It's getting close to the end of 2020 and everyone wants to make plans for the New year. Somewhere near the top of the list is Finances. During this economic downturn if you still have a job, you should try to stay engaged and make it all work. If you decide to make a big life change next year like Retiring, you would have secured a good financial plan many years prior. You & I have seen many friends and family members, struggle financially in their senior years due to financial obligations. All because they did not have a good plan. No one has a crystal ball and things do happen. But, many people are out here living their Best Life in their 60's, because they can live comfortably on what they have. My take on all of this . . prepare for the worst and hope for the best. Financial planners hate when they hear this, because they believe that a good financial plan will work for everyone. According to Cait Howerton, a financial planner in Atlanta. "Breaking down your financial picture into smaller pieces helps you look at your finances objectively. It shows the steps to achieve your goals." Okaay. . this is great if you know how much you will need/have, when the time comes to throw out the alarm clock. . .
No 1. Monthly Cash Flow. This is the single most important number to know, according to most experts. With one look, you can see whether you're living within your means and are financially stable.
How to find it: First, calculate all the money coming into your household, by adding up your monthly income from working and any other sources. Then Subtract expenses from the total income to get the final figure.
What to do with it: If the number is negative - you're spending more than you make. You will know exactly how many dollars you'll need each month to stop the slide. “You have two levers: You can make more or spend less,” Howerton says.
No. 2. Social Security Benefit. More than half of older Americans receive at least 50 percent of their income from Social Security. An estimate of the number now will let you know what to expect later.
How to find it: Sign up for a MySocialSecurity account. You'll see how much you're on track to receive if you claim benefits at different ages. Use the Retirement Calculator to see how future earnings and alternative retirement dates will change your monthly benefit.
What to do with it: Knowing how much you'd receive at different starting dates can give you a better idea of your future monthly income in retirement and help you decide when to claim your benefit. You can take a reduced benefit as early as age 62, or larger benefits for every month you wait until age 70, when your monthly payouts will be about 76 percent higher.
No. 3. Retirement Savings. If you'd like to supplement your Social Security income and any pension you're due, this is where that money will come from.
How to find it: Add up the value of any retirement savings and investment accounts you might have.
What to do with it: Contact your Banker or Pension provider to get the dollar amount. Then add that number to what you'd get annually from Social Security and other sources. Would that be enough to support the life you desire? If not, you may want to start saving more, delay your planned retirement date or both.
[Note: I'm not a Financial professional. You should do your own research & contact a Financial Counselor]
No. 4. Credit Scores. Taking steps to improve it can give you access to better loan terms; it can also mean lower premiums for car and home insurance in many states, and improve your standing when searching for housing.
How to find it: You can get a free copy of your credit score from several sources, such as Credit Karma and Credit Sesame, and from some credit card companies and banks.
What to do with it: If your FICO credit score is below 760, you'll want to take steps to improve it to get the best lending rates. FICO scores, which range from 300 to 850, are a commonly used estimate of how likely you are to repay debt; they are calculated based on your credit report, which shows your borrowing history, late payments and current balances.
No 5. Debt to Income Ratio. It's crucial for getting a mortgage - and, even more so, for your peace of mind.
How to find it: Add up your monthly debt payments and divide this by your monthly gross income (your income before taxes and other deductions).
What to do with it: “If you're looking to get a mortgage, generally the rule of thumb is you want to keep your debt-to-income ratio below 43 percent,” says Matt Schulz, chief credit analyst at LendingTree. Most retirees would feel more comfortable going into retirement without a lot of debt, because that's a fixed expense you have hanging over your head. And, you would want to sleep comfortable every night. So, pay it off.
No. 6. High Interest rate on Debt. The loan you owe with the highest interest rate is the one that will cause you the most financial pain.
How to find it: Look on your latest statements or loan origination documents. The most likely candidates are any credit card debt, vehicle title loans or payday loans.
What to do with it: When you're trying to dig out of debt, directing extra cash to your highest-rate debt will give you the biggest immediate return. With current credit card interest rates at about 16 percent, each $1,000 balance on a card will cost you about $160 a year; each $1,000 you owe on your mortgage might cost you only $40. Paying off that credit card is the equivalent of a 16 percent guaranteed return on your money. [Source: AARP magazine]
Monitoring our physical & mental health is crucial to Living a long Life. Everyone knows that! But, did you know that monitoring your financial numbers will help you to Enjoy that long Life? All this monitoring takes time and considerable consistency. In full transparency, I did not plan my retirement well. Employment to full retirement age got derailed, when a big lay-off & company closure happened. After nine months of tedious job searches, an early retirement was eminent. Thankfully, I am able to live within my means and can Enjoy the rest of my life. But, You can live Better! Prepare & monitor your financial sources well, and get a Financial counselor if you have to. Just DO IT!
** Thanks for Visiting. This post is ForYourEdutainment (FYE). I am not a Financial Counselor, just a woman on this life journey. If you like it, please leave a comment & Share, Share, Share. Don’t forget to follow me on Bloglovin for new post updates, and on Pinterest. **
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