\nYou can start your stockpile by ignoring these common pieces of money-saving advice.\n
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Talk to your old man or your grandma and they\u2019ll nag you to the ends of the Earth about preparing for retirement. But while these money-saving tips seem smart on the surface, John Deglow, CFP, AIF, at Unified Trust Company, says the reality is many retirees live well below their means and this figure greatly overestimates the income they\u2019ll actually need once they put in their notice.\n
As an example, a couple might make $100,000 a year after taxes, but once the kids have flown the coop and the mortgage has been paid off, they actually spend $50,000 annually on expenses. So why would they suddenly need $80,000 to make ends meet when they\u2019re job-less? \u201cA better assumption might be that you would need 80 per cent of your current expenses\u2014not income\u2014during retirement,\u201d he says. Even so, make sure to book a one-on-one with a trusted financial professional who can help you better understand the effects of inflation and accommodate other issues unique to your situation, he adds.\n
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When it comes to signing on a dotted line, you shouldn\u2019t have any doubts, says David Rosen, licensed associate real estate broker. \u201cOften, people advise making a list of pro\u2019s and con\u2019s to decide which home to purchase,\u201d he says. \u201cHowever, if you feel uneasy about an investment or a savings platform, then you are right. Just don\u2019t do it. That list is there to trick your intuition, but your intuition is keenly aware of what\u2019s likely to be a poor investment.\u201d\n
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Debt might always have a negative connotation, but Jeffrey Sklar, managing partner of Sklar, Heyman, Hirshfield & Kantor LLP, says pre-paying and making additional mortgage payments aren\u2019t smart money-saving tips. How come? Your cash could be put to better use and make you more money. \u201cMost folks don\u2019t analyze if there is tax benefit to the interest deduction, as well as opportunity cost in taking the funds from a potential investment with a better rate of return,\u201d he explains.\n
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If your addiction to Starbucks is nearly as committed as your marriage, your friends might raise an eyebrow when you talk about your daily visit. Sure, it\u2019s pricey, but financial expert E. Matthew Buckley says skipping your morning latte fix won\u2019t make a huge difference in your savings picture, though it will impact your level of happiness and concentration. \u201cLife is too short to skip the things you enjoy. This type of money-saving tip is very tactical and amounts to nothing more than running around in front of a steamroller to pick up dimes,\u201d he shares. Instead, talk with a professional who can help you come up with a savings plan that leaves room for your caffeine fix. You should also steal these secrets from the filthy rich.\n
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We hate to break it to you, but for most, this figure is far too low, according to Deglow. How come? Between modest incomes at first jobs and student loan payments, most people aren\u2019t able to save 10 per cent of their income until they\u2019re further along in their career. And once they reach the point where they\u2019re able to tuck away cash, it could be too late to only set aside 10 per cent. To determine the smartest percentage for your lifestyle, chat with a professional who can map out a detailed plan with money-saving tips to prep you\u2014and your bank account\u2014for your golden years.\n
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Depending on your tax bracket and incoming earning, your tax refund in April might feel like the only way you can save money. But this is a dangerous way to save, since it doesn\u2019t directly benefit you in the way the dollars could if you invested them instead, Sklar says. As he explains, \u201cEvery taxpayer is better off investing their funds than providing the government an interest-free loan in the form of overpaying their taxes. It\u2019s much better to have the extra money go directly into an investment each pay period.\u201d\n
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There\u2019s a lot wrong with this statement, according to Deglow. First and foremost, he notes, not everyone needs life insurance. \u201cIf there isn\u2019t anyone who would become financially compromised should you pass prematurely and you have enough assets to pay off your liabilities, life insurance may not be a necessity,\u201d he explains. However, if you do have a spouse and\/or children, you need to crunch the numbers to fully understand how much you\u2019re setting aside. As an example, Deglow explains someone who brings in $100K a year and opts for a $700K life insurance benefit, might be shortchanging their family. \u201cWithdrawing 4 per cent of $700,000 would provide only $28,000 annually for your family. A more aggressive withdrawal rate of 6 per cent provides $42,000, again much less than the family was accustomed to,\u201d he shares. And to make it more complicated, he notes this doesn\u2019t address other liabilities, such as mortgages, credit cards, student loans, and more. His advice?\n
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If the thought of an estate plan hasn\u2019t crossed your mind, consider this your not-so-gentle nudge to do so. While Deglow acknowledges it might not be a super-happy topic to address, the truth is no one know when his or her last day will be, and it\u2019s important to plan for what will happen to your assets. And even if those earnings or ownerships are minimal? It\u2019s still your responsibility. \u201cRegardless of income or wealth, families should plan for guardianship of their children, list beneficiaries, and create other documents addressing Powers of Attorney, naming an Executor, and establishing a living will. Essentially, everyone should leave instructions for what they want to happen, so that those decisions don\u2019t fall on family members who are likely already going through a difficult time,\u201d he says. \u201cIf you pass without an estate plan, your state has a default plan for you, which may or may not follow your wishes.\u201d\n
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Less practical and more karmic, Rosen says being a Grinch with tipping isn\u2019t a way to get ahead on your savings goals. \u201cThe opportunity costs of being known as \u2018cheap\u2019 as opposed to \u2018generous\u2019 are great! However, the amount of money you save by skimming a few bucks here and there are not life-changing,\u201d he shares.\n
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Much like your mortgage, if you use your extra cash to prepay your taxes, Rosen says there are better uses for the extra dollars. While some do this in an effort to avoid paying them late\u2014which carries a steep penalty\u2014he notes a better money-saving tip is to place the funds in a low-risk cash flow investment. \u201cYou will come out ahead, and it\u2019s probably a better investment. The government is going to stay in business with you paying on time, there is no benefit to you to pay them in advance,\u201d he explains.\n","protected":false},"excerpt":{"rendered":"
You can start your stockpile by ignoring these common pieces of money-saving advice. You need 80 per cent of your pre-retirement income to maintain your current lifestyle during retirement Talk to your old man or your grandma and they\u2019ll nag you to the ends of the Earth about preparing for retirement. But while these money-saving\n","protected":false},"author":1,"featured_media":20980,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_seopress_robots_primary_cat":"","_seopress_titles_title":"","_seopress_titles_desc":"","_seopress_robots_index":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[21],"tags":[46,6,103,196,31],"class_list":{"0":"post-20979","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-tie-life-style","8":"tag-life-hacks","9":"tag-life-style","10":"tag-money-hacks","11":"tag-money-saving-2","12":"tag-tips"},"jetpack_featured_media_url":"https:\/\/legendstitch.com\/wp-content\/uploads\/2021\/11\/money-saving-tips-stop-believing.png","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/legendstitch.com\/wp-json\/wp\/v2\/posts\/20979","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/legendstitch.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/legendstitch.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/legendstitch.com\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/legendstitch.com\/wp-json\/wp\/v2\/comments?post=20979"}],"version-history":[{"count":0,"href":"https:\/\/legendstitch.com\/wp-json\/wp\/v2\/posts\/20979\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/legendstitch.com\/wp-json\/wp\/v2\/media\/20980"}],"wp:attachment":[{"href":"https:\/\/legendstitch.com\/wp-json\/wp\/v2\/media?parent=20979"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/legendstitch.com\/wp-json\/wp\/v2\/categories?post=20979"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/legendstitch.com\/wp-json\/wp\/v2\/tags?post=20979"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}