Author Archives: ernie

Early Retirement Secrets

I read an article recently called early retirement secrets. Which gave the following shortlist of things to do if you wanted to make sure that you would be able to retire early. After reviewing this list, I thought that it was ok, but a little academic. I have gone through some of what they discussed and identified.

I have my own thoughts about this subject and what you need to do to retire early. Every person will have a different experience so it is important to evaluate your own situation and make the decisions that are pertinent to your lifestyle. First I would like to offer some comments about each of these points.

Visualize What Retirement will be like
Beat the Other Guy
Use Reminders and Checklists
Plan in Bite-Size Chunks
Consider Annuities
You’re Going to Have Some Losses
Protect Yourself – Do Not be Too Trusting

Visualize What Retirement will be like

It is impossible to visualize what retirement will be like unless you have some role models to follow and you are in the same circumstances as these role models. Still, you are a different person, so do your best at figuring out what you really want to do in retirement and be realistic about it as well. For example, you will probably want to travel, but you cannot travel all of the time. You have health issues to consider and grandchildren as well to think about. List all of the things that you might do in retirement, prioritize and also consider from a budget perspective.

Beat the Other Guy

Simply do not worry about what the other guy is doing, do what is going to provide you with a happy good quality lifestyle. Competing with the Jones (sorry, this is a really old expression) is just a losing situation. Focus on yourself and your family.

Use Reminders and Checklists – it is a good idea to follow up on your investments on a regular basis. You probably would do this as part of your job so why not do the same thing for your personal life.

Plan in Bite-Size Chunks – planning in stages is also a good thing, especially if you are the type that cannot focus on the big picture. Set milestones, achieve those milestones, and then set new ones which will take you to your final objective.

Consider Annuities – I am not a big fan of annuities. They are just a way for the insurance companies and banks to make more money off you.

You’re Going to Have Some Losses – This is very true. During the recession, many people lost huge amounts and then recovered these same amounts provided they well invested in good quality stocks, bonds, and mutual funds. None of this speculative stuff and well-diversified.

Protect Yourself

Do Not be Too Trusting – Always get several opinions and if it sounds too good to be true then it probably is. Most people should have at least 2 financial advisers and they should ask the same questions of both to see what kind of answers they give.

All of the above are excellent points, however as I mentioned earlier a bit academic for a lot of people. The reason I say this is many people do not even know how to get started planning for their retirement and end up retiring without a clue about what they are going to do with their time or if they even have enough money to live on! So what should someone do on a practical basis to prepare for retirement? Here are a few ideas which if followed, will get you ready for retirement. They worked for me.

Save 10% of your salary every year
Develop multipleÂ hobbies that will carry into retirement
Work at a job you enjoy
Try semi Retirement first
Always have a Rainy Day Fund
Always take A Vacation
Exercise

Save 10% of your salary every year – Save it and do not touch this money regardless of your needs. Get used to living on 90% and invest this money conservatively with some diversity so that you can manage the ups and downs of the markets.

Develop multiple hobbies that will carry into retirement – This is really to help you find a balance between work and personal life, as well as give you something to do when you finally do retire. A neighbor of mine told me the other day that he gets up in the morning and watches the grass grow. He has no hobbies and I feel sorry for him.
Work at a job you enjoy – This is a must because if you like the job, you will do a good job at it and excel. Less chance of being laid off and you will be much happier as well which leads to a healthy lifestyle.

Try semi Retirement FirstÂ

For some people, this is really too risky. However, for others working part-time or on full-time short-term contracts is the best of all worlds. A short-term contract gives you some extra money in addition to your retirement income. It keeps your hand in the business. It allows you to meet more people and challenges you as well which keeps the brain sharp. I like short-term contracts since this allows us to travel. We can do some of the things a short vacation would not allow.

Always have a Rainy Day Fund

Let’s face it in today’s world, you’re going to lose your job someday when you least expect it. You may have a boss who does not like you, your company may get into financial trouble or you just fed up and quit. A rainy day fund, separate from your retirement fund, will tide you over until you find something else and take the pressure off as well.

Always take A Vacation – This appears to be a small thing, but it is important to always take that vacation. If nothing else you will learn what you need to do to keep yourself occupied when you retire. I know guys who cannot wait to get back to work after their vacation because they are bored.Â This is the wrong approach. Use this time to train for retirement!

Exercise – both the body and the brain to stay fit and healthy.

Hopefully these tidbits will help someone. If you have comments, please leave them as long as they will help our readers.

Balance Finances, Health and Wealth

Balance Finances – Also Your Health

“There are three major aspects of your physical health that deteriorate with age – your strength, endurance, and flexibility and let’s not forget your cognitive abilities as well. Declines in these areas can lead to loss of quality of life and disability that may increase with aging. Many people can significantly slow down the decline in each of these factors by taking control of their lifestyle. So you have to pay attention to your finances to make sure you have enough to live on, but you also must pay attention to your overall health as well.

Many Canadians are allowing their physical capabilities to decline at a higher rate than what is attributable to the result of aging. Staying active, strengthens the heart, the lungs, and the muscles and keeps strong blood flow to the brain. Even if you go for a brisk walk daily, this can make a huge difference in your cardio levels and extend your life by years.

Some age-associated changes are within one’s control and can be slowed by staying active and making small lifestyle changes. An increase in physical activity at any age is known to reduce age-dependent declines in fitness and can help prevent diseases that are normally associated with aging.Â Diet is also important as well. Eating well, without overeating and maintaining the weight for your body type is important. Overweight people tend to age more quickly so maintaining proper weight levels, exercising regularly as well will help you maintain your health.

Balance Finances – Your Wealth as Well

Paying attention to your finances is equally important. The many demands of life can make it difficult to take full advantage of the power of saving and investing money over the long-term. While consumers may be tempted to ignore the details and deal with retirement financial challenges as they arise, a successful retirement can be attained by taking a few simple steps to determine in advance if their financial capital is adequate. Do the same with your overall health as well and take steps to prolong your life.

The key to a successful retirement isn’t about setting a plan in motion; it’s about building a plan that is dynamic and holistic so as your life changes and your health changes, your financial plan evolves and preserves your money in a way that fits your lifestyle. Much like physical health, action must be taken to maintain strength, endurance, and flexibility in one’s financial health. It is the combination of control over one’s health and finances that leads to a balanced retirement.

Stay on Track

Stay on track and build a plan today. Follow these simple steps to a successful retirement.

Write down your plan. Writing down your physical and financial goals helps you clarify them and gives you something to work towards.
Assess your progress. On a quarterly, semi-annual or annual basis, step back and see whether you have achieved the goals that you set for yourself.
Make modifications, as needed. A plan is flexible and can evolve as your needs change.

You are the only one who can really take control of your health and your financial plan. Talk to experts to help you fine tune your plan for exercise as well as to save sufficient money for your retirement. However do not follow advice blindly, make your own decisions and remember:

If it sounds too good to be true, it probably is
Never put all of your eggs in one basket, diversify

Please leave comments on your plans and how our readers can benefit from your ideas as well.

Working Past 70, You Cannot be Serious

Working Past 70 – Other Solutions to Stretch those Dollars

If you are younger than 40, then you have lots of time to make up your losses and also save for retirement. If you are 55, 60, or even 65 and lost a bundle during the recession, work and severe belt-tightening are probably in order. Also, you may have to make some compromises as well, such as moving in with the kids or even a good friend to share expenses. Financial planners do not usually talk about these solutions since there is no business for them, and they cannot generate any income from you. However, sharing expenses like we did when we were teenagers and young adults may be the way of the future for many older adults on a tight budget.

One has to be very careful if you are going to enter into this type of arrangement. There are many desperate people who would not hesitate to take advantage of someone. In addition, compatibility is an increasingly important element as you get older. We all spend more time at home as we age, which means you spend more time with the person you share your home with. Being compatible is extremely important to ensure a harmonious lifestyle.

Working Past 70 – Sometimes Working Beyond 55 is not Realistic!

If you have your health and can continue to work in the same environment that you are used to, then working for a longer period is probably ok. But what if you cannot work the same job? What do you do?

For example if you have a physically demanding job, you may not be able to continue with this type of work into your 60’s. We all get bad knees, bad hips, backs and as a general rule have less energy. Doing a construction job may mean that you just cannot do it until the age that you planned on.

It could also mean that you need to retrain yourself and switch to another profession as a result. Teaching yourself and taking courses takes time and money, but thousands of people do this every year. You can train for that new job and, in some cases, continue in your new profession well into your 70s. Financial advisers, insurance agents, and many other similar types of jobs are well-positioned in this way.

Stay on top of Trends.

Whatever profession you have, it is important to stay current. Additional training and self-teaching are an absolute must. You should think about learning something new each and every day to avoid becoming out of date with your job and with younger competitors. If you are a computer programmer, learn new programs, stay current with technology, and all of the latest buzzwords. If you are in fashion design, every year brings something new, so you have to stay on top of your game.

On the other hand if you just need a little bit to survive and to top up your retirement income, you may want to consider a low stress job that gets you out and mingling with people. This brings us to our last major topic. How does one prepare for retirement?

What’s the best way to prepare for retirement?

Plan, plan and then plan some more. Every 6 months you should be evaluating your retirement plans and have emergency plans set up so that if something does not work out just the way you thought, you will be able to adjust and utilize one of your backup plans.

This is so important. There is no one set plan or recommendation since we are different, have different needs and objectives. However if you spend some time evaluating yourself and your needs, and then take action to achieve your plans, you might be ok. Whatever you do, don’t depend on anyone else but yourself to prepare for retirement. Not the government , your friends or your family and certainly not your company. They may or may not be around when it comes time for you to retire.

Take control of your life and begin to make your retirement plan today. Set some objectives and goals and work towards them.

Are you changing your own retirement planning to deal with the new realities? Please share by posting to comments. Spam comments will be auto deleted.

Older Workers Planning Not to Retire

Older Workers Planning Not to Retire – Challenge of Not Retiring

Consider getting up in the morning and not knowing what you are going to do the rest of the day vs. going into work and meeting the challenges of your job. Some people would say you are nuts, you need to get a life and set your priorities. Believe it or not many people enjoy going to work, they enjoy the challenge of solving problems and dealing with issues that they can resolve. If your job involves a lot of stress, you may want to deal with this particular challenge and manage it so that the stress becomes manageable and enjoyable. We all need some stress in our lives.

Lots of people want to retire from their current job and move to something else. The changing environment is often a challenge, an enjoyable one and many people rekindle the spark that they might have lost in their current job.

Camaraderie of Working

If you enjoy people and being around people, then you will miss your job unless you replace it with something else. Many people view their jobs as part of their social life ( they actually do work as well) because they have fun at their job and with the people they work with. Some will retire and then go back on contract to the same job and the same company. A lot of government workers seem to be able to do this quite easily at high rates of pay.Â While some do this simply for the money, others do this because they love to work and they just do not see themselves spending time at home, golfing, or traveling all of the time.

Fringe Benefits

There are also fringe benefits that go with work. Many people just go to work and do not have any real fringe benefits. However, if you are a middle manager or senior executive you’re going to miss the power, the support you get from staff, and the travel benefits. Quitting or retiring is tough for some who miss these fringe benefits. Even having somebody arrange your travel schedule for you can be a big issue for many executives.

If you are used to having somebody do all of this for you, then it can be time-consuming and confusing as well. Computer support is a big issue. Now you have to do your own, there is no one to set up and configure your computer or support you when you have a problem with your computer. The best advice is to learn how to do all of this stuff before you retire and be able to do most of it yourself!

Looking Forward to Going to Work

If you look forward to going to work, then you are enjoying work and all that it offers. Everyone is different. For some, work may offer the challenge they are looking for, for others it is just plain interesting. For many people, they really like the social time at work where they interact with other people. This can be really important for many people if they do not have a lot of outside activities they participate in.

We know some people who have no hobbies and do not belong to any clubs. They do not go out much and as a result, work is the social outlet for them and the opportunity to interact with people. So if you really like going to work, then consider carefully what you will do after you retire and if you really need the outlet that work offers.

Older Workers Planning Not to Retire and Self Worth

Self-worth is also very important. Many people identify with their jobs. They measure themselves and others by the type of job they do and the amount of money they earn. Once you retire this all goes away. You can only identify with your past achievements. Unless you get involved in other activities such as volunteering and supporting organizations that help people. Unfortunately, not everyone can or wants to volunteer. If you are the type of person who really identifies with work and measures your self-worth against the job, then you may not want to retire just yet.

Retirement is a very personal decision. Make your decision carefully. Work is good for all of us under the right conditions. If it is not fun it is time to change.

Feel free to leave your comments and suggestions that will help those who are getting ready for retirement. Spam comments will be deleted!

How to become a Popular Website

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Every small business owner loves the exposure and sales that having a website that’s a daily destination for consumers can generate. But getting people who are your potential customers to visit on a regular basis can be a challenge. Especially if updates are infrequent. Or all you have to offer is the occasional monotone press release or product announcement. How do you have a Popular Website?

Thankfully, building a website that’s â€œstickyâ€ enough to keep customers engaged and coming back doesn’t have to require investing thousands. Or reinventing yourself as the next online media empire. All it takes is a little elbow grease and personal touch. Plan regular updates that entice your readers and customers to return.Each strategy is designed to keep your customers coming back. Also make sure you establish goals and objectives for the activity. Then measure the results to ensure you obtaining the results you are aiming for. Follow established SEO (Search engine optimized) design criteria while building your web site.

Connect and communicate to Become a Popular Website

Make no bones about it.Â Blogging should be an essential part of any modern website. After all, a few clicks is literally all it takes to post updates in real-time around the clock. Creating a steady stream of new products and sales that promises something new and exciting with every visit. Better still, professionals at all experience levels have the capability of readily doing it. The practice also helps put a personal face on your organization, shining the spotlight on the individuals behind it.

However, to really captivate an audience enough to keep them returning, take note. You’ll also need to provide content that’s dynamic, unique and offers measurable informational or entertainment value, plus speak in a language that all can understand. In short, the occasional pre-approved sound bite from the HR guy or gal won’t cut it. Rather, you need to address audiences like you’re having a normal conversation. Provide content with meaningful substance to the reader.

Making-of articles, features detailing how to get more from your products, partner profiles, project diaries, step-by-step how-to guides, interviews with notable personalities or internal stakeholders. All present compelling ways to connect with audiences while also keeping them interested and informed. Provide ample incentive to keep coming back.

Bottom line, the content needs to be frequently updated and aimed at your customer or clientele.

Emphasize community building

As social media insiders well know, creating a sense of community around your website is one of the most powerful tools for engaging and ultimately enthralling prospective fans. But doing so doesn’t simply mean throwing up a sponsored message board then leaving it to stagnate. Or e-mailing customers sporadic newsletter updates that regurgitate existing material easily found elsewhere.

Rather, you have to encourage discussion and actively take part in conversations by dedicating internal time and resources. But also make customers feel as if they truly have a voice in the discussion by listening to their concerns. Respond and source feedback at every opportunity. Implementing programs that recognize and reward valued contributors is also vital. Create fan-based initiatives that allow community members to contribute and share ideas, concepts and creations of their own.

Even simply giving enthusiasts the chance to submit designs for your next fundraiser’s logo or arranging times where they can chat with top execs to provide input on upcoming ventures won’t just engender goodwill. They’ll also excite and empower a legion of amateur brand ambassadors. This can be an essential source of free ongoing updates and constructive conversations. Which will both attract users to and keep them enamored with your site.

Design for mass distribution

Sharing is good–even more so if you’ve got a message worth spreading and it winds up in front of millions of eyeballs. As such, you should be not only updating your website with unique pieces of content (surveys, research reports, custom editorial clips, guides to solving common problems, unique looks behind-the-scenes, etc.) designed to grab viewers’ attention, but also making everything from blog posts to pictures, photos, PDF documents and videos shareable, embeddable and ready to be commented upon or re-tweeted via social media platforms.

When it comes to corporate assets, the tendency–especially among hyper-competitive start-ups–is always to tightly hold and control. But often, the more powerful strategy is to design pieces of content with the specific idea in mind of seeding them throughout the user community, as it’s a great way to build brand awareness. Beyond heightened exposure and additional media mentions, using your website to disseminate unique, specially branded pieces of content can also lead to improved search engine optimization results through a larger number of incoming links. And, more important still, generate heightened word of mouth surrounding your homepage, letting countless potential readers know exciting things are happening there on a regular basis.

Focus on value

Exclusive specials, contests, promotions and timed discounts can all be powerful drivers of website traffic, especially in these cost-conscious times. By offering direct bargains and rebate programs on both an ongoing and sporadic basis through your online headquarters, you can keep customers’ interest piqued, and generate additional sales. These marketing programs become even more valuable when coupled with Facebook, Twitter and other social marketing tools, which have the potential to help news spread like wildfire online.

Just make sure that the only place such bargains can be found is on your homepage, and be consistent in terms of the pages to which you drive this traffic, to establish in shoppers’ minds the importance of regularly checking a certain destination. Similarly, establishing relationships with key bloggers and members of the media can also help reinforce the message, as can a regular series of e-mail or newsletter updates designed to inform current and prospective buyers. Customers get to save on purchases while you benefit from enhanced publicity and heightened sales, creating a win-win situation for all.

Use targeted demonstrations

Special membership options, premium subscription packages and frequent buyer programs can all prove great incentives. Services that you freely give away are often just as important as those that you reserve for more exclusive clients. Whether you’re looking at offering complimentary computer virus scans by having users visit your homepage. Or roviding a suite of free continuing education resources. Perhaps simply hosting an archive of complementary, corporate-branded webinars on software engineering can be part of your plan.

Providing helpful services or information at no charge that solve pressing, evergreen problems. Or answer important questions can all serve to generate a steady source of online traffic. They may provide a ready supply of leads to up sell on premium services. Sometimes you have to give in order to get. It may seem counter intuitive, but ultimately, the practice makes a ready way to demonstrate your organization’s capabilities to a potentially lucrative client base. While also giving them a taste of the benefits to be had by partnering on more advanced or long-term services.

Financial Needs of Baby Boomers

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What are the financial needs of baby boomers? How does one go about figuring out if they have sufficient funds saved up for retirement? Perhaps if you have a pension that will last until you die, you will be ok financially. Add government pensions and many people with pensions will be found. They may not be able to do everything they want, but they will be able to live comfortably. Baby boomers have become accustomed to having whatever they want and they have the money to make purchases that their parents never could.

Retiring in Large Numbers

Now they are going to retire on mass and many of them do not have company pensions to fall back on. They have to rely on their own savings, odd jobs, and government pensions which do not pay a lot compared to the cost of living these days. With so many people retiring at the same time, all of the financial companies are developing products that are designed to help the baby boomers. But are they really helping them?

All of these companies are in the business to make money and they have high overhead and that means they need to make a lot of money off of you and me to be profitable. If you are planning to retire soon and have some money to invest, be very careful how you invest and who you invest with. These funds need to last sometime. So let’s break the problem down for people in general terms so that you can help yourself figure out what you need to do. You may have to go over your plan several times to make everything work for you, however, that’s ok, you should do this at least once per year and any time there is a major change in your finances.

Financial Needs of Baby Boomers – When to Retire

Sometimes you just have had enough, sometimes it is health, and other times people are forced into retirement. Pick an age that you are comfortable with for your plan. If your actual retirement age changes, then re-evaluate the plan. You might choose 50 or you may work until you are 70 years of age or even longer. It does not matter as long as you can and you are enjoying the job. Start with the age that you think is most realistic for your situation.

What income will I Have After Retirement?

The next step is to figure out what your income will be when you retire. You will have a combination of company retirement plans, government pension plans, and your savings. Look up these amounts or contact your HR people to find out what to expect. If you have savings, assume that you will receive 4% income from your savings. Don’t forget to project what your savings will be at retirement.Â 4% is a conservative number so anything higher than that is a bonus. Add up all of these income amounts and this will be your total income before taxes.

What do I make now?

Next, calculate all of your income. Your last tax statement will be a good place to look. This will be the total income that you are currently making and is a good measure of what you need to make assuming you are living within your means. You will actually need a little bit less since it is assumed that you are not saving for retirement now since you have actually retired.

Compare your Retirement Income with Your Current Salary

As a baby boomer, this is where you may be in for a surprise. Most people will be shocked when they find out that they are receiving less than they thought for their retirement. Now is the time to take stock of your situation. Possibly you will want to adjust your retirement age so that you can build up a bit more savings and also earn income longer. If you have to retire then there are plans that need to be made to ensure that you can live comfortably.

How Long will I live?

This is another big question since it really puts a limit on how much money I will need to have to live comfortably. If baby boomers are an average 55 today, they can comfortably assume that they will live another 30 years. That is a long time to live on savings alone if there is no pension. For those folks with a pension, they are better off, however, inflation can catch up with them and make things difficult financially.

You can talk to an accountant to have someone do the calculation for you. However, in simple terms, assume you have $300,000 saved up and you are going to live another 30 years. Then that is only $10,000 a year plus interest that you can take out of your savings. If you want your money to last well into your 80’s. This can be very scary for a lot of baby boomers and it is time for a wake-up call to take a look at what savings they need to have.

Hopefully, if you are reading this post you will have gotten something out of it. If you do or would just like to leave a comment for our readers please feel free to do so. We would be glad to have them. Note that spam comments will be deleted.

Setting up Your Writing Business

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Recently, we saw an article about setting up a home business doing writing for a living. This was really a catch-all title, and the article had some good ideas. Since we have some personal experience with running a home business, we thought it would be a good idea to add our two cents’ worth about setting up Your Writing Business.Â. We also added a couple of suggestions, which people may find interesting and useful. Our own home business is a combination of writing, SEO work, and creating websites for our customers. We have been in this business for the past 5 years and have gained a great deal of satisfaction and pleasure out of working for customers around the globe.

Issues You Should Consider About Setting up Your Writing Business

Find a place were you can concentrate and will not be interrupted by the rest of the family.Â Make this your “Home Office” orÂ “writing” place and designate it as your office. It could be a den or one of the bedrooms. Living rooms and family rooms are really not good locations, too many distractions.
Make that your official “home office,” then read up on what the tax people will allow you as a tax deduction. Check with your accountant as well.
Get an accountant to do your books. While this might be expensive for some, it is well worth the expense. The tax people will be less inclined to audit you if they know a professional accountant has completed your tax statements.

Work Time, Schedules, and Work Organization

Establish your work hours. Working at home gives you lots of flexibility, however most of us need a schedule to be effective. Some people work better during the morning while others are better later in the day.
Protect a time each day when you can do some actual productive work and not just checking email, answering letters, meeting people for coffee, etc.
Create a filing system. This applies to your computers disk drive as well as paper files you may have. Be organized , it will save you lots of time.
Set up your address book. Keep emails and phone numbers handy…and if you want to move into the bold new world of 2010, invest in a smartphone or something that will keep those handy and allow you to respond on the fly if needed by a customer.
Create a calendar for personal as well as your business. Not just for your day, but for the big projects you’ve got. It’ll help you figure out what you’re doing and when.
Group similar activities. Do all your mail at one time. Group your phone calls back to back so you get through them all. Ditto email, if that were possible.
At the same time flexibility is key in a competitive world. You may have to drop everything to deal with an important clients requirements.

Finances and Accounting

Set up a bank account that is just for your business so you can easily keep track of your business income and expenses. Sign up for PayPal.
Keep detailed summaries of all expenses. I do this every Saturday morning, so I am always up to date.
Be very organized about your income and expenses. This will only help to make it easier to complete your taxes at the end of the year.
Pay yourself a salary to establish a regular income. This will help you budget in your personal life and meet cash flow requirements. Of course, you need to have the income to support your salary.
If you are concerned about liability, you may also want to consider tracking and incorporating all of your income and expenses through your incorporated company.

Good luck with setting you your business. These are relatively simple and straight forward guidelines that will help anyone in setting up a small business.

We welcome tips from our readers. Please leave a post with your suggestions. Spam comments will be deleted.

Extreme Savers

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What are extreme savers? Every once in and while you run across people who really seem to have their act together when it comes to saving money, while others just seem to squander it and are always running short. These people could be called extreme savers or perhaps they just make efficient use of their money. We know of people with two incomes, who never seem to have any savings.

Yet they freely spend their money on new cars, dinner out all of the time and lots of material things. They seem to have a lot, they throw out a lot of stuff and seem to be really enjoying life. Try talking to them about retirement and the answer is that they cannot even consider retirement until they are 65 at least. Sometimes they even run short of cash before payday.

Extreme Savers – Retire Early

While the extreme savers are looking at retiring at 50 or 55 at the latest. Remember the freedom 55 advertisements. We do not see much of that anymore after the severe recession we have just been through, yet there are people who can and do afford to retire early and have done so on their own without any outside help or huge inheritance. Just how do they manage to accomplish such a feat, while raising a family, buying a car, a house, and all of the other things that go along with living the lifestyle of an affluent person in North America?

It seems that the basic philosophy is to pay cash for everything and not to purchase anything until you have saved sufficient funds to pay for what you wish to purchase. Can it be that simple? Most people today carry multiple credit cards, they have a loan for their car and a mortgage on their home. if they are lucky that is all they have, yet they pay thousands of dollars in interest on these items, while an extreme saver manages to save all of this interest by paying cash for everything. With all of this extra money, not only do things they want to buy cost less, they can save even more money.

Some Examples

A few examples will easily demonstrate what a difference it makes. Let’s assume that you have a car loan. The bank or loan company is usually obligated to tell you by law, how much you pay in interest over the life of the car loan. For most situations at current interest rates, this can amount to several thousand dollars which you tack onto the price of the car. For a car valued at $35 thousand with a loan over 4 years, this extra cost in the form of interest might add up to over four thousand dollars. Imagine if you had that money and wanted to just save it! Now you are earning interest on the money you saved. It just continues to compound and your savings add up quickly.

Extreme Savers – Examples

I recently read an article about a family who had a nice home, two older cars all paid for, they had raised two kids who were now in university, and combined they had savings over two million dollars saved for retirement! They were in their early 50’s and had medium-level jobs. How did they amass such a fortune?

According to them, it was pretty simple. They just lived reasonably, paid cash for everything, and only bought things when they needed to. They did without if they did not have the cash to pay for something. Now you might say that they were so frugal that they and their kids were missing out on life, in fact even depriving their children of a normal childhood. Well, it could not be further from the truth.

Maybe they did not have the latest model cars every year, maybe they did not have the latest electronic gadgets at the same time everyone else did, and maybe they did not go on expensive trips like everyone else in their neighborhoods have done. However they do have two cars, they do go on trips and they do purchase electronic gadgets after the prices have declined. Instead of being early adopters, they are fast followers, buying a flat-screen TV for example after the prices have dropped from the thousands to around $500. A perfect example is that you can buy a 3D TV now for several thousand dollars. Wait a year or two and they will be down to around a thousand, more affordable, and more features.

Summary

Anyway, you get the point, which we will summarize in case you missed a few:

Pay cash for everything
Be a fast follower rather than an early adopter
Do without until you can afford it
Save as much as 50% of your income for retirement
Live within your means
Plan for the long term so that your retirement years are comfortable
Invest wisely
Diversify your investments

Hopefully, this post has given you some ideas about how to become independently wealthy, become an extreme saver and yet be able to enjoy life and all that is has to offer. Having a nice nest egg or retirement fund gives you a lot of independence and just maybe you can retire early instead of working until you are 65 or older.

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How Will You Make Your Money Last

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How will you make your money last as long as you live? That is a question that many people ask themselves who are contemplating retirement. Some people are very fortunate and will have pensions from their employer that kick in when they retire and will be payable as long as they are alive. Unfortunately, consumers who fall into this category are in a small minority. Most of us must rely on our savings, possibly an old-age pension and a Canadian pension in Canada. The United States has similar social plans. What many people do not realize is that these pensions are not sufficient to live on and you must have savings or company pension to provide you with the proper level of income that you feel you may need. If you have not retired, you may still have time to save enough money to enhance your retirement.

Calculate Your Expected Income

In order to answer the question of how will you make your money last you need to know how long you need it to last. There are many assumptions you can make and you can find information from various sources that will help you gather this information to calculate your income and also how long your savings will last.

The premise is to balance income with expenses during retirement for longer than your statistically expected lifetime. Here is some of the information you will need.

– Planned retirement age

– Expected age at death, plus 5 years as a buffer ( base this estimate on your parent’s age when they passed away)

– Total savings at the time of retirement

– Total of all pension income at the time of retirement ( obtain estimates from your company and government )

– Income you feel that you need to maintain the lifestyle you wish to lead in retirement

– Total of all debt payments at the time of retirement

– You need to make assumptions about the average inflation rates as well as your income from your savings, usually in terms of a percent interest rate of income.

Calculate How Will You Make Your Money Last

There are several programs available that you can plug in these variables to help you calculate how long your money will last. Examples include Quickens Income Retirement Planner. This program and others like it will walk you through the exercise of entering the above information and even help you determine your expected life span.

The output can be quite enlightening, providing you with information about how long your funds will last, based on your assumptions, and then provides an opportunity to change various variables to perform sensitivity analysis.

If you first find that you are coming up short and will run out before your expected life span ends, adjust some of the assumptions to see what needs to change in terms of desired income, retirement age, amount of your savings, etc.Â The next step is critical and can have a huge impact on your life. As you adjust the variables, it is important to be realistic because if you are not, you may end up with a rude surprise later in life.

Sensitize Your Assumptions

By playing with the variables you may quickly see what you have to do to ensure that you have sufficient funds to last as long as you need. For example, if you decided to retire at age 55 and find that you are coming up short in income in later years, adjust the retirement age and see what the impact is. Retirement age changes can be dramatic and can make a huge difference in your savings. Another alternative is to retire at age 55 as planned, but then work part-time to supplement your retirement income.

Inflation rates and interest income rates are other significant assumptions that you will make. Small changes in inflation can really impact your outcome.

The point is if you play with the variables you will begin to understand what you need to do to endure that you can retire and live the lifestyle that you would like. Unfortunately, many people start this analysis a year or two before they retire and they then get a rude surprise. They experience a serious change in lifestyle and cannot do some or many of the things they had planned during retirement.

Develop a Concrete Plan

Regardless of when you develop your plan, once you have gone through this process, develop a plan to meet your needs and achieve the goal you are aiming for. Calculate whether you have sufficient funds for your retirement. You can then take the steps needed to make sure you will be comfortable.

Develop your plan, follow the plan and re-evaluate your plan at least once per year. Start early in your life and adjust the plan as life throws various curve balls at you. By following these simple steps you not only will know how you will make your money last. But you will also virtually guarantee your retirement objectives.

Comments are appreciated.

How will you pay for that? Sources of retirement income

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Sources of retirement income determine just how much you will have when you retire. Yet half of Canadians expect pensions to be their largest source of retirement income. Many Canadians have no idea how much they will receive from the various pension sources that are available. This includes any pension that they might receive from their employment. How can a person plan financially for their retirement? Especially if they do not have any idea of what their Sources of retirement income will be when they retire? How do they know much they need to save to give them the lifestyle they wish to have without having this basic level of information?

Many Canadians and Americans for that matter believe they will likely need to work well into their retirement years to give them the kind of lifestyle they wish to have. Â Letâ€™s look at the possible sources of income for a person aged 65 in Canada. Americans reading this post will be able to do their own assessment as well by looking at the pension sources they have in their country.

The common sources of retirement income at age 65 are:

Company Pension plan â€“ the amount you receive will depend on how many years you have paid into the plan and how much you have paid. Early withdrawal prior to 65 will decrease the amount that you will collect from the company plan and also the type of plan the company offers.

Canada Pension plan – the amount you receive will depend on how many years you have paid into the plan and how much you have paid. Early withdrawal prior to 65 will decrease the amount that you will collect from the CPP

Old Age pension â€“ this is a fixed amount which all Canadians will collect. However, if your income from other sources is higher than a prescribed amount the government will claw back some or all of the OAS pension.

RRSP investments- you can contribute to an RRSP until age 69 and then you must convert the RRSP to an RFIFF and start withdrawing money from the plan. You can also withdraw at age 65 as well, however, there will be less to withdraw.

Other Investments â€“ these are investments you may have outside of your RRSP. These could consist of investment properties, mutual funds, as well as the family home.

Supplemental pension amounts if your income is below a certain level

Part or Full Time

Part-time or full-time work after 65 â€“ many Canadians will supplement their income by continuing to work beyond 65. There is the added benefit that this work keeps them involved and active in the community and challenges their minds with interesting work.

Canadians expect part-time or occasional work (26 percent) and income from their own investments (24 percent) to be supplementary sources of income during retirement. Thirty percent of Canadians aged 35-54 expect to be working in retirement, suggesting the concept of traditional retirement is disappearing.

Regardless of your current age, it is important to develop a budget based on the expected income from various sources. This is really the first step to assess if you will have sufficient funds for retirement. It may take some digging to find the estimates for each pension source; however, it will be worth it to assist in planning your retirement. Your HR person can assist you with the company pension plan estimates and the government websites will help with the CPP and OAS pensions. Of course, all numbers will be based on the assumption that you work until 65 to maximize your pension income. Usually, if you retire early, the pensions will be decreased by some amount to reflect less time for your pension contributions.

Get Advice

Once you have these numbers a financial advisor can assist you. They can estimate the amount of money you will need to save to provide the lifestyle you are looking for. Your savings plan will be based on this amount needed. It should generate the amount of money you will need at retirement. You will need to make assumptions about inflation. Also the percentage of income you will generate based on your investment profile and risk tolerance. Invest conservatively and diversely to protect your retirement savings

Having enough money for a comfortable retirement (68 percent) is the most important consideration in deciding when to retire. However, half of Canadians (53 percent) who have established financial goals feel they are somewhat short. Or nowhere close to where they think they should be to ensure a comfortable retirement, up from 36 percent in 2007.

The amount of money saved that a person will need at retirement is a very personal number. It depends on the amount of pension income as well as on personal goals, plans, and expectations for retirement. On average, retirees have a goal of nearly $270,000 as the amount of money required for a comfortable retirement. This is down from nearly $450,000 in 2007. People not yet retired think they will need nearly two and half times that amount. OrÂ almost $660,000, down from almost $900,000 in 2007.

Clearly, the recent economic turmoil during 2008 and 2009 has had an especially sobering effect on consumerâ€™s savings objectives. The fluctuation of the investments during this time has scared many people and caused them to rethink their retirement plans. Fortunately, if you are invested in conservative solid investments, they are generally returning to the pre-downturn numbers that we were used to.