Overcoming Obstacles to Saving

Obstacle - Man Jumping Over Word on Arrow

We’ve all said it, “tomorrow I’ll get to that”, or “maybe next week or next month when I’m not so busy and have a little extra cash”, but time passes on by and we never get to that one thing we’ve been avoiding – saving for our retirement. Here are some of the obstacles to saving that we may identify with:

  • Procrastinating – delaying savings or putting savings off for another time. Check
  • Poor Spending Habits – includes spending on unnecessary items; impulse buying and self-indulgent lifestyles. Check
  • Culture of Dependency – Being overly dependent on others for everything. Check
  • Lack of financial literacy – spending on liabilities or items that decrease in value over time; not knowing how to make your money grow or work for you. Check

Here are some ways by which you can overcome these obstacles:

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Investing in Challenging Times

Tips for investing in challenging economic times

Good Advice for Hard Times

An economic downturn usually makes people more aware of the importance of saving and spending their money wisely.  Here are a few tips you can adopt to help you manage your money wisely during such periods.

 Pay off your debt

The repayment of debt is the best investment you can ever make. A downturn in the economy means fewer job opportunities, wage cuts, and rising unemployment. In order to protect yourself, it is wise to repair your personal balance sheet. Reduce your spending and use the money you save to reduce personal debt first (credit cards, overdrafts, loans), then your mortgage. Build a cash cushion to help meet unexpected bills or to cover expenditure if your income falls.

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2016 Financial Resolutions

Life GoalsEvery year we make plans to start the New Year with a clean slate, or with new goals. Maybe you want to shed a few pounds, start a new course, or open a business; but have you ever thought about your long-term goals maybe a new car, house, a dream vacation, retirement. Planning for the future starts now and the New Year is a great time to overhaul your financial life for the better. One excellent place to start is by making sound resolutions that can help to get you closer to your financial goals.

Financial Resolution 1: Know What You Want

Have clear, concise financial goals for the year.

Unrealistic Goal – “I want to pay off my credit card and have more money in the bank”.

Instead, say, “I will keep the balance on my credit card down to $0 after every month, and ensure I have over $5,000 in my savings account.”

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Are you too young to plan for your retirement?

Many persons who are under 40 years old have not yet begun planning for retirement. However, is there such a thing as “too young to plan for retirement?” Does “the early bird catch the worm? The earlier you start to plan for retirement the more prepared and at ease you will ultimately be. Here are some helpful tips to help you grow your financial wealth and ensure that your retirement years will be well cushioned. Continue reading

The Do’s and Dont’s of Investing

DO

  • Work out what your investment goals are before you decide on an investment plan;
  • Consider what balance of risk and return you are comfortable with;
  • Remember there is no such thing as a high return, risk-free investment;
  • Ensure that the financial services firm or adviser you are considering is registered with the TTSEC;
  • Shop around: It helps you get the best value and most suitable product for your needs.
  • Make sure your read all documents carefully;
  • Bear in mind that past performance is no guarantee for future returns;
  • Diversify your investment to reduce risk;
  • Make sure that you have access to some of your savings for emergencies;
  • Find out what charges (if any) apply and what commission (if any) is paid to your adviser;
  • Find out what charges (if any) apply if you need to withdraw your money before the agreed due date;
  • Find out what happens to your investment if you die; and
  • Make sure that you have access to some of your savings for emergencies.

DON’T

  • Leave money doing nothing for long periods as inflation will eat away at its value;
  • Be tempted by offers that seem too good to be true. (Remember, if it sounds too good to be true, it usually is!)
  • Be rushed into making hasty decisions about a savings or investment  product;
  • Buy or invest in anything you do not understand;
  • Be put off or impressed by financial jargon. Ask for an explanation if you do not understand a particular term;
  • Commit to a long -term investment if you think you may need access to your money;
  • Make an investment decision based only on the advice of a friend or family member.

Make Your Retirement Dreams Come True

Wouldn’t you like to have a million-dollar portfolio when you retire?  Making that a reality requires some serious effort. While we cannot guarantee your success in making such a dream come true we have outlined some steps to help you achieve your objective. 

1. Map out your goals

The leading advice from persons who have acquired wealth is to state your goals and develop a course of action to achieve them. You can use the services of a registered financial adviser to help you map our your strategy to achieve your wealth.

2. Begin to save 

If you don’t save, you’ll never reach your goal. As obvious as this may seem, far too many people never even start to save. If your employer has a contributory pension plan, enrolling in the plan is a great way to put your savings on autopilot. Simply sign up for the plan and contributions will be automatically taken out of your salary,  thus increasing your savings and decreasing your tax liability. Furthermore,  if your employer offers to match your contributions up to a certain limit, be sure to contribute enough to get the full match. It’s like getting a guaranteed return on your investment!

3. Get aggressive 

The returns generated by an investment are dictated by the asset-allocation decision. This is the investment strategy that aims to balance risk and reward by apportioning your portfolio’s assets according to your goals, risk tolerance and investment horizon.

Although there is no simple formula that can determine the right asset allocation for every individual almost all financial professionals hold the view that asset allocation is one of the most important decisions that investors make. The three main asset classes – equities, fixed-income and cash and equivalents – have different levels of risk and return, so each will behave differently over time. If you are looking to grow your wealth over time, fixed -income investments, or a certificate of deposit (CD) aren’t likely to get the job done, and inflation can take a big chunk out of your savings.

4. Put aside for a rainy day

Part of long-term planning involves accepting the fact that setbacks will occur. If you are not prepared, these setbacks can put a stop to your efforts to save. While you can’t avoid all of the bumps in the road, you can prepare in advance to mitigate the damage they can do. Work with a registered adviser to help structure your finances to avoid financial disaster.

5. Increase the amount you save

A major mistake that persons make is to not adjust their savings as time goes by. Your income should rise as time passes due to the fact that you will get raises, you may change jobs, you may get married and you may have a two-income family. Every time more cash comes in to your pocket, you should increase the amount that you save. Unfortunately for many of us with the increase in our income, additional wants/needs arise which compete for the income. The key to reaching your goal as quickly as possible is to act as if there is no change in income and save as much if the increase as you can.

6. Watch your spending

Vacations, car, kids, and all of life’s other expenses take a big chunk out of your salary. To maximize your savings, you need to minimize your spending. Buying a home you can afford and living a lifestyle that is below your means and not funded by credit cards are key if you want to boost your savings. Develop mechanisms to make it to the end of the month before you run out of money.

7. Monitor your portfolio

If you’re a mid-to long term investor, there is no need to obsess over every moment of the stock market or investment products.  Instead, check your portfolio once a year and re-balance your asset allocation to keep on track with your plan.

8. Maximize your options 

Take advantage of every savings opportunity that comes your way.  Make the maximum contribution to tax-deferred savings plans. Tax-deferred accounts provide the greatest benefit for investments that generate frequent cash flow, or distributions, that would otherwise be taxable, thereby allowing these payments to remain whole and be reinvested most efficiently. Taxable mutual funds and bonds produce the most frequent taxable distributions, such as interest, dividends and capital gains and thus so are best suited for tax-deferred growth.

9. Catch-up contributions 

Look for more ways to save money and increase your nest egg for the fast -approaching golden years. When you reach age 50, you can check to see if you are eligible to increase contributions to tax-deferred savings plans. See if your bank or other financial institutions have any special plans or reduced charges for seniors and take advantage of these opportunities.

10. Patience is a virtue 

“Get-rich-quick” schemes are usually just that – schemes. If something sounds too good to be true it usually is! The power of compounding interest takes time to build, so invest early, invest often and accept that the road to riches is often long and slow.

Remember the sooner you get started, the better your chances of achieving your goals!

Money Management in Your Middle Years

If you are between the ages of 35 to 55 this means that you are officially in your middle years. Give thanks!

Now is the time for you to maximize your income generating potential.  At this time you should be taking deliberate steps toward managing your money. You have many competing interests for your money including managing from day to day, saving for tomorrow, providing for a child’s tertiary level expenses and your retirement.

Moreover, this is the time for you to focus on the issue of how to maximize your income during your remaining work years so that you are better positioned to retire, when and how you want. Here are some suggestions for minimizing stress and maximizing results.

Save as much as you can for your retirement

Look for savings that give you a tax advantage. When you reach the golden age 50, you can also make extra contributions to these retirement savings accounts. You should speak with a financial planner or personal advisor about a recommended investment strategy and mix for your age and stage of life. As time goes by you can always alter the mix of stocks, bonds, mutual funds to suit your risk/age profile.

Comparison shop for alternatives 

Look for savings plans or mutual funds accounts which offer a higher interest rate or other benefits for children/teenagers. Utilizing these products can help families and individuals save for higher education expenses. You should also see if you can qualify for a tax break on earnings from investments used for educational purposes.

Use any financial “windfall” you may receive

In the event you unexpectedly become the beneficiary of a large sum of money you should consider asking a financial or tax adviser about your best options, these may include starting or adding to a rainy-day fund for emergency expenses or putting money into your retirement accounts.

If you deposit a large amount of money in a bank account , make sure it is fully protected by the Deposit Insurance Corporation (DIC). You may also consider paying off high-interest debt, such as outstanding balances on your credit cards.

Plan a strategy for having a home and mortgage

If you don’t own a house, consider if it makes sense to buy one, especially if you don’t plan to move in for another two or three years. Home ownership can offer tax advantages and a stable place to live, but don’t take on more of a mortgage than you can afford to pay each month. If you do have a mortgage, periodically compare your interest rate to current market rates and, if rates have declined, calculate whether refinancing makes sense. Remember owning your own home makes you asset rich and you can use the value in your home (equity) from time to time to meet other financial needs.

Managing your money well in the middle years can make all the difference in how you retire, so start today so you can live better tomorrow!

The Young Adult’s Guide To Personal Finance

Managing your finances is not a subject that is taught in our nation’s secondary schools and may not necessarily be covered at the post-secondary or tertiary level either. However it is an area in which most young persons entering the job market for the first time, are fairly unaware. It is unfortunate that most persons believe that understanding personal finance is way above their heads and therefore create a mental block around the subject.

It’s easy to get started on the right path by looking at six of the most important things to understand about money if you want to live a comfortable and prosperous life.

1. Learn self-control

Our parents invariably taught us this when we were children. The sooner you learn to delay gratification, the sooner you’ll find it easy to keep your fiances in order. Although you can effortlessly purchase an item on credit the minute you want it, it’s better to wait until you’ve actually saved up the money. Do you really want to pay interest on a pair of jeans or a box of cereal? If you want to keep your credit cards for the convenience factor or the rewards they offer, make sure to always pay your balance in full when the bill arrives, and don’t carry more cards than you can maintain or monitor.

2. Take control of your financial future 

Instead of relying only on others for advice, take charge and read a few basic books on personal finance. Understanding how money works is the first step toward making your money work for you.

3. Know where your money goes

Once you see how your morning coffee or buying lunch every day adds up over the course of a month, you’ll realize that making small, manageable changes in your everyday expenses can have just as big of an impact on your financial situation as getting a raise. In addition, keeping your recurring monthly expenses as low as possible will also save you big bucks over time.

4. Start an emergency fund

Having money in savings to use for emergencies can really keep you out of trouble financially and help you sleep better at night. Also, if you get into the habit of saving money and treating it as a non-negotiable monthly “expense”, pretty soon you’ll have more than just emergency money saved up: You’ll have retirement money, vacation money and even money for a home down payment. However do not just put these savings into an ordinary savings account. Do research on savings or investment instruments that can provide you with a high interest rate. (Make sure though, that you understand the risk factor involved in all investments).

5. Start saving for retirement now 

Most young persons do not appreciate the need to prepare for retirement well in advance.  However, because of the way compound interest works, the sooner you start saving, the less principal you will have to invest to end up with the amount you need to retire. Therefore, the sooner you will be able to call working an “option” rather than a “necessity.” Company-sponsored retirement plans are a particularly great choice because you can match the company’s contribution with an equal one of your own, thereby ensuring an even higher contribution to your retirement fund.

6. Understand how taxes work 

It is important to understand how income taxes work even before you get your first salary. When a company offers you a starting salary, you need to calculate whether that salary will give you enough money after taxes to meet your financial goals and obligations. You have to take your gross pay, subtract your taxes and see how much you’ll be left with as your net, or take-home pay.  Only then can you make informed decisions regarding how to grow your wealth.

Stay tuned for our next post on  how to manage your finances in your middle years!