You’ve probably heard of the saying, ‘earn like the rich and spend like the poor.’ The rich remain rich by spending like the poor while the poor stay poor because they try to emulate lavish lifestyles. Money management is crucial for both low and high income earners. According to author Elizabeth Warren’s 50/20/30 budget rule, you should allocate 50% of your after-tax earnings to needs, 20% to wants, and 30% to savings. As part of your savings plan, consider making a donation to Yad Ezra. There are many reasons people donate time or money and chief among them is to make a difference in the lives of others. Whatever cause you choose to give to, make a commitment for the long-term.
Any amount of money will always be inadequate if you do not possess excellent money management skills. What are the poor money management behaviors that will ruin your chances to build wealth? Below we look at habits that you need to stop now before they destroy your financial future.
Spending more than you earn
Live within your means. Better yet, live below your means. When you live within your means, you spend less than or equal to what you earn. It's not rocket science people. Living below your means is the only way you will be able to build real wealth. Many people are living way beyond their means and are funding a lavish lifestyle at the expense of their financial futures. Are you buying unnecessary things that are way too expensive? Are you renting an apartment that consumes almost 50% of your income? Are you ever in debt because your money is ‘never enough?’ If these and other similar scenarios describe you, then you will continue to struggle with saving for retirement. There are lots of simple ways to cut spending. Try the 50/20/30 budget rule or come up with your own budget that works for you.
Failure to save for retirement and emergencies
If you are still in your early or mid-20’s, you may feel like retirement is a long way coming. Nothing is further from the truth. Years pass by fast, and the 60’s will catch up with you unprepared. Not having an adequate retirement savings means you may have to work longer than expected. Why not start saving earlier and retire sooner to pursue other interests? Most employers are required Having 3-6 months living expenses in an emergency funds should be a top priority as well. Failure to save for unpredictable times means you may have to finance your emergency with expensive credit.
Not having an investment plan
Congratulations! You've managed to consistently save 10-20% every month. The next step is to develop an investment plan. Inflation will consume most if not all of your earnings generated from your savings account but investments give you a greater long-term return on your money. A good basic investment plan will include the following components: dollar cost averaging, low cost index ETFs or index mutual funds, diversification among stocks, bonds, international stocks, short-term investments, commodities, and periodic portfolio re-balancing. There are numerous options for investing your savings, so it's always a good idea to discuss a plan that meets your particular needs.
Not having a plan to increase your income
You can learn new skills and competencies that make you more valuable to employers and increase your earning power. Alternatively, you can start a side-hustle based on a hobby or anything you are passionate about. Make sure you do adequate market research, have a solid business plan, and be well prepared financially so that your business has a high chance of success.
Regardless of whether you earn $10 or $100 a day, money management is key to your financial health . Developing good financial habits like saving, budgeting, and investing will help you achieve financial stability and financial freedom.
Americans have come to rely on medicine to combat aches and pains to cancer. This reliance on medication has lead to unrealistic expectations and a dangerous increase in drug overdose. Here are some tips that can keep you safe with medicine.
Medicine Isn't Magic
Modern medicine is a wonderful thing but keeping your expectations in check is necessary. Having an expectation that medicine will completely aleviate pain or make you feel twenty years younger can lead to over dependency on drugs. Most drugs will only help make pain manageable and not eliminate pain so you can lead as normal a life as possible. What's the best prescription for pain? Eating a healthy diet, maintaining a healthy weight and getting plenty of exercise can help the body cope with pain.
Store Medicine Properly
Medicine should be stored in their original container in your medicine cabinet away from children. Certain types of medicines that should be stored in a refrigerator include: insulin, suspension and vial forms of medicines, soft gels, suppositories, cartridges, and certain nasal sprays.
Have an Annual Checkup
Having an annual checkup is critical to maintaining good health. While there isn't a standard set of tests for an annual checkup, your doctor will recommend blood work and other tests depending on your medical history. Cholesterol is something that your doctor will want to test for on a routine basis. Your doctor will refer you to a lab where a technician will draw blood using blood tubes and send them off for the testing ordered by your doctor.
Talk to Your Doctor
Mixing opioid pain meds with alcohol or other medications is a recipe for disaster. Be sure to let your doctor know all of the medications, both over-the-counter and prescription, so that they can check for any drug interactions.
Monitor Senior Drug Use Closely
The risk of drug overdose rises dramatically for individuals taking pain medication, especially for those over the age of 55. Health experts describe the problem as epidemic and list oxycodone, morphine, and hydrocodone as the most commonly abused medicines. Older americans are sensitive to drug misuse for several reasons, they are more likely to suffer from chronic pain and be prescribed an opioid drug and second, as the body ages it's ability to clear drugs diminishes, so a safe dosage for a younger patient may be an overdose for an older patient.
Recent data from the Agency for Healthcare Research and Quality shows deaths from overdose for those between the ages of 55-64 rose 700% from 1993 to 2012. If you have a loved one in this age group monitor their use of medicine closely, it could very well save their life.
Life may be good for now. You may have a beautiful house, a great job, the latest car and most importantly, a supportive family. There may be no worries in your life on a daily basis. But you never know when a tragedy can strike and you become low on funds. Have you ever thought about what you’ll do to spend a normal life when you get old and can’t have your job anymore? Well, there are many things that you can do save for the unknown future. Obtaining a good job and living is a smart move but planning ahead is smarter. To start thinking ahead, you’re at the right place as down below are some tips that you can follow to get acquainted of some ways to save for the future.
Know When to Retire
You might already have it planned when it’s time to retire. People wait for the day they can retire and just enjoy life and travel. But retirement means that there is no money coming into your life other than a retirement plan or a savings account. That is of course if you were smart enough to start one early enough.
Knowing when you’re going to retire will be a plus point for you as you will be able to save up a considerable amount for you to spend in it. You can ask a retirement consultant or directly from your employer about your retirement age. Mostly your age will be 65 when you’re expected to retire from your company. But if you’re a favored employee, you can always request your firm to extend your limit so that you can save more.
Increase Your Housing Capacity
Older people in retirement use their resources other than savings to go by in retirement. These can be lands, houses, stocks. Selling your home in old age is a great technique to have funds in it. But if you live in a small house than you might not get a good return on it to use for many years. You can start saving today to be able to upsize your home. As this house can be sold later and you and your partner can downsize to a smaller home or apartment in a friendly community or go traveling to your dream destinations.
Invest in a Significant Retirement Plan
There are several ways by which you can save adequate funds for you to retire. You can invest in stocks and liquidate them when you receive an excellent return to avoid getting it in low when inflation hits. You can save this money in a retirement plan or in your bank account to use it in the future. This money can also be used to make further investments too. Your employer will offer you a saving 401k plan where a portion from your salary goes without deducting tax to be saved for retirement. A better strategy can be creating a gold IRA rollover to keep your retirement funds in the form of gold. This form of retirement plan saves your money and you can liquidate it whenever you want, even in inflation, to get the right amount back. Social security may also be provided to you if you deem eligible for it.
Calculate Your Living Expenses
To fund your retirement you will need to have savings from various resources like a Roth IRA or 401k or income from a business or rental property. Now that you know exactly what plans you’re going to abide by you can roughly come up with the amount you will have in your savings plan and what your income is going to be. You can start planning out your monthly or yearly expenditures to calculate how much you’re going to spend in retirement. This way you will be able to save up funds that you need to support in old age and formulate a plan for spending it. Various things change in a person's life as they get older and you never know what kind of health you'll have when you get older and what will be your needs. You can estimate your needs knowing the other older people’s requirements near you to make a plan.
The idea of retiring early is one that appeals to many of us. We work hard, we don’t want to wait until we’re too old to really enjoy ourselves before we stop. We want to retire while we’ve still got plenty of time to enjoy good health and an active lifestyle. We want to be able to reward ourselves for years of hard work with even more years of joy and pleasure. In fact, it’s thought that one in four 18 to 34-year-olds have set early retirement as their big financial goal, and websites and blogs focused on FIRE (Financial Independence, Retire Early) are becoming more popular all of the time.
But, while retiring a few years early might be very doable without too many lifestyle changes, and just a normal level of saving, if you want to retire much earlier, say in your 50s or even 40s, it’s going to require a big effort in most cases.
Being able to retire so young means that you need to save hard for a long time. Most people practicing FIRE aim to save at least 50% of their monthly income, and more when they can afford to. Unless you have a very high income, this might mean that you need to live very frugally. That might sound a little scary, but the good news is, it’s definitely possible.
What Do We Mean by Living Frugally?
You’ve probably heard the word “frugal” in relation to budgeting and saving money plenty, especially if you’ve done some research into very early retirement. But, what does it actually mean? Frugal living is about much more than saving a little when you can or making a few small changes and cutbacks when money is tight.
Living frugally means being very intentional with your spending. To live frugally all spending must be done mindfully. When we live frugally, we spend as little as possible on the essentials, and never any more than necessary.
How to Live Frugally
Most of us have practiced a little frugality from time to time when we’ve overspent or need to save for something specific. But, living like that all of the time is very different. Here are some of the ways that you can live frugally, helping you to hit that early retirement target.
Create a Realistic Budget (and Keep it Up to Date)
One of the most important elements of a frugal lifestyle is a realistic, and fluid, budget. Work out how much you want to save each month, and how much you need to spend. Set individual budgets for things like food, transport, utilities, and entertainment, and break them down as much as possible.
But, to be useful your budget needs to be realistic. Part of this means understanding that your budget won’t be the same for your whole working life. Your needs will change, your expenses may grow, your income could rise, and your priorities and situation could change a lot. Get into the habit of accessing your budget and making changes regularly to stay on track.
Get Your Priorities Straight
It’s important to know where your spending priorities lie. For most of us, food and housing are high priorities, but you may have others. Think about what you need, what you can’t be without, what you are happy to spend more on, and where you think you can live with the biggest cutbacks.
Become a Savvy Shopper
Living frugally isn’t easy, but, if you become organized and savvy, it doesn’t have to mean missing out as much as you might expect. Get into the habit of always comparing prices before you spend money, and you’ll get some great deals. Using cashback sites or cards can even mean that you make money when you spend.
One of the biggest ways to save and the easiest places to be a savvy shopper is your food shopping. Start making meal plans and shopping lists, shopping in budget stores, buying cheaper brands, and shopping in the reduced sections can help you to drastically slash your food bill, without neglecting taste or nutrition.
Always Consider the Long Term
When we’re being frugal it’s tempting to always buy the cheapest option, but this can create a false economy. If you need new shoes, buying the cheapest pair can mean that you need to replace them quickly. Buying a more expensive, higher quality pair, either second hand, or on sale, can mean that they last for much longer, and your long-term expenditure is reduced. When you spend, don’t just think of the here and now.
Create a Rainy-Day Fund
Let’s face it, as much as we try not to spend money, things happen. Unexpected expenses often crop up at the worst possible time. Without preparation, this can mean that you are forced to get into debt (which should be avoided as much as possible if you want to retire early). Instead, make sure you’ve always got an emergency fund in a high-interest, easy access account.
Boost Your Income
Of course, one of the best ways to save more is to earn more. Working hard and gaining promotions and pay rises is the best way to do this, but side hustles are a great way to boost your income and your savings pot.
Become a Saver
It’s all well and good living frugally, to save money for your retirement. But actually, how you save that money is important. Even with a frugal lifestyle, many people find that if they have money sitting in their account, they splurge from time to time, often when their mood is low and they need a pick me up.
To retire early, you need to save your money carefully, making the most of any excess that you manage to create by living frugally.
Use a Registered Retirement Savings Plan
A registered retirement savings plan is a great way to make your plan to retire early a reality. Wealth Simple offers this easy way to save tax-free for your retirement, and even upon withdrawal, the tax that you’ll pay will be marginal. Explore Wealth Simple to learn more, and to find other great ways to save and protect your money.
Consider Investments
Investments are another great way to make your money work for you. Get advice from a professional, and consider any risks very carefully before making any large investments.
Move Your Money Around
So many of us are guilty of leaving money in a bank account out of loyalty, or because we worry that moving it will be difficult. This can mean that we’re missing out on higher interest or facing large charges.
Moving money is easier than ever. So is comparing interest and other perks. Get into the habit of checking for better returns and move your money around to keep it earning the most interest.
Keep Up to Date with Financial News and Developments
Part of having your money in the right place is understanding investments and financial markets and services. Living frugally probably means that you won’t want to spend too much on advice and professional services, so make sure you keep up to date with any changes and developments, as well as the latest fintech products and services.
Learn More About Your Own Savings Habits
Are you a good saver? Some of us are great at it, and others, even with a strict budget, struggle. If you aren’t good at saving, you might want to keep some of your money in investments and long-term accounts, so that you don’t have easy access to it. You might also want to use savings apps, to save small amounts little and often. This can be a great way to grow a rainy day or emergency fund.
Start Early
Living well within your means, and being a savvy saver are two of the most important elements when it comes to saving for early retirement. But it’s also imperative that you start as soon as you can.
Ideally, you want to have started mass saving in your early 20s if you are aiming to retire in your 40s or even 50s. But if that ship has sailed it isn’t too late. On the downside, you’ll have more to save, and less time to do it. But, on the upside, you might earn more now than you did in your 20s and saving might be easier to manage.
If it’s your financial goal to retire early, start today, no matter how old you are, or what your current financial situation looks like.
Care for Your Mental Health
Living extremely frugally can be tough. Seeing all of your friends enjoying luxuries, treats, and holidays can be hard, and you might find yourself feeling jealous and as though you are missing out.
While you want to retire early, you don’t want to spend your working life miserable, jealous, and depressed. So, make sure you take care of your mental health. A small treat fund can help, and there are plenty of ways to treat yourself without spending much or anything at all.
The most important thing, when you are finding it hard, is to remind yourself of why you are being so cautious with money. Make plans for your retirement, think about how other people will still be working when you have years of fun ahead of you.
Yes, you can retire early by living frugally. But you need to be savvy, you need to be committed, and you need to work hard.
If you want to have a comfortable retirement and financially secure future, you need to think about growing your wealth right now. Think about all the adventures you can go on as well as all the free time you will have if you do not have to worry about finances in the future. Retiring with a comfortable amount in the bank is something a lot of people think about. However, growing wealth and having enough to live comfortably is hard, and there is no easy way to get there. You will need to plan, make some changes as well as follow the steps of those who have already retired comfortably.
Get Out of Debt
Debt is one of the biggest hindrances when it comes to building wealth, let alone thinking about retiring comfortably. Debt makes it harder to save or invest and it keeps growing the longer you take to pay it off. So, before you start thinking about how to grow wealth, you need to think about how you will get rid of one of the biggest obstacles to doing so.
The first step to getting rid of debt is knowing what amount you owe and who you owe. Make a list of everyone you owe as well as how much you owe them. Next, prioritise your repayments. While the goal is to have all your debts paid off, some debts need to be paid off first. These are debts that have an interest rate attached to them. Credit card debts and loans fall into this category. Ideally, you should pay off the debts that have the highest interest rates first. As you reduce the amount owed, the interest you pay will also reduce so the burden of repaying the debts will keep decreasing over time. Next, you need to make a plan of how to repay your other debts. This includes making plans to set aside some money for things like mortgages and utility debts if you have them.
It will take a lot of planning and sacrifice to get out of debt in a reasonable period. Talking to a financial planner to help you out is a great option if you have trouble doing this by yourself.
Save as Much as You Can
Once your debts are manageable or have been paid off completely, it is time to start saving. Setting some money aside means you have something to invest in the future. Additionally, saving early means that you get to take advantage of compounded interest. If you do not start saving as soon as is feasible, that could make a difference of thousands or even tens of thousands in savings.
The question that arises once you understand the importance of saving is, how much do you need to save? A general rule is that you should save around 15% of your income. Some might save a lot more than this, especially if they have lofty goals or want to retire early. As long as you save the minimum amount you have set for yourself plus any other extra money you have, you are on the right track.
Optimise Your Spending
Everyone’s spending is different because we all have different priorities. However, if you want to have enough money to put into a money-making venture or investment, you need to find ways to optimise your spending. This can be through cutting down your spending or finding the best deals on the items you need.
Spending wisely means being conscious of all your purchases, especially big purchases. Many people do not shop around for things like mortgages, cars or health insurance. They purchase whatever is available to them without trying to find out if a better deal is available.
Invest in Stocks
Investing any amount you have in the stock market is one of the best ways to build wealth in the long-term. When investing in stocks, you will need to decide whether you should invest passively or actively. Active investment requires the services of a money manager who will trade stocks for you. These managers try to make you as much money as possible by investing in specific stocks that they know are performing well or that they think will perform well in the future.
Passive investing, on the other hand, is buying stocks that you are sure will keep pace with the market so that your investment offers a good return. The best way to get started investing passively is using online tools that help you put money into the investments you believe in.
Before you can do so, however, you need to learn how to buy stocks online as well as the best tools that make it easy for you, such as Wealthsimple. Wealthsimple allows you to choose from (as well as buy and sell) thousands of stocks on the platform. Wealthsimple also allows you to search for and track stocks easily so you always know what is going on with your investments.
Insure Yourself and Loved Ones
When you think about using insurance to build wealth, you are likely thinking about life insurance. While life insurance can be a great way to build wealth as well as protect your loved ones when you are no longer here, getting health and disability insurance is just as important.
Health issues can spring from nowhere and if you do not have the right insurance, then you will need to use money from your savings or retirement fund to pay your hospital bills. Disability protects your family in case you get injured and cannot work any more. If you do not have disability insurance in this case, you might get into financial trouble for it.
Pay Off Your Home as Early as You Can
Owning a home is a great prospect because the home is an asset that could come in handy in the future. However, a home can also make you stagnate. If you are paying more than 25% of your income on a mortgage, you might not have enough left over to save or invest. If possible, you should try to pay your house off as early as possible. That might mean increasing your monthly payments or even maxing them out if it is possible.
Paying off your house faster also means you pay less interest overall. Also, once you complete paying for the house, you can start putting the money that would have gone to the mortgage into a retirement fund.
Make Automatic Contributions
Voluntary contributions are a challenge for a lot of people. This is because once they receive a paycheck, they think of all the areas they can put the money and use it all before they save any of it. Switching to automatic savings and contributions can help eliminate this problem.
These contributions can be scheduled to occur monthly or when you receive a paycheck. Using automatic contributions will help you maintain a constant rate of saving or ensure some of your money goes into investments that help in building wealth.
Consider a Side Business
If you have difficulty contributing to wealth-building activities, it would be a good idea to consider a second source of income. This could be a side business or taking on a side gig.
Starting a business can be challenging, especially because you may already have a full-time job. However, it is not impossible, especially if you consider businesses that do not require a lot of input from you. A side gig is a better alternative because it allows you to choose your work hours around your existing schedule. A side gig also allows you to work as much or as little as you want, thereby giving greater control of the extra amount of money you can make.
Take Advantage of Tax Deductions and Refunds
Tax deductions and refunds can act as a source of money that you can put into wealth building. This is why it is so important to try to take advantage of tax refunds and deductions, especially if you are self-employed. To maximise your deductions and refunds, you should talk to an accountant. They will look into your finances and help you take advantage of every opportunity to save money or have the money refunded to you. The most important thing here is that once you get the tax refund, you should put that money towards building wealth instead of using it for something like financing your next home.
Match Employer Contributions
Lastly, if your employer is contributing to your retirement fund, try to match the amount they contribute. If you do so, you will end up with twice the amount of money you would have otherwise retired with.
Growing enough wealth to retire comfortably takes a lot of planning as well as time. It might also require that you make some concessions such as downgrading your life and putting more towards saving and investing. However, if you put the right plan in place and follow through, you will not only improve your chances of having a comfortable retirement, but also the chances of retiring early.
Once you have decided to set up a 401(k) retirement plan, the next step is to look for a plan administrator. A 401(k) plan administrator can help smoothen the process of setting up the plan and handle the administrative tasks for a certain fee.
Who is a 401(k) Plan Administrator?
A 401(k) plan administrator could be a person from the organization, such as the owner, or a group of top executives, or an outside party hired to set up and manage all aspects of the 401(k) retirement benefits program. As there are various aspects involved in plan management, most businesses partner with a third-party to fulfil the responsibilities of a plan administrator.
Consultation and Set-Up of the Initial Plan: The plan administrator has a duty of resolving any queries about traditional and Roth 401(k) contributions, fund matching, participant qualifications and so on.
Conduct Annual Audits and Comply with IRS Tests: Except for the Safe Harbor plan, all 401(k) plans are subject to the annual IRS non-discrimination tests and Top-Heavy tests. The administrator is responsible for conducting regular audits and processing the administrative paperwork associated with the IRS testing to ensure that the plan is compliant with the latest laws.
Correct Plan Errors: If the 401(k) plan does not pass the compliance tests, the administrator is responsible for refunding contributions to highly compensated employees and increasing the employer contribution to the low compensated employees to make the plan compliant with the non-discrimination requirements.
Submit Form 1099-R and Form 5500: If any contributions are made, the plan administrator is required to submit Form 1099-R. Besides, the administrator should annually submit information about program funds, compliance interests, vested interests, and deceased participants (if any) to the government through Form 5500.
Supervise Distributions: The law grants the administrators the right to issue benefits to participating employees based on the plan documents. The administrator has a duty of maintaining all documents about such payments.
Handle Status Changes and Communicate with Participants: Lastly, the plan administrator is also responsible for maintaining the plan paperwork related to departed employees, new recruits, or if a participant increases or decreases their contribution. In addition, the administrator should communicate with all participating employees and resolve plan-related queries.
How much does a 401(k) Plan Administrator Cost?
The plan administrator fees vary largely depending on the services that are offered. The plan administrator costs typically consist of a flat administrative fee, along with per-participant fees, asset management charges, and any other transactional fees surrounding loan administration and advisory services.
Consulting a Good 401(k) Plan Administrator
If you want to opt for a 401(k) retirement plan for your company, it is best to seek help from a professional plan administrator. A knowledgeable administrator can provide transparency and help you select the most suitable 401(k) plan based on your business needs. Besides, a good plan administrator will provide personal attention and undertake all the administrative tasks while also offering competitive retirement benefits.
