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It's time to wrap up my series on how not to go broke in retirement. I've covered the first two points in earlier posts:
 
1.  Start Planning for Your Retirement Tax Situation NOW!
2.  Avoid Missing Out on Thousands of Dollars in Social Security Benefits
 
Here are my last two, easy-to-implement- common-sense strategies:
 
3.  Manage Your Expenses

cash-flow - CopyThroughout our lives we focus on our income and maybe sometimes our "net worth."  But not many of us pay attention to the ways our money flows away from us and out of our household. I'm not talking about larger expenses like groceries, insurance, home and car repairs, etc. I'm referring to money that leaks out of your financial system without you even being aware.  I've already emphasized the importance of managing your tax strategy, but other expenses that might be impacting your financial reserves more than you realize include:

  • Capital Loss (as a result of investment loss)
  • Payment of loan interest, and
  • Fees and miscellaneous service charges

By controlling these expenses, you can save a great deal of your money. Think about a slow leak in a swimming pool. By simply plugging the leak, you don't drain your pool nearly as quickly. It's the same with your financial reserve. By reducing the amount of money that flows away from you, you don't need to have as much money coming in.

4.  Guarantee Part of Your Retirement Income

strategyThe wealthy stay wealthy by having a variety of sources from which they obtain their retirement income. They don't just have their money in mutual funds in a 401(k). While they most certainly will have investments, they also rely on other financial products to balance their stock market and investment risk.

The wealthy also think about cash flow and how quickly they can access their money.They think about and plan for regular monthly income in addition to their other financial assets.

Consider this:  You can have your house and car paid off, but if you have no cash coming in every month, what will you live on?

pennies into a pig

If your only retirement strategy is rationing your annual income to 4% of your total financial reserves, then you don't have much of a plan to handle a stock market drop (and capital loss in your 401(k)), inflation or a sudden need for cash, be it for house repairs or money for medical expenses.

You need guaranteed income in retirement. Social Security benefits can provide some of this income. But consider other financial products that provide life-long guaranteed income to supplement your at-risk mutual fund income distributions.

Retirement should be fun and enjoyable. Stressing about money is a sure way to take the enjoyment out of life.

By implementing these simple money management tips, you can go a long way toward ensuring that your retirement will be financially worry-free.

Sincerely,

Dwayne

Beach 1

Published in Coach's Corner
Thursday, 18 September 2014 09:58

Balance Your Finances!

Balance Your Finances
I hear a lot about "life balance." 

But what about your financial balance? 

Take a look at the image of two tanks. Think about where you have the majority of your money situated.  Is it at risk for loss?  Or is it in a financial vehicle where it is protected from loss?

If you can prevent the loss of your original principal (or capital) in the first place, then you are not continually coming from behind to try and catch up.

While it may be a smart move to risk some of your money, that you can afford to lose for large returns, the unfortunate reality is that many people place into investments money that they cannot afford to lose.  

For these individuals and their families, when the loss of investment capital does occur, the results can be financially and emotionally devastating.

Where is your money?

Published in Coach's Corner

 

Losing MoneyMany of us pay a large amount of money (in the form of loan interest and fees) to others for the privilege of borrowing their money. You pay loan interest on our cars, homes, and other loans. If you carry a monthly balance on our credit cards, you can be paying an interest rate as high as 29.99% or more.

You also pay other people to help us manage your money. At your financial institution, you likely pay ATM fees, debit card fees, account maintenance, and transaction fees. In your qualified plans, you can pay transfer fees, paper fees, and service fees, to name but a few.

Any approach you choose for your lifelong strategy should allow you to reduce the amount of loan interest, fees, and service charges you pay.

By reducing loan interest, fees, and service charges, you decrease how much money you let leak out of your financial system. Consequently, you grow your wealth faster. Think about filling a child’s inflatable swimming pool. When there are leaks, it takes a lot longer to fill the pool and it does not stay full. When you find and seal the leaks, it takes a lot less water to fill the pool and it stays full.

When you eliminate many of the fees and service charges banks and other lenders charge, this money stays in your financial system. Over time, the effect of reducing these financial leaks can be significant. Just as with the swimming pool metaphor. Once you eliminate the small but steady leaks in your financial system and capture or reduce the outflow, your money stays with you.

You don’t have to earn, or grow, as much money over your lifetime if you’re not losing it.

Published in Coach's Corner

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