Category Archives: Budgeting That Makes $ense

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5 Ways That You Can Retire on Your Terms Even If You Are Getting Started Late

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Being a CERTIFIED FINANCIAL PLANNER®, I am naturally more in tune with the truthfulness or, should I say, the intentions of retirement advertising. It’s all about hitting the pain points. Not much fun, right? At least buying a new car or a house is fun. Yet sometimes the important things in life are not “fun”. Retirement planning is one of those things.

When you need a new car, you check out the rates at the credit union. If you need a mortgage you also check rates. In other words, you shop for the best rate before you shop for your car or your new home. When was the last time you said, “Hey Honey, we haven’t saved enough for retirement. Let’s go down to the credit union and meet with a financial advisor.”? Probably never. I wish people were as in tune with their retirement planning as they are with getting a new car or a new house.

To compound matters, the big financial companies, that can afford to advertise on TV like to make you succumb to what I call the Lump Sum Scare. You know, they tell you that you need a lump sum of several million dollars or you won’t be able to retire – ever! I know better. If you haven’t saved “enough” and that is a relative term. It’s as personal as your fingerprints, you can still retire, be they different terms than maybe you are thinking about right now.

Let’s look at 5 ways you can retire on your terms, even if you are starting late.

  1. Work longer, retire later. Don’t forget, each year that you continue to work increases not only your Social Security benefit, if you have a pension it could increase that benefit as well. It will also allow your retirement investments to continue to grow (401(k), IRA accounts, and taxable investments)
  2. Work a second job or part-time after retirement. The first step is to figure out what your income shortfall will be and then you can start considering the type of part-time work you will need to supplement your other sources of income in retirement
  3. Reduce monthly expenses. Yes, this can be a painful process but in many cases, it will be necessary. This is why the budgeting step is so crucial. You don’t know what needs to be reduced if you don’t know what you are spending. Check out my “Budgeting That Makes $ense” course for a great way to develop your own successful budget. You can also get a free copy of my  Budget Tracker tool to get started. Most retirees don’t need to live on their pre-retirement standard of living. It will probably be somewhere between 70-80% of what you are spending now. Once you have your budget you can figure out what can be reduced or eliminated.
  4. Increase the contributions to retirement accounts. Use the power of compounding and time to work in you favor. Even a small increase of $50 to $100 a month can have a dramatic effect on your retirement savings depending on how long you have until retirement.
  5. Sell an asset. Again, probably a tough decision. Maybe not, if that vacation home is going unused now that the kids have grown and are not as interested in using it as they were once upon a time. Or maybe you want to downsize and get a smaller, less expensive home or move to a part of the country that is less expensive than where you live now.

Don’t be brow-beaten by TV and social media. Meet with a financial advisor or check out my coaching offer and decide what your retirement terms look like, even if you don’t have a big lump sum saved. You can still retire on your terms. Even if you are starting late. Get my free guide to retirement when you are starting late here.

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Your Life Experiences Affect Your Money Decisions

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A financial advisor was trying to get the business of a wealthy, retired man in San Diego. At their previous two meetings, the advisor talked about making big returns on the client’s money and had the client pegged as an “aggressive” investor. At the next meeting, the advisor was going for the “close” and had fancy charts to cement his presentation and what he thought was a sure sale. As the client sat stoically the advisor asked, “You seem somewhat distracted. Have we missed something?”

The client proceeded to tell the advisor that he didn’t like his strategy and his proposal to invest in risky stocks made him somewhat angry. He explained that his father died penniless after investing too aggressively in the stock market. He went on to explain that his father lost his manhood and his money and that wasn’t going to happen to him.

The lessons in this story are two-fold. First, the advisor failed to ask the right questions. Secondly, he didn’t respect how the client’s life experiences impacted the way he viewed money, which he would have learned had he asked the right questions. We are a product of our environment and life experiences. We either learn from them or we are destined to repeat the mistakes of those who influenced us.

My parents were hard-working people. My father was a career Marine and my mother a stay at home mom. We lived paycheck to paycheck during my childhood though I never felt I lacked anything. My parents never had enough money to even think about saving for retirement as they were busy paying for necessities for my brother, sister and me. So they never thought about retirement income. Fortunately, my father had two pensions and Social Security so they ended up in a financially ok place when my father retired from the City of San Diego.

As a result of my life experiences, I had a keen interest in money and finances growing up. As a kid, I sold flower seeds door to door and I had two paper routes to earn spending money. In high school, I worked at the local drive-in theater.

Not only did I want to have a more comfortable financial life than my parents, but I also wanted to know all about personal finance. That thirst for knowledge drove me to a career in financial services. I have certainly made my share of financial mistakes along the way; too much credit card debt in the past, investing in a “sure thing”. The good news is that those mistakes have made me a better teacher and advisor. They have also made me more prepared for retirement than I probably would have been otherwise.

How about you? What lessons can you take from your life experiences with money? Here are three suggestions to make the most of those experiences:

  1. Write down the mistakes you and/or your parents made with money. Be specific. How do you feel about them? Have they helped or hindered you?
  2. What lessons have you or can you take with you to improve your personal financial life? Write them down in a Financial Journal.
  3. Write down your short and long-term goals in your journal. These could be to get out of debt (long-term), start saving for a grandchild’s college education (long-term), decreasing your spending (short-term), not using credit cards (short-term), etc.

Finally, as we learned from the story at the beginning of this post, find a financial advisor or coach who you trust and who asks the right questions to get to know you and your financial life. There is no such thing as one size fits all when it comes to your unique financial goals and concerns. Don’t let anyone short change the experience for the sake of their personal gain. You are in charge! Please leave your comments below. You can also check out my FREE personal budgeting course here.

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Conquering Debt at Age 60

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U.S. Consumers who are 60 or older owed over $600 billion in credit cards, auto loans, personal loans and student loans last year. That is an increase of 84% since 2010 which is the largest increase of any age group. This information comes from TransUnion data, one of the biggest credit bureaus in the country. $86 billion of that debt is from student loans.

Many older Americans took out loans to help pay for their children’s college education and are still paying them off. Others took out student loans after the financial crisis in 2008 to retool their skills after losing jobs during the economic downturn.

This information presents a dichotomy or sorts. We hear about how the Baby Boomers are the wealthiest generation, yet we struggle to fund a retirement, so we end up working the rest of our lives in many cases. Compounding matters is the crushing debt that many Boomers face in what are supposed to be the stress-free years of retirement.

With this reality in mind, what are some ways to attack the debt problem when we are 60 or older? Here are five strategies to conquer debt when you are 60:

  1. Face the music – this may seem trivial, yet the reality is that many people resign themselves to being in debt for the rest of their lives. That doesn’t have to be the case. First you must come to terms that you have debt and have a desire to eliminate it or pay it down significantly and that you are willing to change the habits that created the debt in the first place.
  2. Target high interest debt first – look at the interest rates on the debts that you have and commit to tackling the highest interest debt first while keeping up with the minimum payments on the other debt as well. It can take years to pay off debt by just making the minimum payment. That is why it makes sense to target the highest interest debt first. Once you pay off the highest interest debt then tackle the next highest and so on. By being more strategic in attacking your debt you will pay it off faster and save more interest as well.
  3. Look at refinancing options – if you have reasonably good credit you can find a lender that will consolidate your debt at a lower interest rate. That can mean a lower monthly payment and a shorter time frame to pay of your debt. Do your homework to compare interest rates being charged. Also, if you are refinancing student debt keep in mind you will give up some of the perks for federal loans such as repayment plans based on income as well as debt forgiveness programs. Consider this option as a great option to save money over time on interest costs.
  4. Pay down your balance as soon as possible – you can do this by making more than the minimum monthly payment each month. Check with your lender and see if your extra payments will go toward interest or principle. Some will apply your extra payment to interest which doesn’t help pay down the debt. You want to have that extra payment pay down the principle. So, call your credit card company or lender and ask them how you can apply extra payments to the principle. Be sure to check that you are not being charged for making extra principle payments. You may be able to avoid the fees by tacking the extra payment onto your monthly payment.
  5. Develop a budget – If your debt is due to a lack of a monthly budget then consider starting one. It takes discipline to live within your means. We live in a world of get it now and pay later. That doesn’t work and it wreaks havoc on family life and retirement. Check out my Budgeting That Makes Sense course. It’s free and will give you a guideline to stick to a budget.

Everyone has a reason for accumulating debt. Sometimes it is due to poor budgeting habits while others can’t avoid it due to employment or other family circumstances. Regardless of the reason it doesn’t have to wreck your retirement. Be intentional, have a plan and work your plan each month. Before you know it, you will have made a big dent in your debt and then it will be gone. Once you are debt free you can enjoy your retirement savings and live your retirement on your terms.