Millennials Can Win The Holidays Without Going Broke!

Do you have a holiday budget in place this year?

Holiday shopping. For some, it’s thrilling to spend hours going from store to store, painstakingly searching for that perfect gift for everyone on your list. For others, the thought of holiday shopping brings on a lot of uncertainty and anxiety.

The worry probably comes into play when you don’t have an actual firm budget in place to keep your gift spending in check. I for one know it’s so easy to get overzealous and spend beyond your means when shopping for gifts for others. This year, though, I have a gift budget in place and I’m sticking to it! The article below will help you, my fellow millennials, to do the same.

By Jill Cornfield

Plan now and avoid buyer’s remorse.

That’s the advice from personal finance website Money Under 30, which found millennials are less price-sensitive and twice as likely as the general population not to know their credit scores.

The site asked 612 adults, including 159 millennials, in April about their finances and what they thought about their own financial futures.

Overall, the survey confirmed millennials lack much of the basic knowledge a person needs to have healthy financial life, says Yoni Dayan, senior editor at Money Under 30.

A third don’t know their credit scores. Half aren’t contributing to a retirement savings plan, and 10 percent don’t even know whether they’re saving for retirement.

Source: Money Under 30

Dayan calls it an interesting contrast that, while millennials are more dissatisfied with their finances than other generations, they’re also much more optimistic.

Now that the holiday season is coming up, they are also perfectly positioned for financial disaster, given their precarious finances.

Americans, in general, took on more than $1,000 in holiday debt last year – and three-quarters said it was because they didn’t budget successfully for the season.

This year’s holiday spending is slated to top $1 trillion for the first time. In other words, the potential for taking on debt is higher than ever, especially for younger people.

Source: Money Under 30

For younger consumers, convenience rules, and Amazon shares part of the blame for making millennials less sensitive to prices.

“We order almost everything via Amazon Prime, with full knowledge that we could get the items cheaper with a bit more effort, but it’s just so easy to order it and expect it in two days or less,” said Priya Malani, a founding partner at financial planning firm Stash Wealth and herself a millennial.

Another danger of e-commerce: drunk shopping. Yes, that’s a thing, and millennials are the generation most likely to shop under the influence, according to Sixty-one percent of millennials admit to this. In comparison, just about half of Gen Xers shop online after they’ve had a few.

“Combined with our ‘you only live once’ [YOLO] mentality, it’s no surprise that we’re poised to be the biggest spenders around the holidays,” Malani said.

‘Yikes, who’s paying for this?’
Surprised by the holidays? Just kind of snuck up on you? Many people take this as a cue to start racking up some hefty credit card charges, as if they have no choice in the matter. “Then January rolls around, and we’re like, ‘Yikes, who’s paying for this?’” Malani said.

Set realistic goals
Millennial money regret usually results from not planning— and last-minute planning isn’t really planning at all.

Malani recommends automating holiday spending with a small, monthly amount. “When the holidays roll around, they can put all expenses on their credit cards to hack those rewards points,” she said. “They know they have the funds to pay off the bill in full.”

How to do it: Figure out how much you spend or would like to spend. Set up your savings account to automate one-twelfth into a designated account. “The money accumulates all year, and you can blow it guilt-free at the holidays,” Malani said.

Make a list, check it twice. It seems obvious, but every person and animal you plan to buy for needs to be on that list. “Put a dollar value by their name and add up all those numbers,” Malani said. If you don’t have that money now or you won’t have the amount saved up, then you’re making a plan you cannot afford. “Hashtag, harsh but true,” Malani said.

What’s in your wallet?
Don’t spend money you don’t have. “Instead of thinking of your credit card as free money, think of it as a smarter way to spend the money you already have,” Malani said.

Never charge more than you can pay off when the bill comes due.

Treat your credit card like a debit card that pulls the money out of your account once a month. Would your family or friends really want you to go into credit card debt to buy them a gift?

Think outside the gift box
Some gifts, such as a Netflix membership, can be shared by several people in your family.

People who live far from their families might consider attending a family gathering. “The whole ‘your-presence-is-a-present thing,’” Malani said.

Try a gift exchange so you buy one gift versus gifts for everyone. Secret Santa arrangements are popular. Handmade edibles and DIY gifts are also a welcome change from the usual store-bought items.

So how will you be keeping your holiday gift spending in check this year? Leave a comment and let us know!

Read the full article here.

7 Myths About Finances in Retirement

Do you subscribe to one of these myths about retirement and your money?

When it comes to your retirement, do you have certain expectations already defined in your mind, or do you already picture your retired lifestyle in a certain way? Or maybe you are young and you have absolutely no idea what your life may look like once you retire? Either way, it’s important for you to get a firm grasp on what your financial future will look like once you do make the decision to exit the workforce.

Retirement is a brand new phase of life that instigates so much change for your finances. You already know you will no longer have that bi-weekly paycheck, but there will undoubtedly be some other surprises when it comes to you finances… things that you might not have expected. That certain lifestyle picture in your head might have led you to believe one of the common myths about finances in your retirement. They’re described in detail below.

By Rachel Hartman

1. Medicare will cover everything. You become eligible for Medicare the month you turn 65, but it’s important to remember there will still be ongoing health care expenses. “Medicare only covers some services for free,” says Jennifer Myers, a certified financial planner and president of SageVest Wealth Management in McLean, Virginia. Unless you qualify for Medicaid, you’ll need to budget for costs such as premiums, copays and deductibles.

You’ll also likely need a Medicare supplement plan, which can be affordable but not free. And keep in mind Medicare only provides some coverage for long-term care. You may want to think about purchasing long-term care insurance to help pay for additional services.

2. I will only need 70 to 80 percent of my pre-retirement income. While your list of expenses won’t include job-related costs like an office wardrobe and commuter expenses, it could easily be filled with other items. You may find you want to spend money on activities such as traveling, eating out, going to the theater or taking up a new hobby. “People are healthier and more active in today’s society than generations past,” Joseph says. “This means they need more money to go out and do what they would like in their retirement.”

3. Taxes will nearly disappear in retirement. Since you’re no longer bringing home a paycheck from working each month, it can be easy to think that taxes will decrease in retirement. Even though taxes can fluctuate greatly depending on where you live and your overall financial situation, you’ll likely need to plan on paying taxes each year.

Some states exempt pension and Social Security payments as taxable income, but they’re still largely subject to federal taxes. Another factor to consider is the amount you have in qualified retirement plans, such as IRA and 401(k) accounts. “Distributions from these accounts are generally fully subject to ordinary income taxes,” Myers says.

4. Downsizing will lead to further savings. A common retirement transition plan involves moving out of the family home and into a smaller place. You might assume this shift will lead to fewer home-related costs, but that’s not always the case. For example, if you move from a large home in the suburbs to a smaller place downtown, you may find the new urban location to be more expensive.

Some retirees come to regret the shift to smaller spaces, as it can be difficult to host family gatherings and accommodate grandchildren. And it can be pricey to move back into a larger home if you regret downsizing. “Reversing a house downsize will inevitably be costly, and retirees may find themselves buying back into an expensive suburban market that they had previously sold out of,” says Michelle Herd, senior client advisor at TFC Financial Management in Boston.

Rather than selling quickly, take some time to consider your lifestyle before downsizing. “This provides some flexibility in terms of getting to know how time in retirement will be spent, where it will be spent and with whom,” Herd says.

5. $1 million will provide a comfortable retirement. For years, building a $1 million nest egg was often considered a solid goal for retirement. However, that figure may no longer be accurate, due to longer life expectancies, increasing costs and active lifestyles. “There’s no one-size-fits-all amount of how much to save for retirement,” Myers says. “If you’re accustomed to a frugal lifestyle or you’ll be receiving a healthy pension, $1 million may be plenty to live on. If not, there’s a high chance it could be inadequate.”

6. I can withdraw 4 percent each year from my portfolio. The 4 percent rule refers to the concept of withdrawing 4 percent from a retirement account each year. The idea is that by following this strategy, you’ll be able to maintain a steady stream of income while keeping the funds sustainable for decades. “This may have been a reasonable standard in years past, but with increased life expectancy and recent challenges, many folks are largely underfunded for retirement,” says Tom Terhaar, an investment consultant with Conrad Siegel, a mid-Atlantic investment advisory firm. “Going forward, if individuals continue to subscribe to this rule, they may find themselves short of their goals.”

A better approach may be to consider withdrawing a lower percentage, such as 3 percent, each year. Talk to your financial advisor to fully evaluate your situation and determine the amount that will work best to cover your needs and sustain funds. You may also want to consider taking on part-time work to help avoid the risk of withdrawing too much from your portfolio during the early years of retirement.

7. I’ll save money by aging in place. Once you’ve settled in the home where you want to spend your retirement days, it may seem that avoiding a move to an assisted living center or nursing home will lead to substantial savings. Yet there could also be plenty of expenses to stay in your place and receive the right level of care. You might need to make modifications, such as putting in a bedroom on the main floor, adding a wheelchair entrance or bringing in home aides to help with cleaning or overseeing a health condition. “While you may be saving money by staying in your home, you could be spending even more on the care front,” Myers says.

So, which of these myths were you a believer of, and how has your view changed now? Or is there something else you can think of that wasn’t on the list? Let us know in the comments!

Read the full article here.

5 Things You Can Do In Your 30s To Save Your Financial Life

Consider these tips for maintaining financial health in your 30s and beyond.

It’s important to monitor your finances closely no matter what stage of life you’re in. I personally check my bank account and credit score every few days. Although some might say that’s overkill, I say it’s better to keep a firm grasp on your financial health and know your money like the back of your hand! This way, you’ll be less susceptible to financial setbacks and mishaps.

No matter how often you monitor your finances, you should always be prepared for a potential financial setback. First, you should identify the most common hurdles you might encounter for your specific age. If you’re 30-something, you might worry about losing your job or perhaps not earning enough money in your current career.

Once you’ve identified those hurdles, check out the tips below to safeguard your financial life.

By Jill Cornfield

1. Be prepared
“It’s no surprise that job stability can create some anxiety, said Marcy Keckler, vice president of financial advice strategy at Ameriprise.

Shore up your financial situation with an emergency fund. Keckler recommends having at least three to six months’ worth of living expenses saved up. It doesn’t need to be in cash, but use an account that would allow quick access to the funds.

“Most people aren’t as secure as they think,” said Rob Cirrotti, head of investments and managed account solutions for Pershing. “Make sure you continue thinking about ways to develop and grow.” Stay at the top of your game, career-wise, and consider taking a new course or two, or learning a new skill.

Budgeting also doesn’t get enough attention, Cirrotti said. Few people have an actual budget, which can do so many things: It helps you reduce debt and build a rainy-day fund so you can deal with unexpected events, and it’s a great way to get some discipline.

2. Diversify, diversify, diversify
Your top priority? Saving for retirement. But be sure your investments are diversified.

A diverse asset allocation — your investment mix — means you’ll be able to take advantage of different market conditions, Keckler says.

“Diversification can also help you feel confident that your investments are prepared to weather the storm in times of market volatility,” Keckler said. “You’ll want to keep your short-term and long-term financial goals in mind.”

Learn to balance by keeping enough funds and savings on hand to live the way you want to while stashing enough so you can do that in the future.

3. Risky business
Remember, you’ve got time on your side.

Risk is really about personal preference but at this age, Keckler says, it’s OK to have some investments that lean toward being more aggressive with greater opportunity to grow over time.

Only when you’re nearing retirement age and want to rely on income from investments should you think about revisiting your tolerance for risk. That’s when you might potentially think about dialing down the risk level in your portfolio.

4. Hands off your 401(k)
That retirement savings account is for your future retirement.

“If you borrow from it or take money out early it defeats this purpose,” Keckler said.

Need to pay for education, a house or car? You can take out a loan for those expenses, but there is no loan for retirement.

A quarter of people in their 30s who borrowed against their 401(k) said they did it to buy a house, according to Keckler. Another quarter borrowed to pay down debt. “If you need to borrow from your retirement savings for a purchase, it could be a sign that you are not living within your means,” Keckler said.

Borrowing from your retirement account means missing out on the chance to make that money grow, setting back your savings efforts. If you’re unable to repay the loan, it will be treated as a withdrawal. You’ll have to pay income tax on it, as well as the penalty for the early withdrawal.

5. Don’t sweat the stock market
If you’ve been paying attention to the stock market this month, you may have noticed some volatility — in fact, “quite a bit,” as Keckler put it, “which people in their 30s might not have experienced if they started investing during the bull market.”

Keep calm. “During market swings, always keep your long-term plan in mind,” Keckler said.

Don’t let your emotions push you to make decisions in the heat of the moment. “That’s when many people end up locking in losses,” Keckler said.

Instead, look for help. Consult a financial professional or a trusted source of financial information or help in sticking to your goals and developing a solid plan.

Consider what products might protect you, from life and disability income insurance to making sure you have adequate health insurance. “Review your auto and home insurance coverage, and consider renter’s insurance if you don’t own your own home,” Keckler said.

So, how have you applied these tips to your finances? We want to hear from you in the comments below.

Read the full article here.