Encountering Speed Bumps Along the Way to Retirement

I didn't plan on it, but it happened. Earlier this year, a tree fell on my home and I ended up paying for repairs and dealing with the costs after deductions are accounted for. This leaves me with a little debt on my credit cards. My normal approach with credit cards has generally been to pay them in full at the end of each month. Unfortunately, I have to deal with some additional budgeting to pay off a larger balance than usual. I was hoping to keep this streak of not having any consumer debt as retirement nears and of course, when I'm fully retired. But these things happen. 

Fallen Tree 

One way I could combat these in the future is to have some of the following in place. 

• EMERGENCY FUND - I'm told from others and reading financial posts, is 3-6 months of monthly expenses saved. These are hard to have on hand as I tend to invest more with my extra money. I need to probably divert some into this account to avoid any "emergencies" hence a tree falling on my roof and deal with repairs. Using a high yield savings account certainly helps to keep emergency funds in tact and also easy to access but harder to avoid temptation in using for other reasons besides emergency. That is a very helpful tip. 
  
  
• HOME EQUITY LINE OF CREDIT (HELOC) - I'm not a big fan of these times of loan. As it's borrowed against the equity of your home. But it's good to have on hand just in case you need to do any home improvements and repairs. Rates are variable and usually you have a time frame to pay off the loan on the principle amount only. 
  
  
• DESIGNATED CREDIT CARD - This route may be much more ideal. If you have a credit card with a low interest rate, charges can be placed on this card for repairs. Be sure to pay them off in a timely manner as interests can add up. 
  
  
• BALANCE TRANFSERS - If you shop around with current credits that you have, you can look for any offers that they offer for balance transfers be made with no interest rates after a certain period of time. This one you'll need to be on top of it as well as once the end date occurs, high interest rates will kick in and that be dangerous, it would have defeated the whole purpose in a breathing room to pay off your balance without incurring any interest changes. Caveat on this route, is that the credit card company will charge a percentage of the amount of each transaction or $5 minimum, whichever is greater.

Overall, we have choices in combating debt that may arise, these strategies, can really help take the stress out of any temporary inconveniences. Hopefully I won't have very many of these during retirement, but if I do, I'll be armed with some options to consider. 

Year Out Before Retirement - Am I Ready?

My last blog post was last December, come to think of it, I'm technically able to tap into my retirement accounts. I believe for those who are 59 1/2 years old, your able to draw from these types of accounts without any penalty. But do I need it as this time? 

As I gear up for retirement next July, I feel I'm in a bit of a speed bump in saving for retirement. Earlier this year, I was hit with a huge tax bill as well as liability on my home insurance. Apparently a tree fell on my home during the winter season. I had to pay for the deductible and that set me back. Tapping into my emergency reserves was hard, but I'm glad something was in the reserves to tap into, that really helped. Also, for some reason, I didn't withdraw enough in taxes and I ended up paying, that also put me in a pickle to tap into my emergency reserves. 

As a result of these sudden expenses, I had to also finance some of the portion on a credit card. Good thing, I was able to snag a couple of credit cards with zero interest for a year to allow me to pay back these expenses I incurred. So, one, emergency reserve fund helps in these situations. 

Since this happened, I had to build back up my emergency reserves, so this will take some time. 

I think once these areas area stabilized, I think I might be able to breath a little better. Not what I expected in my last year before retiring. I was hoping to save like crazy in my last year, but I think in the long run I should be fine. The other area I cleaned up in the past few months in dealing with my finances was to consolidate my accounts to one brokerage. I had to say goodbye to my financial advisor who was charging me over 1% on assets under management (AUM) fee? It appeared to be a lot for so little that I had in my account. The brokerage I'm with, Fidelity Investments is also the record keeper of my employer's retirement accounts for me. They don't charge as much. So having to focus on on brokerage with nominal fees at this time, saved me tons of money in fees. My focus is to be aggressive in my investing. 

Photo credit

In the next 3 months, I hope to be rid of most of my credit card balances that are not zero interest as well as build up some emergency savings before then. Usually the goal is 3-6 months of monthly expenses. Cross fingers I can be rid of my remaining credit balances in 2025. 

Stay tuned. Stay focused on saving and living within my means. I just might be ready for retirement. 

End of Year Check List

As I write this post mid December, I wonder what things I need to gather and prepare for the coming year in terms of retirement planning which also includes tax preparation. 

Certainly, I need to organize my paperwork for my finances, and also get all my "to-do" list planned out. 

Here are a few points I need to make as the year closes and prepare for 2024. 

CHECK LIST

• Review your net worth statement - It's good practice to compare how you did this past year and last year. Add all of your assets minus your liabilities. From there you'll have a sense of what you have to work with and help you navigate for the new year. In addition, you can make some nice improvements going into the new year. 
• Review your savings strategy - Are you saving enough? Is there a goal in place to get to where you want to be? What are you saving for, are you on target? These are just some of the questions you should answer to guide you to better saving as you are close to retirement. 
• Saved enough in your emergency fund - So many recommendations out there, how much to saving for an emergency? Some say 3-6 months of expenses, others say, save for two years worth of expenses, as you are no longer working, so if anything happens, you'll have a buffer to combat any downturn in the economy. Personally, I think saving at least 6 months should do it and saving it in a high interest bearing savings or money market account. FDIC insured, of course. 
• Plot out your trips/ or high ticket expenses - Say you have a couple of big trips planned in the new year, have you saved or will save for these trips? Good idea to budget for these trips. Or if you have a home expense, i.e. new windows, it would be a good idea to save for that to avoid being in debt. 
• Saving for yearly expenses - Good idea to budge for property taxes, yearly subscriptions, these can creep up and blow your budget. Great start is to set aside the dollar amount before the bill is due. I say automate to deposit into a high interest bearing account.
• Pay credit card balances in full each month - this allows you to be ready when your on retirement mode on day 1. The last thing you want to contend with is balances that are not paid off at the end of each month and incur interest which can throw off your budget as a retiree. Make this a priority to not let this become a problem. 

Finally, it's a great idea to review all your expenses this past year and see where you can cut to manage your overall expenses in the new year. 

Let's get out there and make your financial life easy!