, set your monthly contribution amount and your robo-advisor would do the rest. Robo-advisors charge a fee to manage your money, but less than regular advisors.

Bonds

Think of bonds as “IOUs” to whomever you buy them from.

Essentially, you’re lending money and charging interest. Like stocks, not all bonds are equal. Some will be riskier than others depending on their rating.

Here are the different types of bond categories:[5]

  1. Treasury bonds
  2. Government bonds
  3. Corporate bonds
  4. Foreign bonds
  5. Mortgage-backed bonds
  6. Municipal bonds

Mutual Funds

Picture a group of people dumping all their money in a jar that’s managed by a professional. This is how mutual funds work. The fund manager manages the money looking to earn capital gains (interest.)

One of the best types of mutual funds is index funds. Since these funds don’t try to beat the market and instead follow it, they need less research. Because of this they often charge the lowest fees and yield the best long-term results.

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Real Estate

Yes, buying a home is an investment when done correctly.

Imagine buying a home and using it as a rental property. After repairing it, you receive a monthly surplus check of $100 to $200.

This may not sound like a lot, but repeat this process enough times and you’d earn a large amount of passive income. That’s why real estate is one of the best investments to not only retire but become wealthy.

But, it requires a lot of money to start and you should expect losing money along the way as you learn the process.

Savings Accounts

Your money can still grow in a savings account. Nowadays most online banks offer a 2% annual return. Although the average inflation is higher your money will be available when you need it.

7. Master Disincline to Dodge Short Success

Investing for retirement is a long-term strategy. That’s why you need to master delayed gratification. All this means is delaying short-term pleasure for something bigger in the future. Research shows that those who have delayed gratification are more successful.[6]

So how can you master delayed gratification?

By building your discipline.

Think back to what retirement means to you. A clear purpose will help you avoid withdrawing your money during a market downturn. It’ll help you contribute more towards retirement when you’d want to waste it instead.

Your journey towards retirement will be long, so reward yourself along the way. Choose a reward that’s relevant and meaningful, so that you reinforce positive behavior. For example, after contributing more towards retirement, treat yourself to dinner.

8. Aggressively Invest on This One Investment

I’ve mentioned several types of investments but haven’t covered the most important one.

It sounds cliche but here’s why you’re your best investment towards retirement. The more you know, the more money you’ll be able to make. The more good habits you adopt, the more secure your retirement will be.

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More importantly, investing in yourself is an investment that no one can take away. There’s no market downturn nor tragic circumstance that’ll wipe your knowledge and experience.

But, how can you invest yourself?

Reading books, blogs, and anything that’ll help you learn new topics daily. Listen to podcasts and audiobooks on your commute to/from work.

Save money to buy courses and hire coaches. I used to believe hiring coaches was a waste of money when I could learn the subject alone.

But, coaches see your blind spots and hold you accountable. Hiring the right coach will help you achieve your goals faster than you would’ve alone.

Retire Happy with Excess Money

The key to a secure financial future doesn’t only belong to financial experts.

It’s possible for you and I. What if you were able to retire earlier than most people and weren’t a financial planner? What if you were able to focus on what you enjoy doing the most while your money was working hard for you?

I know this sounds impossible now, but the truth is you’re capable of taking charge of your retirement. I’m not a financial expert but I’ve learned how to invest my money by reading books and learning from others.

Investing your money is scary. So start small and invest a small amount of your money with a robo-advisor. Feel your money drop and rise for a month or two. Then, invest more and keep this up until you’re aggressively saving for retirement.

One day, you’ll wake up with a net worth you’re proud of – confident about your retirement. You now know a few strategies you can use to invest in your retirement. Will you take action to retire happy?

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Featured photo credit: Matthew Bennett via unsplash.com

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