Budgeting for regular, ongoing expenses is one thing but saving up for a large expense is a different challenge altogether. On top of managing your weekly spending and saving, you also have to put extra cash aside for upcoming purchases or repayments. Massive expenses may only come up occasionally for most people, but they tend to arise more often than our wallets might like. Your big expense could be something you need, like a deposit for a new home or new car, or just something you want, like an entertainment system or the latest smartphone. Either way, achieving the purchase you’re planning for or dreaming about isn’t beyond reach; you just need to be patient, persistent and follow the tips below.
Visualise Your Goal
It can be hard to rein in spending or live a less-thrills lifestyle. To make it easier to do this, it helps to have a clear picture of what you’re working towards. This might even involve literally having a picture of your goal, such as a photo of your dream car on the garage wall or a Pinterest board displaying the range of designer clothes you’re saving up for. Whether your picture is tangible or purely in your mind, regularly visualising your goal will make it easier to walk past tempting stores and say no to that superfluous plate of sushi. This will also help you to achieve the following step.
Crack Down on Impulse Buying
If unexpected and unnecessary spending is blowing holes in your budget, your big expense is further away from reach than it should be. Once you’ve recognised that buying attractive things without putting much thought into them is an issue for you and your savings, take steps towards cracking down on this problem. For example, this might mean buying your groceries only at supermarkets that aren’t located in shopping centres or deleting your eBay account temporarily until your big expense has been taken care of.
Even with precautionary steps taken, impulse purchases can continue to create havoc in your finances if you don’t have a clear plan for where your income is directed. Analyse your weekly or fortnightly earnings and allocate set amounts to be distributed between unavoidable expenses, allowable spending, regular savings, and specific savings for your big expense. If you earn a predetermined salary each week, this will be easier; you can decide on fixed values to assign to different categories. If your income fluctuates, it’ll be a little trickier, but consider allocating percentages of your income to different areas with a fixed minimum going towards your large expense.
Eliminate or Reduce Existing Debts
If any significant debts are eating away at your saving attempts, these should be given a high priority while you’re allocating where your income goes. By consolidating and reducing your debts faster, you’ll be able to save more efficiently in the long term with less of your earnings being drained by interest fees. Managing debt is something many people are unskilled at though, so don’t be embarrassed to seek professional assistance from an agency such as Debt Rescue. This may not be a short-term solution in terms of saving for a large purchase, but the big expense in your near future will be far more manageable if you have less troublesome debts already hanging over your head.
The more you think about how expensive a significant purchase will be, the more overwhelming things can become in your mind. Remember to keep your goal in mind and take logical steps towards incorporating this large expense into your existing budget. Some clever decisions and strong willpower could very well make the difference between purchasing that item sooner rather than later… or never.
Many people that are close to reaching retirement age are not nearly as prepared for retirement as they would like to be. After years of neglecting their retirement savings to provide their families with the things that they needed, they are now finding that they are far behind on where they would like to be with their retirement savings. For most people, they need to have six to nine times their annual salary saved in a 401(k) account or other retirement accounts by your mid-50s to early 60s to comfortably maintain their current standard of living during their retirement years. However, a large fraction of Americans have very little retirement savings to speak of and are going to find themselves in a tough position during their retirement years.
If you find yourself in this position, all is not lost. There are a number of methods that you can use to catch up on your retirement savings. Here are some of the most effective methods for catching up on your retirement savings.
Revamp Your Budget
If you are having trouble finding money to save for retirement, it may be time to revamp your budget and reduce your expenses. Many of us are paying expenses monthly that are not really necessary to maintain our standard of living, wasting money that could be used to save more for our retirement years. If you are paying for a gym membership you rarely use, cable channels you rarely watch, a mobile device plan that is larger than necessary, or dining out more than twice a week, eliminating these expenses can provide you with a considerable amount of money to save for retirement. Review your budget carefully and eliminate any expenses that are not providing value to your life.
Divert A Second Income To Retirement Savings
If you find that you are not making enough money to pay your necessary expenses and save for retirement, you should consider ways to make a second income that you can divert towards your retirement savings. There are many ways to accomplish this, including taking a part time job, doing odd jobs for money on the side, and turning a hobby into an income stream. The trick is to find something that you enjoy doing so it does not seem as if you are just working all of the time with no time to yourself. Explore your options and try out a few to see if the method is a feasible option for you to increase your retirement savings.
When it comes to retirement savings, there are many money management myths and half-truths that can trip up your retirement planning. Some of these myths steal money from the present to pay for the future while some others just do not make financial sense for many average workers. Many of the myths have been touted by financial professionals for years and are just now being exposed for the myths that they are. Here are some of the most damaging money management myths and half-truths that can derail your retirement savings plan.
You Must Save As Much As You Can
Conventional wisdom says that you must save as much as you can for as long as you can to ensure a comfortable retirement. However, many people take this too far, sacrificing their quality of life today in the hopes of having enough money to take care of all of their retirement expenses in the future. A better plan would be to actually calculate how much money you actually need to save to meet your retirement goals, factoring in the income you expect to receive during your retirement years from Social Security and other income sources. This will give you a solid number for what you should hope to save out of your income each year and allow you the freedom to spend the rest as you see fit.
You Should Pay Off Your Mortgage Before Retirement
Since a mortgage payment is one of the biggest monthly expenses for a household, it makes sense to many people to pay off their mortgage as quickly as they can to eliminate this expense for their retirement years. What many people fail to consider is that the interest rates for mortgage loans are quite low, much lower than the interest rate that you will pay for other financial products, like credit cards and personal loans. If you have additional money to spare, it may be more financially responsible to pay off any high interest debt you are carrying rather than dedicating that money to paying off your mortgage sooner. Paying off high interest debt will free up more money for your retirement savings.
Tax Deferred Retirement Accounts Are Best For Funding Your Retirement
Many people believe that using tax deferred retirement accounts is the best way to ensure that they will have the money that they need during their retirement years. The truth is that purchasing assets that provide you with a positive cash flow during your retirement years may be much more effective at providing you with the money that you need. Instead of slowly draining your retirement savings accounts, you can generate an income and take the minimum withdrawal amounts from your accounts to help your money last longer.
The Real Estate market in the USA is certainly recovering but for some homeowners it is too late. Families that lost their main source of income during the recession were suddenly unable to meet their monthly household expenses and if that included their mortgage the threat of foreclosure was suddenly all too real. Many had pressure decisions that had to be made; the choice of needing to reduce their current and future debt while also needing somewhere to live.
One of the solutions that has often suited both homeowners and their mortgage providers has been a pragmatic one. Homeowners that wanted to stop the level of their debt increasing each month were happy to negotiate with their mortgage providers so that the real estate could be sold for less than the current mortgage figure outstanding. The consequence was that future mortgage payments were cancelled. For mortgage providers who needed to write off the loss at least they were reducing the potential level of bad debt they could face if no action was taken.
The concept is known as short selling and there is little sign of such negotiations fading from the scene. It is because of at least a couple of factors. The first is that there are people who have desperately wanted to stay in their homes and have been fighting against their debt for quite a while. There comes a point where they have to admit failure. Another factor is that there are always regional variations; where the market is slow in a particular State and there is a surfeit of available property mortgage providers can be more inclined to negotiate for a solution.
The figures suggest that short sales as a percentage of total real estate sales in the USA are actually increasing. There are consequences for homeowners who dispose of their real estate in this way. Credit scores are used by lenders as part of their decision making process on whether someone is suitable for a loan. A short sale will be treated in a similar way as if an applicant had suffered a foreclosure. That blemish can stay on a person’s record for seven years but there are things he or she can do to improve the picture so that future loans might be agreed.
It is important for everyone to know the detail on their credit report and certainly report any inaccuracies. If the balance between an outstanding mortgage balance and the short sale negotiated price appears in the detail it is vital that it is removed. The report should be reviewed regularly to see how things might have changed. Things do improve with every positive entry and that happens whenever bills are paid on time. If necessary people should ask their creditors whether they advise credit bureaus of every financial activity and request they do so in particular cases.
The impact of the short sale does reduce year on year until it finally disappears. People in need of loans are certainly keen that this happens and there is some help because of today’s bad credit lenders who also look at applicant’s ability to repay borrowings currently from existing income and liabilities.
Nothing happens overnight and there is no doubt that anyone who agrees to a short sale does need to work hard in the coming years. Everyone understands that the recession was a worldwide phenomenon that caught many innocent victims. It does mean that those who act with financial responsibility after a short sale can expect that they will be able to borrow again in the future in order to rebuild their finances and even buy real estate again.