I want to pose a question out there for all the bloggers, blog readers, browsers, general public, etc. Are you going to be ready to retire? Point blank, I want you to stop reading right now and think for a minute about that question.
Ok. So what's your answer? No? Yes? Lets break it down and see what exactly I'm talking about.
The following are random questions that have to do with your current financial situation. If you answer NO to any of the following its really time to start re-evaluating your position. So lets go:
-Do you have a job? It may seem obvious but a lot of people aren't working in todays struggling economy. Its making matters worse. Bills pile up, homes are foreclosing, cars are repossessed, credit cards are defaulting, the list goes on. so GET A JOB! Anything! Go down and mow lawns if you have to, just get out and do it.
-If you are working great! Are you able to make all of your monthly bills with your earnings? What I'm noticing is that a lot of people don't count basic living necessities toward monthly bills. What I mean is, how much does it cost to fill up your gas tank to get to work? How much are you spending on groceries a month to feed your family? How much are you spending on the satellite TV for 900 channels? Its not just paying your rent or mortgage, car payment, insurance, and utilities. Think about the miscellaneous costs of living.
-How much are you saving currently each month? Did you say saving? YES I DID! Now, I'm not going to go into all of the math to show you how much you should be saving into a 401(k) and multiply the interest rate and figure out how much you'll have and need for retirement. No, I'm just going to say, that in my humble opinion, you should be saving at least 5% of your monthly income into something, like a bank, investment account, IRA, 401(k), stocks, bonds, mattress, etc. etc. etc.
-Do you have an emergency fund? Its also wise to have a little something set aside for a rainy day. Lets face it, some unforeseen circumstance is going to cause you to have to dip into that stash of cash to survive; could be loss of job, medical bills, it could be anything. Its a smart thing to set aside at least 3-6 months worth of living expenses to get by. Be generous too when calculating your figure. If you pay out 1500 in total expenses a month, figure 1700 x 3 = your emergency fund.
-When do you plan on retiring? Is there a plan in mind, a set goal that you want to retire when you're 58? 60? 45??? Hey, its possible. Having a goal in mind really helps map out exactly what you're going to need to do in order for you to get there. If you're 30 years old and you want to retire by the time you're 55, are you on pace for that? Well if not, what are you going to do to change that? Read on. . .
Simple Solutions to assure you're on the right track
Here are a few (of many) things that I feel are important when thinking about retirement. There are a lot of suggestions but I narrowed them down and simplified them.
1. Do you need to clear up any outstanding debts? In order for you to start planning for the future you need to take care of old business first. Now, since Secure Credit Solutions is a debt settlement and credit repair company, we can help with clearing up old debt. So if you have outstanding credit card debt, personal loans, or any unsecured debt give me a call and we can set something up and make sure you're doing whats right. 1-866-975-7526.
2. What is your debt to income ratio? What I mean is, if you have a home (mortgage), 2 car loans, student loans, and so on and so forth; you might want to evaluate exactly what you can start to pay down as fast as possible and free up some of your income so you can start investing. Don't get me wrong, you don't need thousands of dollars to start, if you have 20, 40 or whatever you can put aside START DOING SO! But I would strongly consider paying down a car note or a high interest loan first before investing. Its simple math really; if you have a high credit card balance of say $5,000.00 and an interest rate of 19% (ouch!) its wise to knock that off before you get serious about investing for your future. Why? Well chances are you're not going to find a conservative return of 19% or more on your investment. Get it? (At the end of this blog, I'll post the formula to figure out your interest on any loan, so you can play around and see what you're spending toward interest and what you're spending toward principal).
3. Cut the fat from your spending. Do you have 14 magazine subscriptions? How about 1150 channels? do you have a cell phone and a pager (who carries pagers anymore?), two cell phones and a house phone? Why? Are you a doctor? If you are and you're reading this blog then hopefully you can benefit too! What I'm getting at is this, if you have a pile of magazines in your mailbox a month chances are they aren't free, and those satellite channels you're NOT watching aren't free either. Start looking at where you can cut back a little. Don't be afraid to do it either, you're not going to die. If you're paying 179.99 (abstract figure) for cable call them up and see what you can get for half of that. Find out what specials they have and maybe you can get just as much for a lot less. Your cell phone. You have 5000 minutes a month, rollover or whatever nowadays, but you don't use it. Get rid of it! I have a blackberry and I had all the bells and whistles you can want. I had email, instant message, GPS tracker, unlimited text, the list goes on. Sure I was paying 150 a month! So I called, canceled my email, text, GPS, picture access, internet, I didn't need it. Frankly it was annoying! Now I'm paying just over 50 bucks a month. I saved $100.00 and guess what? That goes into my Roth IRA.
4. Don't break yourself. Don't invest more than you can handle. A lot of these so-called “experts" tell us to invest 10% or more of our income. Sure that would be great if we could. But since I can't invest 10%, I might as well not invest at all. WRONG! don't listen to them. Those that over-invest are in no better shape than someone not investing that is pay check to pay check. What I mean is, they still don't have the money to go out and enjoy themselves. Why punish yourself like that! If all you can afford is 5%, 2% thats fine, it's a start worry about increasing it later when you get a raise, promotion, or pay down some of those debts.
5. Budget Yourself. Along with No. 4 you should create a budget for your entertainment. Shame on you if you're not including that in your monthly expenses. I digress, a lot of people don't. Its important to set your budget, but its more important to NOT EXCEED that budget. If you set aside $50.00 for the weekend make sure you're not picking activities that cost $100.00. If you do then make sure that you limit the following weeks pleasures a little.
Bottom line is that every little expense adds up. Don't nickel and dime yourself out of retirement. Plan wise and pay smart. You don't need to be a stock market genius to plan your retirement properly and invest wisely. How I got started was I read Motley Fool's 13 steps to investing. Great site. (no I don't work for them). It gives you the breakdown of what investing is all about, how to properly invest, safe routes and getting the general idea of the whole thing.
So with that being said I'm finally tying this blog up and heading out. However, before I do, I did promise to show you how to calculate interest for any loan so you can check out how much you're paying into interest and how much into principal. You can also figure this when you're looking into any big purchases so see if it really fits your budget.
With this method of calculating interest there are essentially 2 ways. This is for simple interest rates, not compound.
Lets say you have a $5000.00 balance and your interest rate is 15%, and for the sake of argument will use 1 year over time.
One way is to divide the interest rate into the number of months in a year, 12:
.15/12 = .0125
then multiply .0125 by your principal balance of $5000.00
5000x.0125 = $62.50
So you have $62.50 of interest each month. If this were a credit card, your standard payment is 2%-4% of the balance. In this case it would be either $100.00(from 2%) or $200(from 4%). That means, if you're paying the minimum of $100.00 that $62.50 is going toward interest and only $37.50 is going to the principal.
. . at that rate it would take you over 32 years and more than $7,000 in interest to pay it all off.