How to Choose Where to Retire

As soon as you approach retirement age, one of the questions that will keep coming to your mind will be where to retire and settle down. However, before you make any decision, you need to have a solid plan on the ground.

Regardless of how diligent, productive, and hardworking we are at our workplace, we will all have to retire some day. In spite of this, most people tend to give little or no attention to some very decisive retirement plans. These may include the best states to retire and enjoy the rest of their lives. They often wait until retirement hits before taking steps to make plans for their life after service. At this point, they may be forced to make a hasty conclusion and end up settling in a place that will cause a financial strain.

But if you don’t want to stretch your benefits beyond what you can handle, you must put a solid plan in place to facilitate a smooth and seamless retirement process. This is because retirement comes with a lot of surprises, and these may hit you where it hurts the most if you are not prepared.

Most Americans wish to enjoy their retirement in an accommodating, flexible environment, where they can also enjoy their old age. However, they find it difficult to choose the most suitable state for their lifestyle and fixed earnings. While many prefer to live closer to their friends and family, others want a location that suits a low profile lifestyle.

In this article, we will focus on the important factors that can help you determine the best states to retire at the end of your career.

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Discovering the Best States to Retire in the US: What You Need to Know

Life is in stages, and for every stage, there are some new challenges. However, how you handle these challenges depends majorly on your level of preparation and planning. More often than not, you will find yourself trying so hard to adjust your lifestyle in order not to exhaust your retirement benefits. But when you settle down in a welcoming and tax-friendly environment, you can enjoy your retirement benefits and boost your savings. That is why you need to weigh your options and consider the most suitable state for your lifestyle before finalizing on your relocation decisions.

Many states have a beneficial package for every retiree willing to relocate after their service. However, as long as most retirees make their retirement plans based on their personal evaluation, some places will most likely be more suitable for them than the others. 

To discover the best states to retire in the US, you must consider a lot of factors. While making your consideration, you should consider the negative and positive attributes of each state, as well as research their living standard.

Other important factors that will help you determine the right state to settle down after your retirement include:

Cost of Living

The cost of living in any state is an essential factor that should top your list of considerations before you conclude. If you are planning on making your pensions, savings, and Social Security last for as long as possible, then you have to settle down in an affordable state.

As the cost of living in most US states differs from each other, it may either increase or lower your level of spending, depending on the area you live in.

You may have to dole out a considerable amount of money to access some basic services. However, in other places, these same services can go for a lesser amount of money. If you don’t want to deplete your retirement benefits quickly, you may want to consider relocating to an affordable state with a reasonably low cost of living. When you live in a region where you can manage your daily expenses without cutting back too much on the things you love, it may improve your standard of living and allow you to take on new hobbies.

Security

Every retiree will prefer to settle down in a safe and secure environment. Before you decide which state you would like to spend the rest of your life in, it is important to consider the security risks and conditions. An unsafe environment can endanger your life and that of your property. And you don’t want to spend the rest of your life worrying about your safety when you should be enjoying the things you love the most. That is why you need to choose a place with fewer security issues and crime rates.

Best states to retire
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Climate and Temperature

The weather condition of most US States differs from each other. And because of this, you have to ensure that the weather of the state you are intending to relocate to suits your lifestyle and health condition before finalizing your relocation plan.

During the winter, some states in the US experience some bizarre weather, including violent storms and heavy snow. If you find it difficult to acclimate to cold weather conditions, you may want to consider a place with a suitable climatic condition for your health before you conclude your plans.

Availability of Basic Social Amenities and Other Important Service

As a retiree, you will require a lot of services to keep up with the normal standard of living. That is why it is important to consider places with affordable access to basic social amenities and psychosocial services.  

Living in a neighborhood with fewer services can affect your well-being, as well as limit you from accessing most of the needful health services.

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Closeness to Family and Friends

The state in which your family and friends reside also determines where you might select while searching for the best state to spend your old age. When you retire to a residence closer to your family and friends, you can always enjoy a friendly and warming environment.

Tax

Relocating to a new state after your service years is adventurous and exciting, especially as you no longer have to punch the clock and can afford to do all the things you love the most. However, paying taxes can quickly help to drain your retirement benefits, now that you are living on a fixed income.

While you are getting close to retirement, you should make plans to settle in a state with a friendly tax system. You can check out places with no state income tax or tax on retirement benefits, as they can help boost your savings and increase your wealth.

Housing

As you edge towards retirement, you need to make a proper plan for your housing and accommodation. Everybody has a different view when it comes to selecting a suitable house to live in.  When you choose to settle down in a state with cheaper housing options, you can save more money and still get your desired choice of residence, where you can call home.

The Best States to Retire in the US

Every state across the US has prominent factors that will attract or drive away retirees willing to relocate. However, the following states stand out from the rest, as they offer friendly low property and inheritance tax rates and affordable access to essential services. At the same time, you also enjoy the scenic view, pleasant weather, and conducive environment of these states, as they will add glamor to your retirement plans.

Some of these states include:

  • Nebraska
  • Iowa
  • Missouri
  • Florida
  • South Dakota
  • Mississippi
  • Kansas
  • Kentucky

Harnessing the Power of Technology to Boost Your Personal Finances

What motivations do you need to boost your personal finances? For you, improving your financial status is your utmost priority, and there may be a million and one reasons to keep striving until you achieve that goal. However, you may have everything that you need to build wealth at your fingertips without even realizing it. In today’s world, finance majorly drives the affairs of commerce, business, and various activities in society. This makes “getting money” a critical key to financial freedom.

Previously, making wise investment choices to build wealth did not really come easy for an average investor. But with the advent of technology, you can now access a wide range of information and digital resources that will help you make smart financial decisions. With the availability of video-based financial, educational tools online, you can easily learn how to invest, save, and create wealth that will set you on the right path to financial freedom.     

Therefore, while it is great to understand the importance of finance in your daily life, it is also crucial to be aware of how you can boost your finances. This awareness is called financial intelligence, and in this article, you’ll learn how technology can help you make more money.

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Some Popular Ways Where Technology Can Help Boost Your Personal Finances

Generally, we all need money for the most common things. Mostly, we have needs, goals, expectations, and responsibilities that motivate us to acquire more resources. Interestingly, there are some tech-savvy individuals who have used technology to stay updated on wealth creation practices and opportunities like budgeting, savings, and investment. So if you think technology is only about gadgets and apps, then it is time to rethink how it can impact your personal finances positively.

Thankfully, technology has changed how we live. It has impacted our social life and businesses and has created more money growing opportunities. The same technology has seen the creation of some of the world’s youngest billionaires via social media innovations. Likewise, financial technology has the world running on less cash and carrying out more seamless transactions. Here are some other top ways you can optimize technology and harness its transformative value for your financial growth.

Discover the Power of Automation

Remember the convenience you enjoy when you receive important news alerts and updates on your computer and mobile devices. It is fascinating to see how a world of information is open to you in just a single click. Essentially, we are able to maximize time and resources efficiently when we let technology automate tasks for us. For example, banks are now encouraging customers to use more cashless banking alternatives like apps and internet banking solutions. This innovation makes it easier to reach your savings goals.

Although technology can boost your personal finances, values like financial discipline will help you optimize opportunities when you get one. Hence, you must choose to set auto-saving options with savings or piggy bank apps. Each month or weekly (as you set it), you can lock away a particular amount of your paycheck. 

From the app, you can pay off bills, make transfers, move money to your emergency fund account, and save what you have for the future. Another advantage is automating your credit card payments to avoid the lender’s penalties and other implications that reduce your creditworthiness. Your decision to carry less cash reduces the chances of you spending your money on things off the budget. By teaching yourself to control spending, you climb the first step of financial intelligence. It is only through strategic savings that you can build a gradual pile that will boost your personal finances in the long run.

Utilize Investment Tools

Again, budding entrepreneurs and individuals who want to boost their personal finances for business purposes and other reasons would find investment apps an asset worth having. Some of these apps expose you to high-yielding savings and investment opportunities that can help you increase your financial capacity. Most times, what you need might be an investment opportunity to boost your accumulated wealth.

It is only through technology that these luxuries have been made possible.  All you need to do is approach the best financial and investment products companies to get started on how investments can boost your personal finances.

Boost your finances
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Track your Cash Flow

Do you know how much money you make each month? If you can remember this, then consider how much you spend also. One of the keys to boosting your finances is knowing how you spend your income. However, trying to track every spending on your own with a pen might riddle your analysis with errors and oversight.

You can install an expense tracker app on your mobile device to record all your spending items. Some finance apps allow you to link your accounts from banks, mortgages, cards, and investments to help you generate a comprehensive expense report at the end of each week or month.

You can search your app store or library for a good expense or finance app to start tracking your finance.

Believe in Budgeting

Now you have a clear picture of your finances, including income and expense.  The next thing would be to create and follow a financial plan by drafting an effective budget. Of course, it’s so easy to create a budget; the issue is about sticking to them.  Holding cash or the absence of a financial goal makes it hard to follow through with budgets. With this being said, you just have to be intentional and strong-willed about budgeting.

With your monthly income in view, use a budget app to outline your paramount expense items, such as rent, car insurance, and utilities. After considering the essentials, you can then add items like gas, internet, power, food, grocery, and recreation. For a budget to be considered effective, it would have succeeded in helping you minimize expenses, block financial leakages, and inspire savings. The journey to financial freedom is a gradual process. It involves making smart decisions, learning financial literacy, and exploring new opportunities for income growth. You may not be able to transform your personal finances overnight. But you can utilize technology to boost them significantly.

The True Cost of Early Retirement

Many people dream about leaving their 9-to-5 jobs, pursuing their passion, and traveling the world before they get to the standard retirement age. If you don’t enjoy what you do for a living, for example, it’s easy to want out as soon as possible. Even if you do have a job you love, you could be yearning for a more flexible schedule and the freedom to plan your own time and give more time to the things that matter most to you, like family. Early retirement is a noble dream, and if you have thought about it, you are one of many. Defining what this vision really is and what it is going to cost is vital. What it means to you is a personal view, but in terms of the costs, there are some basic checks you need to consider.

Defining the Goal

What is early retirement for you? At what age do you want to leave your day job? What happens after you retire? While this might seem like a bombardment of questions, they are all important ones you have to answer if you are thinking about retiring early. If you are currently in your 20s and want to retire by the time you are 40, that gives you just under 20 years to prepare financially for that leap. If you are in your thirties and want to retire at 40 as well, then you only have less than a decade to put your ducks in a row. With this in mind, you can begin to assess how practical your dream is and whether you need to adjust it to make it more realistic.

There also have to be some good reasons behind your decision. While it’s a personal choice and there isn’t a right or wrong decision, it should make sense to you and for you. If you don’t like your current work schedule and it’s making you miserable, there could be changes you can make right now so that you are less strained and overworked. A new job, a different role, or a discussion with your employer are all worth exploring. You could find yourself feeling happier and more fulfilled sooner than you thought possible.

Another possible reason you might want to retire early is so that you can be your own boss. Running a business is exciting, particularly if you are a natural entrepreneur. What you have to bear in mind is that, when you start the business, you might put in more hours than you ever did with your employer. So if you are looking for a way to do less work, this might not be it.

You could also be looking to leave the workforce sooner rather than later to pursue volunteer and service opportunities either locally or internationally. This is a noble pursuit and could be very fulfilling. That said, you have to consider how you plan to fund your activities and whether or not you could incorporate some of those current passions into your life today.

Many people take off from their day jobs before they reach retirement age only to find themselves slowly pursuing part-time and eventually full-time jobs afterward. This happens for several reasons, including boredom, feeling unfulfilled in their new routines, not having enough money, or not having had a plan for the long post-retirement period to begin with. So take some time to consider what you really want and why.

Retirement and Costs

When you eventually retire, your whole financial position is going to change. Without a regular paycheck, you need to have a new way to maintain your current lifestyle and have enough to pursue your dreams. Your bills are not going to go away; in fact, they could even increase. You still have to pay your insurance, your taxes, and your debts. Unexpected expenses are still going to pop up here and there, and you may still want to upgrade your car at some point. If you have children, you have to take into consideration their ages at the time of your planned retirement. If they are still going to be financially dependent on you, then accounting for their educational and personal needs must be done thoroughly.

Most people rely on their 401(k) and other retirement savings accounts when they retire. These allow them to enjoy a monthly income. The more you have saved up, the better your returns are going to be. It also helps to have other investments built over time, such as property, dividend stocks, businesses, and other ways of earning passive income. Retirement isn’t cheap, especially if you have plans to do more with your time. If your monthly income is going to drop after retirement, you have to know how you are going to manage the lifestyle downgrade. While it can be done, and many do pursue a more frugal and minimalist lifestyle by choice, these are all considerations you have to think about beforehand.

Creating a Financial Roadmap to Early Retirement

We have talked about knowing the reasons for your early retirement, different ways of getting income when you are retired, and the cost of living. If you are still set on the goal, then now is the time to put pen to paper and create a financial roadmap to get you there.

Clarity about your financial goals is going to give you peace of mind. For one, you are going to know that your needs and the needs of your dependents are not going to be negatively affected by your decision. Secondly, with a 10, 20, or 30 year financial goal, you can begin to break that down and take the necessary immediate and short-term steps to make it a reality. When you make progress towards your goal each day, it gives you confidence and gets you that much closer towards living the dream.

Your financial roadmap should begin with assessing your current finances and defining your desired financial position at retirement. Next, you need to think about what you need to do between now and then to get there. The best time to invest is yesterday, so getting practical is important at this stage. In the next section, we are going to get even more specific about the actions you need to do to make retiring early a reality.

Dealing with Loans

We have spoken quite a bit about the money coming in and the expenses taking money out, both currently and post-retirement. One important category we haven’t yet touched on is that of personal loans. As you map out your current and desired financial position, don’t forget to consider the loans you have that are not fully repaid yet.

Taking out personal loans is common at one stage or another. If you meet the requirements of the loan provider, you can get a lump sum of money to use for different purposes. Perhaps you needed the money to buy property, start a business, pay tuition, buy a car, or just to get you to payday. There are many different personal loans, and these can be taken from banks, lending agencies, friends, or family members. Depending on who gave you the loan and how much it was for, you may have to adhere to certain conditions. Loans often come with a stipulated payback period and an associated interest amount. Paying off your personal loan in a timely fashion must be a priority because your credit score can be adversely affected when you default or are regularly late with payments.

When it comes to planning for retirement, it’s a good idea to try to pay off all your personal loans as soon as possible. Once you have this done, you can then focus on investing more. Many people are tempted just to pay the minimum monthly repayment amount and divert additional income towards shares and other investments. While this might seem attractive, it can be counterproductive. Loan interest percentages are often higher than what you might receive from your investments on a good day. In most cases, it might make more sense to pay your loan and eliminate all the interest you were going to pay first. After that, your money is your own, and you can focus on growing it.

If it is not going to be possible to pay off your personal loan in its entirety before your planned early retirement, you can always factor that element into your financial roadmap and retirement planning. We are now going to look at how to handle your money now as you work toward retirement.

Increase Your Earnings

You want a good lifestyle after retirement, and it’s more than likely that you have exciting plans that need to be funded. One practical step you can do right now is to look for ways to increase your earnings. There are various ways to do this. You could ask for a raise or look for a better paying job. You could pursue a side hustle or go into business full-time.  There are countless opportunities to make more money. Don’t be afraid to invest in yourself to get you there. Maybe you need to take a professional course or go back to school to increase your skill set and earning potential. If you have to borrow money to pursue any of these channels, you have to weigh out the costs and benefits.

Investing for the Long Haul

Another way for you to build your financial position is to look into long-term investment opportunities. This means putting your money somewhere it can grow over time and having the patience not to keep moving money around. Dividend stocks are a good example of a wise investment. As with all investing, having a diversified basket is the safest bet. Over time and with some consistent investing, these stocks could bring in real value and return.

Watch Your Spending

The final tip we have for you is to watch your spending. You might have to get more frugal with how much you order take out. Perhaps it’s time to start taking a packed lunch to work. Your goals determine the action steps you have to take right now. If you have to make more sacrifices than you want to and you feel like you might have to miss out on a lot of the fun at the moment, it doesn’t hurt to revisit your goals and reassess what your priorities are.

8 Steps to Reduce Credit Card Debt

These 8 steps to reduce credit card debt revolve around a basic yet powerful concept: A credit card is a two-edged sword. In other words, the fact that you are concerned about its liabilities underlines how financially resourceful a line of credit can be. However, this debt is also a problem that you need to address. Otherwise, your FICO score and personal budget may become even more difficult to manage.

Just as importantly, accumulated credit card debt limits your ability to enjoy its benefits in the future. Tackling these liabilities starts with an organized and well-planned approach. Furthermore, the following 8 steps to reduce credit card debt are designed for long-term successes. That is to say, they enable you to keep your finances intact and continually grow your FICO score.

Start With a Plan

Steps 1 and 2: Add up Your Debts and Expenses

While it seems obvious, the first of the 8 steps to reduce credit card debt is to add it up. Firstly, identify how much you can afford to pay and put together a defined timeline. Secondly, determine the amount of credit that fits your budget and, equally as important, suits your needs. Some people rely on credit cards for quick cash during an urgent time, to give an example. Others, such as consumers who already have enough emergency funds, may use their credit card to go shopping or pay for travel expenses.

Nevertheless, cardholders should add up each of their total debt and combined credit balances. After that, they can put together a realistic and defined timeline for paying it off. The credit card issuer’s billing or collections department will certainly work with you if you’re behind. More details on that are coming. Beforehand, compare your total open credit to what you actually need.

When a cardholder’s balance is over the top, they might consider closing some accounts to lower their monthly payments. Similarly, if credit cards don’t cover all the necessary costs, you could reexamine your budget or find alternatives, such as a medical FSA card.

Step 3: Rank the Accounts by Age

In short, a consumer’s FICO score is about their ability to consistently pay on time and keep their finances intact. Many banks will give you even more money (credit) when you don’t miss any due dates for several months in a row. Moreover, when the issuer doesn’t increase the balance, a three-year-old credit account still demonstrates that you are responsible at budgeting. This is very important to lenders and creditors. Therefore, when you rank the accounts by age, it gives you an initial idea of which credit cards to retain/cancel.

Step 4: Rank the Debts and Balances

Needless to say, consumers should start with credit cards that have the largest monthly payments. This critically helps them reduce their debt, but affordability is also a factor. Since the monthly bill is based on how much credit the issuer gave the cardholder, consumers can make their budget more manageable when they remove expensive items. Moreover, lower credit card payments make it easier to meet other obligations and remember due dates. If you want to decide on which line(s) to close, both of the account history rankings and monthly payment list should guide your choice.

Slash the Burden

Step 5: Keep It at 30%

When it comes to FICO scores, the credit card utilization rate (i.e. how much you actually use) is a critical factor. In general, spending over 30% of the total balance reduces your credit score. For example, to maintain a healthy FICO score, cardholders shouldn’t spend over $300 on a $1,000 line of credit. Just as importantly, when you cap the utilization rate at or below 30%, your credit score starts to gradually climb.

Above all else, this enables you to take your time while navigating through these 8 steps to reduce credit card debt. In fact, even if this takes several months, your FICO score will keep growing as long as you don’t exceed the 30% threshold. It also means that you pay what you can afford without putting your credit at risk.

Step 6: Tackle the Small Ones

Firstly, consider closing out inexpensive balances. To give an example, assume that an individual has five credit cards. Their respective amounts are $200, $300, $600, $900, and $3,000 (or $5,000 in total). The cardholder wants to reduce their overall credit lines to $3,000. If they start with the larger ones, it may take much longer to attain that goal. Subsequently, the consumer gives up before paying off and closing any of the accounts.

They can cover the smaller balances, such as the $200 or $300 credit cards, in one or two payments. The number of monthly payments will advantageously go down, which makes it easier for the cardholder to manage their budget. This difference, in itself, can massively motivate consumers to stick to their plans and further reduce their credit card debt.

Implement and Move Forward

Step 7: Categorize Your Expenses

Credit cards can valuably help you save money and manage cashflow. Yet having too many accounts has the opposite affect. In light of this, an effective debt-reduction strategy requires you to specifically define its purpose. In other words, will you use it to pay for medical bills, gas, leisurely expenses, or a combination of them? Once you categorize the budget items, dedicate a separate credit card for each one. At the end, you narrow down your accounts to two or three lines.

This strategy is advantageous for several reasons. Firstly, the less credit card bills that you have, the more likely it is that you remember them. It also makes it easy to manage your expenses and taxes. For instance, when you want to claim your medical bills as deductions, the related credit card’s statements make the process time-efficient and simple. Secondly, organized finances reduce the likelihood of a missed payment, which only harms your FICO score. Thirdly, when your spending is under control, you can effectively maximize the advantages of a points/rewards credit card.

Step 8: Call the Issuer

Many people are intimidated by the idea of calling their creditor when the payments are past due. However, doing so can go a long way. For a start, when you inform them that you have a plan to take care of your late payments, they will note that on your account. Consequently, the balance is much less likely to go to collections than if you were to ignore their calls or avoid updating them. Needless to say, a collections account can cause your FICO score to dip.

Additionally, when you call the card issuer’s billing department, they will contact you when you’re ready to pay and remind you of the obligation. In a way, they also keep you in check. After all, the only way to stop the calls is by fulfilling the owed amount. Above all else, consumers need to implement these 8 steps to reduce credit card debt from the start.

Final Thoughts: 8 Steps to Reduce Credit Card Debt

A solid and concrete plan will guide you forward. From there, you may lower your credit card utilization ratio and give yourself enough time to implement the strategy.

At the end, a categorized and simplified credit portfolio can serve you for years. In other words, the best way to manage and limit credit card debt is by making it as easy to remember the payments and monitoring your spending.

Should I Open a Custodial Stock Account?

There are all sorts of portfolios that cater to investors’ and consumers’ different needs. If you want to save money for your child’s tuition or future expenses, a custodial stock account offers crucial advantages. Firstly, you start accumulating cash at an early stage. Secondly, you set the objective of your choice, such as college education, an additional source of income, etc. Thirdly, these funds grow over time and make it even more easy to achieve your goals. In addition, you may determine when the beneficiary has access to the account (i.e. at what age).

However, different portfolios have their own characteristics. Because of this, a family that opens the wrong type could end up with extra expenses and unrealized profits. For a start, do you even need a custodial stock account? In some cases, a 529 college fund or an IRA/Roth IRA are better choices. When you consider a custodial account or compare it with other options, there are certain questions that you should ask yourself.

How is a custodial stock account taxed in contrast to the alternatives? What type of investments (stocks, bonds, real estate, etc.) can you utilize? When may you withdraw the money and how easy is it to do so? Above all else, would you benefit if you opened two portfolios at the same time, such as a 529 college fund and a custodial stock account?

Goals and Spending Habits

Whether you want to invest money for tuition expenses, medical costs, or retirement, there are obstacles that you must overcome. They are mostly related to your financial needs and eligibility. This is also important because a custodial stock account beneficiary may spend the funds as they please, without incurring fees on disqualifying purchases.

Moreover, almost anyone can open a custodial stock account. Its eligibility requirements are relatively easy to meet. This is not to say that these portfolios don’t have their own limitations. Instead, your investment objectives and financial plans will define how a custodial stock account fares in comparison to other options.

Firstly, consumers that have a 529 college fund, a 401(k)/IRA, or a health savings account (HSA) may only use their money to pay for certain costs. A 529 fund, for instance, must cover tuition fees, student housing, books, and other specific educational expenses. However, account holders and/or their children cannot use a 529 on student loan payments. In the same vein, IRA and 401(k) owners may withdraw from their portfolios when they reach the retirement age, but not beforehand.

Avoiding Fees and Penalties

HSAs have similar spending restrictions, while flexible spending accounts (FSAs) are even less lenient. For example, what happens to unused FSA funds at the end of the year is out of the owner’s hands. The employee may return them to the account holder, but they could also take the money or cover for other employees’ benefits. Similarly, consumers can’t use an FSA to pay for insurance premiums or non-prescribed medicines.

What happens if they do? The IRS will slap a ten percent penalty. In fact, this even includes leftover 529 funds after your son/daughter graduates. To illustrate, here’s an example: Two parents saved $100,000 in a 529 account by the time that their child turned 18. Initially, their goal was to raise $80,000, which would cover tuition fees, student housing, and transportation costs. However, their investments outperformed expectations and grew their 529 balance to $100,000.

In other words, after paying all of their child’s college expense, the parents had $20,000 left over. If they withdraw the money, the ten percent penalty still applies. That is to say, the account holders will receive $18,000 from the remaining balance. The other $2,000 pays for the fee. A custodial stock account has similar restrictions.

Once a parent or legal guardian makes a deposit, they may not withdraw the funds unless the child reaches the age of maturity. Yet the beneficiary may use their custodial stock account to cover any types of costs, whether they are educational, medical, personal, or a combination of those.

Eligibility Problems

If your household is uncertain about whether or not they will send their children to college, custodial accounts give them room to make a decision. Similarly, consumers who can’t estimate their health care expenses may choose a custodial portfolio, rather than an HSA or FSA, to avoid fees. Above all else, a custodial stock account is ideal when you can’t qualify for other types funds.

To open an HSA, for example, households need to have a minimum annual insurance deductible of $1,350 (individuals) or $2,700 (family plans). Similarly, if your employer doesn’t offer FSA benefits, opening this account type is not an option. Equally as important, the two medical accounts’ rules establish yearly deposit limits and maximums. When your medical expenses exceed this amount, an HSA or FSA, in itself, will not suffice.

IRA and 529 funds are relatively easy to qualify for. However, keep in mind that these accounts also have their own restrictions, especially when it comes to annual deposits or withdrawals. A custodial stock account, on the other hand, is much more lenient.

More Money, More Options

There are additional advantages that a custodial stock account has over its alternatives. Firstly, investors can put their funds in more assets. To clarify, the two main custodial stock account types are UGMA (Unified Gifts to Minors Act) and UTMA (Uniform Transfers to Minors Act). UGMAs only allow you to invest your balance in stocks, mutual funds, and bonds. In this respect, UGMA accounts are similar to IRAs, HSAs, and 529 funds.

UTMAs, on the other hand, give you more flexibility. Alongside the financial instruments above, UTMA account holders may also purchase real estate property, patents, and commercial vehicles. Equally as important, with an UGMA custodial stock account, your child assumes ownership of the funds once they turn 18. Meanwhile, UTMAs enable parents to set their daughter or son’s age of eligibility, which can be between 18 and 25.

When we compare the two, UTMAs and UGMAs certainly have their own pros and cons. More specifically, UTMAs are suitable if you prefer to invest in diverse assets. However, parents who prefer to focus on stocks or bonds would benefit from an UGMA, especially when the beneficiary’s age of maturity isn’t an obstacle. Either way, a custodial stock account is advantageous because it gives parents these different choices.

What About Taxes?

Tax deductions and benefits are key concerns amongst investors. This is even more so the case when they compare custodial portfolios to HSAs, FSAs, 529 funds, and/or IRAs, all of which allow you to deduct deposits from your taxable income. Equally as important, you don’t pay taxes on your investment and interest profits. A parent or guardian’s custodial stock account contributions, on other hand, aren’t deductible. Similarly, the child owes taxes when the funds generate revenues.

Usually, the parents file and pay on their behalf. Yet this narrative only takes half of the story into account. Firstly, a household’s medical and educational expenses are tax deductions, regardless of how they pay for them. While you don’t initially deduct the funds when they’re deposited into a custodial stock account, your child certainly does if they spend them on health care or collegiate costs. These deductions also reduce the minor/beneficiary’s taxable investment and interest income.

Secondly, the first $15,000 that each parent deposits into an UGMA account per year is tax free. In contrast, an individual can contribute no more than $2,750, $3,500, and $7,000 into an FSA, HSA, and IRA, respectively. While all of these deposits are deductible, their combined value ($13,250) is still less than the $15,000 gift tax exception that custodial stock account holders enjoy.

Should I open a custodial stock account?

If you want to save money for a child, but without a specific goal in mind, custodial portfolios are more advantageous than the other options. Your daughter or son can use the funds conveniently when they get older and without being constrained by fees or penalties. After that, the beneficiary may deduct medical and educational costs from their taxes. The two custodial stock account types (UGMA and UTMA) allow you to pick the assets that you want to invest in and when the child can access the money.

Parents shouldn’t worry about setting clear financial objectives and deadlines. A custodial account is a great option when you don’t want to commit to an HSA or 529 fund. Above all else, while early savings can lead to sizable profits, a rushed decision could cost you even more in taxes, fees, and penalties.

How to Get the Most Out of Capital Budgeting

All big-time firms know the extent of capital budgeting. If you are an accountant, you definitely know the extensiveness of these methods. Capital budgeting plays a vital role in various large companies ranging in all areas from production factories, construction, and many more. However, many ways apply under capital budgeting. Some businesses struggle with trying to make the most out of capital budgeting. Companies spend a vast amount of money hiring multiple accountants to find an estimate for their future profits. Most industries go through four accountants in one month. Is this because they don’t like the outcome result, or simply because they are too stubborn to trust the process?

Getting the most out of capital budgeting is a result of trial and error with various methods. Every company is different and has a distinctive amount they can spend. Budgeting is the most crucial factor for any industry! For business owners to be successful, they must turn a profit within the first three years, or the company may fail. Unless you have a degree in accounting, you can expect to hire an accountant or two to handle the money side of the business.

Large firms sometimes hire accountants to investigate the last ten years of records if the company is missing a large sum of money. Accountants are educated to create equations and mathematical charts to show the expenditures of money. Expenditures are another word for the money you have spent, or it is also the action of spending money. Their math equations can explain the calculations of the profit by a specific period. These accountants are essential to businesses to help achieve their future goals by creating budgets. They also demonstrate the importance of investing in stocks and their own company.  

Capital Budgeting

If you are new to the business management world, capital budgeting is a term you need to learn quickly. As stated before, capital budgeting is the most critical factor for any company or business. The simplest way to explain capital budgeting is that it’s a planning process to discover if a business’ long term investments are going to pay off. In this language, paying off means profit. Regarding capital budgeting, an owner must consider expenses for fixing machinery, buying necessary items, and investing in new products. Some corporations also invest in stocks to keep their cash flow on a positive level.

The term capital refers to the capitalization structure of a company (retained earnings or equity). No enterprise owner wants to think about any sort of debt; therefore, capital budgeting is the best method to control the necessary expenses. 

The primary goal of capital budgeting is to increase the profit that shareholders receive within a year. When starting a business, the goal is to make money. However, some proprietors jump in with the assumption of profit right off the bat. In a few situations, this may be the case, but most corporations begin slowly to ensure there is no chance of suffering from a large amount of debt.

Other concepts to acknowledge when beginning capital budgeting are possible renovations to buildings, add on construction as the business grows, and general utilities. Some accountants make sure to factor in these possibilities when evaluating the sum for a capital budget.  Not adding these to the budget can create a deficit in the profit to future years when the expenses arise. These are mainly thought of as “what if” aspects to the budget. Except, general utilities are a monthly bill everyone must pay if they own a building. Depending on the type of business you own, some utility facilities give discounts, especially construction companies.

Now that the general idea of the concept is laid out, let’s dig in a little deeper to discover the particular methods behind this term. The concept of capital budgeting is broken down into four separate processes. Two of the ways entail discounting the interest rates on the value, while the remaining systems do not. These systems are calculated by using the interest rate subtracted from the timeshare value.

Take a look at the contrasts between these approaches to uncover one that may work for you.

Capital Budgeting Processes

Payback

The non-discounting approach does not consider the timeshare value of money. The significant difference between this practice and the other three is the dollar value. The way this process is worked is by assuming the dollar value stays the same through future years. Each dollar earned back in the future has the same amount as a dollar spent initially.

The payback equation analyzes the number of years it may take for the investment sum to rebound in profit. You may have thought this method meant the cash flow would equal the previous amount invested. The payback approach tends to give off that impression when first discussed. However, this is only an effective system when the company is already at a high-profit rate.

Unfortunately, for smaller businesses, the value of a dollar usually needs to be discounted by at least 15%. Products, utilities, and employee payments consume a large portion of the profit money, although some people don’t mind spending the extra money because they are doing what they love. If you are passionate about your career, money doesn’t mean that much in the big scheme of things.

Return on Investments

The other non-discounted method to learn about is ROI (return on investments). The goal is to get the present income statements to equal the amount that has been invested. This approach helps detect disputes in separate divisions of the company. Return on investments is the oldest known method in the history of capital budgeting. Capital budgeting was based around this system. However, today, this is not the most effective or efficient way to figure up your capital budget. If you prefer to adjust the numbers on a pen and paper, this is the method for you.

ROI is definitely a lengthier process compared to the other three methods. Today, the ROI approach is commonly used when money comes up missing. Due to the extensiveness of the equations, accountants need enough time to file through previous records and numbers. Unless you have a large sum of money unaccounted for in your documents, the return on investments method should be a backup plan. Today, there are software applications that can configure the numbers at the tip of your fingers. If pen and paper is not your style, consider using technology to assist you with these other methods.

A drawback of using this method to configure your profit sum is that it ignores the period in which money is returned. Due to the failures, this approach caused people to begin to discount the value of their dollar.

Discounting Methods

The remaining approaches discount the value of a dollar. The reason for the discount is not to stretch your budget too far. An individual would rather see a higher profit at the end of the year than a deficit in the profit amount.

The human brain is wired to show emotions based on previously given data. Therefore, if you were expecting $1,000 in profit yet only receive an amount of $800, you may begin to feel disturbed or angry. Accordingly, this method prevents those unexpected feelings from happening.

Internal Rate of Return

The calculations of this method take the interest rate and create a slight discount that applies to future income. After using this plan to a set of numbers, the equation constructs a percentage. The percentage is then applied to the sum of the total investments and subtracted by the estimated costs of other known expenditures. The goal is for the interest rate to create an equal number to zero after adjusting the budget amount. After the perfect price is uncovered, an accountant can then adjust for the “what if” factors.

Even though there are software applications to assist in this process, it still can take a few days to figure out the correct rate of change. The trial and error steps in this process make it very time-consuming. However, trial and error are the most efficient ways to generate a percentage in capital budgeting. They are a common trait of each method.

Net Present Value

The last and most effective way to find your capital budget is known as NPV (net present value). Multiple software applications can easily configure the amount of your profit. Net present worth adjusts the amount of your current cash flow and subtracts it with the sum of your cash investments. Corporations have found that this method of capital budgeting has given them the closest estimation to their actual profits.

Why should you put all your faith into an estimation?  It may seem intimidating when the reality of the process is just one big educated guess. However, the math behind the methods is very extensive and creates numbers that fall very close to the actual profit sums. Remember, if you can’t afford the employee bookkeeper, there are software programs to configure your profit. If you chose to use a software application, make sure your numbers are correct. Try not to doubt yourself. It is perfectly normal not to want to spend the extra money to hire a bookkeeper. Nonetheless, having an accountant review your financial statements is always an excellent idea.

The best way to get the most out of your capital budgeting is to give these methods a try! Ensure you are double-checking your numbers and prepare yourself for the protracted process of trial and error. Trying different ways is time-consuming; however, it can benefit you and your corporation in the long haul. Each company is diverse and located in separate areas, so do not compare your costs with other businesses. Also, if your enterprise is smaller than others, you may not have as many expenditures. Assuming that you are just beginning in the business world, keep in mind that slow and steady wins the race.

How to Create a Budget in Excel

Many people involuntarily have a monetary black hole in their lives. What this means is that when they get money, it’s spent without any trace of what it was spent on. Sometimes, if you can trace it, you find that the cause for the spend was unwarranted.

When you consider all this, you begin to see how implementing a budget in your life can improve your cashflow. There are no words to describe the extent to which budgeting gives you much greater financial control.

There are many concepts involved in a budget, just as there are multiple ways you can prepare one. In this article, you can expect to read all you need to know about budgets, plus there is a look at how you can create your budget in Microsoft Excel.

What Is a Budget?

You most likely have a general idea of the answer to this question, but there is no harm in putting some specifics to it. Note that there are both corporate and personal (household) budgets. While some of the concepts can apply to either type of budget, this article is concerned with personal budgets.

A budget is a summary of all the income and expenses that you expect. It is meant to be a roadmap based on predictions. There’s typically a time period that the budget represents. Some people do their budgeting by the quarter or by the year, but it’s most common to do so using monthly periods. Doing so gives a more modular breakdown, and there is more data for period comparisons.

The idea of a budget is not to lessen your spending, though the possibility exists that cutbacks may happen based on what you determine from creating one. The point is for you to maximize your efficiency in the way you spend. So remember to make your budget efficient instead of completely focusing on being conservative.

The budget is intended to separate your sources of income and expenditure so you can see how much each contributes to the bigger picture.

The Purpose of Your Budget

Now, you know what the budget is, but what does it do for you? The budget is a roadmap, as stated above, but it is also a monitoring tool. When you use it to plan your spending, you’re not supposed to just ignore it when the applicable period is passing. The idea is that you keep coming back to the budget to see how closely you’re managing to follow the designated plan.

While you’re doing this, you’re also likely to pick up on your healthy and unhealthy spending patterns. Having them readily documented makes it easier for you to set objectives to curb the habits that are bringing you down financially.

This is the reason that you should never try to cut corners as you create the budget. The less information that is available, the less accurate the budget is likely to be when compared to what really takes place. You can’t create a proper roadmap if some of the roads to the destination are missing.

Try to be as detailed as possible if you truly want your budget to become the useful tool that you intend it to become.

Creating Your Budget

Following are the steps that you need to go through, as you work on creating a suitable budget.

Establish the Budget’s Purpose

If you don’t do this, then don’t bother with the budget. Don’t ever start drawing up a map that’s not meant to lead to any destination. That’s a waste of both energy and time. Most people don’t live by a budget, and many of those who don’t have tried and failed because of the general lack of direction.

You can think of this in the same manner that you would think of starting an exercise or diet regime. If you are someone who maintains healthy habits, why do you do so? If you are not, what would be your motivation for doing so? Naturally, you wouldn’t respond by saying something like “for exercising sake.” The chances are that you’d do it to keep fit, maintain a healthy weight, increase strength, etc.

Likewise, you need to determine why you’re drawing up a budget before you go ahead and do it. Remember that the idea is to ensure that you’re using your money in the most efficient way possible. That is easiest to achieve when you know what efficient means in the context of the goals that you’ve set. Here are some of the main reasons that people create budgets:

  • Reducing debt
  • Achieving long-term financial goals
  • Finding routes to allow for more saving
  • Finding routes to allow for better investments
  • Cutting overspending

Ascertain Your Current Habits

Before you decide where you want to go, you need to at least know where you are. The way to do this with budgeting is to start by looking at the way in which you currently spend money. If everything were perfect with the way you did that, then you probably wouldn’t even be considering the creation of any budget.

Note that this is not always something you can figure out immediately. This is even more so if you’re one of the people that have trouble accounting for where money goes. You may need to actively monitor yourself during a normal month to get an idea of where the money is going.

You need to keep honest with this. Some people feel inclined to make small changes when they’re accounting, as they don’t want things to look too bad. Remember that there’s no better place for things to look bad, as that’s the point of creating your budget.

Account for Your Income

The next step is to note your income as accurately as is possible. Your income forms the pool of funding that is available to allow expenses to be covered. If this figure is too far off, your budget may as well not exist.

A good idea is to account for your net income in your budget. Your gross income is not a fully usable figure, so there’s no point in including it. Just remember to ensure that all your income is in full view. So whatever alternatives you have that provide you with money need to be accounted for.

Not everyone has a fixed income, so the people who have a variable one sometimes find it challenging to complete this step. What you can do is decide on a base figure. Even if your income is not constant, there’s usually a worst-case or average figure that you can use. Of course, the worst-case figure is the most extreme. The point is to use a single figure as your income. If you get extra, then you can just add it to the subsequent month’s base income.

Account for Your Expenses

This is the flip side of the income coin, so it is just as important. Most people create a budget because of this area. This is where you account for all the money that you spend monthly. Everything you can think of should go here. You should then categorize these expenses as fixed and variable.

The fixed ones are things such as rent, mortgage payments, and car payments. While there can be changes, the general figure is the same.

The variable ones can change each month. These include entertainment, groceries, and clothing purchases. This is the easier category to adjust, so you need to be as accurate as possible in recording it.

Get Your Totals

Now that you know what you’re working with, it’s time to total your monthly income and expenses. This is an important step to understand just how much you gain and how much you spend every month.

Doing this also gives you a clear indication of the extent to which your income is adequate to handle your expenses.

Make Your Adjustments

This is the part where you start making realistic adjustments to facilitate your needs based on the reason you established for creating the budget. This is the time to lower and cut the non-essentials as necessary.

Maintenance

The only thing that’s left to do is to review monthly to see how well you’ve managed to stick to the plan. You can also adjust based on what you see happening each month.

Creating a Budget in Microsoft Excel

You could write down all these inflows and outflows on a piece of paper and manually do your calculations. You could also use a calculator program and manually make your entries and changes.

Alternatively, you can use Excel to get your budgets done efficiently. Excel allows you numerous rows and columns to use, plus it automatically updates entries based on formulas you put it.

It may be a good idea to list your income and expenses in parallel columns. Ensure that any figures that reference other figures (like totals do) are filled in with formula calculations. This means that figures automatically adjust when you update figures they depend on.

Consider using a different sheet for each month and naming the sheets accordingly. This provides a neat way for you to review your progress and neatly organize your historical data.

You may even stand to benefit from seeing a pictorial representation of the figures. Excel features graphs and charts that you can use to achieve this. This gives an easily understandable idea of where things stand, and you also get insight into your trends to see which are healthy and which ones you need to kick to the curb.

Best Ways to Increase Your Savings After Retirement

It is good to save while in active service, but it is better to adopt some workable methods that will increase your savings after retirement. The truth is, your retirement benefits are never enough. And if you seek to create an ideal lifestyle for yourself even while you are out of service, you have to save more to have more.

Of course, everyone wants to retire and live a comfortable lifestyle, where they can travel to their dream destinations and spend a lot of time doing what they like the most. But the thing is, you have to own a lot of money to achieve all these. And if you don’t have enough savings, they will be nothing more than just a pipe dream. However, contrary to popular belief that it is nearly impossible to save money after hitting the retirement age, you can actually increase your wealth if you follow the right steps.

It doesn’t matter if you have a large investment nest egg at retirement, you can still boost your savings and increase your net worth. Even if you were not able to save enough money before retirement hits, your retirement age could be the perfect time to continue your savings if you are ready to acknowledge some methods.

Is It Possible to Increase Your Savings After Retirement?

At times, retirement planning can be more than what you think, especially if you are planning to increase your savings and live your best life. Most times, many retirees assume that expenses decline after retirement, but in truth, it is the direct opposite. Expenses are inevitable, and even after vacating public service, you may be continually plagued with excessive spending. At this point, it is reasonable to think that adopting a frugal spending plan will affect your lifestyle. But it doesn’t have to; you can still go about your normal life and increase your savings while at it. By following these tips, you can save more money and increase your wealth while maintaining your lifestyle.  

In order to not risk everything you have labored for and subject yourself to more harsh work after retirement, we give you five keys to help you increase your savings and limit your expenses. 

Define a Qualitative Spending and Investment Goal

You don’t have to wait until you retire before you start taking steps to ensure that you are financially buoyant after retirement. You can prepare ahead of the changes that are likely to happen once you retire, and with this, you can increase your savings even if you no longer have a steady source of income like before.

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When you create a financial plan, you can find a way to balance and control your income and spending. Also, before you go into any new venture,  there is a need for you to consider the purpose of investment. This is very essential if you really want to enjoy everything that you have labored so hard for. Once an investment objective is decided, it will be necessary to define the risk profile and, above all, the timing.

Another alternative is real estate. Recent studies show that the gross profitability offered by housing in the USA stands at $65,000. If you have more than one home and can afford to rent out one of them, you can generate additional income and boost your savings. However, if you do not have a second property but have savings to invest, you can take your time to evaluate some other investment options before going into real estate.

Go into Simple Online Business and Increase Your Earnings

The truth is, no amount of budgeting and cutting down on spending is ever going to make up for not making enough money. In fact, you will be able to save more money and enjoy your lifestyle at the same time, if you increase your earnings and income.

You can go into any of the less demanding online businesses and start making extra income without leaving your home. There are a number of reliable online marketplaces where you can register and start selling mail-able items via the web.

Additionally, retirement provides you with a lot of time to enjoy what you like doing the most. Now, you can focus on perfecting your crafting skills and creating some handcrafted items that can be advertised and sold online.

These simple business ideas are cost-effective and can help increase your income, as well as boost savings. However, you should always take caution and follow the recommended safe practices in communication, transactions, and many others while selling online.

Cut Back on Activities that May Prompt You to Spend More

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Saving is all about sacrifice. And if you want to live a comfortable life after retirement, you have to let go of some certain habits and activities.

Perhaps you like eating out in nice eateries and restaurants; you can cut out this habit and start preparing your own meal at home. Even if eating out has become part and parcel of you, you can reduce the number of times you do it without completely letting it out of your plan.

For instance, if you eat out five times in a week, you can cut back a little and reduce it to two times. This will ensure that you do not completely forgo a fun part of your life, while putting some extra cash toward your savings.

To cap it all, you don’t have to sacrifice your favorite lifestyle before you can increase your savings. Even if you have retired and no longer have a steady source of income, you can follow the steps listed above to save according to your capacity, without missing out entirely on the things that you love.

Important Tips and Tricks to Help Secure Your Children’s Financial Future

You can have all the money in this world, but if you don’t make plans to secure your children’s financial future, it can be all for nothing. This is because children hold an important place in your financial lifestyle. And it is every parent’s responsibility to give their kids a head start financially by doing some smart financial planning before the future comes.

When you fail to plan for the future of your children, it may become disastrous, not only for them, but for you as well. Your children’s success in the future hugely lies in their hand, but you can make it easier for them with sound financial planning.

In this article, we aim to highlight the best methods, tips, and tricks that can help you lay a solid financial foundation for your kids and set them on the right path to financial freedom.

Creating a Solid Plan to Help Secure Your Children’s Financial Future

Children come with a lot of financial responsibilities. And as long as they are the future hope of every family, you need to create a solid plan for them all.  

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Usually, most parents will have to combine their daily tasks and challenges with the burden of raising their kids and creating a solid future for them. This is where it gets tricky, as you have to work on your professional life while saving for retirement.

Finding the right balance between all these may seem daunting at first. But if you can follow some practical steps and make proper and adequate planning at the right time, you can make the entire process easy, smooth, and effective.

Here is how you can go about it:

Prioritize and Protect Their Important Goals

Creating a solid financial future for your children involves advance budget planning that covers their goals and future ambitions. While some parents may decide to go above their financial limits for the sake of their children’s future, it is better to stay within your financial capability.

Every parent should take responsibility for protecting their children’s future. You have to set an achievable financial goal and work toward it. You can begin by creating an all-inclusive plan that will help your kids achieve their goals and ambitions in the future. These goals must be well defined to obtain a better result within a fixed period. When you plan out your objective sequentially, you can always attain greater height.

The best way to make this work is to agree with your spouse and share equal responsibility while working individually toward achieving a better result.

Invest in Their Future Early Enough

A recent survey shows that many Americans will gladly give up their vacation time in exchange for their student loan payment. But that is only if their employers are ready to take that route. If you fall in this category, you are more likely to be willing to do anything to go back in time and correct your mistakes. While this is literally impossible, it doesn’t have to repeat itself with your kids.

As a parent, you can opt for a reliable future investment plan for your children if you don’t want them to suffer the same fate.  This will serve as a credible source of income that they can fall back upon when the ROI starts coming in the future.

However, it is important for both parents to carefully consider the risks involved in the investment plan before they commit to it.

Invest in High Yielding Schemes

While it is one thing to invest, it is another thing to invest in a scheme that will yield the desired profits. A wise investment will grow your financial capacity within a short period.

To make sure you are well able to create a strong financial future for your children, you should ensure that you only invest in opportunities that attract tremendous returns.

However, some of these opportunities might come with higher risk factors. And this implies that you should never invest in a business sector that you have less or no knowledge about. Also, you need to weigh your options and be sure that you can manage any risk that may arise after investing.

Get a Reliable Insurance Coverage

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Emergencies like natural disasters, car accidents, sicknesses, and other unforeseen situations can affect and disrupt the financial plans of any family. But when you have insurance coverage, you can always regain your ground.  With a reliable investment plan, you can scale through most of the possible emergencies and mitigate your risks.

Appoint a Nominee

Nobody wishes death upon themselves. However, it is inevitable and can happen at any time. That is why you need to make proper preparations for this type of unforeseen circumstance that may jeopardize the future of your children if care is not taken.

As a parent, you need to be able to confide in a trusted person that will stand in the gap in case death comes in. The same person must be ready to stand as a guardian to the children until they grow older and are able to claim their benefits.

This individual will ensure that your kids can fully benefit from the investment plans you have provided before your demise.

As a parent, you can select a nominee from your immediate extended family or a trusted friend. 

Review Your Financial Plans Frequently

After mapping out a workable plan to secure your children’s financial future, review your policies and ensure that you are on the right track. From your children’s education to their goals and ambitions, changes may occur that may warrant you to make adjustments and implement new strategies.

Teaching Strong Financial Planning

While all these tips will most likely work in favor of any parent looking to secure a strong financial backup for their children, the kids have their roles to play as well. They need to adopt some financial etiquette that will help them build on the strong financial foundation that their parents labored to lay down for them. While you save for their future, always educate them about money. When they lack knowledge about money, they might grow up to spend extravagantly. Use a real-life example to educate them on how to avoid debts in the future.

Factors that May Affect Your Children’s Financial Future

Family finances are perhaps one of the most sensitive aspects of every couple’s financial lifestyle. For most people, the earlier you start planning, the better the outcome will be. By controlling your overall financial lifestyle, you can make plans for your kids and follow it through to secure their financial future.

While this doesn’t seem like an easy thing to do, you can build a solid financial foundation for your kids without neglecting the present-day needs if you manage the following challenges effectively.

Unplanned Investment

For business owners, it is easy to grow your business and transform it into a dependable source of income that can be handed over to your kids and the generation after them. But that can only be possible if you invest wisely and avoid making foolish financial decisions.

When you invest without adequate planning and preparation, it may come back to bite you in the future. Unplanned investments will most likely lead to huge losses and eventually force your business to fold up. Once you are out of business, you may lack the capacity to make enough money for you and your family, thereby unable to save for your children’s future.

Spending Above Your Income

It is simple; you cannot save for your children if you are unable to afford a comfortable lifestyle. And one sure way to end up in a bad financial state is when your expenses exceed your income. In this situation, you can barely save for anything, not to talk of the future of your children. While planning for your kids’ future, you may need to cut down your expenses and save more money instead.       

Lack of Financial Planning

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Without a solid financial plan, your children may find it difficult to survive in a world where everybody is struggling to get by. For optimal results, you, as a parent, need to make a strong commitment to secure your children’s financial future if you want to see them prosper in life.

How Much Should I Have in Savings?

Budgeting can be difficult and confusing for many. Most people have a finite amount of money that they receive with each paycheck, and they are not entirely sure of the best way to prioritize it while still meeting all their needs and desires. It isn’t always easy to know how to delegate your money to so many different aspects of your life. This depends a lot on your age, too, as well as your financial aims and objectives. This article goes over our recommendations for a healthy amount of savings to have at different stages of life.

Why Should I Save?

You may be wondering what the purpose of saving substantial amounts of your money is in the first place. It can seem frustrating to put so much of your money away with the intent of not using it for possibly decades to come. However, it is really important that you use the money you receive while you are young and healthy to set yourself up for a future where you no longer need to work, especially once you get too old to do so comfortably.

Life is also full of unpredictability and instability. While you may be healthy now, it is not guaranteed that this is always the case, and you could suddenly become ill, or some emergency might come up which means you need a substantial amount of money to cover yourself. This is especially true in a country like the US, where many people do not have health insurance or have limited insurance, for example. If you can prevent needing to borrow money from lending institutions or others whenever possible, then you are best off doing so.

Many people in the US save far too little money too. There has recently been research conducted by the Center for Retirement Research at Boston College into the matter. They found that almost half of Americans at working age save less than they should, and they are thereby risking that when they retire their standard of living is going to be lower than it otherwise could be. Furthermore, only 40% of Americans surveyed would be in a position to unexpectedly pay $1,000 out of their savings if they needed to in an emergency. 

How Much Should I Save for Emergencies?

The amount of money you should have in savings varies dramatically from person to person. For example, if you have a family and are the primary breadwinner, it makes far more sense for you to have a much greater amount saved up than a student who works part time, for example. However, the amount that people need saved up to cover emergencies is also relative, as a student living alone or a single person generally has a lower cost of living and spends less on necessities and groceries than somebody with a family.

As such, recommendations like these are relative. It is generally advised that if you have a minimum of three months’ expenses saved up before you start saving up for anything else or investing your money. However, six months’ of expenses is certainly a safer option. The idea is that you have enough money saved up that in case of emergency or if you lose your job.

This does not necessarily mean that your savings should simply equate to six months’ worth of income. Your expenses are going to vary a lot depending on your lifestyle and living situation, and your assessment should broadly be based on several different factors. If you are a single working individual, then the most important things to think about when figuring out how much money you should have for your emergency fund is your needs with regards to food, utilities, transportation, housing, debt, and various types of insurance.

If you are in a household where you are not the only one providing income, then you don’t need to save as much as you would need to otherwise. Also, if your income is not consistent from month-to-month, then it is better if possible that you save up more than six months’ worth of income, as you may find that it takes longer for you to get back into a position to be able to be consistently earning income if you are unable to work for a lengthy period of time.

How Much Should I Have Saved Up by a Certain Age?

There are recommendations regarding how much money you should have saved up by a certain age, and these also vary depending on your lifestyle and your living situation. The following provides a breakdown of different age brackets, and a general recommendation for how much you may like to aim to have saved up by each stage of life:

In Your 20s

On average, someone in this age group who is working full-time and leading a household is going to earn $66,470 per annum. The average estimated expenditure on essentials per month for such a household is $3,458, so if you multiply this by a number between three to six months depending on what type of work you have, then you have a very general figure of $20,748. This is unlikely to be identical to the amount that you are going to save up, of course, as your income and expenditures are not exactly the same.

This figure can seem really daunting to recent graduates, especially if they have student debts and loans as well to worry about. However, if you do not have a loan which is rapidly accruing interest, then it is probably best to establish yourself with some level of financial security and instead pay your student loans back gradually over time.

If you are not sure how you can reach this target or it seems too difficult, you might want to temporarily take on a second job until you have emergency savings put aside. This is not something you are going to regret if you ever need it, so it’s a great idea if you can to sacrifice a little extra of your time in order to set yourself up well against any emergencies that you might end up experiencing.

As far as your retirement fund is concerned, you should aim to have around $66,470 saved up by the time you reach your 30s. This is a great foundation to build upon as you move up the career ladder and begin earning more.

In Your 30s

By this age, the average American is earning $92,576. However, average expenditure at this age is also a little higher, so your emergency savings should probably be somewhere between $12,900 to $25,800, depending on your lifestyle and how stable your income is.

As far as your retirement savings are concerned, it can be a little harder to put money aside in this decade of your life, as this is a time when many people have young children and are perhaps not advanced enough in their careers to be saving substantial amounts of money. However, it is always important to put some money aside when you can, and it is recommended that you have around $277,728 saved for your retirement by the time you reach your 40s.

In Your 40s

When you are in your 40s, you are most likely going to be at the earning peak of your lifetime. However, you are also probably going to spend the most money in your life at this stage. It can be a stressful time, especially as this is when you should be focusing on building up your retirement fund as much as possible while you are earning as much as you are. By the end of this decade, you should look to have at least $596,538 saved, based on the average income of an American in this particular age group.

In Your 50s

At this point, if you so choose, you may want to begin working less hard than you have previously and also make things a little easier on yourself. This is especially true if you have enough money saved up from the previous decades that you no longer need to work as hard as before. As such, you only need to save around $100,000 this decade on average, if you have met your earlier targets. By the end of this decade, you should aim to have around $643,792 saved up.

In Your 60s

By the time you come into your 60s, you should ideally have enough money saved up in combination with your assets and investments to be looking at retirement, so there are no concrete recommendations regarding saving beyond this point. Hopefully you find yourself in a position where you can enjoy your retirement and the fruits of your labor.

Other Goals for Savings

Of course, retirement and emergencies are not the only things you are necessarily going to save up for during your lifetime. You are probably going to have other things that you need a little extra money for, and it is best if possible to save up for these over time, instead of impulsively spending the money when you might not have it at the time and then having to borrow it and make it up later.

Vacations are a fairly common thing to save up for, and this is a great way to make sure you and anyone else you might be vacationing with can have a holiday that is extra special and memorable for all of you. Studies have found that Americans often pay for their vacations with credit cards, which is not the best way to fund your holiday if you can avoid it. It is always best to do whatever you can to avoid being in debt or owing anybody money, so do your best to save up for events like these instead. Weddings are another common expense, and something that people want to spend lavish amounts of money on to make sure they are great and memorable events. While weddings are indeed special, it is again advised that you try not to borrow money for your wedding and instead save up for it.