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Guest Post Investing

7 Ideas to Help Cut Expenses in Retirement

Mobility
Creative Commons License photo credit: Lucy Boynton

This guest post was written by Arjun of Investing Thesis: Credits Toward Financial Freedom – a personal finance and investing site from a Canadian perspective. If you like this article, I encourage you to subscribe to their site.

Not all of us will retire well-to-do and comfortable for the rest of our lives. In fact, since the chaos caused by the recession, many people who thought retirement was just around the corner were very wrong and finding out you can’t retire when you planned can be devastating news. Finding a new job or staying longer at your old one may not have been in the cards but for some, it is the only alternative for staying afloat in a world of rising consumer prices and lowered incomes. If you have suffered through some unfortunately financial times on the road so close to retirement, there are still some practical tips that will allow you to retire as you intended by cutting down the costs of living and by spending more wisely. Here are some tips to help you retire on schedule and still enjoy the rest of your life without much financial worry:

1. Senior Discounts Save Money

For some, asking for a senior discount is a hard thing to do. But pride be gone – senior discounts should be considered a financially-savvy move rather than an age reminder. There are so many businesses that offer special perks to seniors, many of which are well-advertised and beneficial. But more often than not, companies that do not advertise will still offer price discounts or other incentives if customers ask. Dine out during the early-bird specials and keep your eyes peeled for other local businesses offering weekly incentives.

2. Smaller Home, Smaller Bills

While you may be mortgage free, it still may not pay for you to live in a large, multi-room home that you rarely use or need the space you once did. Typically the largest expense is still the maintenance on a large home. The yard still needs tending, the furnace needs to be cleaned, the utility expenses may be unnecessary in a larger home that now just houses one person or a married couple. Consider downsizing your house once the kids are out of the family home. Depending on your preference, you may choose to move to a smaller home or even a condo where no yard work or other maintenance is required. Look for properties in other areas that are more affordable and more manageable since you no longer have to consider school districts or the proximity to other things you no longer need to do. All of the extra income you make from the sale of your home should be invested into your retirement nest egg for additional security in retirement.

3. Investment Fees Can Bite

Investment returns laden with fees and other expenses can be drastically reduced. Even after retirement, you might want to check out other investment options that have fewer fees. Have an understanding of how much in fee expenses you are paying out and how it can impact your overall retirement funds. Even bank fees like those imposed on checking accounts, overdrafts, and ATM usage can eat away your savings for retirement.

4. Retirement Distributions: Take the Minimum

If you are 70 ½ years or older, you are required to take minimum distributions from your retirement accounts annually. The amount is calculated by dividing your individual retirement account and any 401k balances by your IRS-determined life expectancy. If you do not take the required amount, you can face a steep 50% tax penalty plus and additional hit when the income tax is place on the amount you should have withdrawn.

5. Get on Board with Medicare

Three months before your 65th birthday, you can sign up for Medicare coverage. Be sure to complete the application in a timely manner to avoid premium increases of 10% for delayed enrollment. If you are still working and have health coverage, you need to sign up within an eight month period once you leave your job or you will be penalized.

6. Spoil the Grandkids With Time, Not Money

Any grandparent could potentially go broke trying to keep up with the latest and greatest products being marketed to kids. Sure it’s fine for grandma and grandpa to buy nice things for their kin but spending needs to be controlled. Now that you are in retirement and have more time on your hands than you know what to do with, choose to spend time with the kids rather than spoil them with material goods.

7. Travel Smart

One of the perks most people consider during retirement is the ability to travel without time constraints. Even if you are working on a tight retirement budget, travel is still possible. Work to cut out expenses you no longer even use like full package cable television or two vehicles. Find ways to supplement your travel account and plan ahead. There are many kinds of trips that are planned especially for seniors so check with a travel agent. Plan to travel on off-peak times and days to get even more savings. But do plan to do something fun for yourself during your retirement years.

Retirement has become a time not everyone is looking forward to out of financial fears but it is never too late to start paving the way for a more golden ‘Golden Years’. If you are the child of a parent approaching retirement, you can do your part to help them comparison shop using the Internet or keep them updated about other money saving tips they are not aware of coming from a different generation.

How do you plan on cutting expenses for retirement?

Guest Post Money Management

Five Reasons Why You Should Still Use Personal Checks

Bag heads
Creative Commons License photo credit: scragz

This is a guest post by Kasey Steinbrinck, who has spent more than seven years writing for multiple forms of media. He has worked in the television, newspaper and radio industries, but now spends his time blogging about personal checksand business checks for the online company Check Advantage. He also has first-hand experience with using his credit card too much. You can read more of Kasey’s writing at http://blog.checkadvantage.com/.

Paper or plastic? That’s a question you usually hear at the grocery store, but it’s also a decision you’ll have to make when it comes to payment options. Will you use a credit card, debit card, cash or a personal check?

You’ve probably heard the rumors that personal checks are on the “endangered species list” of ways to pay. However, according to the Federal Reserve, there are still more than 30-billion checks written in the U.S. every year.

Maybe you’ve been in line behind a little old lady when one of those 30-billion personal checks was being meticulously written out, but only after that nice little old lady dug through her gigantic purse to find a couple of coupons for 25-cents off.

Despite her lack of multi-tasking skills, those little old ladies all over the country may be teaching us a lesson in personal finance wisdom! (Not to mention – patience – which is a virtue by the way)

Here are five reasons why keeping personal checks around is still a good idea:

1. It’s Easier to Keep Track of Your Personal Finances

This is probably the biggest advantage of personal checks. Let’s be honest. When we all started using debit cards to make purchases, most of us stopped using our check registers.

Those little books with white and gray lines can be a very valuable tool. You’ll usually get one when you order new personal checks. Have you ever received one when your new debit card came in the mail? I haven’t.

Yes, it can be a pain to carry a register around so you can record every little payment. That’s why they make duplicate checks. You can always check out the carbonless copy when you get home and then balance your checkbook.

Personal check registers can help you stay within your budget. Sure, online banking is super convenient, but when you’re actually keeping track of things on your own with hard-copies, you’ll be much more aware of what’s in your account. Plus, sometimes banks make mistakes. You’re more likely to catch an error if you’re keeping track of things yourself.

2. Real People Don’t Accept Credit Cards

Visa isn’t quite “everywhere you want to be.”

One of the arguments against personal checks is that some vendors no longer accept them as payment. However, there are plenty of other situations in life when money will need to be exchanged and personal checks are ideal.

What happens when you need to pay the babysitter and you ran out cash on your date? Where do you plan on swiping your credit card? Careful with that one!

Imagine getting a birthday card from Grandma, and instead of a personal check she sent an IOU and a stick of gum.

What do you do when you’re heading to your cousin’s wedding and you’re picking up a card at the last minute, but you forgot to get a gift?

Let’s say your greasy overweight landlord is pounding on your door asking for the rent. I doubt he takes American Express. But if you give him a personal check and ask him to wait until Friday to cash it – you might be able to calm him down.

Personal checks can certainly come in handy from time to time!

3. You Can Get “Back to Basics”

The recent downturn in the U.S. economy has made the idea of getting “back to basics” something that’s both trendy and smart. The basic idea is to simplify your life.

That means not only thinking about how much you’re spending, and what you’re spending your money on, but also what you use to spend that hard-earned money.

Many Americans are finding themselves in some serious debt because they used credit cards and spent money they didn’t have. Then things head into a downward spiral when you can’t keep up.

When you got your first credit card someone probably told you something like “Use this for emergencies only!” But somewhere along the way, the convenience and speed of swiping a plastic card surpassed the concept of being responsible.

It’s so easy to flip your wrist, or punch in a pin number without really thinking about how much money you’re throwing around. On the other hand, when you go back to using personal checks, you are forced to write down the amount you’re spending. Using personal checks can open your eyes so that you see exactly how a particular purchase is going to affect your life.

4. Sometimes Being Slower is a Good Thing

Just ask the Tortoise how he managed to beat the Hare.

It’s no secret that checks take a little longer to process than an automatic payment you set up online or an electronic payment using a debit or credit card. But slowness can actually be an advantage.

Check 21 legislation became law in 2004. It allows banks and businesses to use electronic images and substitute checks as a legal form of payment. That’s made check processing much faster and more efficient. Yet it still takes one or two days for the typical check to go through.

Now let’s say your purse is stolen (heaven forbid), and your checkbook and debit card are inside. That nasty thief could drain your checking account while swiping your debit card all over town. If you don’t report your card stolen immediately, you’re probably going to be held accountable for the money that was spent during that time period.

If that purse-snatcher tries to use your personal checks, you have more time to cancel those stolen checks before they are actually processed. This way there is no charge to you.

5. You Can Express Your Personality

It may not be the most useful benefit of using personal checks, but it’s definitely a fun reason to keep them in your pocketbook.

We love to personalize and customize just about everything we own. From personalized license plates to monogrammed bath towels, MySpace layouts and cell phones, everyone wants to be an individual.

Personal checks have been ahead of the game on this for a long time. There is literally an endless supply of styles you can choose from if you decide to order personal checks online.

There are checks for people who are animal lovers, outdoor enthusiasts, sports fans and more. You can order personal checks featuring your favorite cartoon character, or even have family photos printed on the checks.

Some credit card companies have tried to jump on the personalization bandwagon, but it just isn’t the same. Not many people really get to see your credit card. But you’re handing personal checks to people all the time. They can be great conversation starters. Who knows! You could meet the love of your life because of your taste in personal checks. You can order new personal checks here.

What Do You Think?

It’s probably pretty unrealistic to think we can all get rid of our plastic payment options and use personal checks exclusively. However, should we keep them around or not?

I’m sure there are plenty of people with opinions about the future of personal checks. Let’s hear what the readers of Financially Poor think about the topic. Leave a comment and let us know!

Debt Management Guest Post

Everything You Need To Know About Credit Agencies


Creative Commons License photo credit: paalia

Today, Mr Credit Card is going to give us a quick run down on credit bureaus and credit scores. Aside from reviewing credit cards, Mr Credit Card has also written about identity theft protection reviews. Please check out his site for the latest credit news

A couple of hundred years ago if you wanted a loan you might have to present your case to the lender for why you are “good for it”. If the lender didn’t know you, they might ask about you around town to see what your financial reputation was. Today, the Credit Agencies fill that role in an electronic way. Virtually all people in the United States have a file with Equifax, TransUnion, and Experian, the three major credit agencies. For a long time, the file consisted solely of the details of the accounts you hold with lenders that report to one of these agencies. For instance, your bank might report your credit card account, when it was opened, what your balance is, what your credit limit is, and what your payment history has been. Quickly interpreting all of this information became a challenge for financial institutions and the credit agencies boiled it down to a single number known as a credit score.

What This Means To You?

Every time you apply for credit, a record is sent to the credit agencies. If you take out a loan, or obtain a credit card they are informed as well. Over time, a picture of all of this information, including your payment history becomes your credit score. Your credit score is used by lenders to determine if you will be granted loans in the future. For that reason alone, it is important to maintain a good credit score. Unfortunately, credit scores are now being used for all sorts of reasons that have nothing to do with loans. Employers are increasingly using credit scores to screen applicants. Insurance companies have also been known to set rates based in part on customer’s credit scores. While I am strongly against such uses, everyone needs to be aware of this reality when making decisions that can affect your credit score.

How Your Credit Score Is Determined

The credit agencies actually have a policy of specifically not telling the public the exact formula they use to generate credit scores. Nevertheless, observers have deduced an approximation of how the score is computed. As one might expect, payment history is the most important factor making up 35% of the credit score. 30% is determined by debt ratio. Debt ratio is the amount of debt you have relative to the amount of credit your currently have. It might not be intuitive, but having more available credit actually increases your credit score as it lowers your debt ratio. 15% of your score is determined by the length of your credit history. Therefore, it is best to keep credit cards open for a long time, rather than cancel unused cards, especially if there is no annual fee. Of the rest, 10% is composed of the types of credit you have been extended, and 10% from the number of recent credit inquiries you have.

How To Increase Your Credit Score

Obviously, paying your bills on time is by far the most fundamental thing that you need to master to improve your credit score. Less obvious is the strategy of hanging on to your accounts for a long time. This will improve your credit history and debt ratio. Also, do not apply for credit too frequently. Many shoppers cannot resist the lure of the 10% discount frequently offered when opening up a store charge card a many chains. As a rule of thumb, I limit my credit card applications to situations where I am offered a sign up bonus worth at least $200. Anything less simply isn’t worth the hit on my credit. Finally, double check your credit reports regularly. Errors in credit reports are extremely common, and credit bureaus have little incentive to correct them. When requesting a copy of your credit report, go directly to the three major credit bureaus or through www.annualcreditreport.com, the only site that will actually offer you a free report (though the credit bureaus will always be trying to sell you their “credit monitoring services”). Many other similarly sounding sites exist to sell you some product or service in addition to supplying you your credit report. By law, you are required to be given a copy of the report every year, and you do not have to purchase anything to get it.

Having a Good Credit Score Saves You Money

With the huge impact that the three main credit bureaus have on society, it is worth noting that having a good credit score can save literally thousands of dollars in your mortgage interest for example. Even if you are not a credit addict, it always pays to maintain a good credit score as soon as you can.

The easiest way to build a credit profile is simply to use a credit card. But there is a big caveat here. You have to use it responsibly. That means paying your bills in full and using it for expenses you would have to make anyway (and not on impulse purchases). A college student (if responsible) can start building their credit with a student credit card. If you have no credit, you can start of with a secured credit card.

Your credit report is an important part of your reputation, and a good credit score is an extremely valuable asset. Learning how to maintain a good credit score is a key skill for financial survival in today’s economy.

Debt Management Guest Post

Is Debt Snowball An Effective Debt Reduction Strategy

This is a guest post by David Brown, a content writer with Oak view law group. He writes on a variety of finance related topics with a strong focus on debt.

Are you submerged in debt and desperately looking for a way out of the debtors prison? Well, it is certainly possible for you to get out of the red zone without filing bankruptcy or consolidating your debt. The modern era we live in offers far too many strategies to combat debt. One of the better known approaches to eliminate debt is debt snowball. Can this approach really lead you to a debt free destination? Let’s discuss.

What is debt snowball?

The concept of debt snowball has been popularized by financial guru Dave Ramsey. Debt snowball is a process by which you list all your debts from lowest to highest and attack the lowest debt first. You need to pay minimums on each bill except for the lowest one. Pay as much as you can towards the lowest debt so that you can get rid of it as soon as possible. Next, you move on to the second lowest debt and the process continues till you are free from the rib crushing, spine tingling clutches of debt.

What are the advantages of debt snowball?

“Personal finance”, Dave Ramsey correctly points out, “is 20% head knowledge and 80% behavior”. Debt snowfall is based on this view. It rightly assumes that paying off smaller debts gives a sense of victory which motivates people to pay off all other debts.

It is relatively easy to pay off bigger debts using debt snowball method. Here you clear the smaller debts first. So by the time you reach the bigger debts, the extra amount that you can pay towards them increases. Consequently, it is possible to eliminate them quicker.

Another advantage of debt snowball method is the reduction of the total amount owed to creditors in a single month. This can save your neck in case you encounter an unforeseen situation like loss of job or medical emergency.

Debt snowball has often been compared with debt avalanche theory by which you try to eliminate the debt with the highest rate of interest first. This approach is mathematically better than debt snowball as you have to pay the least amount of interest. Nonetheless, the debt with highest interest rate can also be the one with the highest balance. This means it will take a long time to pay it off which can have a psychological impact on you. It is highly possible that you will try to get rid of it for several months only to give up because of a feeling that you are getting nowhere. This is where debt snowball scores over debt avalanche. The “quick wins” you get with the former, gives you hope-something very important, sometimes more important than money.

Some criticisms against debt snowball

It has been pointed out that by emphasizing on human psychology, debt snowball puts mind over matter which can result in monetary loss. As you focus on the debt with smallest balance instead of the one with highest interest rate, you have to pay more money in the long run. Thus, your “motivation” comes at the cost of some extra bucks.

Secondly, debt snowball does not take into account the difference between secured and unsecured debt. Problems often follow if secured debts are not addressed at an initial stage- foreclosures and repossessions being at the worst end of the spectrum.

Is debt snowball the right choice for you?

Debt snowball is a simple debt reduction method which is suitable for people who have a wide range of balances. It gives you tangible results and motivation which is missing from other similar approaches. While is it most effective for people who need some encouragement in the form of quick results, individuals with a lot of patience will benefit more with avalanche approach because it is cheaper.

Debt snowball can certainly help you to climb up from the trenches. However, you should remember that it cannot make you debt free with the wave of a wand. But if you stick to it till the end then your patience will be certainly rewarded.