How to Get Ready For
Retirement: Save Money and Make Money
Get rid of debt
No matter how close or how far away your retirement is, the
time to get ready for it is now. You need to increase your retirement savings,
knowing that a dollar that you invest now can be worth three dollars in the
future.
If you feel that you haven't saved enough, here are some statistics to
make you feel better. In mid-2006:
- The
average of retirement savings for families with a head of the household
who's 43 is $18,750;
- A
before-retirement household of people older than 55 has retirement savings
of $60,000;
- Baby
boomers aged from 41 and 54 have retirement savings of $30,000;
- Baby
boomers have a median total household personal retirement savings of
$35,000;
- Baby
boomers who save in a 401k have an average 401k account balance of $80,000;
- A
survey says that 51 percent of workers 55 and up have saved less than
$50,000 in retirement savings this doesn't include their investment in
their primary residence. In the same group, 39 per cent had saved less than
$25,000 in retirement savings;
- Another
survey estimates that one in five pre-retirees from 50 to 64 have less than
$5,000 in retirement savings.
So if you feel you haven't paid enough attention to your retirement funds,
relax. You can start doing a few simple
things now, and you'll soon boost your stake. Let's start by plugging
your money leaks where money is being drained away and you don't even
realize it. The major money leak for most people is debt, both credit card and
other debts.
Plugging your debt money leaks
For most people, credit cards are the primary way in which
money leaks out of their pockets. Take steps to plug those insidious leaks
today, and you will find that you have more money, without working harder or
changing your lifestyle.
How many credit cards do you have? It's instructive to
count the number. Then, work out how much you owe on each card, and how much
you're paying in interest. Credit card debt is VERY expensive, although the card
companies work ultra-hard to disguise this fact from you.
There's a solution:
pay off your credit card debt. TODAY, on all your cards.
If you can't pay off your card debt immediately, you're in
trouble, because card debt can eat into your savings if something comes up so
that you have no money coming in. This could be an illness, an accident, or
being out of work. If you're like most of us, you've never bothered to check how
much you owe on your cards, you just use them. However, when you're trying to
build your retirement savings, avoid credit cards.
If you have serious credit card debt, realize that you're
not alone. Credit card companies spend millions of dollars to encourage
consumers into debt. If you need help getting out from under a mountain of card
debt, then see a counselor at a non-profit credit counseling bureau. They're set
up in all states to help people just like you, so don't hesitate to call them.
They're trained to help you to get out of debt, plugging that enormous money
leak.
Are you paying too much interest? You CAN switch cards
All card companies are not equal. Some charge huge interest
rates. If you're going to need a few months or longer to pay off your card debt,
check out which card company has the lowest interest rates. If you have a good
credit history, and are a heavy credit user, then credit card companies make it
easy to switch to the card that theyre offering. It will only take a couple
of phone calls, and a few minutes of paperwork. Considering that you can be
saving hundreds or even thousands of dollars, which will boost your retirement
fund, invest the time.
How much do you owe? Taking stock of debts
A money leak is a money leak. You won't be able to power up
your retirement savings if your money is dripping away. Make a list of everything you owe, to everyone, including personal debt.
Your list should look like the table below, with the
highest interest rate charge listed first:
|
Owed To
|
Balance Owing
|
Interest
|
Payments
|
Cycle
int.
|
|
Amex
|
$8,970
|
21%
|
$300
|
2 cycle
|
|
Dept. store
|
$4,522
|
22%
|
$180
|
Av. daily
|
|
Brother
|
$10,000
|
0
|
0
|
|
Be sure to list your personal debts. Yes, our friends and
relatives say: "Pay when you can" and "Don't worry about
it", but you do, and they do, and your own guilt will over time erode your
valued relationships. So be strong, and
put your personal debt on an equal footing with your corporate debt.
The emotional debt: counseling can help
Most of us were taught everything else in school, but we
weren't told about debt and how to manage money. It can take a huge burden off
your shoulders when you see a counselor for even one session. The major benefit
is that you realize that you're not alone most people have challenges with
money, and the worst thing you can do is to keep going and hope that somehow
everything will magically fix itself, because chances are that it won't.
What if you owe huge credit card debt? Getting out of credit card debt
If you're shocked when you list your credit card debts,
relax. Do not panic. You can get out of credit card debt, but it will take a
little time, and you'll need to make some adjustments. The most important one
you can make is to pay off more than the minimum that you owe on each card
if you don't pay more than the minimum, paying off your credit card debt with
the interest can take you longer than paying off your mortgage you become a
unwilling slave to the credit card company.
Here's how to get
out from under credit card debt:
1. Decide what's the biggest amount you can afford to pay
off each month on all your cards. It might be $300. Add $10 each to the minimum
you're paying off on all your cards. Let's say that you're left with $200 after
adding $10 to each of the cards.
2. Pay the extra $200 on the card which is charging you the
highest interest. Keep it up until that card is paid off, and then cancel the
card.
3. Now pay off the next highest-interest charging card. Pay
it off with the $200 every month, until it's paid. Cancel it. Then start again
with the next card, and so on.
Paying off your card debt can take time. However, that's
not important. Even if it takes years, you're taking action, and each month your
debt is going down.
Taking out a home equity loan to pay off
your cards
If you have extensive credit card debt, there's an
alternative to paying them off one by one. You can take out a home equity loan
to pay off your debt. The big
advantage to taking out a home equity loan is that it will be at a lower rate
than you're being charged by the card companies.
Home equity is the difference between what your home is
worth, and how much you owe on it with your mortgage. For example, if you have a
home that's worth $300,000, and you owe $150,000 on your mortgage, your equity
is around $150,000. However, this doesn't mean that you can borrow that amount.
Banks have ways of working out the equity which is never more than 80 per cent
of the value of the property, they also take into account the mortgage, how long
you've been paying it off, the house market, and many other factors. It's worth
discussing it with your bank, because if you can borrow against the equity, it
consolidates all your credit card debt.
Using the equity in your home with an equity line of credit
You can also choose to take out an equity line of credit.
This is credit against your equity in your home. The amount of interest changes
according to the current interest rates. One of the challenges with this kind of
loan is that the payback period is not set. While this sounds excellent, it can
be a trap unless you're very disciplined: remember that you're being
charged interest on the amount you've borrowed it's not a free line of
credit.
Do you own a business? If so, see your bank to see what
commercial options they have. You may be able to get an interest-free business
loan and apply some of it to your debt. As with all situations, this one has a
challenge: it's a loan to your business, not to you. See your accountant to ask
whether he has any suggestions. You may be able to take a loan in lieu of your
salary for a period.
Yes! Happy days, you're out of debt!
Once you're out of debt, not only can you now put the money
that you were using to pay off the debt into savings, but you can also have the
satisfaction of knowing that you've plugged a money leak that will go a long way
towards ensuring that you have a happy and prosperous retirement.
Put your money to work for you before retirement (and after)
Later in this guide we'll be discussing a safe form of
investment that you return you income during your retirement. However, before we
discuss municipal bonds, let's discuss the money that you're letting slip
through your fingers every day.
Have you paid off your home? If you haven't you have
another money leak, that's leaking money that you could and should be using.
Pay off your mortgage
If you haven't paid off your mortgage, look at paying it
off as a priority. The real estate market rises and falls, but no matter at what
level the cycle happens to be at currently, one thing's certain there's a
limited supply of land, and whenever there's a limited supply, the cost of it
goes up. Therefore, look into what savings you could make if you were to pay off
your mortgage faster. You could save thousands of dollars that you can put into
your retirement fund.
Saving money on your money
Many people never look at their bank statements to see what
fees they're being charged. Please get out some bank statements and look at the
fees. Then, spend a few moments online, and see where you can save.
Save money on checks
Save money on checks by buying them through check
discounters like:
- Checks
Unlimited
- Checks
in the Mail
- CheckWorks
Your bank charges $20 to $25 per 200 checks, discounters
charge around $6.00 to $8.00 for 200 checks.
Depending on how many checks you use, you can save $19 dollars a year and
more.
Save money on Automated Teller Machines (ATM)
Check your bank statement to see whether you're being
charged fees on your withdrawals from ATMs. Usually your own bank's ATMs lets
you make a number of withdrawals before you're charged. Make sure you know how
many you can make, and don't make withdrawals from out-of-network ATMs, because
with the surcharge, you're paying interest of around 7 per cent to access your
own money, which is outrageous. By avoiding ATM fees, you can save from $100 to
$200 a year.
Watch for new finance and money management services online
The Internet cuts down on the cost of providing financial
and money management services. This means that the smaller operators who are not
as well known often provide better services and much better rates than the
larger established players. Be on the watch for new programs and new deals.
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