Here at Nelson Financial Planning, we know our clients work hard at their jobs. Most also have a 401 (k), to which they contribute a portion of their paycheck every month. If you haven’t opened a retirement account yet, you should do so today, especially if your employer matches at least a portion of your contributions. Continue reading “How Much Can 1% Affect My Returns?”
Throughout your lifetime, you’ll have many numbers to remember, and as you get older, it seems like there are even more. We’ve got some more numbers for you, and you’re going to want to remember these, because they’re important when you’re preparing for retirement. What are some financial numbers you need to know for your financial future?
- The first number is your monthly cashflow. It’s important to have a handle on your income vs expenses and know exactly where your money is going. To determine this, write down all your income, subtract all of your expenses, and look at the dollar amount that remains. If it’s a gain, great! If it’s a loss, it’s time to rethink your budget. Use a budget to keep track of the income and expenses occurring on regular basis and be aware of your loss or gain each month.
- The next number is the money you can expect from your Social Security benefits. What would you get if you took Social Security at age 62? What about the ages between that and 70? Social Security benefits account for about 40 percent of the average retiree’s income, so you’ll need to determine how you’ll pay for the rest of your expenses.
- Know how much you have in your retirement savings. Calculate how much money you will be able to access from all sources of liquid investments. These are investments you can immediately convert to cash, as opposed to things like real estate, which can’t be easily liquidated. Divide that number by 25 to find the amount of income you could reasonably use to fund your retirement. The sooner you start saving for retirement, the better off you’ll be when you reach retirement age, because compound interest will help you build your fund. Be aware that when you do access your retirement funds, you’ll likely owe taxes.
- It’s important to know your credit score. This number determines how much you can borrow and how much interest you’ll pay. A score below 760 means there’s room for improvement. Paying your bills on time is the biggest factor in your credit score, and your debt to income ratio also has a big impact.
- That brings us to the next number: your debt to income ratio. To determine this, add up all of your monthly payments, including rent or mortgage, student loans, credit cards, and other debts. Divide this number by your gross monthly income, and the resulting percentage is your debt to income ratio. Below 35% is optimal.
- Know the interest rate on your debts. This is the cost of your money. Look at your statements to determine your interest rates, then put your cash into paying down the highest-interest debts.
As you can see, the first three numbers have to do with how much you’re putting away for your retirement- your assets. The last three are about the debt you’re carrying, or your liability. Planning for retirement also involves carefully considering how much money you’ll need once you’re no longer working. The rule of thumb has been to plan for 70 to 80 percent of your current income, but many retirees are finding that a comfortable amount is closer to 100 percent.
When you’re ready to create a strong financial plan for the future that will allow you to live the lifestyle you want to live, Nelson Financial Planning can help. As one of the best financial planning firms in Central Florida, we provide guidance and financial advice so that you can make informed decisions about your future. We believe you should enjoy your retirement, so we’ll work with you to create a plan for a stress-free future. Call (407) 307-3061 or contact us today to set up your free consultation.
In times of financial upheaval, companies often offer severance packages and/or early retirement to some of their employees. The truth is that by doing this, a company can release someone with years of experience and a commensurate salary, replacing that person with someone who has less experience and can be paid less. Whether or not to take the early retirement or severance can be a stressful question, especially because there’s often a limited time in which to make the decision.
There’s a lot to consider when making this kind of decision. You might be offered a severance package when you’re already nearing retirement age. Do you take the severance or retire early? The severance package may be substantial, but will it cause you to miss out on retirement benefits?
For a person who is not quite at retirement age, a large severance package may be attractive, but is it worth looking for another job? Entering the job market in middle age can be risky. On the other hand, if you’re being offered a severance package, your company may not be doing very well. In that case you could be at risk of losing your job in the near future anyway, which would make taking the offered severance a good idea.
Something that’s important to consider is your health insurance. If you’re suddenly out of a job, where will you get health insurance? More importantly, how will you pay for it? If you opt for COBRA, will you have to pay for the whole thing, or will your employer contribute? Can you possibly move to your spouse or partner’s insurance? Every situation is unique. Severance packages are based on a dollar amount for a certain number of weeks, based the number of years you’ve worked for the company. When you look at the health insurance costs the package might seem less appealing.
If you’re offered a severance package, in some cases you can negotiate a better one. To do this, first conduct some research to determine what you should reasonably be able to expect. Then, gather relevant information about your length of employment current earnings, awards you’ve received for successful service, and anything else that demonstrates your value to the company. Be calm and confident, and once the package is offered, look for areas where it might be increased. If there’s a noncompete agreement included in the package, you may be able to use that as leverage. If the company is unwilling to increase your offer, ask for an extension of benefits. Severance package negotiations are not always successful, so be prepared to politely accept a refusal. If you are successful in your negotiation, make sure to get it in writing as soon as you can.
If you need help deciding what to do about the severance package you’ve been offered, Nelson Financial Planning can help. As one of the best financial planning firms in Central Florida, we provide guidance and financial advice so that you can make informed decisions about your future. We believe you should enjoy your retirement, so we’ll work with you to create a plan for a stress-free future. Call (407) 307-3061 or contact us today to set up your free consultation.
In our spend-happy culture, it’s sometimes hard to find financial peace of mind. The national credit card debt is up over $200 billion over the past five years, and things like online shopping and keeping up with the Joneses make it almost certain that this number is going to continue to snowball. Enjoying your life is important but having a sound financial plan is vital. One key to gaining a strong financial footing is identifying areas in which you overspend, perhaps listed below.
- Clothing: Don’t pay full price for clothing. There are plenty of tricks for getting around this, from shopping consignment to finding promo codes online to joining loyalty programs.
- Water: Bottled water costs more than gasoline, so skip it. Instead, buy a filter for your home and use reusable bottles.
- Car Insurance: Most people choose an insurance company and stick with it, even if the premiums keep climbing. By shopping around every two to four years, you could reduce your rates by $100 to $200 a year.
- Being over-insured: It’s important to have the insurance you need, but Insurance companies, tend to play on people’s fears, roping them into insurance they don’t need, like extra rental car protection or too much life insurance. Additionally, about 84 percent of Americans don’t ask for basic discounts in their insurance, though these discounts could save hundreds of dollars each year.
- Cheap things: Dollar store items may seem like a bargain, but if they break almost immediately, they’re not such a great deal. Look for mid-priced items of good quality instead.
- Expensive things: While going for the cheapest option often means missing out on quality, buying the most expensive doesn’t guarantee it. Shop carefully: high priced mattresses and top-dollar hotels, for instance, are unlikely to be worth more than more reasonable options.
- Subscriptions: Streaming services, gym memberships, and anything that auto-renews can all cost you in the long run. Take a hard look at what you’ve subscribed to and decide what you can do without.
- Eating Out: It’s fine once in a while, but if you make it a habit you can easily end up throwing away hundreds of dollars every month.
- Eating In: If you’re not careful, it’s easy to overspend in the grocery store, overbuying food you paid too much for and will likely eventually throw away. Never shop when you’re hungry, plan meals before you go, based on the sales, and always shop with a list.
At Nelson Financial Planning we want to help you create a financial plan that provides for your future. As one of the best financial planning firms in Central Florida, we provide guidance and financial advice so that you can make informed decisions about your future. We believe you should enjoy your retirement, so we’ll work with you to create a plan for a stress-free future. Call (407) 307-3061 or contact us today to set up your free consultation.