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10 Financial Decisions You Should Stop Putting Off

10 Financial Decisions You Should Stop Putting Off

It is never too late to start taking care of your financial needs, if you recognize that you need a well developed financial plan to meet your current and future financial needs. If you are still unsure where to start and what decisions to make, here is a list of top 10 financial decisions you shouldn’t be putting off to kick start a better a financial future for yourself.

Start early

If your finances are not on track and take time to really think about them and start now. Now is the best time for you to start building a secure financial future even if you are too old to save much.

Stop relying on your single income

Find new avenues to increase your income. If you are relying on just one income, be on an active lookout for developing a second stream of income. You can do part-time jobs, online work , work from home, sell on ebay and Gumtree but start looking for new and innovative means of increasing your income. Higher level of income can help you to not only achieve mental comfort but it will also help you pay off your debts easily or save more.

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Start building an emergency fund

Do this by making regular contributions to the saving accounts offering you best returns. A basic rule of thumb is having savings at least equal to 3 to six months of salary but it can vary depending upon your circumstances, family size and income level. A good way to trash your savings is to save it into money market funds. If you are living in UK, you have a really nice way of saving your emergency funds in tax-sheltered individual saving accounts or ISAs as they are normally called.

Automate your finances

This will help you develop the habit of saving automatically as well as help you pay off your bills and debts online. Remember, there is always a choice to automate savings or debts. A better way is to automate your savings and expenses rather than debts because if you automate debts, you may end up not having enough cash flows in the end to fund your other expenses.

Decide about timing and location of your retirement

Start saving for your retirement now because if you start now (if you are not in your 40s already) time will be on your side and with compounding impacts, your retirement savings can easily reach your target level once you reach the age of your retirement. If you are young and starting your career, look for investing into IRAs and 401(K) if you are employed. Sooner you start saving for your retirement, a bigger saving pot you will have in the end. With cost of medical care increasing, chances are that most of your savings will go to your healthcare so save enough so that you can really enjoy your retirement savings.

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Develop a plan to pay off your debt and stick with it

There are different methods to start prioritizing your debts and paying off. Snowball method suggests paying of smaller debt first whereas another technique of paying off your high interest rate loan first is also often recommended. However, debt also has an emotional drain on all of us so you can start to prioritize debt on the basis of their emotional intensity rather than their cost.

Have a life insurance policy in place

In the case of an emergency it can help your family to actually get some financial cover. There are lots of insurance policies ranging from covering damage to your appliance to your life but put off all insurance decisions but one of having a life insurance policy in place. Having a right amount of life insurance however, can vary depending upon your individual circumstances but focus at least on having a sum assured at least equal to 3 years of your current salary.
< h2>Start to save for your down-payment of your dream home

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Paying as much as you can in down-payment can reduce your monthly mortgage payments as well as interest rates. If you are planning to buy your home now with no or very little down-payment in savings, it is better to rent rather than buy.

If you are considering buying your own home, you may have to recheck whether you should buy or rent

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If costs associated with buying such as interest rates, repairs, taxes etc are greater than what you can afford, it is better to rent rather than buy.

Start to build your credit history

It can help you get good rates when you finally decide to buy your own home. Credit cards can be a great way to develop your credit score provided you don’t mess with them. Use credit cards to develop your credit history rather than as a tool to buy things which can depreciate in value quickly.

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Personal finances can easily be managed provided we take right decisions at the right time. When in doubt, always seek advice and focus more on things which can help you save more. One final word! Start now to track your expenses not to know where your money goes but to know how you can discipline yourself by cutting some of the unnecessary expenses.

Image Credits :

Featured photo credit: Morgue via cdn.morguefile.com

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Adnan Manzoor

Data Analyst & Life Coach

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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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