Dodge these Early Retirement Pitfalls

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Dodge these Early Retirement Pitfalls

In order to retire early, our intention is to find a high-paying job where we can work hard. Working hard for hours on end can be constraining. Most working individuals feel that they do not own their time because they need to report on the job 8 hours every single day, sometimes even longer.

It is for these reasons retiring early is a very attractive idea to most. The truth is, a happy life is not guaranteed by early retirement. Most have fallen into these retirement pitfalls and are getting a tough time getting back on track. Avoid the following if you are planning to retire early:

A shortage of preparation:

Many people would like to retire early but only a few get prepared for it. Plenty of problems may stem to lack of preparation. You need to realize that once you quit work, you stop making money.

This may result to a significant drop in your cash inflow. Your earnings declined but your expenses will never disappear. Having to spend will be inevitable. And if you do not have enough, you will end up penniless before you know it.

Should you want to give up work and retire at the time you are 50 then you have to start saving, investing and setting up a secure financial state. If you do not want to be employed for the rest of your life, look for investments that will enable you to earn.

You may invest in real estate, bonds or shares and other financing products that may be easily available to you. You do not want to become homeless after you retire so purchasing a house should be one of your most priorities too.

Splurging money at the early years of retirement:

Spending too much during the first couple of years of retirement is another downfall of early retirement. Early retirees just do anything without believing that their money will soon become depleted from traveling, purchasing, and taking pricey vacations.

Do anything that you really like with the best awareness to comprehend that your retirement are being depleted slowly. Should you really wish to do those activities, make sure that you save for all those activities in advance and don’t just rely on what you have ended up saving for your entire retirement years.

You also have to find a means to replenish the amount you have spent. Do not just rely on your pension plans and social security trust funds as they may not be enough; invest into something.

Assess the cost of living you will likely incur when you retire so you know just how much you need to save. The value of your money has a direct effect from inflation rates, which should also be taken into consideration.

If the inflation rate is higher than the interest rate you get on your investments, then you will surely have a tough time coping eventually.

Getting bored of retirement:

Retiring is fun if you have many things to do. Should you retire, be sure that you have organized activities on your mind. Some would do landscaping work, while some would volunteer within their community. Make sure that you think about activities you will do once you retire to overcome boredom.

To ensure that you enjoy your early retirement, make sure that you are planning early on. Manage your finances well and have a list of the things you wish to do with your time.

What You Need to Have an Early Retirement

In some way, we were programmed to study hard to find great jobs which can help secure our future. Many people believe that when we find a good paying job, it will be easier to retire early. Nevertheless, to retire early, can it be really that high salary job we need to have?

After doing hard work for almost all of our entire lives, an early retirement and enjoying the life after is a dream and aspiration for many of us. Living your daily life without having to worry about waking up early to go to work is something to look forward to.

To become free of work at an early age allows you to do the things that you want. You can enjoy life by discovering new things, traveling the world, or spending it with your family.

Retiring early is not a worry if you just think it over. Nevertheless, the guarantee of getting your money to last for so long as you live is intimidating. Even though it has its advantages, it can also be concerning. How sure are you that you will have a comfortable life?

Before retiring early, you must consider a number of things. These include financial plans, medical care, and most essentially, the things you will do as soon as you retire.

Financial Planning:

When deciding on a financial plan for your retirement, there are many things that you have to take into account. Start by evaluating exactly how much you have right now. By evaluating the amount that you make month to month today, you will be able to start preparation.

It will be easier for you to begin planning if you know the exact number which you make per month. When planning how much money to set aside, consider your lifestyle today. You also have to know how much you will need to live in comfort.

Your retirement just is not comprised of its first couple of years. The present life expectancy rate must also be considered. Know of how much you will need if you are to live up until you are 75 years old if you are planning to retire when you reach 55. That is preparing for 25 years and never having to work.

Overall wellness:

As you get older, you have to accept the fact that you will not be in good physical shape so health is a primary concern. This explains why it is crucial that you have allocated enough for long-term health issues.

If you have not, include this along with your savings and apply for a health insurance that will give full coverage of your possible needs. Ask yourself as to the amount you're prepared to spend and need for medicines due to unanticipated health problems.

Start to live a healthy lifestyle and be cautious of what you eat. However, this will not guarantee that you will not encounter health problems in the future.

Life in Your Retirement:

What precisely are the things you would like to do when you retire and how will you spend it? Life can get easily boring so you have to think in advance. Many people would purchase home in retirement communities in which there are a variety of activities specifically made for them.

Do you want to travel the world? Just be sure that whatever you decide to do, you have got the financial resources to cover for it.

It's easy to plan your early retirement. Then again, you must really get ready for it. Secure financial resources to help you attain financial freedom. Invest in business ventures such as real estate because they yield higher returns, making it easy for you to obtain financial stability in the future.

Simple Ways to Build Wealth from Scratch

Starting out with nothing makes it hard to imagine becoming wealthy. Even if you are putting aside a little extra cash from time to time, it is still difficult to see how those small amounts could add up to enough to count for anything significant.

The reality is, anyone who has built a significant amount of wealth starting with nothing had to start somewhere. They also understood that there is no hidden secret or magic button for getting rich overnight.

You do not even need luck, genius or family connections. Instead, creating wealth is a process that takes planning and patience. It is also much easier than most people want to believe.

No matter how much you are earning right now, there are some simple things anyone can do to start building wealth from scratch. The key is to create a solid goal based on your individual financial situation and stick to your plan.

Here are some tips to get you started on your wealth creation goals:

Step #1: Repay debts

If you are spending most of your disposable income repaying outstanding debts, you have less money to put towards your wealth creation goals. Take a close look at the interest you are paying on your current credit cards, personal loans or student loans.

Then work on ways to pay down those debts. Refinance to loans with lower interest rates. Find ways to put some extra cash towards your balances.

It is much easier to create wealth with a clean slate than it is to dig yourself out of a financial hole. If you can manage to repay your outstanding debts, you should feel confident that you can start saving to achieve your financial goals more easily.

Step #2: Spend less than you earn

If you're serious about creating wealth, work on ways to keep your living expenses as low as possible. In order to get ahead financially it is important that you learn to spend less money than you earn.

For some, reducing living expenses might mean sharing an apartment with a roommate for a while. For others, it could mean living at home with mom and dad for a while longer to save money.

Look for ways to reduce your current living expenses. It is much easier to save money when you're not spending every cent you earn.

Step #3: Look for additional streams of income

Regardless of what you do to earn your primary income, start thinking of ways you might earn some extra money on the side. The internet has made it easier than ever to generate additional income around your regular working hours. There are plenty of sites around seeking people willing to complete tasks for a few extra dollars.

Alternatively, you might choose to cash in on your existing skills or talents. Graphic designers or writers can sign up with freelance sites. You might prefer to tutor high school students, mow lawns, clean houses, or babysit neighborhood kids on weekends.

Your options are only limited by your imagination, so take some time and look around for things you might do to earn some extra cash on the side. Any extra cash you earn should be put towards your savings goals.

Step #4: Automate your savings plan

Take a bit of time to work out exactly how much you can afford to save each week. Then commit to putting that amount of cash aside in an interest-bearing savings account every week.

To ensure your stick to your savings plan, set up a regular direct payment from your bank account into your savings account each week. When your savings plan is automated, you are less likely to find excuses to spend that money on other things.

Step #5: Invest wisely

Investing your money wisely does not require you to attend expensive investing seminars or spend years studying. You also do not need to pay for investment managers or advisors who take a percentage of your investment cash as their fee.

Instead, learn a bit about investments that allow you to take control of your own money and grow your own wealth safely. For example, earning a few extra dollars in interest earned on your savings might not seem exciting, but it is still a form of investment that helps boost your wealth over the long term.

When your savings balance is high enough, think about investing in 'buy and hold' investments that generate a return for your money. Low-cost index funds or carefully considered stocks paying dividends could be a good option for increasing your returns.

As your savings and investment portfolio grows, you might choose to diversify your asset base to include cash-flow positive real estate. The rental income you receive from your property should cover all expenses associated with owning the home and still generate a profit for you as well.

Step #6: Reinvest your profits

One of the key factors of building wealth is learning how to take advantage of compounding. Many types of investment allow you to reinvest your profits back into the same asset class, which speeds up your wealth creation plans.

For example, if you leave your money in a high-interest savings account, the bank will end up paying interest on the original amounts of interest you have already received.

The same is true with some stocks. Many companies pay shareholders dividends each quarter. Instead of choosing to receive your dividends in cash, you may have the option of choosing to receive your payment in the form of more shares. Aside from adding to your share portfolio at no extra cost, you also avoid paying brokerage fees on the transaction.

Even an investment property offers the opportunity to compound your wealth creation goals. If your rental property is cash flow positive and generates a profit that exceeds the costs associated with owning it, you can pay the profit towards repaying the outstanding mortgage more quickly and start building up your equity in the property.

Step #7: Rinse and repeat

The key to building real wealth is to repeat the process until the income you earn from your investments exceeds your expenses. Continue putting any extra cash into savings. Put your amassed savings into carefully considered investments. Then find ways to compound your returns on those investments.

Wealth creation is not difficult and you don't need to be a rocket scientist to make it work for you. All you need is a defined plan that works for your individual financial situation. Then stick to your plan until you achieve your goals.

How will saving money benefit you

Too many people do not put away enough money for their retirement or unexpected expenditures. Planning will give you peace of mind and ultimately lead to a better quality of life.

There are two common traps people fall into when it comes to saving and investing. The first is that we say we can't afford to save money - "I hardly get by on what I earn". The second is that people think there's always plenty of time before they need to start planning their financial future.

The truth is that if you're earning an income, you can afford to put some away and the longer you postpone investing for your future - the more you'll have to put away every month to reach your goals.

All it takes is a little planning and self-discipline. This article will help you formulate a budget and start an investment plan.

Monthly Budget

The first step is to draw up a monthly budget. Be realistic and use your head - don't let your spending be guided by your emotions. Most of us waste money through impulse spending.

This means we often spend money on things we don't need, just to make ourselves feel better when we're feeling down. This does nothing except make our lives more difficult in the long term.

Take a few days to draw up a monthly budget. Review it a few times; shifting a few dollars here and there can make a big difference in the end. Being realistic means that you have to consider all expenses.

You are going to want to go out sometimes or buy clothes and occasionally spoil yourself with luxury items. It does not matter how much you earn, you need to adjust your budget so that you're able to put away at least 10% of your monthly income into a savings account.

Start Saving Money

If you do not have a savings account, open one. Look for the best interest you can, while having reasonable access to your money - you may need it in an emergency.

It is usually better to have an account that doesn't allow you instant access to your money, consider a 24-hour notice account - this will help prevent impulse spending. Stick to your budget.

There isn't much point putting all your spare income away if you have high-interest debt. Mortgage rates are usually fairly low, but if you can afford to - pay a little extra every month this will make a big difference in the amount of interest you pay over time.

Take a serious look at high-interest debt like credit cards, store accounts, and motor finance. You will always be paying more interest on these, compared to what you're earning from a regular savings account.

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If you have accounts that are charging a lot of interest, pay them off as soon as possible. When you start saving perhaps put only 5% of your income into a savings account so that you can start building up a security nest egg. Use the remaining 5% to start paying off accounts and credit card debt.

Having credit cards can be a good thing. It improves your credit rating and gives you access to extra money if you really need it. However, credit cards must be used responsibly. Pay all outstanding credit balances on these cards and start paying the full amount outstanding every month. Interest on credit card debt will eat away at your ability to save.

Longer Term investing

When you start saving money, you'll be putting a little away every month, this means you'll only be able to put money into a conventional savings account. The interest on these accounts aren't too high, but at least your money is starting to grow. To get better returns on your money, you need to have a relatively large sum to work with.

If you've been putting away 10% of your income for a year, you'll probably be able to start looking at longer term investments that will enable your savings to show better growth. Initially, you may want to put your money into a fixed deposit account.

These accounts range from 3 months to a few years and will earn better interest than a savings account. Remember that you won't be able to access that money for the duration of the deposit period, so keep some money back in case of emergency.

Over time you will want to consider better investment opportunities. This could take the form of stocks, bonds, real estate and p2p lending or even currency or bitcoin trading. The important thing here is keeping a balanced portfolio and a broker can advise you on how to do this.

You don't want to invest all money in similar markets. This means to invest some in retail stocks, some in industrial stocks, bonds, gold or real estate - to name a few options. The more you diversify, the safer your money will be - when one market falls another will rise, offsetting the losses.

Following these few easy tips will change your life forever. It may take a little time to adjust to living off less money every month - but the rewards are well worth it.

Tips for Living a Frugal Lifestyle

Frugal living is about being conscious of and smart with the money you spend on necessities, utilities, or other living costs. It is about saving money and creating a nest egg for yourself, without taking on a mountain of debt. Whether you are just starting on your own or are looking for new ways to save money, here are some tips for adopting a frugal lifestyle:

1. De-Draft Your Home

Home heating and cooling costs are expensive and you are likely to spend a lot more money per year when your home is full of drafty spots. These are the areas around door jambs and windows where hot air can seep in during the summer, and cold air can leak in during the winter. Install new windows and doors for long-term savings or purchase weather strips that adhere to the seams to keep heat and cool air from entering your home.

2. Don't Waste Food

Think about all of the times you've had to throw away food that spoiled before it ever got eaten. Be a smart shopper and only purchase ingredients you know you will use. That means planning meals so that you can use up the entire ingredient, or refrain from making a dish that requires a specialty component. Also, be careful only to cook enough food for the meal, or that you know will get gobbled up come leftovers day.

3. Keep a Close Eye on Bills

The standard drill for many people is to open bills and then pay them right away without carefully examining all of the charges. Take a close look at each bill you receive to make sure you are not being charged for services you don't use, or are getting overcharged for your services. If you find a billing mistake, call the company who issued the bill quickly to get it resolved.

4. Organize Your Bill Payment System

Late charges add up quickly and are not in line with frugal living. Take charge of your accounts and make sure you never incur a late fee or NSF fee from your bank or account companies again. Organize your finances so that you know when you get paid and when your bills are due; most businesses will allow you to change the due date so you can pay your bills according to your paydays.

5. Avoid Payday Loans

While they can put a short-term bandage on an emergency, payday loans are grossly expensive, and you should avoid them at all costs. A single payday loan can yield an interest rate that is 300% or higher and can cost thousands of dollars to pay off. Tuck some money away into savings or ensure that your credit score is high enough to get approved for a low-interest bank loan to pay for emergencies.

6. Buy Quality Items

When shopping for everything from shoes to clothes, and even home appliances, always look for items that are of high quality, although they are more expensive upfront. Things made from high-quality materials will last much longer than mass-produced low-quality items. A good pair of leather shoes, for instance, can last for a few years, versus those made from synthetic materials that may only last for a few months.

7. Upcycle Your Stuff

Instead of getting rid of old clothes, housewares, jewelry, yard equipment, and other household items, find a way to upcycle them and give them a completely new life. Old clothes can become tote bags and quilts; broken yard equipment can be painted and turned into decorations, broken jewelry can be deconstructed and used to make new jewelry, etc. Brainstorm creative ways to reuse the items you already own.

8. Save Food Storage Containers

Storage containers are expensive! Next time you purchase sour cream, pasta sauces, jams, margarine, or any other food staple that comes in a jar or plastic container, save these containers to organize your stuff. These containers can be spray-painted to match the look of your home and are perfect for storing craft supplies, nails and screws, paperclips, makeup brushes, and other small items.

9. Make Your Cleaning Supplies

Pioneers and villagers have been making their homemade cleaning agents and soaps for years, and you will save a ton of money each year if you do the same. Cleaning supplies sold in stores are full of harsh chemicals and scents. Do some research online and look for cleaning supply recipes that you can make at home. If you prefer scented cleaners, find a bottle of essential oil and add in a few drops.

10. Beauty the DIY Way

Beauty products like night creams and moisturizers can set you back hundreds of dollars per jar and often fall short of their promised results. Instead of forking out the big bucks to have younger and firmer skin, try whipping up natural beauty aids of your own with ingredients you already have at home. Complete a simple Google search and find recipes for beauty enhancers that use ingredients like honey, milk, mayonnaise, olive oil, and more. You can achieve glowing skin on a dime.

11. Shop Second Hand and Save

Take advantage of American consumerism by purchasing like new and name brand clothes and accessories at your local thrift store. Thrift stores have come a long way in the last couple of decades, thanks to people's increasing need to update their wardrobes all the time. You can find an assortment of different pieces that are still on trend and in style without paying high retail prices.

12. Reduce Your Square Footage

Many people dream of living in a huge home packed with elegant furnishings, but do you need all of that space? Large houses cost substantially more when it comes to property taxes, insurance, energy, and upkeep. Figure out the minimum square footage that is comfortable for the size of your family, and save yourself a ton of money in the process. Tiny homes and ramblers are becoming hot real estate once again.

13. Use the Library

When was the last time you visited your local library and took advantage of all the free resources it has to offer? At the library, you can relax and literature, borrow books, use the internet for free, and even print documents. By utilizing your local library more, you can save on costly internet services, electricity, and printer ink, as well as become more educated at the same time.

14. Drink at Home

The average cost of a cocktail at the bar is about $5, which adds up quickly when you get caught up socializing with friends. Avoid the bar altogether and invite friends and family over for a cocktail party at your house. You can purchase liquor and mixers for a fraction of the price at the store and can avoid all of the weird interactions with people you don't know at the bar.

15. Negotiate Fees

Fees from bank transactions, money transfers, phone payments, and other services start to add up when you use them several times a month. It is always best to try to avoid paying extra fees in the first place, but if you find yourself in a situation where you are going to get hit with one, ask the representative with the company to waive or reduce the fee. It never hurts to ask, and many customer service representatives have the discretion to reduce or waive the cost if you ask. Point out that you are a loyal customer and give them a gentle reminder that you can take your business elsewhere.

16. Free Community Activities

Become a tourist in your town and explore all of the fun free things there are to do during the summer and holiday months. You can learn new things about your community, mingle with the locals, make some new friends, and save hundreds of dollars by not traveling.

17. Preserve Your Food

Growing your food is not only healthier than purchasing it from the grocery store but, when done correctly, it also can yield crops that you can continue to use all year long. Plant a garden and can your bounty. You can also go berry picking, fishing, and hunting, and preserve your food to feast on through the year. Invest in plenty of canning jars, freezer bags, and a large deep freezer.

18. Avoid Restaurants

Consider restaurants a place to go when you want to celebrate life's special moments, not as a place to get your everyday meals. Feeding a family of four can cost $40 or more per restaurant visit, and this money is better spent at the grocery store buying ingredients for delicious at home meals. Prepare meals ahead of time and freeze them, so you have easy go-to options for busy weeknight meals.

19. Find a Gourmet Coffee Machine

For less than $200 you can find a top-of-the-line machine that makes gourmet coffee beverages, cold-brew coffee, espresso drinks, and more. Make the initial investment, and you can save hundreds of dollars per year by not going to your local coffee shop in the morning. Stock up on syrups, gourmet coffee, chocolate sauce, whipped cream, and other ingredients needed to make your favorite coffee drinks at home.

20. Downsize Your Garbage Can

Most cities base the price for garbage service on the size of the can you put out at the curb each week, whereas recycling is usually free. Invest in a large recycling vessel and get your family into the habit of recycling trash instead of just throwing it in the garbage can. You can also create a compost pile with food scraps and make homemade fertilizer for your gardens. Using a smaller garbage can will almost instantly cut your garbage bill in half.

Frugality will help you save money and use it to pay down debt, create a healthy emergency fund, and put away money for fun-filled vacations and the other things you want to do in life. Use these tips to reduce your spending and enjoy a more relaxing, less expensive, and more environmentally friendly lifestyle.

Tagged in: personal finance
I like to take risks, That's how I make money. But they are calculated risks.

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Guest Thursday, 14 November 2019