Guest Post

Helpful Ways to Retire Without a Mortgage

March 8th, 2012  |  Published in Guest Post  |  2 Comments

The goal of all retirement financial planning is simple—you need to be earning more in passive income than you spend each month. Retirement doesn’t necessarily happen at age 65. For some it happens much earlier in life due to good business decisions, inheritances, etc. For others, it never happens!

One of the best ways to ensure that your passive income covers your living expenses is to focus on eliminating or significantly reducing your monthly expenditures. If most Americans look at their monthly expenditures, the largest ones tend to be mortgage, food, and possibly health insurance.

As a retiree past the age of 65, your health insurance will be covered. And, your monthly food costs will be significantly lower than they were when you were raising a family. The mortgage, however, is typically the largest monthly expense that retirees often carry with them into retirement, and this can cause undue financial stress during a period of time that should be the least stressful of all.

Percentage of Families with Mortgages

Every three years, the Federal Reserve Board publishes a study titled, “Survey of Consumer Finances,” which surveys economic conditions in the U.S. The latest published study available is from 2009, and the data tells this:

  • In 1989, only 26.4% of all households with head of household over 65 years old were carrying a mortgage during retirement.
  • By 2007, 46.5% of all households with head of household over 65 years old carried mortgages during retirement.
  • That is a mind-boggling 76% increase in less than 20 years.

The trend is obviously growing. However, with simple planning and discipline, one can eliminate the mortgage and gain debt relief well before retirement age, which will significantly increase monthly cash flow during retirement.

The Extra Payment

Compound interest is incredibly powerful—both for good and bad. It works against you if you are the borrower. For example, a $200,000 mortgage at 6% for 30 years will result in a monthly mortgage payment of $1,200- without taxes and insurance. At the end of the 30 years, a borrower will pay over $230,000 in interest alone!

However, if a person is able to pay just a few extra dollars each month, it will save thousands of dollars off that total interest payment, and it will reduce years off the mortgage. An additional $100 per month would save nearly $50,000 in interest and shave 5 years off the life of the loan in our example above.

Refinance

This is probably the most common method of reducing the life of a loan. If you are currently holding a 30 year note on your home, you can refinance at record-low interest rates. Because interest rates are so low right now, you may be able to refinance from a 30 year loan to a 15 year loan, without much of a significant bump in your monthly payment. Similar to the extra payment plan, this will shave tens of thousands of dollars and years off your loan.

Trade It In

If you are nearing retirement and have nearly paid off your current home, consider selling it and using the equity to purchase a smaller home, condo or townhouse that you can afford in cash. This eliminates your monthly payment and gives you financial peace of mind.

Rent

Although it is the American Dream to own a home, renting is often the better financial decision. When you rent, your total monthly expenses (taxes and insurance) are much, much lower, and you are not responsible for any large repairs or home improvements that may need to be made.

How Much Should You be Saving?

January 19th, 2012  |  Published in Guest Post  |  5 Comments

The following is a guest post.

When you are young, retirement seems to be a lifetime away. Being told that you should save for that day is difficult to comprehend. But the fact of the matter is that even if we are young and healthy and fit, we have parents and grandparents who are older and we should take our cue from them.

Their standard of living should be an eye-opener for you. Do they battle to make ends meet or do they live comfortably with money left for traveling and dining out?

How Much To Save

It is generally accepted that you should save at least 10% of your annual income. If you can push that up to 15%, it will be so much better. There are those who advise that 20-30% should be the aim, but think about your living expenses up until your retirement.

You should first eat and then save. Sources are useful for viewing the wide variety of savings products available to choose from.

The idea is that you should steadfastly continue to put away the 10%, but in addition to that, set aside another 10% in an income-generating product.

The Alternative Income

To stop your day job and put all your efforts into a get-rich-quick scheme means you may falter on both counts. But sticking to your 9-5 job and starting something else on the side can work wonders.

If you can find something that you enjoy, let’s say it’s a hobby and you work one hour on that for every ten hours you work at your regular work, you have started on your alternative income.

A passive income would be ideal but is it possible? Even if you don’t like a specific idea, if you can work the idea and turn it into an additional income over time, it is going to come to your aid when you want to stop the regular job.
If the alternative income does turn into a full-time business over time, that’s good, but if it does not, it really doesn’t matter. What matters is that you find an idea or two that can keep your attention and that can start generating an income for you.

Your ability to earn an income is your biggest asset and that does not only mean working 9-5. It means generating an income from a small business or a hobby. You can earn more working for yourself than working for a boss.

You can also use 10% of your working time and invest that into developing your sideline. In other words, instead of saving the 10%, you can “save” 10% of your time to generate that extra income. If you continue to work at this and the income grows, there might come a time when you can bid your boss farewell.

Any additional cash that you are not using for daily and monthly expenses can be saved on top of your 10% saving. A visit to money saving websites will bring ideas for additional savings.  Put your savings in online savings accounts so it won’t be easily accessible.  So, if you can keep up the day job and start a side job, the combination of the two will work nicely when you want to retire.

This means you will retire with the retirement money from your work and the 10% you set aside yourself and you will have the income from the side job on top of that. By doing this, you should be able to get to your retirement rather sooner than later.

Retirement, Saving and the Base Rate

November 18th, 2011  |  Published in Guest Post  |  4 Comments

By the time we retire, we (should) all aim to have enough money set aside to ensure a comfortable standard of living in our latter years. The way we do that can differ: some people put their trust in pensions; others in property; others in stocks and shares; still others in a combination of investments.

Here, though, we’ll have a look at straightforward savings: at people who like the idea of putting money in a savings account and watching it grow over time as (a) they add to it and (b) it accrues interest.

For anyone who’s thinking of saving up to help fund their retirement, it’s important to understand about the base rate and how it affects the interest rate paid on savings accounts.

The base rate, set by the Bank of England, influences how much interest banks will charge on mortgages and loans – and pay on savings. ‘The Bank,’ its website states, ‘sets interest rates to keep inflation low to preserve the value of your money.’

Right now, with CPI inflation at 5% (October’s figure, the latest available), it follows that the actual ‘real terms’ value of money is falling quickly. Inflation should be around 2%, the target set by the Chancellor, but it’s been well over that target ever since December 2009.

It’s been a contentious issue for some time now – particularly among savers, who have, in general, seen the returns on their savings plummet since the base rate dropped to an all-time low of 0.5% in March 2009.

When inflation outstrips returns on savings, it means those savings are actually worth less as time goes on – that ‘money in the bank’ might be growing, but not as rapidly as costs are going up. Figures from the Bank of England show that savers had (by September) collectively lost out on £43 billion of interest, thanks to the low rates of interest paid on their savings. For someone who was counting on that interest, it’s bad news indeed.

On a brighter note, savers who are also borrowers might find the money they’ve saved on their mortgage actually outstrips the loss on their savings.

For many people with variable-rate mortgages, the interest charged on their mortgage dropped a long way when the base rate did. In other words, their mortgage payments have been far lower than they ever expected: Bank of England figures show that borrowers have collectively saved £53 billion since the base rate dropped to 0.5%.

If you like, you can see this as proof that every cloud has a silver lining – after all, plenty of people out there see property as a great way of saving up for retirement.

Elderly Investing in Property

October 19th, 2011  |  Published in Guest Post  |  Comments Off on Elderly Investing in Property

Real estate loans are often marketed to young professionals that are often just starting out in life. These individuals seem to be the ideal property buyers but they often do not have the financial assets to qualify for a loan. The group of people that could benefit the most from real estate loans are older more established individuals. They can enjoy all of the following benefits.

Elderly people often get better loan terms

Getting financing for a loan today takes a better credit score than it did in the past. The stringent requirements for buying a home actually benefits older individuals. Building a really high credit score requires that you have a long term track record of paying your bills on time. Older individuals are far more likely to receive better home loan rates when seeking mortgage refinancing and home purchases. Being older and keeping a good credit score can lead to great loan terms.

Elderly people often need smaller homes

As people age and get older, they are often in search of a new home that is more suitable for their needs. A great big house with many floors might be perfect for a young family raising kids. An older individual with an empty nest however may prefer to downsize to a home in which everything is on one level. Ranchers require a whole lot less work to take care of and make it a whole lot easier for people to get around. This will make it easier on the person that wants to live on their own.

Elderly people want to leave their children an inheritance

The single greatest asset that most elderly individuals can leave to their children is a home. The bulk of the retirement income that most people have lies in their own home. Many elderly people know that the market has been down for awhile now and it may take years to recover. While they may not be able reap all of the rewards of a future housing rebound, their children certainly can. Leaving family members with a valuable piece of property is a great way to start them off on the right foot.

Before agreeing to any purchase or refinancing loan, you need to shop the loan being offered to several lenders. Compare home loans being offered and see which ones makes the most financial sense based on your income and living circumstances.

The Most Effective Ways to Save

September 16th, 2011  |  Published in Guest Post  |  4 Comments

The current economic climate is not beneficial for savers. Low interest rates and the rising cost of living make it difficult for most households to save. Careful planning can, however, help maximise the rate of return on any savings made.

The most important thing to consider when deciding where to place savings is what they will be used for. Are you saving for general retirement or are you saving up for a specific event, such as a big holiday or a wedding?
If you are saving for a particular event, then you should consider a notice account. You have to give notice of any withdrawal but in return, you get a better rate of return than an ordinary savings account.

ISAs continue to be one of the best ways to save in the UK as any interest gained is tax free. There are various types of ISA and the one you choose will reflect your needs and requirements. The section on the individual types of ISA at moneysupermarket gives more details on the different ISAs available and rates offered, but a brief summary follows.

Cash ISAs – Each year you can save an amount set by the government into a cash ISA. In the tax year 2010/11, this is £5,100. Different ISAs have different rules. Some allow you to access cash when you like. Others offer a higher rate of interest but you can’t touch the money for a year.

Some cash ISAs allow you to pay in a regular sum. Others only allow you to pay in once. Some have fixed rates and some have variable rates. It all depends on how much money you can put aside and when.

Monthly savings usually have lower rates but are easier for most people to manage. Fixed rates can seem attractive, but bear in mind that rates can vary widely over a year.

Once the tax year has ended then you get a new allowance that can usually be added to the balance of the old.
Another type of ISA is the Stocks and Shares ISA. This is more risky as your investment is tied to the performance of the stock market, which can be volatile. However, any gains made on your ISA investment are interest free.
This type of ISA is worth considering when saving long term, as historically, the stock market offers good rates of return, particularly over a long period.

For those saving specifically for retirement, there are a number of options. First and foremost is a pension fund, often available through employers. These have the advantage that employers often contribute as well.

If you are not eligible for a company pension scheme then you can still save using retirement accounts. There are different types of account available. You can put aside a regular amount monthly or an annual sum.

For those who have some money that they are prepared to tie up for a number of years, fixed rate accounts can be a good option. These are often called bonds.

In bonds or fixed rate accounts, savers have to be prepared to tie up their money for between two to five years. In general, the longer you are prepared to tie up the money, the better the interest rates.

Some accounts offer fixed interest rates but savers should remember that economic conditions can change dramatically over a period as long as five years. Therefore a fixed interest rate that seems attractive at the beginning of this period might not be so attractive at the end of the period.

The primary things to consider when you are choosing how to save are when you need access to the money and how much money you can afford to set aside. This will help you decide the type of savings account you need. You can then compare and contrast interest rates to help you make you make your final decision.

Southern Scotland paying the highest energy rates in Britain

September 1st, 2011  |  Published in Guest Post  |  Comments Off on Southern Scotland paying the highest energy rates in Britain

Research recently conducted by comparison site moneysupermarket.com electricity prices, has shown that the residents of southern Scotland pay the most for their dual fuel supply, compared with the rest of Britain.

Moneysupermarket’s aim was to find out just how much people were overpaying by on their energy, in order to encourage them to take a leap of faith and switch from their region’s incumbent provider. According to experts at the price comparison website, British consumers could stand to save up to a quarter on their energy bills – that’s £287.12 for per year for many residents in southern Scotland, for example.

Currently, it is estimated that British bill payers collectively squander around £3.2 billion per year simply by remaining loyal to their region’s often expensive energy suppliers. Householders are urged to get online and start finding out which energy supplier is cheapest in their area so that they can make the change and save a few hundred pounds per year.

The research by moneysupermarket also went on to highlight that British Gas currently provides the least expensive energy supply in 2011, with its Websaver 11 package having come out on top as the industry’s best value tariff in a whopping 13 out of the 14 UK regions assessed.

Quite simply, householders who have never thought to switch from their region’s standard energy supplier currently pay a great deal more for their energy than they would if they decided to compare gas and electricity prices and switch to the cheapest deal.

Utilities manager, Scott Byron, at Moneysupermarket.com explained: “In the days before the energy market opened up to competition, British Gas provided gas to all energy regions while electricity was provided by one regional supplier, for example London Energy in London which now falls under EDF Energy. Despite the greater choice available to consumers for both gas and electricity, the majority of UK households remain with the providers who traditionally provide their gas and electricity.

“Anyone still loyal to their incumbent supplier is over paying for their gas and electricity. At a time when all UK households are feeling the pinch from the rising cost of living, people are still burning money by not shopping around, using comparison sites and switching to a much cheaper deal. Finding the right tariff for your consumption level and region means bill payers could save on average £265 per year.”

Mr Byron also pointed out that buying an online tariff is the way to go: “The best value deals available are the energy companies’ online tariffs. They enable consumers to pay monthly installments, record actual meter readings with an online account and cut out the need for estimated billing. Paying by monthly direct debit allows consumers to spread the cost of their energy evenly throughout the year and avoid the ‘bill shocks’ that come after the costly winter months when energy usage is at a peak. If households aren’t on this kind of deal they really need to act now. Times are still tough and even though the warmer months are on the way, there is never a bad time to start saving money on your energy bills.”

Car Insurance Bumped

September 1st, 2011  |  Published in Guest Post  |  Comments Off on Car Insurance Bumped

Insuring a car can be expensive to do, but it doesn’t have to be, as there are many ways in which the consumer can get their hands on cheap car insurance quotes.

To insure a vehicle is a legal requirement and there are many insurance companies that offer car insurance policies that are tailored to the individual’s need and budget.

A car insurance policy needs to be renewed on the same date every year and although the policy that is currently running seems to suit your needs and requirements now, this may not be so when it comes up for renewal.

Allowing a car insurance policy to automatically renew itself can lead to the monthly, or yearly, payment being bumped up and as such, it is always worth, a few weeks before your policy is due for renewal, shopping around and getting quotes from other insurance companies. This can potentially save you a substantial amount of money.

Being a sensible driver can also help as the number of years you have of a no claims bonus can entitle you to heft discounts from some insurers, as, by not claiming on the insurance policy for an accident or theft from the vehicle for example, proves to the insurer that you are not a risky driver. Claiming on the insurance policy will see the cost of the monthly installments rise significantly the following year.

Keeping your insurance policy to a minimum can also help to save money as, if you add extras onto it such as legal protection, breakdown assistance and the use of a courtesy car should your own vehicle be damaged in an accident and therefore off the road for a while, can all add extra cost. Paying for a comprehensive insurance policy when you drive an old vehicle can be false economy and insurance providers may suggest a third party, fire and theft policy better suits your needs.

Car insurance for young drivers is something that is worried about, particularly by parents of those who have passed their test but are still under the age of 25. Shopping around can help you find the best deal but the choice of the car for your youngster can go a long way in helping to keep cost down.

A sensible, middle of the road vehicle will cost substantially less that a vehicle which has had improvements to it, such as alloy wheels for example and it is worth encouraging your youngster to keep their annual mileage down as low as they can. Enrolling them onto an advanced driving course will also be beneficial as any tests they pass proving that they are a sensible driver will go a long way in reducing car insurance for young drivers.