Who doesn’t want to be skinny? On January 1st you or someone in your family is probably going to make a New Year’s resolution to lose weight. Your goal may to lose a certain number of pounds but what you’re picturing is a “skinny you”, right?
Sorry to say but I’d be willing to bet that you’re going to weigh more on January 1 than you do right now in the middle of November.
So let me give you a head start on your New Year’s resolution to lose weight. Rather than waiting until January 1st when it’s dark and cold outside and you have a whole holidays worth of meals and desserts pushing against your belt…
Why not Give Skinny a Chance?
Don’t set yourself up to fail on those dreams of a skinny you. Get a head start on all those other suckers who are going to have to roll out of bed early on a cold dark January morning. Picture them 10 or 15 pounds in “fat debt” and trying to make a dent in their weight while recovering from a holiday bingeing hangover.
We know there are going to be thousands of calories shoved at us between now and the end of the year. You also know that at the start of next year you’re going to want to lose weight.
The logical thing to do is to eat fewer calories over the holidays. But just like personal finance, our diet is often driven by emotion rather then logic. So don’t think about it logically. Think about how much it will suck to feel fat and tired at the time of the year when you want to focus on new beginnings. Think how motivated and invigorated you will feel to be slim and trim January 1!
The Cost of Being Unhealthy
What does this have to do with personal finance? Quite a lot actually.
For the last several years the companies I’ve worked for have been taking proactive steps to help their employees improve their health and lower their own health care costs.
It’s to the point now where we can save over $1000 on our insurance premiums if we follow a simple wellness plan.
A big part of the process is a biometric screening whose results reveal whether or not you have metabolic syndrome. If you don’t know what metabolic syndrome is (I didn’t) it’s a combination of high blood pressure, high blood sugar, being overweight, and high cholesterol that can lead to heart disease, stroke, and diabetes.
What’s one thing all those nasty conditions have in common? They’re expensive to treat!
You don’t just wake up one morning with metabolic syndrome. It’s a gradual process of eating too much of the wrong kind of foods & not exercising that gets us into that situation. What it boils down to is that there are things you can do today to avoid the unpleasantness of things like diabetes and heart problems.
Not only will it help you feel better it can potentially lower your insurance premiums and should also lower healthcare costs down the road.
This all started last week while I was out for a run. I was thinking about how much of my kids Halloween candy I’d eaten the night before & the week before that. I felt like I had gained 5 pounds in just two weeks and I knew it wasn’t going to get any better. The days are getting shorter, darker, and colder so its going to be increasingly difficult to get outside to exercise. Plus the holidays are on the way and we all know what that means for waistlines.
So on my run I resolved to get back to something I did two years ago. I didn’t have a name for it back then but now I’ve decided to call it the “give skinny a chance challenge”.
It’s pretty simple. From now through the middle of January I’m not eating any sweets. This means no cake, candy, cookies, ice cream, pie, etc.
It does sounds kind of like a bummer so let me share my personal experience. I did this two years ago and when January rolled around I felt great and had actually lost weight over the holidays. The longer I did it the easier it got. In fact when I hit January I was on such a roll that I just kept going and avoided treats all together for a long time. For whatever reason once I just decided I wasn’t going to eat sweets it was so much easier to say no when they are offered.
Self Control Problems
Then the following winter I decided I was going to enjoy the delicious delectables of December. Almost anytime a sweet was offered I accepted. I remember knowing that I shouldn’t eat so many sweets but going ahead and eating them anyway. More often than not I ate more sweets than I should, like the famous potato chips I couldn’t eat just one.
Maybe you have better self-control than I do but simply swearing off sweets for the holidays was much easier than constantly battling over what I should and shouldn’t eat.
Another cool side effect is that my kids get really into this challenge as well. They love being the “treat police” & reminding me constantly that I can’t have sweets. I don’t by any measure expect them to skip sweets as kids over the holidays. I know I wouldn’t have at their age. However, I am pretty sure they’ll remember what I’m doing and when they get older and have better self-control (and a slower metabolism) I’m hoping they will remember my example. In a way I am doing it for them so I can be healthy and live longer to see them grow up and have their own families.
So if you have kids, a spouse, or even a friend recruit them to be your challenge police and help you stay honest.
Challenge Rule Adjustment
I am making one small adjustment to the rules this year. One thing I ran into last time around is that people work hard to make you holiday desserts and can be pretty disappointed when you turn them down.
Therefore I’m giving myself one free pass each month to eat a treat. So when we’re with our family on Thanksgiving and Christmas and they pull out the pie or dessert they worked so hard to make I can say thank you and try a piece of it. Of course it’s not just to be polite, after my fast from sweets I’m sure I will be happy to enjoy a slice of holiday delight.
Get Out of “Fat Debt”
I challenge you to join me in this “Give Skinny a Chance” challenge. I can almost promise you that if you follow along that you will feel much better about yourself mid January than if you don’t.
Just to let you know this is not something that comes easily for me. I love desserts, especially chocolate ones. I’m also an ice cream fanatic. I wish I could eat ice cream for lunch and dinner every day. Even though it might sound hard I can tell you that this will work. I mentioned how last time I was doing so well that I kept going through January and far into the next year. By cutting out sweets and exercising regularly I was able to lose 50 pounds, so it definitely works.
It’s a slow and steady approach. There are times when you really really want a sweet but you are much more likely to lose weight and be healthy if you resolve to do it now rather than waiting until New Year’s resolution time.
So join me and give skinny a chance! If you want to follow along enter your email address below and we can share updates. Put down that candy, cookie, or cake and sign up!
There is a health insurance alternative available that wasn’t getting much attention in the media prior to the implementation of healthcare reform. But now that the Affordable Care Act (ACA), or better known as Obamacare, has become a law the land, health sharing ministries are rising as viable alternatives to the health insurance exchanges.
What a health sharing ministry is
A health sharing ministry is exactly what the term implies. It’s a group of people, bonded by faith, who participate in a ministry that provides funding for the health care needs of everyone in the group. In theory at least, this is exactly what health insurance is, but that definition is not applied to health sharing ministries in the strict sense – or the legal one.
The reason for their increased popularity – in addition to the fact that the enable someone to get some form of health care coverage other than the exchanges – is that the ministries provide a specific exemption to the penalty that people will have to pay if they do not have health insurance coverage. Health sharing ministries enable people to get a form of health care coverage that is generally significantly less expensive than what is available through traditional health insurance providers.
A health sharing ministry isn’t true health insurance
A health sharing ministry will not necessarily cover all medical expenses. For example, some of the exclusions include:
- Pre-existing conditions
- Ongoing prescription therapies
- Medical treatment arising from use of alcohol or other immoral acts
- Medical treatment following attempted suicide
- Behavioral conditions
- Childbirth occurring outside a marriage
There are also dollar limits on the amount of coverage that would be provided for many individual conditions or injuries. Unlike traditional health insurance, health sharing ministries are not a bottomless pit of coverage. Limits are imposed due to the fact that the amount of coverage available cannot exceed the amount of money available in the sharing ministry’s fund.
But because of the exclusions, and the fact that health sharing ministries are not-for-profit entities, the cost of coverage is substantially below what it is for traditional health insurance. Monthly contributions are typically significantly less than half of what they are for traditional health insurance policies, and different deductible levels are available.
Health sharing ministries aren’t for the general public
In order to participate in a health showing ministry, you have to meet certain criteria that are consistent with the ministry’s core beliefs.
Using Medi-Share as an example, here are the requirements to participate in the ministry:
- Have a verifiable Christian testimony indicating a personal relationship with the Lord Jesus Christ, and profess the Statement of Faith
- Attend a fellowship of believers, regularly and actively support that ministry, and live under the discipline of that body Share the conviction that believers are to bear one another’s burdens according to Galatians 6:2
- Believe the biblical doctrine that their bodies are temples of the Holy Spirit and therefore are to be kept pure
- Must not engage in sex outside of traditional Christian marriage
- Cannot use tobacco or illegal drugs in any form, or abuse legal drugs or alcohol
- Be a U.S citizen (those serving abroad as missionaries may qualify) or a permanent resident with a visa or green card and Social Security number who lives full time in the United States
Though many will find such requirements to be offensive, it has to be remembered that health sharing ministries are faith-based organizations that will not accommodate the general public or the commonly accepted parameters of the secular world. Not only is adherence to faith positions a requirement, but is also believed that living according to biblical standards will lower the cost of healthcare for all members in the group.
If you are a believing Christian, and living a biblically-based lifestyle, health sharing ministries are an option.
Obamacare has increased the significance of health sharing ministries
The Affordable Care Act (ACA) has made health sharing ministries a more viable option. Since the implementation of ACA, the cost of health insurance has only increased, due largely to mandated coverage and procedures. The use of the word affordable in connection with the law is a cruel hoax, since so many people are paying so much more.
Health sharing ministries offer what is, on balance, reduced coverage, but they do so with much more affordable monthly rates. For a Bible-believing Christian, membership in a health sharing ministry could be the difference between having some kind of healthcare coverage, and not having any at all and being forced to pay the penalty for going without health insurance.
They could still become the future of health insurance in America
In some quarters it’s believed that health sharing ministries could be the ultimate solution – or at least an option – to the current traditional health insurance system. Some experts see health sharing ministries becoming the model of workable health car coverage for the general public.
It remains to be seen if the basic concept of health sharing ministries will eventually be adopted in a more secular form, or even if the public is willing to forgo unlimited coverage in favor of more affordable premiums. But it does represent an option in a health care system in which there seem to be fewer options all the time.
There’s an ongoing debate as to which is the better choice, whole life insurance or term life insurance? For most people, term life insurance is your best choice. In fact, in most cases, it’s not even close.
Here are the reasons why we think term life insurance is your best choice…
It Costs a Lot Less Than Whole Life or Other Investment-centric Policies
Life insurance agents love to sell whole life policies and other investment-centric insurance products on the investment provision. It provides a double benefit – investment accumulation, plus life insurance. It’s a compelling sales pitch, but it’s a very expensive one.
The difference between whole life insurance and term life insurance on a per thousand basis isn’t minor. A whole life policy can easily cost 10 times as much for the same level of coverage. The cost advantage is overwhelmingly in favor of term life insurance.
You Can Buy a Lot More of It
Because term life insurance costs so much less than whole life, you can buy a lot more of it. This is a major factor, especially for young families with small children.
The need for life insurance is never greater than when you have very young children. Not only are there more years to replace lost income that may result from your death, but you also have to be concerned with providing them with money for a college education.
This is also a time in life when families tend to have maximum levels of debt. They buy a house with a minimum down payment (and a maximum mortgage), they have new cars that are financed, credit card debts, and often student loan debts carried over from their college years.
Covering all of those obligations will usually take several hundred thousand dollars worth of insurance, and even into the millions. Very few young families can afford the premiums for that kind of coverage if it is provided by a whole life policy. By contrast, high face value term life insurance is far more affordable.
It Can Be Tied to Specific Obligations
Term life insurance policies are also more flexible than their whole life cousins. Because they run for specific terms, generally anywhere between five years and 30 years, they can be tied to specific obligations. Once the obligation is gone, the policy can be allowed to lapse.
Perhaps the best example of this is having a term life insurance policy for the specific purpose of paying off your mortgage. If you recently took a 30 year mortgage, you can also take a 30 year term life insurance policy in the same amount as the mortgage. Upon your death, the mortgage could be paid automatically out of the proceeds of the insurance policy, enabling your family to live in their home mortgage-free.
You Can Cut Back When You No Longer Need It
One of the under-appreciated secrets of life insurance is that the amount that you need rises and falls over the course of your life. Earlier I gave an example of a young family with large obligations. That family will need a high level of life insurance coverage. But as the family matures, and the children reach adulthood, the parents will no longer need anything close to that amount of coverage.
An empty nest household may find that their need for life insurance declines by 50% or more. With a term life insurance policy, the reduction in coverage can happen automatically. However if your insurance is provided by whole life policies, the coverage will remain fixed for the rest of your life. That can mean that you’ll be paying for coverage that you really don’t need.
It Leaves You With More Money For Investing
Since term life insurance costs so much less than whole life, you can take the money that you save on premiums and invest it in mutual funds. That will enable you to increase your financial assets as the years go by.
This is important in relation to life insurance. The greatest need for life insurance occurs during times in life when you have the fewest financial assets. As your financial asset base grows, your need for life insurance declines. In a real way, the higher level of financial assets means that you gradually become self-insured.
It is even conceivable that you can reach a level of financial security that you no longer need life insurance at all.
It’s Pure Insurance Because Less of It Goes to Fees
Term life insurance is pure life insurance. That’s true because there is no investment provision – and because less of your premium goes toward fees.
It’s no secret that life insurance agents make more money selling whole life insurance policies, and other investment type life insurance products. This is possible because the investment provisions are packed with fees.
For example, though life insurance agents will sell you heavily on the concept of cash accumulation in your policy, very little cash accumulation takes place in the first few years that you have your policy. The reason that it doesn’t is because much of the premium goes to paying for commissions.
And even after your policy does begin to accumulate cash value, you’re still paying commissions and other fees that are eating up at least a portion of your premium.
It’s probably true that a whole life insurance policy is better than having no insurance and no investment plan at all. But if you can buy term life insurance, and begin putting money into a mutual fund or exchange traded fund based on the S&P 500 index, you’ll almost always come out way ahead of the person who takes an equivalent amount of whole life insurance.
If you’re an advocate for whole life insurance, please feel free to comment below on what cases you think whole life is suited for.
Part-time jobs are the traditional route for college students to take when they need to make money. But a viable alternative might be to start your own part-time business instead.
Part-time businesses can offer a number of advantages over part-time jobs:
- Since it’s a business and not a job, you can have more control over your schedule
- You might have the talent to make more money in a business than on a job
- The experience you gain could help you no matter what career you ultimately go into
- It could be a jump start on your post-graduation career, if the business is even remotely related to your major
- You’ll be establishing yourself as an entrepreneur while you’re young, which can be a major advantage throughout your life
With those advantages in mind, here are five part-time business ideas for you to consider.
There are probably one or two subject areas where you have above average abilities, and you can use those courses to tutor other students. Alternately, you an also tutor kids in high school or even younger. Math and writing are two subjects that are in particularly high demand. But you can tutor in any subject area where you’re strong, including anything related to computers, science, history, or reading.
You can also choose to tutor in non-academic areas. This can include basic computer operation and applications, sports, music and even English as a second language.
If you’re interested in tutoring, put together a good looking flyer, and distribute them around your campus and in the school offices. You can do the same thing at other colleges as well, or even at local high schools, and middle- and elementary-schools. Advertising in common ad sites, like Craigslist, or in school newspapers could also bring in business.
Do you see all the blogs and websites on the internet? Many of them need content writers. If you have areas of interest and where you have above average knowledge – along with above average writing skills – you may be able to pick up few gigs as a freelance writer.
You can start by getting articles published on some of your favorite sites. Make some comments on the sites, then follow up with email conversations with the site owners. Offer to write an article or two on the site for free. This will provide you with published articles that you can then use to market your work to other websites for paid work. Once you have a few clients, you’ll have a part-time business up and running – and one with little or no overhead at that.
Start Your Own Blog
You can also do your own writing by starting your own blog. This isn’t an immediate income as it will take at least months, and maybe a year or more to get it up, running and profitable. But if you can, you may have a solid side business (or something more) for the rest of your life. As a college student you have a built in advantage with a blog since much of the blog reading demographic is college students.
The idea is to build a blog with content that readers will find appealing. Not a general audience, but a niche who are interested in a specific topic area, and likely to remain loyal readers. The best blog ideas are ones where you are passionate, but also have commercial relevance. Personal finance (think Money Smart Life) is a perfect example.
Once you have the blog up and getting a few thousand visitors each month, you can take advertising and affiliate arrangements that will allow you to monetize the blog. It’s a work-at-home venture, so it will fit with just about any kind of schedule you have.
Buying and Selling Used Merchandise
If you have an eye for bargains, you could become a regular shopper at thrift stores and garage sales, buying decent merchandise on the cheap, then selling it at a profit.
This can work especially well with entertainment equipment, small household appliances, jewelry and antiques. The idea is to buy an item for, say, $5 – then sell it for say, $50. That may be one of the best case scenarios, but you get the picture.
You can sell the merchandise on websites like eBay, Craigslist or even Amazon.com. Once you learn how those sites work, you can identify the items that sell the fastest and for the most money, and concentrate your buying efforts in those areas.
Sell Your Computer Expertise
Though you may think of your computer skills as average, they’re probably above average compared to the general population. As a young person, you’ve grown up with computers, but not everyone else has. That can be a business niche for you. You can sell your skills to help people set up their computers, set up applications, teach them how to use those application, or troubleshoot problem areas.
You can probably sell your services at a much lower rate than Geeksquad and other professional services, and that will give you a price advantage. Craigslist is a good place to market computer services, but you can also try school newspapers and even local neighborhood newspapers.
Some people, completely lacking in computer skills, may want to keep you on as a regular help source when ever they need it. That can be the beginning of a solid client base, as well as a source of referrals.
Have you considered starting a part-time business as a college student?
“Vision is the art of seeing what is invisible to others.” – Jonathan Swift
Everyone says that you should be debt-free. Inside, you probably already know that. After all, there are so many benefits to being debt-free that it doesn’t take a financial expert to figure out that your life will be better without debt that it is with it. But that begs the question: why isn’t everyone debt-free.
I’m going to speculate that knowing what’s right isn’t sufficient to motivate most people to do anything, least of which to become debt-free. You can crunch the numbers all day and still not find any inspiration to get out of debt. The problem is that we become comfortable with our habits, even when they’re bad habits. If you’re in debt, particularly if you’re deep in debt, the only way to get out is to change your thinking.
But if you’ve ever been on a diet, or tried to quit smoking, you know that changing your thinking isn’t the easiest thing you’ve ever done. The only way to make that happen is to create a whole new vision for yourself. It’s an emotional exercise in which you have to create a whole new set of emotional reference points. You have to imagine what being debt-free will feel like, then remind yourself of it every day of your life until it becomes a reality. It’s about creating the destination before beginning the journey.
Motivational experts refer to that as creating affirmations, which is essentially about creating and embracing a new self-image, complete with daily reminders to keep you on track. You have to change how you see yourself, in order to change what’s going on your life. Change is not driven by reason, and that’s why imagining being debt-free is so important in accomplishing it.
So let’s start the process by framing out what being debt-free will feel like.
Less worry and anxiety
Start by imagining how it will feel to have less worry and anxiety in your life. It’s not possible to completely banish worry and anxiety, but in today’s world debt is a major source of both. How much of either will you have when you’re debt-free?
Worrying about how you pay your bills each month, or how you’re going to get out from under a mountain of debt, literally tangles your brain. When it reaches that point, you’ll have little mental capacity to make improvements in your life, including career advancements that could help in so many other fronts.
How much clearer will your mental state be when you’re debt-free? How good will you feel physically when your body isn’t weighted down by the stress of debt?
Getting truly restful sleep
How well you sleep is often controlled by your level of worry and anxiety. But even though they are connected, lack of sleep becomes an entirely different problem. It drains your energy level, and makes it more difficult to accomplish even routine tasks. It also causes physiological problems, such as an increase in blood pressure and a battery of phantom aches and pains.
Now imagine that you’re debt-free, and all those problems are gone…
Having complete control over your income
What makes debt particularly difficult from a financial standpoint is that it gradually comes to control your income. Once debts are established, they require fixed monthly payments that must be made even if your income is insufficient. You can cut your grocery bill, your energy consumption, your entertainment expenses, and everything else in your life, but your debt payments will still be there – no matter what.
Now imagine that you’re debt-free, and your entire paycheck is yours to do what you please with. You can spend it, save it, invest it, or give it away – the choice is all yours.
How good does that feel? Will that motivate you to become debt-free?
Ending your various involuntary “partnerships” with the banks
There’s a debt culture in our society that most of us have become intoxicated with. We’ve come to believe that being in debt is normal, and that it’s the way that you get the things that you want in your life.
But there’s something else you get when you’re in debt – you enter into involuntary partnerships with your lenders. If you doubt that your lender is a partner in your life, try not make your payments and see what happens. Whatever assets you have that are acting as collateral for the loans will be gone. If they are unsecured loans, the lender can establish liens against your general assets, such as your income and your bank accounts.
In business arrangements, lenders can even restrict how you operate your business or use certain assets.
Most of us don’t think about the control that lenders have over us. But think deeply about this for a minute, and embrace it as the reality of all debt arrangements.
Then imagine that all of those involuntary partnerships and other assorted entanglements are gone from your life…
Having control over your economic future
Debt has influence over how you think, what you’re concerned with, how well you sleep at night, a big chunk of your income, and even control over your assets. Put that all together, and you have a series of arrangements that are compromising your economic future.
You can’t do what you want, you can’t spend money the way you want, and you don’t have nearly as much money to save and invest as you want, because your cash flow is committed to keeping your lenders at bay. This is a big reason why some people have no savings, or never begin retirement plans. They’re too busy paying yesterday’s obligations to move forward into the future.
Now imagine that you’re debt-free… what kind of future will you design yourself?
Spend some time ruminating on what it will feel like to be debt-free. If you can embrace that on an emotional level, you’ll find the commitment that you need to actually become debt-free. And once you are, so much more will be possible in your life.
Not long ago I wrote an article about saving money on youth sports and I got a text message a few days later from a friend asking about putting sports purchases on a rewards card.
There are a few tips I shared that lend themselves to using a rewards credit card. I’ll talk about them in the context of a specific card, lets look at the Discover it® card.
Getting the Right Size
One of the tips I gave about buying youth sports equipment was that when something was on sale you should buy multiple sizes of the item and return the ones that don’t fit. This is a good tip if you’re buying something online or if you’re in the store and your kid isn’t with you to try on the gear but you want to buy it right away to take advantage of a sale. If you take a guess at a size and choose the wrong one then you have to return it and you miss the sale price. At the start of a new season it could also be that all the sizes you need are sold out.
The obvious downside to this tip is that you’re paying for items you don’t use. However, if you put your purchase on your credit card and you return the sizes that are too big/small right away then you don’t actually end up having to pay for them. By the time your credit card bill comes due, you’ve already returned the items and got the credit on your account.
One of the nice things that Discover offers is that if you shop online for these types of items using Discover Deals, you can receive 10% Cashback Bonus when shopping at Sports Authority online. Deals is their program that helps you find coupons and discount codes and they have a Sporting Goods category, you can see more about the deals here.
Getting Cashback on Team Fees
One of the reasons Discover can offer higher rewards to users are the fees paid by the merchants. Most youth sports organizations try to keep their costs low so this means many of them don’t accept Discover when you try to pay for league registration fees.
However, if you’re making payments on behalf of the team and you’re getting reimbursed then a rewards card can give you some cashback. For example, I registered a soccer team for a tournament last Spring and the fees ranged from $400 – $600 depending on the age bracket of the team. Typically the way this works is you pay to register and the parents of the kids pay you back their share.
So if you were using the Discover it card and you earned 1% back on the purchase you’d get $4-6 cashback. Coordinating team events is a lot of work, it definitely takes up more time than $5 can cover but if you’re putting in the effort it doesn’t hurt to get the cash back.
Another tip I gave was to buy off season and take advantage of sales around the holidays. Discover’s rewards card program has a rotating schedule of where you earn the highest cash back rates. In the last three months of the year those categories are on amazon.com, department stores and clothing stores so if you can find deals on sports equipment or apparel during times like Black Friday or Cyber Monday then you can also earn higher cash back on those purchases.
Credit Card Tips
I recently made two videos about credit cards as part of a Money Minute contest. Each one contained one simple tip, the first was to only use a credit card if you could pay off the bill each month and the other was to get a rewards card. So having read all the above, you obviously don’t want to be charging your kids sports cost on your credit card if you have to carry a balance. However, if you can pay off that balance each month then having a rewards card can earn you some cashback.
This post is published as part of the Discover Preferred Blogger Program.
If your parents don’t have much in the way of retirement savings, there’s an excellent chance that they are carrying a significant amount of debt. Unfortunately, debt goes hand-in-hand with a lack of savings. Retirement can be the moment of truth for the debtor class, since there will be no assets to draw an income from. Meanwhile, debt will represent a reduction of future cash flow.
For this reason, if your parents have no little or no retirement savings, one of the best ways you can help them is by helping them to get out of debt. Retiring when you’re in debt is not a good idea so they should continue earning income until their debts are significantly reduced.
Here are a few ways you can help.
Help Them Create a Budget
In general, when there is an imbalance between savings and debt, there is typically a lack of budgetary discipline. Too much money is going into consumption, and not enough is going into savings. You can help your parents work through that dilemma by helping them to create a budget.
You can have them set up a free budget software, such as Mint.com. That will help them to track their spending, as well as to determine where they can make cuts in their budget in order to free up money to payoff their debts, as well to begin saving some money for retirement (it’s never too late!).
No other assistance that you offer your parents will do much good if they are not able to implement a basic budget. A budget is the method that creates the discipline necessary to improve your financial situation.
Help Them Develop Additional Income Sources
Sometimes what a budget reveals is that there’s simply not enough extra income to begin paying off debt. This happens because debt is a vicious cycle – as the level that you owe increases, the ability to service it on your income declines. It may be entirely necessary for your parents to find a way to increase their income, and dedicate the extra cash flow to paying off debt.
Though it may seem readily apparent to you that they need additional income, but to a person approaching retirement, the idea of working more might be seen as an oxymoron. Though it’s not pleasant to admit, a lot of people believe that they are entitled to retire even if they don’t have the resources to do so.
You may have to help them identify their talents, skills, and specific interests. In doing so, you might help them to determine what it is they can do to earn extra money. If you have a business, you might consider hiring one of your parents for part-time work, or even on a contract basis to do very specific work.
You can make it clear that the extracurricular income activity is just a temporary venture until the debts are paid. If they want to have anything that looks like a decent retirement, that can provide the necessary motivation.
Offer to Pay One or Two of Their Debts
If your parents have not saved much for retirement, it probably won’t be practical for you to provide them with direct support. A better way to do this may be to payoff one or two of their loans, maybe their biggest ones. That will enable you to make a one-time contribution to their retirement, that would improve their cash flow but not require regular checks from you.
Let’s say that your parents have a car loan with a $15,000 balance, and a monthly payment of $500. By paying off the loan for them, it will be the equivalent of providing them with direct support of $500 per month – only you won’t have to be writing checks for the rest of their lives.
Naturally you have to get some sort of an agreement from them that they cannot take a new car loan anytime in the near future. But this may be a way to enable you to provide direct support, without making them into full-fledged dependents.
Get Them Into Debt Counseling or Debt Consolidation
It’s unfortunately true that some people never get serious about a debt problem no matter what you do. And it may be even more complicated since you are their child, and the historic nature of the relationship may not accommodate them taking advice from you.
But if they have a debt problem, and you are unable to help them address it, you may need to point them to debt counseling or even some sort of debt consolidation plan. They may need to participate in some sort of a formal plan that will help them to get out of debt. If that’s the case, then it’s best to get them the help they need as soon as possible.
The sooner that they get out of debt, the better it will be for them once they reach their retirement years.
In Extreme Cases You May Need to Recommend Bankruptcy
This should never be a first resort for people with a debt problem, but it is also true that some people get so deep in debt that they can’t possibly get out. This is even more pronounced as people get older, approach retirement, and have neither the energy nor the motivation to tackle an out-sized debt problem.
If that’s the case with your parents, it is entirely possible that the most constructive way that you can help them is by directing them to a bankruptcy attorney. Many people who are in debt live in denial about the extent of their problem. Denial makes it easier for them to live with debt day-by-day, but also guarantees that they will never get out from under it.
It may be the best thing that you can do is to encourage them to file bankruptcy, wipe their slate clean, and start fresh. That will not only eliminate their debt, but it will keep them from borrowing serious money for at least a few years. And once their debts are gone, they may be able to survive in retirement even on a very limited income.
All of these are tough choices, but there aren’t many options available for people who are entering the retirement years with little or no retirement savings. Pick the best strategy for your parents situation, and do what you can do to help them get out of debt.
Working during the retirement years is not a subject that a lot of people want to consider. But if your parents will have few financial resources that will enable them to retire fully, working may be the only option. But it may not be as bad as it seems on the surface. How you present the idea to them can make all the difference in the world.
Why Your Parents May Have to Work During Their Retirement Years
There are a variety of reasons why your parents may have to work during their retirement years. Some have to do with a lack of preparation, but others have to do with the fact that times have changed, and some of the old retirement provisions just don’t exist.
Here’s some examples:
- Lack of a traditional pensions
- Social Security benefits aren’t as high as they expected
- Lack of adequate retirement savings
- Lack of adequate savings of any kind
- Too much debt
The last three reflect a lack of preparedness, however sometimes these are the result of major medical events, the loss of a job in the years leading up to retirement, or large costs associated with educating children.
Whatever the reasons for the lack of retirement income, it’s important that you are not too judgmental, and that you focus your efforts on pointing them in the right direction.
Framing The Silver Lining of Continued Employment
While it’s true that most people envision retirement as a time of not having to work at all, it’s more important that your parents are able to survive during that time. It’s actually not the worst outcome that could happen either.
Rather than emphasizing the fact that they won’t be able to retire, instead sell them on the idea of semi-retirement. This means that though they will have to work in order to survive, they shouldn’t have to work as hard as they did throughout their lives. They can still retire from their primary occupations.
This could be a matter of using continued employment income primarily as a supplement to Social Security benefits.
That may not give them all of the perks of the traditional golden retirement, but it should enable them to be comfortable and to have more time for leisure activities than they may have had in the recent past.
Encourage Them to Continue With Part-time or Consulting Work in Their Current Field
Generally speaking, the highest paying form of work will come from doing something similar to what they are doing during their careers. That would mean converting a full-time career into either a part-time job or consulting within the current field.
20 to 30 hours per week could be that they need in order to supplement their Social Security benefits. They can choose to work either so many hours per week, or even during busy times in their industry. That would leave them with short retirement periods in between assignments.
Encourage Them to Try Their Dream Career
Semi retirement may be the perfect opportunity for one or both of your parents to pursue their dream career. That can be an occupation that they always wanted to consider during their working years, but were unable to due to high expenses, or to the fact that the transition would result in a large decrease in income.
But without dependents, and having the benefit of Social Security income, retirement may be the time to pursue that dream career.
One of the side benefits to a dream career is if they really like the work that they’re doing, it won’t feel like work, and they may find themselves enjoying life more than ever.
Encourage Them to Start Their Own Business
It’s probably true that most people have some sort of business idea that they’ve played with, even though they never followed through with it during their working years. Now may be the time for your parents to put that kind of plan into action.
A business is not just a chance at providing yourself with an income. It can also represent the adventure of a lifetime. Not having a boss, being free to pursue any direction they like – and being in a business they enjoy – can be more rewarding than lifetime of sitting by the beach or playing golf.
And if the business is successful enough, they might find themselves able to fully retire in another 10 or 15 years. This can come about as a result of either earning enough money to save for retirement, or being able to sell the business for a large lump sum when they’re ready to retire completely.
If You Have a Business, Hire Your Parents
If you have your own business, consider finding a way to hire your parents. You can hire them either on a part-time basis, or even on a seasonal basis during the busy times of the year for your business. This may take the pressure off of your parents in having to either find a job or start their own business.
Having to work in retirement might not be a virtue, but if it is the only way for your parents to survive, then it’s a topic that you are going to have to bring up. And if you have concrete suggestions as to how they can do it – in a more creative, flexible, and rewarding way – they may be more open to the idea than you might imagine.
Some people can’t wait to downsize their homes in retirement, especially if it means moving to a more pleasant location. It can be an outstanding strategy on so many fronts. But many more people resist downsizing even though it may be highly desirable or even entirely necessary.
If you’d like your parents to downsize, but they’ve been resisting – or you anticipate that they will resist – here are points that may help you to persuade them.
Why They May Not Be OK With Moving
The first point is understanding why your parents may not want to downsize in retirement. By anticipating these in advance, you may be able to work around them.
Here are common objections to downsizing:
- Habit – “This is where we’ve always lived” – it can be especially difficult for them to uproot after several decades in the same house.
- Emotion – A house isn’t just another possession, it’s a home; leaving it means letting go of memories, especially if they raised their kids in the house.
- Fear of change – Some people just don’t do change well.
- Fear of their own mortality – Moving out of their longtime home is seen as an acknowledgement that they are coming to the end of their lives.
- They distrust you – If you press the issue too hard, they may assume that you have a selfish motive. Or they may be unconsciously resisting the parent-child role reversal that often takes place between adult children and their aging parents. Tread lightly here!
- There may be no health reasons necessitating a move – for now.
Identify which objections your parents are likely to raise or have raised in the past, and be ready with a work-round. For example, if fear of their own mortality is the issue, stress the move as a shift to a new beginning in life. Or if they are in good health, emphasize that that’s the best time to make a move, since they can do it on their own terms, rather than being forced into it by a life event.
In addition, be ready to explain the many benefits of downsizing…
Lowering Their Monthly Payment
Living comfortably in retirement is all about getting your budget to fit within a reduced income. Since housing is typically the largest expense, reducing it can be the single best way to create some breathing room in an otherwise tight budget.
This can be especially significant if your parents live in an area that has high property taxes. Going from a home that has an $8,000 annual property tax bill, to one where the taxes are only $2,000, will save them $6,000 per year. That translates to $500 per month, and is practically a small pension.
Also, if your parents still have a mortgage on the home, trading down to a less expensive home could be a way of becoming mortgage-free. For example, if their home is worth $300,000 and they have a $100,000 mortgage on it, selling the property and trading down to a house that’s worth something less than $200,000 could enable them to buy it for cash, and make the old mortgage go away forever.
Freeing Up Capital
If your parents have lived in their home for many years, they may have a lot of equity in the property. If they are light on retirement savings, this can be a way to build up their investment portfolio quickly.
If their home is worth, say $500,000, they can sell it and buy a new one for $200,000 – and put $300,000 into retirement savings. Using the safe withdrawal rate of 4%, that would give them an additional income of $12,000 ($300,000 X 4%), or $1,000 per month. That, plus lower carrying costs on their new home.
Less Space = Less Maintenance and Lower Upkeep Costs
A larger home will naturally cost more to maintain. That includes landscaping, housecleaning, snow removal, as well as anything that needs to be replaced, such as the roof, the furnace, the central air conditioner, or even the driveway.
Some of that cost is also born through time and effort. The larger the home is, the more time that your parents will have to spend maintaining it. That may not be a problem when they’re younger, but as they get older it could become a burden. And if they have to pay people to start taking over those chores, the cost will become financial.
It’s an Excellent Strategy If They Are Financially Unprepared for Retirement
We’ve already discussed the financial benefits that downsizing can bring. But they can become critically important if your parents have little or nothing in the way of retirement savings. If they will be primarily relying on Social Security and some sort of continuing job situation, downsizing could be a move of strategic proportions.
In this case, the lower living costs, as well as the additional investment capital they can get as a result of downsizing, could be the difference between a fairly comfortable retirement, and an old age of perpetual struggle.
It’s Easier When Downsizing Happens Early in Retirement
Most people will have to downsize at some point during their retirement years, particularly if they live well into their 80s. At that point, necessity may step in and force it upon them. But making a move is always easier when it is done in the early years of retirement. At that point, your parents will have more control over the process and how it turns out.
In addition, the financial benefits that come from downsizing can last for the rest of their lives. This may be the most important benefit that you can introduce your parents to in the event that they are reluctant to make a move. If nothing else, downsizing early gives them the ability to settle in to their new lives, which will make the whole process go much smoother.
If your parents don’t want to make a move, introduce them to these benefits one at a time. It may take several years to convince them of the merits of downsizing, so you may want to begin as soon as possible.
You’ve probably seen the Discover commercials where a person finds their credit score on their statement and calls in to ask about the new score on their bill.
It makes sense that credit card companies would make this available to their customers; I’m surprised that more of them don’t. Now that Discover and a few others have set the precedent hopefully more banks will follow suit.
Of course you can see your credit report for free once a year but a credit report isn’t your credit score and your free credit report isn’t intended for the purposes of monitoring your credit.
Credit Score Changes
The nice thing about seeing your credit score on a monthly basis is it can alert you to any big changes. If you’re paying your bills on time and not opening up more lines of credit then your score shouldn’t really change that much from month to month. But if you do see a big change then it can alert you something isn’t right.
When you miss a payment it’s typically not reported to the credit agencies right at the end of your billing cycle. When the next bill is due if you haven’t caught up on your payments then the late payment appears on your credit report.
The later your payment is, the bigger impact it has on your credit score. A 60 day late payment is worse than a 30 day late payment and a 90 day late payment is worse than a 60 day late payment – so the sooner you realize you missed payment and correct it, the better for your score.
Automated Payments & Alerts
This is why I like using automated bill pay; to make sure my bills are paid on time and to alert me if one of them isn’t. However, technology isn’t perfect. There have been times when online bill pay has had hiccups.
Most major credit cards offer alerts that will notify you about events like an upcoming bill due or when a bill is overdue. However, there are things you might not be able to get alerts for like your mortgage or car payment.
As I mentioned above by the time you miss a payment and it’s reflected on your credit score some damage has already been done. However, the sooner you catch it the better.
Credit Score Monitoring
There are credit monitoring services that will keep an eye on your score for you, most of them charge some type of fee. If you don’t want to pay for updates then the credit score on your monthly Discover it ® card statement can be another way to stay on top of your credit score. Discover allows you to view 12 months of your FICO® Credit Score for free as well as key factors in why it has changed over time.
This post is published as part of the Discover Preferred Blogger Program.