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8 Critical Things to Do Before Buying a Home

Posted by on Apr 21, 2016 in Articles, Uncategorized

So you’re finally ready to get serious and buy a house — chalk it up to the amazing spring weather, or maybe a precious bun baking in the oven, or that much anticipated promotion at work. Whatever the reason, you feel primed to start poring over listings and spending your weekends open-house hopping. Exciting! Yet while you might feel prepared for this next giant step, just remember — there’s a lot of planning and prep work that goes into this purchase, even before you start to look at homes. So make sure you’ve got all your mallards in a row first! Use this checklist to figure out if there are any things you may have missed. Crunch your numbers First, ask yourself not if you’re ready emotionally — because it sounds like you are — but ready financially, says Kristen Robinson, senior vice president at Fidelity Investments. A perfect place to start is at our Home Affordability Calculator, where you can punch in your income, desired location, and other factors to see if your expectations jibe with reality. Good luck! Know your credit score Your mortgage’s interest rate — and, as a result, the size of your monthly payments — will be directly related to your credit or FICO score, essentially a summary of how reliably you’ve been paying off your debts. “If you’ve had too many problems or late payments leading up to the purchase of a home, your score could be lower, and you might get a higher mortgage rate,” says Ali Vafai, president of The Money Source, a national lender and servicer. Many major lenders require a score of at least 620 for a mortgage, but if you find out you’re below that or want to boost your score, now is the time to get started, since it can take months to take effect. Amass a down payment Most mortgage lenders require a cash down payment of 5% to 20% of the price of a home. For the U.S. median home price of $292,700, that’s anywhere from $14,635 to $58,540. If you don’t have this kind of cash lying around, it’s high time to start a saving goal for the next few months. You can start by putting off buying any big-ticket items, fancy vacations or other extravagances. This is a new home we’re talking about, remember? You can also explore other ways to come up with a down payment fast — like borrowing from your IRA or even getting a gift from your parents (lucky you). Get educated The most important aspect of purchasing a home? Understanding the nuts and bolts of how it works. Consider taking advantage of local home-buying seminars, often offered by banks or nonprofits. Such resources will explain aspects of a home loan, like the criteria lenders use to evaluate a borrower, the documentation buyers will need to provide and what each portion of a mortgage payment goes toward. Even better: these seminars are usually free. Interview at least three real estate agents Just about everyone knows a real estate agent or five, which explains why 52% of home buyers find their agent through a friend. But don’t just settle for the first agent to cross your path — remember, a house is a huge purchase, the stakes are high. In the same way you’d want to thoroughly vet a surgeon before upcoming surgery, make sure to do the same here, too. Here are some questions to ask a real estate agent before deciding which one is right for you. A real estate agent can also help in the education department,...

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How to Detox Your Finances This Spring

Posted by on Apr 19, 2016 in Articles, Uncategorized

Spring is one of my favorite times of the year. The weather is warmer, which means my daughters no longer have to look like Ralphie’s younger brother from the movie A Christmas Story. This also means that I can’t hide indulgences in chocolate and comfort foods during the winter behind big sweaters. Our family tradition is to do a cleansing of our bodies and home to welcome in a new season. As I was talking about this to a girlfriend over ice cream (O.K., the cleansing will start next week), she mentioned that she wished she could do this for her finances. Here are some financial areas I suggested may be due for a cleansing: Documents. Do you have a section in your closet that looks like a paper version of Cousin Itt? Use this cleansing period to rid yourself of the stress of piles of unidentifiable papers that keep growing. Use the following guidance as a general rule for keeping records: Sales receipts- Consider attaching your sales receipt to your warranty and discard when your warranty expires. If you do not have a warranty, consider keeping your receipt until your date to get a refund and/or exchange expires. Paycheck Stubs- The rule of thumb is that you can get rid of them when you have compared the stubs to your W2. Tax Return- The conservative guidance is to keep the records forever. Others say seven years. The more complex your tax returns are, the longer they should be kept. Healthcare Statements- Keep until you have verified that the bill has been settled. While you are purging records, you might as well get them organized: Consider getting a fireproof safe or safe deposit box for important documents like marriage certificates, birth certificates, passports, property insurance information, and estate documents like a will and powers of attorneys. Make sure the executor of your estate actually knows where your documents are located. For those that have fully embraced the digital age (I am Generation X and I will admit that I am not quite there), consider storing your documents digitally. Expenses. If your wallet is like a black hole (money seems to disappear the second it connects with you), then it may be time to do a spending cleanse. If you are not sure where to start, consider this list: Eating out. Eating out is the ultimate black hole of most budgets. If you spend $10 on lunch and cut out lunch twice a week, that could add up to $1,000 a year that could go toward a financial goal like a starter emergency fund or paying down debt. If you must eat out, consider downsizing the meal – water only, appetizer or cheap entrée with no drink. If you are with a friend or significant other, consider splitting a meal. Your wallet and your waistline will thank you. Cable TV. It never fails to amaze me how some people will work 70 hours in a job they hate to pay for a $150 cable package that they are too tired to watch. Consider streaming devices like Google Chromecast, Apple TV, Amazon Fire TV or Roku to cut the cable cord and stream TV and movies through services like Netflix, Hulu, and Sling TV so you won’t go into television deprivation. Cell Phones. Contact your cell phone provider about discounts on your cell phone package.  Another consideration is to use Tier 2 carriers such as Cricket, Metro PCS, Boost or Straight Talk that sometimes work with the same cell phone towers as some of the bigger carriers like AT&T, Sprint, T...

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How to Decide If You Should Run a Business in Retirement

Posted by on Apr 15, 2016 in Articles, Uncategorized

Consider how a small business could fit into the retirement lifestyle you desire. Older workers often have the necessary knowledge and expertise to start a business to gain extra income during retirement. But there are many angles to consider before you decide to run a business during your retirement years. There are financial challenges regarding the start-up funds and cash flow as well as lifestyle considerations, such as how much time you want to spend running your business. Here’s how to tell if starting a business in retirement might work for you. Consider the cost. Before you jump headfirst into your own business, consider the physical, mental and time costs involved. If you’re already a business owner, you might have some idea of the demands. If increasing your leisure time is a goal, you may want to consider how to keep your business running while cutting down on your time commitment. If you’re not yet an entrepreneur, think about what type of lifestyle you want to lead as a business owner. You might want to work 10 hours a week or 40. Some people would rather have a set schedule each week, while others prefer flexible hours. Think about whether you want to work with people or be primarily on your own. Your income needs are also important. Consider whether you need to make a few hundred dollars a month or a few thousand. Your lifestyle needs can help determine the type of business you want to begin. You might want to be able to travel while you work. For example, you could start a blog, which you can run from anywhere but could require a lot of time. Or you could start a crafting business where you work alone during the week and then interact with customers at craft fairs on the weekends. You might need to use some of your own money to get the business started. Some businesses can be launched for just a few hundred dollars or less, while others cost thousands or more to start up. Consider how much you can safely afford to invest in the business, and don’t put any money down that you can’t afford to lose. Consider your retirement benefits. Continuing to earn income in retirement could impact your retirement benefits. Your income might affect the size of your Social Security payments. If you are age 65 or younger and earn more than $15,720 in 2016, part or all of your Social Security benefit could be temporarily withheld depending on how much you earn. However, after your 66th birthday there’s no longer any withholding if you earn above the limit. Continuing to work could also make your Social Security income taxable. For 2016, your Social Security benefits will become partially taxable if your adjusted gross income, nontaxable interest and half of your Social Security benefit tops $25,000 for individuals and $32,000 for couples. If these income sources top $34,000 for individuals and $44,000 for couples, a greater share of your Social Security benefit, but not all of it, will be taxed. If you continue to work after signing up for Social Security, remember to determine just how your earnings will affect your Social Security income during retirement. It’s about your preferences. Whether or not you should run a business in retirement depends on a variety of factors. If you have substantial retirement savings and don’t need loads of extra income, a business that takes just a few hours a month could be a fun hobby. But if you want to continue working full time at something you love, consult with...

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Retirement Isn’t About Losing Identity

Posted by on Apr 13, 2016 in Articles, Uncategorized

It’s a chance to create a ‘second act.’ When my friend Lowry was 87 years old, she happened past a neighborhood travel agency in Glendale, California, a city where she’d lived for more than 20 years. She noticed a young man standing in front of the window, peering in. He looked to her like a man who was burning to go in and buy a ticket to a faraway place, but something was stopping him. The fleeting moment was so profound for her that she took it as a sign to make a change in her life. Lowry, a grandmother who taught business for nearly six decades, packed her world atlas and her old typing manuals, and began a chapter in travel adventure that included a Greyhound bus trip across the United States, and celebrating her 88th birthday in Bangkok. At the time, I was in my 20s, deeply involved in the world of work, not thinking at all about getting older, retiring, or what I might like to do in my second act. Lowry’s adventures registered most for me because she was a friend of my family, and was using my parents’ house as home base at the same time I was there, getting ready to fly the coop. Lowry lived to be 98. Now that I am 64 and in my first year of retirement after a career as an English teacher, I miss her. I wish Lowry were still around so I could talk to her about getting older, about adventure, about identity after work, and about how we approach this next phase of our lives. Many people consider retirement to be a blissful payoff for a lifetime of hard work. Without the confines of a job, you wake up happy each day to an empty calendar, infinite choices and no work stress, the thinking goes. I am not unappreciative of the free time before me. Yet as much as I enjoy making my own schedule each day, it occurs to me that there’s actually a formula for doing retirement right if you want a successful second act like Lowry. I believe it goes something like this: Retirees who seem to have no trouble going from working to not working did not identify themselves mostly by what they did for a living. Even if they did call themselves accountants or physicists, they no doubt also relied on other self-definitions. Next, either add to your circle of friends or re-educate those you have about your new endeavors. You have to spend time with people who identify you in this new way. It’s easier to let go of an old identity and craft a new one if you have relationships with people that match what you envision for yourself. For me, I always saw myself as more than a teacher, but it still feels odd to go from being one thing to not being that thing at all. I am replacing it with both travel and exploring my youthful dream of becoming a writer. To ease my transition, I enrolled in a writing grad program while I was still working to get myself ready for the shift. But I’m still struggling with seeing myself in an entirely new light. When I was talking to a fellow retiree recently, she asked why I couldn’t just call myself a writer. It’s a logical question, but one that makes me think of buying a trendy hat or pair of shoes you’ve been coveting and then feeling foolish when you wear them. Everyone else could think they look great, but you just...

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How to Free Up Money to Put Toward Retirement

Posted by on Apr 7, 2016 in Articles, Uncategorized

With a few tweaks, you can find more money to invest in your future. According to a recent survey by the TransAmerica Center for Retirement Studies, 61 percent of people currently in their 40s expect to either work past age 65 or not retire at all. The numbers weren’t much different for survey-takers in their 50s, with 59 percent expecting to work past age 65 or not retire at all. It’s no secret that Americans have some work to do when it comes to saving for retirement. Nearly every authority in the personal finance and retirement arenas has been touting the very real need for people to increase the amount of money they are saving for retirement. Americans know what they need to do, but the big question is: “Where can I find more money to put toward retirement?” Varied reports in the financial world tell us that between 40 to 60 percent of families are living paycheck-to-paycheck. Those living on a tight budget might find it difficult to find more money to put toward retirement, however there are often hidden ways for people to free up money that can then be used toward retirement savings. Here are seven ways to find more money to put toward your retirement. Start Budgeting and Tracking Spending A 2013 Gallup poll found that only 1 in 3 American households prepares a detailed budget to track spending. The fact is, you can’t manage your money more wisely if you have no idea where it’s going in the first place. By planning out where you want your paycheck to go, and by tracking where you spend money each month, you can better direct your money toward your most important financial goals – including retirement. Cut Unnecessary Expenses Unnecessary expenses often devour a large portion of a household budget. The average American spends over $200 a month on restaurants alone. Here are some nonnecessities that you may be able to cut back on – or eliminate altogether – that will help you put more toward retirement. Cable or satellite TV packages Gym memberships Magazine subscriptions Restaurant or takeout expenditures Cutting back on or eliminating unnecessary costs and putting some or all of that newfound cash into retirement vehicles can help assure you’ll live more comfortably during your retirement years. Find Ways to Decrease What You’re Spending on Necessities Necessary expenses such as groceries and insurance can’t be eliminated from your budget, but those expenses can often be reduced. Try making a detailed meal plan for your household and grocery shop only once a week. Skip the snack foods l as well in order to reduce grocery expenditures. Shop around for insurance quotes to see if you can find insurance for less. Work to reduce your electricity bill by being more mindful of energy usage. By examining each necessary expenditure to see if you can spend less, you can free up more cash to put toward retirement. Drive Paid-For Cars The average car payment for Americans today is $482 a month. Instead of taking on car loans, choose instead to buy reliable used cars that you can pay for with cash, and put the money you would have spent each month on a car payment into a retirement vehicle. Downsize Your House Is your mortgage payment eating up more than 30 percent of your net income? If so, it might be a good idea to downsize to something more affordable so that you can increase your 401(k) or IRA contributions each year. Put Pay Increases Straight into Your Retirement Funds Since pay increases equal money you’ve...

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How to Rightsize Your Retirement

Posted by on Apr 5, 2016 in Articles, Uncategorized

About a third of Americans between ages 50 and 64 plan to move within the next five years or so, according to a survey by the Demand Institute. Some baby boomers – especially those who have been renting all their lives or who never moved up from their starter house – actually plan to spend more on their homes in retirement. But more often than not, the baby boomer move will involve downsizing. They will trade in the old family home for smaller digs, perhaps in a less expensive neighborhood. Putting the old house on the market and clearing out decades worth of possessions can involve a lot of work and emotional unrest. Many people who do not plan to move actually cite their overwhelming amount of possessions as a significant reason they are staying put. But there are enormous benefits to cleaning out the clutter and changing to a simpler lifestyle. It helps to think of a move not as downsizing, which suggests sacrifice, but as a liberating choice that points us toward a less stressful and more rewarding lifestyle. But whether we’re moving across town, across the country or not moving at all, we shouldn’t let our future lives be weighed down by our past commitments or former obligations. The best solution, for all of us, is not necessarily to downsize or upsize, but to rightsize. We should choose a home, neighborhood and lifestyle that allows us to pursue our true dreams in retirement. Here are a few suggestions inspired by a new book by Kathy Gottberg, “RightSizing: A Smart Living 365 Guide to Reinventing Retirement”. She also blogs at Smart Living 365 about making “conscious choices for a better lifestyle that more closely fits your new needs in retirement.” Step off the keep up with the Joneses treadmill. Some of us have our self-esteem wrapped up in the size of our house or how fashionable our neighborhood is. But at this point in our lives, we should be beyond such superficial comparisons. It’s not what you have that’s so important, but what you do. So stop trying to impress your friends and neighbors, and start enjoying life as you want to live it. More freedom in your life. A smaller home brings lower house payments in terms of taxes, insurance, utilities and maintenance. It also means less clutter, less work and less stress. Maybe you can even get your new home without a mortgage. The money you save on your home can be used to finance the things you like to do, whether it’s travel, a new hobby, helping out your children and grandchildren or shoring up your retirement savings. More time to do the things you want. The bigger the house, the more maintenance you have to do. The more stuff you have, the more you have to clean, store, fix and find. Once you rightsize your life for your new stage – with no kids, no job, no obligations – you can spend your time doing the things you enjoy. You no longer take care of things for other people, but have the time and energy to pursue your own interests and passions. A more friendly neighborhood. If you give up the big suburban yard for a little patch of cityscape, what you lose in lawn maintenance you gain in convenience. It saves time and it’s more fun to walk to the corner to get your morning coffee and hook up to wi-fi, compared to climbing in the car and fighting traffic for 15 minutes to do the same thing. Also, many people benefit from...

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