Category: Finance

Cash Budget and The Envelope Method

Cash Budget and The Envelope Method

Easy Ways to Save Money – Cash Budget and The Envelope Method

Easy Ways to Save Money using the cash budget and envelope method

Today, we are talking about the cash budget / envelope method strategy as an easy way to save money.

However, first, we need to address: credit cards.  We love them.  First, we love the ease of quickly swiping your card at checkout and moving on with your day.  We also love the rewards we get with them and the simplicity of having one consolidated bill to pay. 

In addition, we love the quick checkout of online shopping when our credit card number is on file and we just have one button to click and voila – a package arrives at our doorstep.  And, at least subconsciously, we love not having the stress of whether or not there is money in our checking account today to pay for the purchase…that can get sorted out next month.

The Price of Paying with Ease

But that ease comes with a price.  A pretty steep one in fact, according to Forbes.  Research shows that consumers are willing to pay up to DOUBLE the price if paying with a credit card than with cash.  That’s a lot of extra spending that dwarfs even the best rewards program!  Additionally, for the majority of Americans who don’t pay off their credit cards each month, interest rates can be 20% or more.  Between excess purchases and interest fees, that adds up very quickly!

The Benefits of Paying with Cash

  • Paying with cash, on the other hand, drastically reduces how much you spend, making it easier to save. 
  • When you pay with cash, you actually see how much you are paying and feel the pain of handing over a large sum of money.  However, with credit cards, you can walk out of the store on a spending high with little thought to the consequences. 
  • In addition, with a cash budget, you live with the immediate reality of the money you are handing over, making you less likely to spend more than you really want to.  And then there is the obvious – with cash, once you are out you are out.

A Cash Budget Case Study

set up a cash budget in three easy steps

To illustrate our point, let’s do some simple math.  Say a person intends to spend around $1,500 a month on groceries, eating out, household items, clothing, and miscellaneous items.  With cash spending, you can limit yourself to that $1,500.  But with credit cards, you could easily spend an additional $180 each month or more. 

Even with some of the best rewards programs, you will only get back around $35.  In a year, the person using the cash budget will have spent over $1,700 less than the credit card spender.  In addition, that person using the cash budget is no longer paying interest fees for credit cards. As a result, they will have saved $200-300 a month – adding up to around $2,000 for the year.  The cash budget will have saved this person thousands!

3 Easy Steps to Start a Cash Budget

Considering a change but not sure how to start?  Let’s talk about The Envelope Method – a system that uses envelopes to allocate the cash for exactly how much money you want to spend.  When you leave home, you grab the money from the envelope and do not allow yourself to spend more than what you have cash for.

So let’s get started.

Step One: Create and record a budget

I like to keep my monthly budget in a spreadsheet (like from Excel), but you can keep it anywhere you like – a piece of paper, a sophisticated financial software program, or anything in between. 

How to Determine Your Budget

  • Every month you will have fixed expenses (like your mortgage or rent payment) and variable expenses (like groceries). 
  • Start by taking your net income each month and subtracting out the fixed expenses that you know you will have – like your mortgage or rent, car payment, insurance payment, cell phone bill, utilities, etc. 
  • Then, you need to determine how much you want to spend on variable expenses. 
    • List out each category of spending – groceries, supplies, dining out, entertainment, gas, clothing, donations, etc. 
    • Take a look at the last several months of your bank or credit card statements to see how much money you are actually spending in each of these areas.  This is not necessarily a pleasant task, but if you don’t know where you are overspending, you can’t correct it. 
    • Determine how much you actually want or need to spend in each area and deduct that from your income. 

Consider a Slush Fund

Unless your budget is extremely tight, you may also want to consider a small slush fund category.  This money can be used for fun or spontaneous purchases, or saved for a larger fun or spontaneous purchase later. 

If you are not naturally a very disciplined person, The Envelope Method could seem a bit constricting.  Having a little, even if it’s just $20 a month, in a slush fund to spend on whatever you desire can help ease the pain of the transition. 

Determine Your Savings or Deficit

The amount remaining is how much you have to save each month.  Hopefully you have a pleasant surprise at this point, realizing that yes, you really can save that much!  However, you might also have a not so pleasant surprise – like discovering that your eating out and entertainment expenses are putting you in the negative each month.  That’s a tough realization, but it empowers you to make different choices to meet your savings goals.

If you are in a deficit, check out our tips on frugal living and saving money here.

An Example of a Monthly Cash Budget

Below is an example of a very simple budget, for illustration purposes.  This example is a monthly budget, but you could also consider doing a weekly or biweekly budget depending on how often you are paid.

Step Two – Prepare the Envelopes

  • First, determine a safe place to keep your envelopes of cash.  This could be a drawer or a filing cabinet or someplace else. 
  • Next, list out the spending category for each of your variable expense types – groceries, clothing, gas, eating out, etc., each on an individual envelope. 
  • Then, determine how you best want to organize them so that you can quickly find the envelope you need.

Next, Prepare the Cash for the Envelopes

  • After each paycheck, assuming it is electronically deposited, withdraw the amount of money you have budgeted for cash spending.  Be sure to ask the teller for bills that are small enough you can divide the money up correctly. 
  • Then pull out your budget and put the correct amount of money into each envelope.  In the example above, you would need to withdraw $675 from the bank and divide it up correctly over the 5 envelopes.

Extra Cash for Unexpected Needs

Depending on how often you need to spend money, you may wish to keep some extra cash in your wallet.  For example, take an extra $50 out the first month only to put in your wallet.  Then if you happen to be out and need to spend money unexpectedly, you can simply pay for the purchase with the money in your wallet and immediately reimburse yourself from the correct envelope when you get home. 

It’s important to immediately reimburse yourself so that you aren’t overspending and needing to pull out that extra $50 each month.

Step Three – Use the Envelopes

Perhaps the most challenging part of this process is remembering to get the cash out of the envelope before leaving the house.  That’s why keeping a cushion in your wallet is helpful.  Additionally, you could keep your checkbook and/or debit card with you at all times.  However, you should always have a backup plan to avoid using your credit card!

Tips for Success

pin for easy ways to save money by using the cash budget and envelope system
  • Before leaving the house, grab the cash that you intend to spend.  Going back to the example budget, if you budget $400/month for groceries and go shopping once a week, you may always pull out $100 before heading to the store. 
  • Or perhaps you shop for different items at different stores and you know one week is more expensive than the next based on what you are buying – adjust accordingly.  Maybe you need $80 this week and $120 the next.  It’s fine to vary how much you pull out of the envelope each time, but make sure that you stick within the cash you have for the month.
  • Of course, real life is difficult to balance down to the penny.  There may be times when you have to spend more in one category than you were expecting.  For example, perhaps you are hosting Thanksgiving and you are going to blow past your set amount for groceries.  When that happens, you can turn to your slush fund (if you have one) or reallocate money from a different envelope – perhaps you choose to not eat out this month and pull it from the entertainment envelope. 

What to Do with Extra Money

On the flip side, you may find that at the end of the month you have some money left in an envelope.  You could put it into your savings account, keep it in the envelope for next month, or reallocate the money to a different expense.  In all of these situations, the great news is that YOU are in control of your spending and you are staying within your budget.

Imagine going to the store with $50 in cash from your clothing envelope to buy a new pair of shoes.  At the store you find the dress shoes you need to replace the ones you have that are worn out – great!  But then you notice another pair that you like that are on sale. 

In the past, it would have been easy to just put both pair on your credit card and not given it a second thought…until the bill came.  But now you are on the cash only method. 

You have two choices:

  • You can either forgo the second pair knowing that, while the shoes are nice, you have worked hard to get on this savings plan and you don’t want to feel the physical pain of having to hand over the extra cash and cut spending elsewhere. 
  • Or you can decide you really like that second pair and pull the money from your slush fund envelope for this month.  Guilt free spending.

The Cash Budget / Envelope Method Applied to Savings

You probably have a checking account to handle short term expenses, as well as long-term savings accounts like a 401(k).  But if you don’t already have one, I recommend that you have a savings account for medium-term expenses – like vacations, gift giving, house expenses, etc. 

When you are in a position to save money each month instead of living paycheck to paycheck, you will need to save for larger expenses that the envelope funds won’t cover.  Perhaps you are planning a vacation or your house needs a new furnace.  If you are proactively saving, you can avoid putting these items on credit cards.

How to Keep Track of Goals

Having a savings account for each thing you want to save money for could be a bit cumbersome.  But it’s very easy to keep an Excel file, or use a notebook, and list out exactly what the money in the account is for. 

For example, you want to go on a trip next summer and your dishwasher is on its last leg so you know you will need to replace it soon.  You are sticking with your cash budget and able to save $400/month.  Each month you intend for $200 to go toward your vacation, $100 to go toward your dishwasher, and $100 to go toward building your emergency fund.  Your savings account tracker would look something like this:

Each month you add to whatever category you are saving for.  If you need to take money out of that category, then update your tracker accordingly.  Money can sit in there as long as you like – in this example the “Gift Fund” wasn’t accumulating any more money but $250 was available at any time to purchase gifts.

Cash Budget Conclusions

Credit cards make it easy to overspend without even realizing it.  If you don’t know where you are spending your money, you are likely overspending. 

The good news is that with some simple organization and discipline, you can make sure you are spending your money intentionally.  Cash budgeting using the “envelope method” is a great way to keep yourself from overspending and make it much easier to save money.

Cash Budgeting and the Envelope system provide an easy way to save money
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Easy Ways to Become Debt Free Before Retirement

Easy Ways to Become Debt Free Before Retirement

easy ways to become debt free before retirement

Easy Ways to Become Debt Free Before Retirement

As you begin to think about retirement, you’ve probably thought about things like draw-down strategies and the amount you will need for yearly expenses. And, as you probably know, the lower your yearly expenses, the less you will need in your retirement nest egg.

So, if you’re finding that you can’t quite make the numbers work between what you have set aside for retirement and what you need to live, you may want to consider the goal of becoming debt free before you retire.

The following are a few tips to help you pay off your debt before you retire.

Create a Budget

The first and most important step you’ll want to take to become debt free is to set up a budget. If you’ve never created one before, it may seem daunting at first – but it doesn’t have to be.

A budget can be as simple as a record of expenses compared to your income. You may use a spreadsheet to manually track these items, write them down with pen and paper, or you may review your bank statements.

Or, you can use tools to help automate this for you. Mint is one of my favorite tools for budgeting because it does all the work for me. After connecting my accounts, it tracks both my expenses and my income in real-time. I can set expense categories and monthly limits. If I go over in a category, Mint notifies me.

Whichever method you use, a budget is pivotal for you as you prepare for retirement. Once you’ve set one up, look at your categories. Start to consider which areas are negotiables (in case you need to remove them or reduce them later) and which aren’t negotiable.

Most of all, take a look at your expenses that go toward debt. Review how much of an impact this has on your budget and consider if reducing debt is the right plan for you.

If it is, consider the following tips to tackle your debt by category.

RELATED READING: How to Set up a Cash Budget and using the Envelope Method

Student Loans Hindering you From a Debt Free Retirement

Becoming Debt Free Before Retirement

It may be decades since you last attended college, but there’s a chance you could still have student loans to your name.

According to the Wall Street Journal, in 2017, on average, student loan borrowers in their 60s still owed $33,800. What’s worse is more than 40,000 people aged 65 and older defaulted on student loans in 2015, which is a 362% increase over the previous decade.

Why is this so high? Often, these student loans aren’t their own; they’re for their children or grandchildren. Roughly 93% of all new private student loans to undergrad students have an adult signature on them – usually by parents and grandparents.

If you’ve graciously co-signed on loans for a student, remember that you are liable for paying those off, and you should consider those as your debts, too.

How do you get rid of those as soon as possible? You have a few options: pay them off or refinance.

Pay the loans off

The easiest way to get these off your mind and out of your debts is to pay them off.

If the loans are for you, consider any additional room you may have in your budget to put a little extra money toward your student loans. Every little extra bit helps.

If these student loans aren’t for your education, you may want to work with the student to get a plan in place for quick payoff. You may not be interested in paying them off yourself, and that’s absolutely fine. Help the student understand the impact of a few extra dollars each payment to expedite the payoff process.

Refinance the student loans

One of the reasons a co-signer is needed on student loans is because of the lack of credit history of many entering college students. However, once the student is out of college and has a career, that student may have established credit. Encouraging the student to refinance loans under his or her own name will free your role of this debt being yours, and may help the student get better rates.

We refinanced my husband’s graduate school student loans recently and saw a significant reduction in his interest rates. Changing nothing else about our payments, that would have allowed us to pay off the loans almost a year sooner.

Pay Off Your Mortgage

A recent study found that 44% of people in their 60s and 70s in retirement still have mortgages on their homes. While some do plan to pay the mortgage off within a few years, roughly 17% of them say they may never pay it off.

If you are at all able, try to pay off your mortgage before you retire. As you think about your monthly required expenses in retirement, housing costs could add a significant amount to those expenses. And, greater housing expenses add to the amount of money you’ll need in your nest egg to retire.

If you feel that you’ll be downsizing your home when you retire, consider your options for finding a place where the sale of your larger home could cover the entirety of the expenses of your new home. You’ll have a place to live and no mortgage payment.

Slash Credit Card and Consumer Debt

Easy Ways to Become Debt Free Before Retirement Pin

As you get closer to living on a fixed income, ensuring that you can afford what you spend is of utmost priority. This means that you’ll want to steer clear of racking up credit card debt and consumer debt that you may not be able to afford in retirement.

This is where the budget you set up can really come into play. Understand what your income is each month and how you can pay for your expenses without taking on more debt.

If you already have credit card debt, this is a good time to pay it off. Whether you were using credit cards for medical bills, vacations, or large purchases – the balance can follow you for years if you don’t make it a priority.

This is likely the first debt of all debts you’d want to pay off because the interest rates can be astronomical. Paying down the minimum balance won’t be enough to make a sizable impact.

Considering a Debt Free Retirement

If you’re hoping to have a debt free retirement, know it’s possible to achieve. Whether you have credit card debt, a car loan, a mortgage, student loans, or any other debt – you can pay it off before retiring. Use budgeting tools to get you where you want to be so that you don’t have money stress while in retirement.

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What is Long Term Care Insurance?

What is Long Term Care Insurance?

What is Long Term Care Insurance?

What Is Long Term Care Insurance

Long Term Care Insurance Polices provide cash to cover the cost of your care when you cannot take care of yourself.

At some point, you may need help to get through each day. Hopefully, you have family and friends to help you, but even they can only help you to a point.

Many people find maintaining their independence and dignity an important value. Consequently, these people find Long Term Care (LTC) Insurance is an important part of their financial planning.

Defining Your Needs

You need to start thinking now about how you will plan for your own care down the road. “Long-Term Care” as a plan has many parts including:

  • Where you will live
  • What services you will need
  • What people you can depend on
  • How you will pay for everything
  • What legal considerations you need to address

Additionally, part of your plan might also include insurance.

What Can Long Term Care Insurance Help You Pay for?

Long Term Care Insurance can help you pay for:

  • Nursing homes & LTC facilities
  • In home daily living services
  • In home personal services

Who Needs Long Term Care Insurance?

According to New York Life Insurance Company, 70% of people age 65 and older will need help with daily living at some point. Moreover, almost 50% of these people will end up spending more than $107,000 on Long Term Care costs.

Reasons People Get LTC Insurance

Here are a few types of people that need Long-Term Care Insurance:

Do I need Long-Term Care Insurance?
  • Independent people who do not want to rely on their family to take care of them or pay for their care.
  • Prepared people that do not have reliable support they can trust to help with their care.
  • Determined people that want enough money to cover in home services so they don’t have to go to a nursing home.
  • Planning people that do not want to drain their retirement accounts with LTC expenses.
  • Finally, people that do not want to end up on Medicaid at any point in their lives.

Does Medicare Cover Long-Term Care?

Many of my clients have asked me if Medicare covers Long-Term Care costs and services. It is a good question, but perhaps not a good answer. The answer is no. Medicare does not cover LTC costs.

Why Doesn’t Medicare Cover LTC?

What is Medicare - Medicare Life Health Co.

To start, long-term care has mostly to do with the support and services you will need for daily living and personal care activities. These are not medical services. Consequently, they are not covered by Medicare.

  • For example, if you need to see a doctor or medical provider, that is a medical expense.
  • In contrast, if you need help using the toilet, that is a long-term care expense.

What About Medicaid?

Medicaid will eventually help you pay for LTC expenses. However, you must be considered below the poverty level before the Medicaid program kicks in.

As an example, my grandparents both lived to be about 87 years old. (Married 67 years!) They had enough money to cover their assisted living expenses for a while, but the last 6 months or so of their lives were spent on Medicaid. They had to do a “spend down” of all of their assets to cover LTC expenses. Once their funds were exhausted, Medicaid kicked in.

In their case, while they had money to spend, they had choices on where they lived and what services they used. However, as soon as the money was gone, they had to move to a place that had “beds” available for Medicaid recipients. As a result, they were moved around a lot in their last year.

On the much brighter side, they were together until the end and passed months apart. They were also happy and loved. So, even though the journey was difficult, we were all in it together. You can read a little more about my care-giving story here.

If you do not want to “spend down” your assets on LTC costs, you will need to have insurance to cover your care costs.

How Does LTC Insurance Work?

LTC is an insurance policy. Consequently, you take it out now to pay for a future event that may or may-not occur.

  • First, you pick a plan with an insurance carrier and structure it to fit your needs. This includes deciding how large of a benefit you want.
  • In addition, your decision will also depend on how much premium you can afford to pay a month for your policy.
  • Premium cost is based on age, and availability of policies are dependent on health underwriting. As a result, not everyone will be able to afford a plan, and not everyone will be able to get a plan. As with most insurance, the younger and the healthier, the better. So, start soon.
  • Then, you keep paying premiums until you need the policy. (Or you cancel the policy because you ended up not needing it. For example, you die before you needed it.)

When Do Long-Term Care Insurance Benefits Begin?

First, in order to start using your LTC policy’s benefits, a licensed medical practitioner will need to certify you chronically ill.

According to Mutual of Omaha, being chronically ill means, “You need help with at least two of the six activities of daily living for at least 90 consecutive days or you need continual supervision due to a severe cognitive impairment.”

The government defines Activities of Daily Living (ADLs), as “basic actions that independently functioning individuals perform on a daily basis.”

ADLs Include:

Caring for Elderly Parents - a how to guide from medicare life health co.
  • Bathing
  • Dressing
  • Using the toilet
  • Transferring (to or from bed or chair)
  • Caring for incontinence
  • Eating

So, you typically need to not be able to do at least two of these to start your benefits.

Do Benefits Start Right Away?

To start, it takes a bit of time to get the right paperwork completed by your doctor, sent in and then certified by the insurance company. Even then, your policy might not kick-in right away.

To keep the cost of LTC insurance lower, many insurance companies will build-in an elimination period. Often, you can decide how long this waiting period will be before benefits begin. Naturally, the longer the waiting period, the less expensive the policy.

Will My Policy Last Until I Die?

Typically, your policy has a set payout rate. This means that it will pay out up to a specific dollar amount. If you outlive this amount, then you will have to use other resources to pay for your care.

How Much will my LTC Policy Cost?

The cost of your policy will depend on your needs, cost of living in your area, your age, your health, and many other factors. To find out an exact cost, you will need to work with an agent to discuss your unique situation.

How Much Long-Term Care Benefit Do I Need?

This is also a question we can’t answer without knowing your needs and situation. If you are wanting a rough idea of what you may need, try out this Long-Term Care Insurance Calculator from Mutual of Omaha.

What are the Alternatives to Purchasing a Long-Term Care Plan?

Long-Term Care Policies are expensive. Additionally, if you wait too long they might not be available to you. One alternative is to spend down your assets until you qualify for Medicaid. If you do not have a lot of assets left by the time you need Long-Term Care, then this may be an option for you.

However, if you have saved money and do not want to drain it all away in medical costs, then you may have another option: Life Insurance.

Do I need life insurance in retirement?

“As an alternative to Long Term Care Insurance, some retirees consider Life Insurance Policies that have LTC riders or a Chronic Illness Rider. For example, an insurance carrier might offer a product (like an IUL policy) with an option to purchase up-front a rider that will cover long term care events. You can pay qualified long-term care expenses with the death benefit, naturally, before death. Then, when you pass, the insurance company pays what is left to your beneficiaries.”

From Our Article: Do I Need Life Insurance In Retirement.

Conclusions

In summary, long-term care insurance can protect you and your family against the rising costs of assisted living and nursing home care. However, it is expensive. You need to plan ahead to either secure LTC insurance early on, or find another option like life insurance with LTC riders.

medicare and medicaid difference guide
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7 Best Frugal Living Tips for Seniors

7 Best Frugal Living Tips for Seniors

7 Best Frugal Living Tips for Seniors

The 7 Best Frugal Living Tips for Seniors

During various points in our lives frugal living is bound to have a different meaning.  While we are young, or have small children, frugal living may include things like couponing or discounts on things for ourselves or our children.  As we age though, frugal living tips for seniors takes on a whole new meaning.

Tip #1: Frugal Living Benefits Come with Age

Aging comes with benefits when it comes to the frugal mindset. Correspondingly, there are so many programs for seniors to take advantage of, you just have to ask about them and then do them. 

To start, here are a few frugal living senior discount programs:   

  • Discounts:  Think of AAA or AARP.  You can find so many places that accept these cards and you can get automatic discounts.  Don’t be afraid (or embarrassed) to ask!
  • Senior Discounts:  Many restaurants offer senior discounts (55+ or 60+) where you can get 10% – 20% off your meal.  Many grocery stores also have a senior day where you can get a percent off of your total grocery bill on certain days.  Many retail stores also offer a senior day for a percent off.
  • Travel:  Same applies for airline, car and hotel stays.  Senior discount!  See our article on frugal travel / slow travel.
  • Free activities:  Many city’s offer free activities such as concerts in the park and museum visits. 

Tip #2: Be Frugal, But Not Cheap

Frugal vs. Cheap.  Where is the Line? 

One of the key takeaways I got when talking to people is that in order to be frugal successfully, you cannot be cheap or stingy.  Is it better to buy something more than once because it’s cheaper? Or, is it better to buy the more expensive, but quality, item that could last a lifetime? Stingy living or being cheap is different than being frugal.

When adding up the numbers, it would make sense to purchase the more expensive, but quality item. However, it may cause a little bit of sticker shock at first. 

Frugal Living Tips for Seniors #3: Increase Cash Flow by Paying off Debt

To start, pay off your mortgage/debt before retiring whenever possible. In most cases, your mortgage/debt payment is your largest expense.  Consequently, by having no mortgage payment you have the option to downsize. Moreover, you can use the equity to purchase something smaller with the proceeds to help fund your retirement. 

Easy Things to Make and Sell for Money

Not having a mortgage payment is a huge weight lifted when it comes to retirement planning and frugal living for seniors.  However, don’t forget about your property taxes and insurance!  Those still need to be paid.  Therefore, put them into your monthly budget so you are not shocked when bills come due. 

Click here to read our article on easy ways to make things to sell for fast money.

Tip #4: Budgeting on a Fixed Income

Next, be intentional in how you spend your money.  Budgeting is a helpful tool in determining how much you can spend.  There is only a finite amount of money to be spent before it is gone.  Using the 4% rule for example; if you have one million dollars, you can only withdraw $40k a year in order to not run out of money. 

Be intentional about how much and how often funds are pulled from retirement savings.  By keeping track of every dollar you spend you should be able to forecast how much you will need later in life. 

This doesn’t have to be a cumbersome activity.  You could simply use pen and paper, excel or if you are savvy you can use online tools such as Mint or Personal Capital. Over time you will have a good understanding of your spending habits and will be able to better forecast the upcoming years of spending and adjust accordingly.  

Related Reading: Cash Budgeting & The Envelope Method

Frugal Living Tips for Seniors #5: Embrace the DIY Mentality

Things you can do yourself, do them!  YouTube has a plethora of information on how to fix literally anything.  Why pay someone to do something that you can do yourself.  Perhaps not the big jobs, like a kitchen remodel, but those pesky small jobs that you may hire a professional for, learn to do them yourself. 

There are also plenty of people to ask if you’re not a YouTube fan. For example, going to the hardware store and simply asking the expert in the department.  Who knows, you may even find that you enjoy doing odd jobs around the house.  

Frugal Living Tip #6: Going Green

There are other ways to be frugal that could require money up front but will save money in the long run.  Electric vehicles for example.  The reality is that they usually do not cost more than a standard gas run vehicle.  But, you do save on the expense of gas and much of the maintenance.  To power an electric vehicle is pennies on the dollar compared to a gas powered vehicle. 

As another example, solar panels and solar water heaters can save you money.  While expensive to install, over time (usually a set number of years), the cost savings outweighs the cost expense. (That is, if you are in a sunny area). Also, don’t forget about the tax advantages of going electric or solar.  You can receive a tax credit, in most cases, both federally and by the state you are living in.  

Tip #7: Prioritize What Makes You the Happiest

Finally, and I think most importantly, you need to figure out what you enjoy doing and make that your priority.  The last thing you want in retirement is the feeling of being left out because you fear you don’t have enough money to do those things that you want to do, that you enjoy.  Just make sure to get the biggest bang out of your dollars.  Simple things like going out for lunch rather than dinner can help.

Conclusions

In summary, you want to make sure that you are happy in retirement and not just counting your pennies.  If you have a frugal mindset but are also doing things you enjoy, retirement will be much more enjoyable. 

Further Reading

Want even more Frugal Fun? Click here to read our article on the number one thing you can do to save money on healthcare.

Health Hacks to Save Money
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529 Gift – The Perfect Grandparent Present

529 Gift – The Perfect Grandparent Present

529 Gift – The Perfect Grandparent Present

529 Gift - Perfect Grandparent Present

One of the best presents a grandparent can give is access to higher education. A 529 Gift is a great present for your grand-kids, and it is easier than ever to get your contributions in the right place, quickly.

Whether you can give a little, or a lot, every bit helps. College is more expensive than when you were young. In fact, one year of school tuition ranges from $10,000 to $40,000+ for average public to private schools (respectively). So, if you happened to pay your way though, that is great, and it is still possible today. However, more often than not, students leave school with large amounts of debt.

What is a 529 Plan Gift?

First, a 529 is a tax-advantaged college savings account. Officially, the government named these plans – Qualified Tuition Plans. The money in these plans are invested in the market, so your money can grow with interest. Each state has access to different accounts, and there are national ones too.

The tax-advantage to this account is that your after-tax, invested money grows tax-deferred. This is true for both federal and state taxes. Some state accounts also allow you to deduct your contributions from your state income taxes up to a certain amount.

In other words, you cannot deduct your contributions from Federal taxes, but in some states you can. Then, when you withdraw your funds to use at a qualified institution, you do not have to pay taxes on either the principal or the interest. (Withdrawals that are not qualified get hit with a 10% penalty.)

Why a 529 Gift is Wise

Here are our favorite reasons a 529 contribution is a great gift:

  • Compound interest makes a 529 Gift – a gift that keeps on giving!
  • In 30 states, your gift is deductible on state income taxes.
  • Children get too much “stuff” for presents. Giving the experience of learning is very powerful and memorable.
  • Saving for college, even through gifts, if a good lesson for kids to learn.
  • It helps parents (your kids) keep up with the cost of raising kids!
  • The kids themselves are not in charge of these accounts, so you know the money has a better chance of being used properly.

How to Gift a 529 Plan or 529 Contribution

To give a college savings contribution, you will either need to set-up a 529 plan if your grandchild does not have one already, or contribute to an already established account. Here is how you do both.

Setting-Up a New 529 Plan

If your child or grandchild does not already have a 529 Plan, you can set one up for them. You will open the plan up in their name. However, remember, this is a custodial account, so they will not have access to the funds.

To start your process, you can find a list of State 529 Plans here with links to each one.

Contributing to an Existing Plan

529 Gift - College Savings Plan Contribution Gifts Pin

First, you can send a check to your grandchild’s 529 Plan Account.

Second, there is a free and convenient service you can use to send money electronically to your grandchild’s account. It is called Ugift, and you can find their website here. You will need your grandchild’s unique Ugift code. You will need your family in charge of this account to give you their code. If they logon to their account, they can see a place to get a Ugift code to share with you.

After you have this code, you can go to the Ugift 529 website and enter the code on their homepage to start your contribution. They have printable certificates if you want to give one, but everything will be do electronically from there.

Conclusions

Giving a 529 Gift is a great present for any occasion. Moreover, it is a gift that can grow with time, and won’t end up at the bottom of the laundry pile in 2 weeks.

Other Articles About Gifting

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What is a Reverse Mortgage?

What is a Reverse Mortgage?

What is a Reverse Mortgage?

what is a reverse mortgage by medicare life health

Reverse mortgages can be very intriguing to those that are reaching retirement age. Additionally, they can be intriguing to those that are in retirement and concerned about cash flow.

So, just what is a reverse mortgage?

Why do people take them out?

And, are they good or bad?

Reverse Mortgage Defined

A reverse mortgage is a loan you can take out against the equity on your home to provide you a cash flow, often in retirement.

Contrary to a regular mortgage, the bank will pay you an agreed on sum of money each month, instead of you paying them. Consequently, that is why it is called a reverse mortgage.

Home Equity Conversion Mortgages (HECM) is the technical name for a reverse mortgage. The FHA insures them. Moreover, they are “non-recourse” loans. This means that even though there might be interest applied, the repayment of the loan will never be more than the actual value of the house when it is sold.

Does My House Qualify for a Reverse Mortgage?

To be able to do a reverse mortgage, you must have equity in your house. This means you have to owe less on your house than it is worth and then have value on it beyond that to draw cash from.

Moreover, the government states you must only have a “small balance” left on your current mortgage, or you must own the home outright. Which makes sense if you want to borrow against it.

Why Do People Take out Reverse Mortgages?

As pensions become less common and 401k’s end-up smaller than one hoped, seniors need to get creative. A home is often times one of the biggest assets retirees hold when they stop working.

Consequently, when other assets are not as robust as they need to be to provide for living expenses, seniors turn to their home for cash.

Are Reverse Mortgages Good or Bad?

As a tool to provide cash flow in retirement – reverse mortgages are neither good nor bad – they are neutral. They are good for providing cash flow in retirement, if your house is one of the ONLY places you have access to cash. However, they can be bad if you take one out incorrectly or without carefully considering how to use one responsibly.

What to Consider Before Taking out a Reverse Mortgage

Reverse mortgages can be useful, but there are things to consider carefully before taking one out.

  • First, you must be very careful who you work with when you take out a reverse mortgage. There are mortgage scams and frauds out there.
  • Second, you must still pay your property taxes and homeowners insurance each year or your house could end up in foreclosure. According to the US Government Accountability Office, defaults increased 2% from 2014 to 18%. These defaults were mostly due to borrowers not paying taxes/insurance or failing to meet the occupancy requirements. Which brings us to the next point.
  • Third, the house you reverse mortgage must be your primary residence.
  • Fourth, you must be at least 62 years old to take out this kind of mortgage.
  • Finally, in addition to owning your home or only having a small balance left on it, you must also not have any outstanding debts to the Federal government. (For example, back-taxes.)

How Do I Start the Process?

First, if you are considering a Reverse Mortgage, the first step is a required consultation by an approved HECM counselor. You can find a counselor on this government search page.

Then, to find a HUD (U.S. Department of Housing and Urban Development) certified lender, you will also need to visit this government web-page.

For more information, and to get your specific questions answered, please visit the FHA Resource Center.

Further Retirement Reading

If you are looking for other ways to generate cash flow in retirement, that do not involve mortgaging your house, please start with our very popular article series – The New Rules of Retirement.

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Jobs For Retired People

Jobs For Retired People

Jobs For Retired People: Supplementing Your Savings to Live Your Best Life + Retire Early?

This article, “Jobs for Retired People” is the second article in our New Series: The New Rules of Retirement.

Jobs for Retired People? Doesn’t retired mean “NOT WORKING?” Maybe, but maybe not! In our Series – The New Rules of Retirement, we are exploring what it means to re-define retirement to fit your needs and lifestyle.

In our last article, we discussed how the “Average American” close to retirement age these days might not have as much saved as they would like. We also did some math to discover what amount of side income might be needed for the majority of Americans to still “retire” when they wanted to.

In our case study, the “Average American” with the most average of savings might need an extra $1,295 a month to live the lifestyle they envisioned in retirement.

Retire Early???

Some of these side gigs might even allow you to quit your job earlier than you thought possible. We have heard stories of people LOVING their side job so much, and actually making good money from it, that they were able to retire from their full-time job early.

Side or Part-Time Jobs for Retired People

The Best Side Jobs for Retired People & People Saving Extra For Retirement

This article will help you to find a fun or creative “Side Job” / “Side Hustle” / “Part-Time Work” or another source of passive income to help you retire or save more for retirement.

A few things to keep in mind:

jobs for retired people
  • First, these are jobs to supplement your retirement savings. They may or may not be HUGE money makers – often they are just a way to make some extra income.
  • Second, they are meant to also be enjoyable and creative! Yes, they are still work, but with a retirement flavor and happy attitude. Some keep you active or challenge you mentally. Others are creative, and some even keep you social!
  • Finally, you can start these jobs before you retire. Use them as a second job to give your retirement savings an extra boost. In addition, many of the passive income generating jobs take some time to develop. That means the earlier you begin them, the more you can sit back and just maintain them later.

Side Job Category One: Jobs that Keep You Active

Pet Sitter / Dog Walker

Listen, retirement is not getting any cheaper or any easier. Everyone thinks they have enough saved for retirement as they near their golden years, however, the truth of the matter is that majority of people have nowhere near enough money saved. This is likely why you’re looking for a side job in retirement. Either that, or you’re just plain bored.

Either way, becoming a pet sitter or dog walker is a great opportunity to make a little extra money. 

Sites such as Wag! or Rover make it easy to do this. You’re probably already going to a morning walk anyway, so why not bring a furry friend with you and get paid to do it. If you’re really feeling adventurous, you could let the furry friend sleep over and get paid even more.

You could earn several hundred dollars a week all by just living as you normally would, but having an awesome four-legged companion with you. (From Austin with TheLogicofMoney.com)

Handy-Person

If you are good at fixing things, there are a lot of people that are not, and they need your help. People all over need help with small house projects and light outdoor work.

Becoming a “handyman” or “handywoman” might be as simple as making some quick business cards and passing them out to everyone you know. It is a great word-of-mouth, referral business, for those with a solid network of friends, family and co-workers. If you need help finding people to help-out and are comfortable online, services like TaskRabbit, can point you towards people looking for help.

Category Two: Jobs that Keep You Social

Vacation House/Room Renter

Tom Blake, from ThisOnlineWorld, suggests Airbnb as a way to stay both active and social in retirement while making extra money. He includes this in his list of “The Best Gig Economy Jobs – Make Extra Money On The Side.”

Airbnb allows you to make your house, or a room in your house available for rent to travelers. You can make decent side-income renting your home if you live in a well traveled area.

Tom mentions Airbnb is a great way “to make use of any extra space you might have in your home (in case you haven’t downsized) as well as meet new people!” Many of our friends have great Airbnb stories from both sides of the service. It’s a unique travel culture that can provide exciting experiences to an otherwise quiet retirement.

Drive for Uber or Lyft

Uber and Lyft are good ways to make a little extra money while interacting with new people. If you are in a touristy town and like to talk up your local hot spots and events, then you will find your happiness with a driving service.

On the other hand, driving services can also work out for people that don’t like to constantly chat (or drive around tipsy people late at night). Everyone needs trips to the airport, especially in the quite early mornings. Moreover, if you really aren’t feeling social, Uber Eats allows you to drive around food instead of people.

Category Three: Jobs that Keep You Creative

Selling Crafts – Online or In-Person

Craft Fairs are still hot! If you like to craft, you can tour your state (and beyond…) selling your creations. Makers Markets, Junk Stocks, Fundraising Craft Fairs, State Fairs and Flea Markets abound and are fun for all involved.

For those of you like enjoy selling online, the popular markets include Etsy, Artfire and Bonanza. To learn more about how to sell on Etsy and everything it entails, I recommend this article on Successfully Simple Sisters.

If you need help with setting up an online shop, hop onto a site like Fiverr and search for “help with etsy shop” or something similar. You will find freelancers that will help you get started!

Freelance Writer

For those of you that like to write, look into becoming a freelance writer. Online publications (and some local in print ones) are always looking for people to add valuable content to their sites for their readers. We suggest reaching out to the smaller ones you might already read first.

In addition, you can find places to write for by searching for “best sites for freelance writing” or something similar. Here is one article we found to start you off. Insert your specific area of interest to make it more relevant. For example, “best sites for music freelance writing.”

Category Four: Jobs for Retired People that Keep You Busy

Taking Surveys

If you are looking for a way to make money on the side that doesn’t take a whole lot of effort, then taking surveys is a fun way to pass your time. You can sit on the couch, listen to music or the TV, and provide your opinions to people who want them.

Popular online survey sites include Pinecone Research (which I did for a couple years and loved!), Opinion Outpost, Inbox Dollars, and the National Consumer Panel.

If you want to take this one into the “real world,” then look for paid opportunities for participating in Focus Groups and Health Studies.

Category Five: Jobs for Retired People that Keep You Challenged

Start a Blog

Oh boy, if you are up for the challenge, then try starting a blog! People actually do make money from their blogs these days – especially niche blogs. However, there is a steep technology learning curve, if you are not already very comfortable creating online.

Blogging can be a great way to generate passive income. Typically, you can make good money after years of effort, lots and lots of writing, and much search engine optimizing. If you enjoy learning and writing more about a subject you are already passionate about, then you will love blogging. On the other hand, you will also have to find learning about blogging interesting, because half of your time will be devoted to that.

Tutor or Teach

Both in person and online, tutors and teachers are in demand. If you have a field of expertise or passion for helping a certain age, then start there. This is a great business to grow by word-of-mouth if you have a decent network of friends and family to reach out to, but there are also businesses that can bring you students. Tutoring centers exist both online and in physical locations and are always looking for qualified help.

If you have graduate degrees in certain areas, you can look into teaching at your local universities and community colleges as an adjunct professor. Certain fields are always looking for people with Master’s degrees and beyond to teach both online and in person classes.

Jobs for Retired People Conclusions

jobs for retired people

There are so many opportunities to create the kind of retirement and work-life you want in our new economy. The New Rules of Retirement say you have the creative power to shape your life.

You can work and play at the same time with these part-time jobs.

We will be continually adding to this list. We would also love to hear your suggestions and what has worked well for you. Please email us or comment below.

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