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5 Costly Retirement Regrets We Should Avoid

5 Costly Retirement Regrets We Should Avoid

There is much to consider when preparing for retirement. New retirees are always more than eager to share stories, successes and mistakes they have made along the way. If you listen closely, chances are many of them will tell you something they wish they could do over or do different.  Here are 5 costly retirement regrets we should all avoid.

1. Spending too much in your peak years.

When you were young, you wanted the finer things in life; Cars, houses, cloths, boats etc. As you get older, spending too much in your peaks years becomes a retirement mistake.

This is because you lose the power of compound interest. The longer you keep your money invested, the more of it you will get out. Most people in their twenties and thirties unfortunately do not think this way until it is too late.

The best way to avoid this retirement mistake is to first control your spending. Clean up your vision board, you don’t need all those material things to show how successful you are. As Dr Sues once said “Those who matter don’t care, and those who care don’t matter”

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Next, get financially literate. Take some money classes to understand how to build a budget, get out of debt and invest.

Make sure you are also putting some money back in your youth. It may not seem like much right now, but little drops of water make a mighty ocean.

2. Not taking good care of your health and body

Entering into retirement with bad health can have some very costly consequences.  When we are young, we spend so much time working, so much so that health and fitness is often the last thing on the mind. The mistake here is that too often; people pay the cost of their bad food and exercise choices when they have the least amount to spend – retirement.

This retirement mistake will not only have you running out of money too soon into your retirement, it will also rob you of precious time that could have been spent with family.

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The best way to avoid this retirement mistake is to remember that your health is your only true measure of wealth, so take good care of yourself.

Start by making better food choices and also exercising to keep you looking young and vibrant. At retirement, you will probably be paying your own health insurance out of pocket, so it pays to have a solid foundation in health and wellness.

3. Borrowing from yourself

A major mistake people make heading into retirement is borrowing from their retirement accounts to fund large purchases. This could be a second home, a remodel, or a child’s college education. The big mistake here is not only will you have to pay taxes, penalties and fees to get your money out; you may also have to work longer.

The emotional attachment that leads you to justify making these large purchases will cost you big in the long run

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The best way to avoid this money mistake is to remember why you started saving in the first place. These fees are put in place to remind you of the commitment you have made to secure your final future.

Maybe start a fund for whatever project it is you want to accomplish. Set measurable savings goals over a set period of time to meet this financial goal. You may have to get an extra job, however it will be well worth it.

4. Not downsizing soon enough

Life can often feel like one big roller-coaster ride.  We leave the comfort and acreage of our parents homes to the small nest eggs of a bachelors pad or apartment. As we get older and have our own families, we also follow suit and acquire our own large homes to raise our kids in. However this becomes a retirement mistake if you do not know downsize soon and early enough. Whether it’s moving into a smaller home or selling off a second car, don’t forget that you must already be living below your investment income going into retirement. Most folks waiting to cut back at retirement will be drowned out by the cost of downsizing.

The best way to avoid this retirement money mistake is to make sure that you are not blinded by your pride. Do not be given to the temptation of keeping up the perceptions others have of you. At this age you should be travelling and enjoying the world with your spouse much more than you did when you were younger. Chances are you will not need the huge house. Not to mention, you will be paying lower monthly bills.

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5. Not kicking a bad habit early enough

There is a feeling of invincibility we all feel when we are young. We develop vices too often as a means to socialize or pass the time. From alcohol consumption, smoking cigarettes to gambling, most people regrettably count the cost of their vices when it is too late.

While it is OK to indulge yourself in whatever past time you choose, the retirement mistake here is forgetting to count the cost. A regular smoker will very easily spend three thousand dollars a year on cigarettes. This is money that could have been put into a ROTH IRA.

The best way to avoid this mistake is to create an allocation system for yourself or a play fund. This is a reasonable amount of money you have allowed yourself to spend on all vices. Your need to live a comfortable life in retirement must be greater than your need to have too much fun now.

Approaching retirement doesn’t have to be all dark and gloom. Just remember that the choices and decisions you make now will affect the rest of your future.

Featured photo credit: http://theneotericgroup.com/experience/retirement-residences/ via theneotericgroup.com

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Last Updated on March 3, 2021

Top 6 Hacks on How To Build Credit Fast

Top 6 Hacks on How To Build Credit Fast

When done right, credit can open doors and provide a lifestyle that you never imagined possible. Anything from flying around the world in first-class and staying at 5-star hotels entirely for free to starting and scaling businesses. It’s also an area where it can be easy to make mistakes and hard to recover from without the right information. In this article, I will break down how you can build credit fast so you can open doors in your life!

When you start to think about improving your credit score, you have to answer three important questions first:

  1. What are you trying to achieve by having good credit?
  2. What really is your credit score?
  3. How is your credit score calculated?

What Are Your Credit Goals?

Having a high credit score is great, but ultimately, your credit score is a tool in your personal finance arsenal that you can use to open doors. The first question you should ask yourself is “what will a higher credit score do for me?”

I work with many clients directly at Freedom Travel Systems to help them fully leverage the power of their credit so they can enjoy free luxury travel and start or grow their business. For my clients and many others, here are a few common goals many credit-savvy individuals have:

  • Free Travel – getting access to travel rewards cards so you can get tons of free travel and even get first-class flights, hotel suites, and luxury amenities all for free
  • Start/Grow a Business – getting access to business credit so you can start and grow a business with 0% or low-interest financing that does not impact your personal credit
  • More Approvals – getting approved for credit cards, auto loans, or mortgages so you improve your lifestyle or build your personal wealth
  • Better Rates – getting better interest rates on any loans you get will save you tens or hundreds of thousands of dollars over your lifetime

What Is Your Credit Score?

Your credit score is simply a 3-digit number that tells potential lenders how reliable of a borrower you are. Keep in mind that lenders, such as banks and credit issuers, stay in business by lending. Their goal is to find the people that have the highest probability of paying them back and they assess this primarily through your credit score.

What’s important to know is that there are two major scoring models used to create your scores. These scores are your FICO Score and your Vantage Score. More than 90% of lenders rely on your FICO score, so when you are checking your score, you want to make sure you see the actual score that the lenders use. And no, checking your own score does not hurt your credit!

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Then enters the 3 main credit bureaus, which are essentially agencies that collect credit information on you. These are Experian, Equifax, and TransUnion. These bureaus then apply a scoring model to the information they have on you and voila, you now have a credit score! Bureaus sometimes have different information on your report, which is why you will see 3 different scores.

How Is Your Credit Score Calculated?

Next, you need to understand how the credit score is calculated. This will provide a high-level overview, but there is more detail to each of these factors alone.

There are 5 main factors in the calculation of your credit score:[1]

  1. Payment History (35%) – This refers to the amount and percentage of on-time payments you have.
  2. Utilization (30%) – This is how much revolving credit you use as a percentage of the total revolving credit issued to you. Note that installment loans like auto-loans or mortgages do not count towards this while credit cards do.
  3. Age of Credit (15%) – This refers to how long your credit history is, primarily your “average age.”
  4. Credit Mix (10%) – This is how many different types of credit you have. For example, there are credit cards, student loans, auto loans, mortgages, personal loans, and lines of credit.
  5. New Credit (10%) – This primarily refers to how many inquiries you have for new credit.

Top 6 Hacks on How to Build Credit Fast

Now that you’ve learned more about your credit score, here are the top 6 tips on how to build credit fast.

1. Don’t Close Your Cards

Many of us are taught that getting a new credit card is bad and having too many will hurt your score. In fact, the opposite is true. You want to have many positive accounts reporting to your credit report. Logically, this makes sense because having more accounts with more on-time payments shows that you are a more reliable borrower. You just don’t want to open too many accounts too quickly since that can hurt your “new credit” factor.

Instead of closing a card, what you should do is simply keep the card open and put a small subscription service on it monthly. Why? Because each time you have an on-time payment, it helps build your payment history, the largest factor of credit.

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If you close a card, you are missing on potential on-time payments, age of credit, credit mix, and also lowering the total credit lent to you so your utilization percentage may go up. If you have an annual fee on a card you don’t like, see if there is a “no-fee” version of the card and downgrade it to that card rather than close it.

2. Use Autopay to Never Miss a Payment

This one is easy to do and easy not to do. Go into your credit card account and set up auto-pay. You can choose to either pay the full amount, the statement balance, or the minimum payment. Personally, I like to set up autopay to pay the minimum payment so that I never get a late payment. Then, I go in and manually pay the statement balance each month by the payment due date.

This helps me personally see my spending and have a manual review of my charges while ensuring, not have to pay interest, and still get the benefit of making sure that I never miss a payment if something goes wrong. Think about it, if you were to have a medical or family emergency, the last thing you want to experience on the back end of that is a late payment and a drop in your credit score. So, set up autopay.

A pro tip is to update your payment due dates across all bills and accounts to be the same so that you can “time batch” the process and have one time a month where you sit down and handle your payments. You can do this by simply contacting the credit card company or doing it online.

3. Get a Credit Limit Increase to Lower Your Utilization

One of the factors that get most people into trouble is using too much of their allotted total credit. Their utilization, which is the percentage of revolving credit they use, goes up, and their score tanks. You should aim for less than 30%, and in an ideal world, less than 10%.

To help drive this down, call your credit issuer and ask for a credit limit increase. This will help increase the total amount of credit extended to you and drop your utilization. Oftentimes, they will only give it to you when your utilization is fairly decent (less than 50%), so work to pay it down as best as possible before doing this. You should ask if the credit limit increase will give you an inquiry as some banks do a hard inquiry while some do not. If they do a hard inquiry, it is often better to just get a new card altogether or pass.

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4. Add Authorized Users to Increase Your Age, Add History, and Decrease Utilization

This is one of the best hacks out there as it helps with the 3 biggest factors of improving your credit: payment history, utilization, and age. This concept is also called “credit piggybacking” where someone with great credit history on a card adds an authorized user (AU) to the card. When the AU gets added, the credit history and information from that card are added to the AU’s report!

This is extremely helpful for people with young credit because it can drastically increase your age of accounts. It can also help many people with limited payment history or high utilization.

Please be aware that anything good or bad on that account you are added to will show up on your report. So, you want to avoid any cards with negative marks or high utilization. That being said, it is a one-way street, so nothing that you do with your credit can impact the primary account holder.

This is so valuable that there are companies that sell AU accounts. I always suggest starting with your family and/or personal network first as there are likely people in your network that can help!

5. Space Out Your Application Strategy

New credit is the smallest factor of credit, but it still matters! If you are looking to build up your credit, you should space out your applications. If you apply for too much credit in a short period, it looks very needy in the eyes of the lenders. For this reason, it is safest to apply for cards slowly over time unless you have really studied more in-depth how this works. A good rule of thumb is once every few months.

If you are in the credit game for the hopes of getting tons of credit card points for free travel, which is what I personally take full advantage of, you will want to familiarize yourself with the different bank rules and card promotions to put together the right application strategy. Applying blindly will waste inquiries and leave tons of benefits on the table!

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6. Review Your Report for Negatives

If you have any negative or “derogatory” marks on your credit report, this will hurt you drastically. They do impact you less as they age, however, you should review your credit report to ensure that everything on your report is 100% accurate and actually yours. Wrong information ends up on credit reports all the time and you will want to take personal responsibility for making sure it is accurate.

The “burden of proof” is on the credit bureau to confirm that any information on your report is in fact accurate. If you find inaccuracies, you can dispute that with them, or you could consider getting a credible credit repair company to help you.

Final Thoughts

There you have it, the top 6 tips on how to build credit fast so you can get closer to reaching your goals. Now that you’ve learned more about how credit score works and how you can improve yours, you’ll hopefully be able to make better financial decisions and achieve your financial goals quicker.

More Tips on How to Build Credit Fast

Featured photo credit: CardMapr via unsplash.com

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