Four ways to simplify your finances

                                              1. Automatic transfers

    Take advantage of direct deposits, checkbook transfers, and paycheck deductions so you don't ever touch the money you want to save. The fewer times you touch your money the less you'll be tempted to spend it.

2. Online bill pay

    This saves time, money, ( stamps, checks, etc. ) and is free with many financial accounts or credit cards. You can schedule these in advance on a specific date thus never having a late payment, and you won't lose interest by paying too early.
  
3. List things to accomplish

     This helps me a lot because it's right there in front of me. Day to day tasks or savings goals need to be on your mind if you tend to procrastinate or put them off. By checking off listed items, you get a sense of accomplishment and stay on track to meet goals.

4. Budget

     This is an oldie but goodie. No one likes to do it, but if we track our spending, there can be no doubt where our weakness to spend or short comings to save are coming from, just do it. See you next time. Finwiz.

Five key risks in retirement.

                                       1.) Longevity Risk

   There is a 50% chance either a husband or his wife wife aged 65 will live to 90 and a 25% chance one will reach 94. Therefore, couples need to plan for the real possibility they’ll need 25 or 30 years of post-retirement income.

2.) Inflation Risk

  Annual inflation  of 2% that’s been in place the last two decades will erode the purchasing power of a retiree by 40%, assuming 25 years in retirement. Inflation could be higher and erode savings much faster.

3.) Asset Allocation  Risk

  History shows equities provide the long-term growth that is needed to provide retirement income. To protect against volatility while still generating growth, retirees need a diversified portfolio that includes stocks, bonds and cash.

4.) Withdrawal Rate Risk

  Stock market volatility shows the need for conservative rates of withdrawal to avoid running out of money before you run out of life. Outliving your investments rises with annual inflation-adjusted rates over 4 to 5% of the original value of a portfolio.

5.) Healthcare Risk

  In 2010, a Fidelity survey highlighted retiree concerns about healthcare costs beyond what is covered by government or private insurance. 39% of retirees believe such costs could deplete their savings and lower their standard of living. Finwiz.

Money Habits to retire young

 

   Taken together, here are four money habits that will make you rich:

Save and Invest

  Always, always, always save and invest a portion of your income. Start out at 10%, and increase it each year from there until you’re setting aside a large percentage. If you do this from your very first job on, you’ll have painlessly accumulated a good sum of money.

Diversify Your Investments

  Things happen to all of us, no matter how charmed our lives might be most of the time. Investments go bad, employers go out of business, and skills become outdated. Invest across industries, companies, and types of investments — and understand your investment choices. Make sure you aren’t devastated by a job or income-source loss by having multiple things to fall back on.

Prepare For Emergencies

  Keep an emergency fund on hand. This emergency fund should be accessible and safe, not in investments. Laddered CDs can work, so long as you’ve got enough in them to leave you with a year’s worth of expenses after early withdrawal penalties.

Insure Against the unknown

  Keep a good health insurance policy and disability policy in force. Health care expenses are a big cause of bankruptcy, so guard against them even if you’re young and healthy. No one plans to get sick or injured.

 Use these good money ideas and you'll be on your way to a happy retirement or whatever else you want.  Which path will you choose? Finwiz.

Becoming financially secure is about learning to be the CEO of your own savings

 

   When social security and company pensions were first set up most retirees lived less than ten years in retirement. Longer life spans for both men and women means living for 25- 35 years in retirement, no generation has ever done or tried this before. Living off of savings and investments for 25 years or longer is going to require skills not taught to most of us in school. Current school of thought says we can withdraw four percent of current assets and not outlive savings. We need to do some backwards math to see how much to accumulate for the income we need in retirement. Someone that would like fifty thousand annual income would need to calculate the following equation with x = savings;  x times 4%= $50,000 so x = $50k divided by 4% or $1.25 million. Learning the math behind retirement is just as important as savings itself. When we have a handle on how much we need to retire secure, it's easier to create a plan to accumulate those assets. The more we read about personal finance strategies the better prepared we're going  to be down the road. Finwiz.

Automate your savings with these simple ideas

                                                         1: Direct Deposit Into Savings

     This makes the amount you want to save easy, gets you discounts on ATM fees, and save you the agony of a lost paycheck.

 2: Schedule Periodic Transfers

     Transfers of just $50 a month from a checking account to an IRA or Roth IRA will add up to large sums over time.

  3: Saving Money Using Credit Card Rewards

     I love this one. As long as you pay off your entire balance every month why not get paid to charge. You can buy gift cards at reduced rates or just reward yourself.

  4: Ignore Raises, Bonuses, And Surprises

     This is the best way to save long term with no reduction to your take home pay. When you get a raise, just pretend you didn't and save that income in a tax efficient manor. If you can't do this, there's no chance you're ever going to save (read my first post back in May). Later, Finwiz

Saving isn't enough to be financially secure, understanding how debt works against us is key

    If we take out a 30 year $150,000 mortgage at a fixed rate of 4% and buy a home, how much debt are we in? Most accounts and bankers would say that's easy $150k. We have just committed to $760.03x 360mo.= $273,000 that's $123,000 in interest over that 30 year mortgage. We may be 150k in debt technically, but in reality we're going to need 273k plus cash flow to pay back that loan. Understanding this reverse compounding is a key lesson in personal finance. If we aren't careful about borrowing, any savings we accumulate will just be spent paying back loans.

   Let's save an instant 80k. Take out a 15 year $150,000 mortgage at a fixed rate of 3.5% and we pay back only $1072.32x180mo.= $193,018. We just saved 80k in interest to invest or spend on other things. Few people ever notice that payments on 15 year loans usually increase our monthly payment by a manageable amount not 100%. In the above example paying another $300 a month over 15 years we save 80k, that's a lot of coin. Finwiz.

Don't keep putting off saving for retirement

   The excuses I hear for not starting savings are comical: I need to pay off my credit cards first, I'll wait until I get married, I have student loans to pay off, and my all time favorite, I'll wait until I have more money. Don't make excuses, you need to plan for retirement as early as possible. Consider the following information on what you need to save (based on starting age) to have a million by age 65. For simplicity I assume an 8% return.                             

                                                                                                                

Age 20 $200  mo.

Age 30 $450  mo.

Age 40 $1055 mo.

Age 50 $2850 mo.

   The cost of waiting is just too high! Einstein once said  "compound interest is the eighth wonder of the world". You can see in the above table we only get that 30 or 40 years of compounding once. Don't just make the assumption that a million is enough either. Inflation of 3% a year will cut the dollars purchasing power in half over 25 years. My twenty and thirty somethings' readers should consider a much higher savings goal. In other words 25 years from now you guys will need  two million to have the purchasing power one million has today. SAVE! SAVE! SAVE! Finwiz.