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4 Ways To Prepare for Retirement

4 Ways To Prepare for Retirement

Retirement is something most people try to avoid thinking about. This seems strange, since retirement should be some of the most blissful and relaxing years in a person’s life.

The problem with retirement is that it takes years and years of financial planning to make sure that relaxation is actually an option. If planned incorrectly, retirement will instead be a miserable time period filled with fruitless job searches and financial stress.

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Luckily, it is never too late to start planning and figuring out what exactly needs to be done. Here are five ways people build steady retirement incomes that allow for safe and secure retirement.

1. Buy real estate

Real estate is an asset that typically goes up in value over time. Sure, there are ebbs and flows, and sometimes real estate will lose value for a few years, but in the long run it has always gone up. It is also expected to continue to do so for the foreseeable future. The world isn’t getting any bigger, and that means that land is becoming increasingly limited.

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Buying real estate for your retirement can be as easy as purchasing a home while you are young, or as complicated as going into a commercial venture with some business partners. Getting a home for yourself while you are young can allow you to stop throwing away money on rent and instead put that money to something you own. As long as you are planning on holding the home for the long haul, it is typically a good idea.

2. Fixed deposits

If you are a little closer to retirement and don’t want to risk your current retirement savings then you should look at something called fixed deposits. These are essentially savings accounts that give higher interest rates. You agree to leave the money in the account for a specified period of time, and the bank will agree to pay a higher interest rate than a typical savings account would get. Fixed deposits are similar to CDs.

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3. Start an IRA

Many people have heard of these and might consider them too complicated to try and set up. In today’s age that couldn’t be further from the truth. You can open up an IRA in a matter of seconds using just about any broker. There are some brokers coming out today called robo-advisors that will essentially make most investing decisions for you based on your current situation.

One of my favorites is called Motif Investing. They allow you to decide what industries you think will do well in the future, and they will find and make the investments for you.

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4. Start an online business

With the way the internet functions today, you can start an online business in just a few minutes. Many people do this because once the business is thriving and they are ready to retire, they can do so, and the business typically continues to thrive with little effort. You can sell physical products, or you can just become an affiliate of a few niche companies and then take a commission every time you refer a customer to them. Many people do this and are able to retire early with a consistent income.

The key to retirement is diversity. Do not rely on a single income source, or you will find yourself in trouble if that single source has issues. Be careful not to rely on the government too much, as policy is always changing, and you never know exactly how much you will really get. Many people believe that social security will take care of them, but current numbers point to a different story.

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Spencer Mecham

Personal Finance Coach, Digital Marketer

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Last Updated on June 1, 2020

How to Pay off Debt Fast Using the Stack Method (A Step-By-Step Guide)

How to Pay off Debt Fast Using the Stack Method (A Step-By-Step Guide)

Whether it’s consumer debt on credit cards, student loans[1], or a mortgage, most people find themselves weighed down by debt at some point in their lives. This can keep us working jobs we hate just to pay the bills and keep our heads above water. By learning how to pay off debt fast, you can release this burden and remove some of the stress from your life.

The Stack Method is one way to do this. Once you understand it, you too can learn how to pay off debt fast.

What Is the Stack Method?

The Stack Method, often referred to as “debt stacking,” requires making a list of all your sources of debt, starting with the debts that incur the highest interest. Then, you make the minimum payments for each source of debt, but when any extra money comes your way, you throw it at the debt at the top of the list. This way, you eliminate the debts with the most interest first, dropping extra costs to a manageable level in a fairly short amount of time.

To get started with the Stack Method, go through these steps and overcome those mountains of debt today.

1. Stop Creating New Debt

Most people do not receive training in handling money and how to live within their means. If you’re in debt, then you’re probably one of these people, and it’s time to bite the reality bullet.

It’s going to be impossible to get out of debt unless you retrain your financial habits right now.

You must make a stand against all the marketers trying to take your hard earned money or offering easy finance. You don’t need more stuff to make you happy. What you need is financial peace of mind.

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So cut up your credit cards or freeze them. I mean this literally. Put them in a container of water and stash them in your freezer. Then, when there’s an opportunity to spend, you have time to thaw out (you and the credit cards) and really decide if you need that purchase.

2. Rank Your Debt by Interest Rate

Make a list of all your debt with amounts and the interest rate. The highest interest rate should be at the top as this is what you’ll pay off first.

Paying off your high interest debt is the key to the Stack Method.

Interest is a powerful weapon, and right now the bank or other financial institutions are using it against you. Interest significantly increases the amount you need to pay back, and often we’re completely unaware of how much that is.

For example, if you have a $10,000 credit card debt at 20% interest where you pay a minimum payment of $200 a month, you will end up taking 9 years and 8 months to pay off the actual amount of $21,680 including $11,680 in interest!

3. Lower Your Interest Rates

You can often lower your credit card interest rates by doing a balance transfer. This means moving your credit card to another bank, where they will lower the interest rate to get your business[2].

Shop around and try to get the lowest interest rate for the longest duration (preferably until it’s paid off completely). Just make sure you’re reading the terms and conditions carefully so you don’t get stung by the new bank in other ways.

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Once you’ve done this, you can order your list of debt again if interest rates have shifted.

4. Create a Strategic Spending Plan

This is where we improve your financial control from Step 1. Take a piece of paper and write down your income after tax and all the expenses that you have. This will include the minimum payments on all your debt.

Look at your expenses, and then rank them in order of importance to you. Look at the items on the bottom of your list and decide whether you’d rather have them or be financially stable. The objective is to create a spending  plan where your expenses are lower than your income.

You also decide how much you are willing to spend on each area of your life. You can allocate amounts for rent, groceries, eating out, buying clothes, and other activities. However, realize that once you’ve spent your allocated money, there’s no dipping into other areas[3].

It also helps to have a “Fun Account” that you can spend on what you like, and an “Emergencies Account” in case your car breaks down or other unfortunate incidents come up.

You also want to include the extra amount you’re going to use to pay off debt in your spending plan.

Can you afford $20 a week? $50? $100? $200 or more? It’s important that you get a realistic number that you can commit to each week without fail, and this is your Stack Repayment.

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5. Create a Payment Schedule

The first part of the Stack Method is to cover the minimum payment on every single debt you have. Any time you miss a payment, you incur fees, and these add up quickly. This also includes making the minimum payment on the debt with the highest interest rate.

Then for the debt with the highest interest rate (your Target Debt), you’re going to add the Stack Repayment from your strategic spending plan. You apply this Stack Repayment and the minimum payment until that debt is paid off in full.

As your official minimum payment decreases, you add that extra amount to your Stack Repayment. So, as your minimum repayment drops, your Stack Repayment increases equally. This will compound how fast you pay off the Target Debt by adding even more to the payments you’re making.

6. Reward Your Progress

You want to track your Target Debt so you can see your progress along the way. You can also decide on milestones that you’re going to celebrate and reward yourself for.

A reward doesn’t have to cost money, but if it does then it comes from your previously allocated spending plan.

This is an important step as it will keep your motivation going when you feel your willpower fading.

Just like you’ve trained yourself to brush your teeth and shower, you can train yourself to manage your money. Feel great that you’re now entering the 10-20% of people who are actually responsible with money.

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7. Compound Your Results

Once you pay off your Target Debt, have a huge celebration and congratulate yourself. Then, you move the Stack Repayment (which includes the previous minimum payment now) to the next debt with the highest interest rate.

This becomes the new Target Debt, and you are using your Stack Repayment amount plus the minimum payment for the new debt.

This is why the Stack Method is so powerful. As you decrease a debt, you actually increase your Stack Repayment amount. This means the second debt will get paid off even faster, the third even faster than that, and so on and so on until you are completely debt free.

8. Be Kind to Yourself

During this process, your resolve is going to be tested multiple times. Maybe you’ll have an emergency like your car breaking down or the need to travel for a sick relative. The important thing is to not throw up your hands in despair and slipping back into your old habits.

Life will test your commitment to your new responsible money attitude, and it’s up to you how you respond. When things go wrong (and I guarantee they will), you need to shrug it off and get back on track.

Show compassion when you accidentally go over your target spending amount and decide to do better next week.

The Bottom Line

The Stack Method is a powerful tool, but it’s up to you whether you use it effectively. If you really want results, then bookmark this article immediately and start working through the steps.

It’s only by the decision you make right now that you will enjoy a debt-free future and live a financially responsible life.

More Tips on How to Pay off Debt Fast

Featured photo credit: NeONBRAND via unsplash.com

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