Three Reasons to NOT Save for Retirement

Most people are vastly under saving, but no matter where you are at with your retirement investments, it never really will hurt to save more. Life is spontaneous and will sometimes throw you in different directions, so there will likely be times when it is more important to allocate your money to other important costs rather than saving for your retirement. Here is a list of three reasons that you may NOT want to save for retirement at the time:

Silver CascadeCredit Card Debt

If you are in a significant amount of credit card debt it is probably a good idea to put a hold on your retirement investments. High interest rates on your credit card debt puts a drain on your finances and unless your investments are making more in interest than you are paying on your debts you are effectively losing money. It’s important to pay off, or at least minimize your credit card debt as a priority over retirement savings.

Have an Emergency Fund

Life can always go differently than you expect it to. By having an emergency fund you will be able to protect yourself financially if you suddenly lose your job or encounter any unexpected medical costs. It’s a good idea to have at least 6 months of living expenses saved up. Once your emergency fund is stocked you should then allocate those funds to your retirement savings.

Student Loans

If you are young, you likely have significant student loans. While you might think that it makes the most sense to direct some money to retirement investments and some to your loans. But if the interest rates on your loans are higher than the interest that you accumulate on your retirement investment, you are losing money. It’s wiser to pay off your debt as quickly as possible and then invest in your retirement.

An exception to this, however, is a low interest student loan where your interest rates are less than the interest that you make on your retirement investments. If this is the case it’s smart to allocate funds to both.

Retirement investments are important and should always be part of a healthy financial plan, but there will be times in your life where it makes more sense to prioritize other expenses over your retirement plan. If diverting money from your retirement investments can help you with current financial burdens, don’t be afraid to deviate from the plan. Finding a balance is important when allocating money to your expenses and to your savings.

 

Financial Resolutions for the New Year

New Year, new budget. Here are 10 financial resolutions that can help you put your financial cards in order this year.

o-NEW-YEARS-RESOLUTIONS-2014-CANADA-facebookRe-evaluate your finances

Create or update your net worth statement. To do this make a list of everything that you own – savings, investments, house, car etc. Then make a list of all your debts – loans, credit cards, mortgage etc. Subtracting your debts from your assets gives you your net worth. Use this as your baseline for monitoring your progress over the year.

Make a Budget

And be realistic about it. This is the best time to take a fresh look at how you are spending your money. Make a list of your expenses and subtract this from your income. Prioritizing your spending can help you to cut back this year and help you to make saving part of your budget.

Organization

Having a filing system or spreadsheet can help you keep your resolutions in check. Maintaining a comprehensive calendar of bill payments and deadlines will als help you to stay on task when it comes to paying your bills on time and within the limitations of your budget.

Set Goals

Make realistic goals. Make a list of what you would like to save for and put a price on each item. Prioritize these goals and create a time line of when you should achieve each one. When goals are specific and measurable they are easier to achieve.

Get in Control of your Debt

If you’ve calculated your net worth then you know exactly what you owe. Now is the time to stop shopping with your credit cards. In an ideal situation less than 28% of your pretax income should go towards your mortgage while no more than 36% should be allocated for all your debts combined. New years is also a good time to consider debt consolidation if you find yourself in an overwhelming financial situation. Take charge of your debt and resolve to get rid of your credit cards.

Create an Emergency Fund

As a goal you should start to save up enough money to cover 3-6 months of expenses in a savings account that can be accessed. Do not touch this money unless you absolutely HAVE to. (ie: lost your job, became ill, etc.)

Put Money Away for Retirement

Contribute to a retirement plan (401K, RRSP, employer plan) and keep adding until you reach the maximum. Progress towards your retirement goals by continuing to contribute each year.

Review your Investments

Check that your investment portfolio still reflects your financial situation. Buy and sell investments to refine your portfolio if necessary.

Take a Look at your Insurance Policies

A quick call to your insurance representative may reduce your premiums. Check to make sure that your health, auto, home, or tenants is still reflective of your life. Make adjustments where applicable.

Write an Estate Plan

Create an estate plan or modify your current plan. If you have had a new baby, married or divorced recently you will want to review your beneficiary designations.

New Years resolutions are easier to achieve when you have a well put together plan. Cheers to a happy, healthy and financially rewarding year!

 

 

 

Should I Save or Should I Go?

When you’re young, it’s easy to look at what you hope to be decades worth of time and think, “I have plenty of time to invest, but my debt needs to be taken care of now. I’ll invest later.” Chances are, you’re thinking that way now, or even decades later—and that’s why you shouldn’t wait until you’re debt free to invest in your financial future.

There is always going to be debt, whether it’s your student loans, or a car payment or your mortgage or a credit card or two. There is not always going to be time to invest and see a real return on that investment. That’s right: the longer you wait to start investing, the lower your returns on those investments will be.

This doesn’t mean that you should ignore your debts. On the contrary! What we’re talking about is doing both. Here is how you do that.

1. Take Stock of Your Debt

If you’ve been trying to hide from your debt, now is the time to stop. Gather up all of your bills. Get a copy of your credit report. Verify all of your debts so that you know exactly how much you owe and to whom.

2. Fix Errors

Did you know that credit report errors have a huge impact on your credit score? And according to LexingtonLaw.com, millions of Americans have inaccurate credit reports. Go through your credit report with a fine toothed comb and make sure that any errors you find get fixed. Those debt verification letters you have can serve as proof if the credit reporting agency refuses to fix the mistake.

3. Pay on Time

Most personal finance articles will tell you that you have to pay considerably more than the minimum amount due on your credit statements if you ever want to pay off your debt. They’ll tell you to pay at least the minimum amount due, plus however much you are charged in interest each month. Most of the time they’re right.

If your financial situation is dire, you can get away with paying $5-$10 more than the minimum due each month for a few months while you work to get your finances straightened out and a budget set up. If your debt is freaking you out, you might want to consider something like debt consolidation to help you get your payments under control.

4. Pay Yourself

You’ve undoubtedly heard of the book Rich Dad Poor Dad. The central tenet of this book is the concept of “paying yourself first.” This means taking some money and setting it aside in a savings account every month and then paying your bills. This ensures that you’re saving for the future (and emergencies) while also paying your bills and paying down your debt.

And really—that’s where the heart of investing while paying off debt lies. As you build up money in your savings account and can afford to do so, roll your savings account balance over into small investments like CDs (making sure you leave a good amount in your savings account in case there are emergencies). Then, as these investments mature, you can roll your profits over into other investments.

So many people, when they think of investing, think of pouring thousands of dollars into the stock market or high yield bonds. It’s okay if this is your goal and if you work hard there’s no reason you can’t get there. For now, though, invest directly in yourself with your savings account, CDs and small investments. This way, you’ll have a good start for when you’re ready to retire later.

Investing For Beginners

In addition to working hard, making good financial and investment decisions is going to play a large role in your financial future. There are two things you can do with money, spend it or increase its value by investing – this is how the wealthy remain rich while others seem to never get ahead.

indsexStart Now

The sooner the better. Waiting until you have that extra 10K to invest is not the way to go about it. If you wait until you have the funds you will never get any traction. The truth is, it doesn’t matter how much money you have, start by putting aside $10 a week and increase  as your financial situation changes. If you start investing in your 20s you will be in a better position in your 40s than someone that waited until they had that 10K.

Rid Yourself of Unnecessary Debts

Debt is the exact opposite of investing. Instead of using your credit to make purchases use your own money and cut down on spending whenever possible. The money you save can be invested in your future.

Get Professional Help

Take the proper steps to get yourself familiar with the market. Before committing to a plan speak to a professional to find out what your options are. For example, you can start opening and managing share accounts with financial services companies like Interactive Investor. Certain assets may suit your needs better than others, professionals will help you find which will work best for you.

Learn

Learn about your investments and investment options. The more you know the better you will be at making decisions like when to invest and when not to. Some people prefer to be passive investors – leaving your money with experts. While this is a perfectly good option if you are the type of person that likes to be involved in your financial future it will help you to understand what is happening with your money in the long run.