The Finance Blogger


Rent Your Home to Retire Early

May 21st, 2017 ernie Posted in Debt Freedom No Comments »

Rent your home to retire earlyShould you rent your home to retire early? This is the question many people ask themselves at various stages in life. Retired baby boomers traditionally have a home they have owned for many years. It is paid off and worth a small fortune. Should they unlock this value by remortgaging, selling and renting or take a reverse mortgage? What about millennials just starting out. Should they buy a home now and incur all of the maintenance expenses, taxes etc along with interest payments on the mortgage? Or should they rent an apartment and set aside the savings for investment?

These are hard questions and many do not have easy answers. There are some fundamental truths that everyone should consider before making a decision. Every person will answer them differently. It is very important that you assess these questions from a personal perspective before making a decision.

Rent your home to retire Early – Fundamentals

  • Will you save and invest your savings from renting
  • Can you deal with the risk associated with your investments
  • Income from work only will not allow you to retire early
  • Must have investments that grow on their own – real estate, stocks, equities
  • Can you live in a frugal manner
  • Do you have the discipline to save for retirement
  • Do you have the discipline to not touch your savings

These and a few other questions basically describe someone who is a risk taker, focused on saving, understands that they need to invest in something that will grow over time in addition to the money he or she puts in.

 

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Pay Off Debt the Right Way

December 21st, 2014 ernie Posted in Debt Freedom 1 Comment »

Pay Off Debt the Right WayConsumers can save themselves a great deal of money if they can pay off debt the right way. They can reduce the overall amount of interest they pay on this debt. Consumers can also reduce their monthly payments as well and that leads to an easier financial lifestyle. In this post we will discuss some of the key steps or guidelines to follow. They will lead to a healthier financial lifestyle and leave money in your pocket to be used for other priorities. Aside from the obvious, i.e. don’t get into debt in the first place, paying off debt the right way is something to pay attention to.

Pay Off Debt the Right Way

Pay off high interest rate debt first – if you have a mixture of different kinds of debt at various interest rates, it makes sense to pay off the high interest debt first. Credit cards typically have higher interest rates than do personal loans for example. Either consolidate the credit card debt with a low interest personal loan. Or pay them off before paying down other lower interest debt.

Avoid pay day loans – payday loans are among the most expensive loans available with high interest rates and fees that are charged. Avoid pay day loans like the plague. Even credit card debt costs less than payday loans will cost. If you have a payday loan, this is the first debt that should be fully paid to reduce the significant expenses associated with carrying this kind of loan.

Avoid zero interest credit cards – these kinds of cards are great if you have the discipline to avoid carrying a balance after the initial grace period.  Once the grace period is over, the full debt is charged at the prevailing interest rate. Which is usually in excess of 20%.

Don’t Panic

Don’t panic, get advice. – If you have a lot of debt and are worried that you cannot see a way out of the mess, seek some advice from professionals. Beware of anyone who is trying to sell you a financial product as a solution. Although it could be the right answer, it can and will likely cost you even more money.

Avoid band aid approach – figure out the best long term approach. Band aid approaches are usually just that and will just help you financial situation get worse. Seek advice, develop a plan that is focused on meeting short term issues as well as the long term debt. Then implement that plan with the goal of being debt free as soon as possible.

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Most consumers will not retire debt free

December 2nd, 2013 ernie Posted in Debt Freedom No Comments »

Most consumers will not retire debt freeOver 51% of homeowners are confident that they will retire with some kind of debt including a mortgage payment, even though they feel it is an important goal to retire with no debt payments.  The reality is that Most consumers will not retire debt free. Most people are not happy with how they are managing their debt and have not sought the assistance of a financial planner. Consumers are generally unhappy about how they’ve managed debt. They have failed to develop a financial plan, a plan that they can follow through life and as a result they have no idea whether they will have sufficient funds available to support them during retirement.

They come from all walks of life and income levels as well. They are worried about their quality of life during retirement and they are worried about whether they can enjoy themselves. will they have enough money for travel, for visiting the grand kids or even buying the food etc that they need. For some,  it means they have to continue working well past the age where they expected to retire.

Most Consumers Will Not Retire Debt Free

Increasingly people as they get closer to retirement are realizing that they will have to work longer just to maintain their quality of life during their older years. They do not have the savings to rely on and they must work to ensure the income levels they need to maintain the quality of life they are used to.

Develop a Financial Plan Now

Developing a financial plan, consolidating your debt into one low-interest loan, focusing on reducing your debt, and discussing your retirement plan and savings plan with a financial adviser are key attributes for people who would like to retire debt free. Spend a few hours a month to get your financial plan in order. It could mean a huge difference for you and your family later on in life.

Discuss your plans with your spouse and write them down. Focus on meeting whatever objectives you set. Make sure your investments are diversified so that if one investment suffers a loss, you are only partially impacted. Ask for advice from several people, read about financial planning and do not follow advice blindly without testing the advice with other people.

If it sounds too good to be true, it probably is too  good to be true.

For more posts about debt freedom, click here.

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Debt Collection

September 7th, 2013 ernie Posted in Debt Freedom No Comments »

Collection of debt is something that most people really do not ever want to have to deal with. Debt collectors specialize in collecting debt from people who have been unable to repay their debts. Once a loan has gone for several months with out the monthly payment being received it can be quickly turned over for debt collection and next thing you know you are getting these obnoxious phone calls from debt collectors asking for money.

Debt Collectors

Debt collectors can also come after people who have a payment that they should have paid and for what ever reason have missed the due date. For example, failure to pay your hospital bills, x-ray charges etc can also trigger these kinds of calls and nasty letters in the mail.

Depending on the size of the debt, whether it is secured or unsecured, debt collection will take various forms and may be quite troubling to many people. For example let’s assume you purchased a car and took out a loan when you bought the car. The loan would have been secured by the car that was purchased. If you decide to miss payments on the car loan, debt collection may start with phone calls. Then they gradually proceed to more drastic action. At the worst point after all negotiations have finished, the debt collection process will move to a point where they move to repossession of the car.

Debt Collection – a Last Resort

Basically this is the last resort. The lender needs to repossess the car in order to sell it. They wil use the proceeds to recover the loan and all fees associated with the cost of the loan and repossession. Don’t ever allow your debt situation get to this point. Take action and pay your monthly payments. Also talk to the lender to negotiate or renegotiate the loan.

If you are beginning to receive those automated phone calls about debt that you have and are just ignoring them, it may be time to just step up and deal with the situation. The automated calls are just the first step. They will progress to even more annoying steps from the debt collectors. They could even begin calling at work or talking to your boss and colleagues. Deal with the situation before it really gets out of hand.

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Making My First Million

August 2nd, 2013 ernie Posted in Debt Freedom No Comments »

Making My First MillionIn my early thirties I decided that I wanted to make a million dollars at some point. I was making about $35,000 a year total income, had a home that was heavily mortgaged and two kids and my wife stayed home to raise the kids. A pretty traditional life since I fit in well with my peers. There was one difference, I wanted to have a million dollars in assets before I retired. At the time making my first million looked like a huge challenge. I was not sure how I was going to accomplish this seemingly unattainable feat, however looking back on it now, it was relatively easy although not without some risk.

What Were My Strategies re Making My First Million

Making my first million was really a combination of strategies, listed below:

  • Saving
  • Investing
  • Buying a home
  • Starting a business
  • Becoming a landlord
  • Setting a budget
  • Finding deals
  • Doing it Yourself

Here is more detail about making my first million.

Saving – was definitely a factor in contributing to a million in assets. Like many consumers, I contributed to a retirement plan and the money grew from there. It was a factor that helped but certainly did not get me even close to the number I was looking for. Perhaps I did not save aggressively enough, however my main objective was to reduce our mortgage which is another form of saving and reduces the overall interest that you pay.
Investing – in the right stocks, mutual funds and bonds has also helped a great deal. Within my portfolio of investments which was my retirement plan, we made sure that we were invested in blue chip stocks that had a growth factor as well as a dividend paid every 3 months. Same with mutual funds. Bonds were something new to me and were part of my diversification strategy. When I invested in bonds I was able to buy bonds from good companies that paid in the 6% range which is very good by today’s standards.
Buying a home – was another huge advantage in terms of asset growth. Over the last 25 years my home has doubled in value. Location and quality mean a great deal. We have been offered some really great deals for our home, however we are not ready to sell just yet. Buying a home is so much better than renting in terms of asset growth.
Starting a business – we also started a small business which provided us with added income and tax deductions. It has not made a huge contribution to achieving the goal of a million dollars, however it has helped .

Becoming a landlord – by buying several apartments and town homes to rent out has definitely made a big contribution. We got the same asset growth that we did for our home and someone else paid for it i.e. our renters!
Setting a budget – and living within our means. We did not go into a lot of debt and have all of the toys that some people seem to have. We did go on a trip each year for two or three weeks and lately we have been going away for several months in the winter. But the bottom line is that we lived within our budget and avoided racking up credit card bills which would have triggered high interest charges.
Finding deals – and always s negotiating has saved us thousands. Our motto is “we always ask for a discount, the worst that will happen is that they say no” and they almost never say no. from 10% to as much as 50% savings have been obtained in this manner. When you apply this approach to everything you buy over 35 years, you can save thousands of dollars.
Doing it Yourself – is another way to save money and contribute to a million dollars. When you consider that every $100 you pay someone to do some work for you means that you must earn from $150 to $200 in before tax dollars, doing it yourself makes a lot of sense.

By applying all of these strategies we have easily attained our million dollar objective and now I am wondering how I should go about getting to two million while continuing to enjoy life and of course my retirement. Any ideas? Comments welcome.

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Biggest financial Mistakes – Too Much Debt

July 26th, 2013 ernie Posted in Debt Freedom No Comments »

Biggest financial MistakesOne of the biggest financial mistakes that many people make is taking on too much debt. It can slip up on many people without then even realizing what has happened to them. They may have a mortgage which also means they pay property taxes. They also probably have a car loan and a couple of credit cards. But then the house or the car needs repairs and they want to go on a trip or they really like buying clothes. Next thing you know their monthly payments for all of this debt are causing them a lot of stress. If for some reason you are unable to make all of these payments, your credit limit is going to take a hit making it more difficult to borrow money and you will probably have to pay higher interest rates as well.

Biggest financial Mistakes – too Much Debt

35% Limit

Most lenders view people has having too much debt when their monthly payments are more than 35% of their gross income. This includes all mortgage and loan payments along with the minimum payment on credit cards. Don’t forget to add in the property taxes as well. If you are close to this limit or over the 35% level then you are in the category of having too much debt.

Rising Interest Rates

If interest rates rise and your mortgage or loans have to be renewed, next thing you know your monthly payments are well above the 35% limit and you are also having difficulty in meeting your monthly payments, along with the utilities and all of the other bills that regularly come in.

Too Much Debt

Many people make this mistake and this is one of the biggest mistakes you can make when it comes to having too much debt. Pay off the debt as quickly as possible, eliminate the interest you are paying and make sure that you are not leaving yourself at risk due to increasing interest rates. You never know when an emergency will materialize and you do not have the savings or the room to add debt to help you deal with whatever emergency you may have. Always pay down your debt as quickly as possible.

For more posts about debt freedom, click here.

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When Will You Be Debt Free?

March 21st, 2012 ernie Posted in Debt Freedom 1 Comment »

Most people want to be debt free by the time they retire and most aim for this objective, however surveys are increasingly showing that most people are not achieving this aggressive objective nor are they coming even close to meeting it. When Will You Be Debt Free? Retirement with a nice nest egg seems to be a dream that many people are just not achieving.

Respondents to one survey projected they would be debt-free by 55, on average. A key finding of the poll shows that across all age groups, consumers tend to believe they will be debt-free within approximately 10 to 15 years of their current age. The reality is that many will not be debt free even into retirement. The poll found:

  • Consumers aged 18-24 believe they will be debt-free by age 32, on average
  • Consumers aged 25-34 believe they will be debt-free by age 44, on average
  • Consumers aged 35-44 believe they will be debt-free by age 54, on average
  • Consumers aged 45-54 believe they will be debt-free by age 60, on average
  • Consumers aged 55-64 believe they will be debt-free by age 65, on average

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