Thoughts On Finance

From the rich to the low income, money and stretching a dollar is on everyone’s minds these days.  A recent Dr. Phil show reviewed some of the biggest money mistakes people make, and I found the information very interesting so I am passing it on to you.

1.  Living Beyond Your Means – One of the biggest mistakes people make is that they want more than they can actually afford.  Spending money on things you can’t afford will most definitely put you into financial crisis.  We as American’s must learn to live within our means.  We may not want to but if the math says we can’t afford it, then we can’t.  There is no magical way to afford things that are beyond the dollars you bring in, so live wise and be frugal.  In the long run, being debt free will give you much more than that new TV or car will.

2. No Emergency Back Up Plan – Families must live below there means if they are going to be able to tuck some money away just in case of emergency.  In this country, families used to only have one income, and in that case if one party was unable to work, the other party could just get out there in the work force and earn a paycheck to keep the family afloat.  Now with most families using all the income potential just to get through the day to day, it is more important than ever to have a savings plan and to keep adding to it each paycheck.  Hopefully you won’t ever need it, but it will be nice to know that if you hit a rough patch you have something to fall back on.

3. Fixed Income Is Not The Only Answer – Fixed income is an important regular, steady income and is very helpful to have, however there are other ways to make money, and there is nothing wrong with investigating other options while bringing in the weekly paycheck.  There is a whole world of business opportunities available, everything from starting your own home business, to finding a side job that allows you to work from home.  Be sure to not limit your options to just the jobs that will bring in a paycheck, sometimes your greatest earning potential may lie in a great idea you have, so don’t just dismiss all else, keep your options open.

4. Cashing Out Your 401K – Sometimes you may not have a choice.  Financially, you may absolutely have not other options, however, if at all possible keep that money in there.  It is money that you can use for a down payment on a home or for kids college, and in addition to those things, you may also need need it to supplement your Social Security Income when you are old.  If at all possible, don’t take the money, and if you need to try and take as little of it as possible.  It is not a good idea to steal from your future to pay for today.

5. Believing The Myth Of Fixed Expenses – There are absolutely no fixed expenses.  When budgeting and realizing that you can’t meet your monthly expenses with your income, it is time to cut down to the bare minimum.  A car payment is not fixed, sell the car, pay off the loan, and buy a cheap car to get you back and forth to work.  You can reduce your energy bills by being more conscientious.  There are ways to reduce just about every bill that you have, if you just work at it.  More peace will come into your life if you are living below your means.  Happiness comes directly from the peace in knowing that you don’t owe anyone, anything, so cut back now and reap the rewards, you will probably even live longer being this kind of stress free.

I have seen it happen all too often in the recent past and I don’t know if it will ever end. The older employees who have just about reached the top of their salary level begin to get weeded out and replaced by the younger employees that will do the job for about half. If at all possible, do not let this happen to you without being financially prepared for it. I did not think I would be prepared but I am surviving and you will too.

If you still have a mortgage, get that thing paid off if you possibly can or have alternative living arrangements for yourself – even a roommate would help. Hopefully, you have a 401k plan that you have been investing in or a retirement plan of some kind. Be sure to find out the best method of switching it over to an IRA or the like so that you will not be hit hard by taxes.

If you are nearing early retirement age (62), seriously consider taking advantage of your Social Security benefits. The monthly amount will be less (I think maybe 25%??), but if you multiply the amount you will receive yearly by the number of years until you could take full retirement (66 for me), you will find that it would take you many, many years at full retirement to make up for those few years of early retirement benefits. Make sense?

If you are one of those 55+ employees, it would be wise to just check in to basic health insurance. And be sure you can get coverage for pre-existing conditions. As it turns out, it is not nearly as expensive as I had feared and just knowing the facts (and adding a little for inflation) goes a long way as far as your peace of mind.

There are dozens of things you need to “just check out” for yourself before you actually retire. So do yourself a favor and check it all out now in case you find yourself sliding toward that door out of the work place. It may not be a walk in the park, but you can do it too. I have not looked back.