How to Save for Retirement While Still Enjoying Today

First, understand that you can’t save for retirement. Retirement is not something like the purchase of a new car, or holiday that has a fixed price and can be purchased at when you have the money.

In order to retire from the workforce you need to have enough financial resources that you can support yourself in the lifestyle you desire. This will require you to be financially independent – not that you have a fixed amount of money stashed away in some investment account somewhere.

Second, you must understand that you don’t have two different lives – the working life and then the retirement life. You have one life and the money you need to support your lifestyle in that one life is not something you can save for.

Yes, one thing you can and should do is to have some money invested for long term support of your lifestyle. But, the only way to do this is to start with every dollar you earn and simply designate a percentage for long term savings.

Third, long term savings can include the retiring of debts which have accumulated because you have already spent your future earnings. If you have enjoyed a lifestyle benefit from the advancement of credit today, then you are simply doing things in reverse. If you are being charged say 18% on your credit card and are paying that amount with after tax dollars, the best investment you can make is to pay that bill.

Fourth, the only way you can know how much money you need to have coming in each month so you can be financially independent is to first know how much is going out. This amount needs to be an exact amount – not a guess. That means that for a period of time you must do some research by tracking your expenses – all of them.

Fifth, when you know what money is going out, you can evaluate where to allocate funds most effectively. You can work with a professional to compare alternatives for paying off debt if necessary and to consider options for combining financial programs. Some examples, of this type of financial strategizing are reorganizing debt, combining mortgage payments with investments, investing within insurance, or leveraging exiting assets.

Whether any of these strategies makes sense for you personally, isn’t something that can be answered until you have the other items in order first. Then you will know what you need, where exactly you stand today and can explore alternatives to bridge the gap that enable you to develop long term financial independence while still enjoying your life today – because it’s all one life.
Copyright© 2006 Tracy Piercy. Written Permission is required for reproduction. Thank you.

Want More Money? Here’s a no gimmick idea guaranteed to work – if you work it!

You will often hear me recommend that you use cash for purchases whenever you can. There are many reasons for this and you can read about them in some of the free articles on www.moneyminding.com or in the MoneyMinding® Method ecourse. I encourage you to find out more, however, for today here’s the guaranteed more money results idea:

The most common argument I get to using cash is: ‘I spend it too fast’, followed closely with ‘then I wouldn’t get the points on my credit card’. The credit card issue is a separate one, and is easily answered as well, but the first issue needs to be addressed before you can benefit from the credit card points anyway.

If you want more money you need to know how much more; you need to know what you want it for; and you need to have these reasons written down. Some of these things will be fairly close to your purchasing grasp today, and some will be for luxury items you currently enjoy but really ‘should’ be using that money for other things. Some examples might be the lunches or coffee out you currently enjoy easting out, or the new digital doodad you’ve been eyeballing for months but don’t quite have the cash available to buy it.

When you use cash, you will be forced to make some decisions about you upcoming spending ahead of time, thereby creating a sort of mental budget. When you use cash for your purchases you also get change back. For most people that money goes right back into their wallet for the next purchase and the little bits left over get stashed in a jar somewhere at home waiting for that someday when you’re going roll it all up and take it to the bank.

Right now, decide with a paper and pen what sort of things you would like to have more money for. Write them down, and then for the most immediate and important ones allocate a place you can start to accumulate money for. If you want to have more money to eat in restaurants, then designate that you will put all the $5 bills you get back as change from your regular purchases. If you’d like to have money for that digital doodad, then decide right now how much you’d like to accumulate, where you’ll begin your ‘cash stash’ and which denomination of currency you’re going to allocate to the cause.

When you make your regular cash purchases take that denomination of currency and keep it separate from your regular spending money. Or, just for fun, when you get change, rather than putting it back in your wallet to spend, put it in your pocket. When you get home empty your pockets into your pre-designated savings places.

This technique works for many types of saving, spending, and giving plans and has many benefits besides being able to have the things you want from your money. You just have to do it and keep doing it – knowing that the money will come when you are being intentional and strategic in your planning.

Copyright© 2006 Tracy Piercy. Written Permission is required for reproduction. Thank you.

When do you Lock in Your Mortgage?

Good Question? Yes, rising interest rates is a consideration, but so are some other things that might be even more important depending on your situation and your overall goals. Here are some things to consider from a situation that came up recently.

The goal in the example is to get the mortgage paid off within 5 years. The interest rate is only one of the technical considerations. Many people make decisions based on these technical details that are out of our control. Yes, managed, but not controlled.

The best way to stay in control and confident is to remember your primary goal and your reasons for choosing the product and terms you did in the first place. It is also important to know your exit plan - ie. when do you abandon the current program?

All this is not to say don't lock in; rather, don't make the decision based on fear of interest rates rising. In the case of mortgages, a good mortgage broker will consider your financial planning goals and present you with solutions that will meet those goals. In the example above the goals are: to be mortgage free before retiring from work, to maintain flexibility of payment while still considering new work, being confident in your decision based on different outside influences (i.e. interest rate).
Your broker will also present you with the pros and cons of switching in the context of your financial goals and current financial situation. There are costs, time, etc. that all come into the picture.
Before a meeting with your financial advisor or mortgage broker, it is helpful to know what your top monthly mortgage payment could be; what your time frame for payout is (in months) and other considerations and factors that could affect your payment plans. Some examples here could be different work, and therefore different income where you might be able to make higher or not as high payments, or possible lump sums of money that could be applied to the mortgage, or even the need for extra cash in the case of an emergency or terrific opportunity.

There is a lot to consider. This is why the expertise of a financial planning professional is so valuable, because getting focused too much on the rate of return before everything else will not help you stay in control or make decisions that are supportive of the bigger picture. This is the same approach you need to take with your investments: consider the bigger picture, goals, current needs, etc. first, then work your way toward considering the interest rate.

Copyright© 2006 Tracy Piercy. Written Permission is required for reproduction. Thank you.