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5 Financial Tips

It’s common to not want anything bad happening to us or our loved ones. But not properly planning for these circumstances can end up being a very costly mistake.

Here are five financial topics that many people will put off for as long as possible. These delays end up costing significant amounts of money down the road if you’re caught off-guard.

Funding retirement savings

Why people put it off: There are other bills to pay or other purchases people want to make. Also, if you don’t have access to an employer’s retirement plan that can make retirement saving less automatic. Sometimes parents prioritize paying for their children’s education instead of funding their own retirement.

How it costs people: They may have to work longer or during retirement. It can also cost them the retirement lifestyle that they envisioned. It can also cause parents to be forced to live with their children if they didn’t properly plan for retirement.

What you can do: Make sure you start contributing toward your retirement as early as possible, with the goal being to maximize your annual contribution. But even if you can’t reach the maximum level, try and push your limits by raising the percentage you contribute toward a retirement account.

Buying life insurance

Why people put it off: If nothing bad happened to them previously, they think nothing bad will happen in the future. They also don’t like to think about death. Or they rely too much on a smaller insurance policy through work.

How it costs people: People aren’t properly prepared when an unexpected death happens and people’s lives are significantly impacted. A family may be forced to move if they can no longer afford the mortgage or rent upon the death of a parent.
With a proper policy in place, a child’s college tuition could be taken care of if, God forbid, a parent passed away. Without one, saving for college may be even harder for one parent. Grieving is hard enough. But grieving — and worrying about money — would make the situation even more stressful.

Procrastination here also costs people as life insurance rates generally increase as people get older. We usually don’t get healthier as we age.

What you can do: Use a life insurance calculator to see how much your family or loved ones would need if something were to, God forbid, happen to you or your spouse.
For many, term life insurance is sufficient. It’s usually the most cost-effective option too.

Getting disability insurance

Why people put it off: They assume they’ll stay healthy and nothing will happen to them. It’s the money-saving mentality that they’ve gotten by without it, so why pay for it in the future.

How it costs people: If you’re not able to work, then you likely won’t have a regular stream of income coming in. Or that stream may be substantially reduced. This can cause you to deplete your savings. Or it could cause you to incur debt or be forced to dramatically cut your spending.

What you can do: Make sure you look into disability income insurance if you wouldn’t be able to live without your income. Don’t assume that health problems and other circumstances can’t happen to you.

Making a long-term care and estate plan for their family

Why people put it off: Nobody likes to have a conversation about death. It can be even harder to talk about death with your loved ones. Also, the pressure for the perfect plan could lead to no decision or no plan put into place.

How it costs people: Better planning can help parents make better living choices when they age. Parents leaving a house to loved ones might not be the best decision in some cases.

What you can do: Try to plan some sort of gentle conversation about the topic with your parents and see where it goes from there. Make the best possible decision now, especially if it’s a decision that you can change. And then revisit that decision in a year to see if anything changed or if you changed your mind.

Building savings and maximizing returns

Why people put it off: They might not think it’s worth it because they think the interest won’t add up over time. They don’t see the big picture of letting money just sit there, not earning a competitive yield.

How it costs people: Not earning any interest really hurts your future purchasing power. It’s not something you can see on a month-to-month basis. But long term, your money is losing future value. Even if you’re only earning a few dollars in interest, that’s better than nothing.

What you can do: Use a savings calculator. Plug in your current APY and then compare savings and CD rates on Bankrate. Calculate how much money you would have if you were in a higher-yield account.

Moral of this blog - it is better to be prepared, anything can happen!

Homebuying terms that start with A

Starting off the new year with some fun vocabulary terms is a great way to learn more about the home buying process. By reading this, you will gain a better understanding of the following: amortization, adjustable rate mortgage, annual percentage rate, assessment, and arbitration.

Amortization is the process of paying off debt with regular payments made over time. The fixed payments cover both the principal and the interest on the account, with the interest charges becoming smaller and smaller over the payment schedule.

An adjustable-rate mortgage, or ARM, is a mortgage with an interest rate that can be increased or decreased from time to time, depending on various factors. An ARM is helpful for someone taking out a mortgage during a period of low interest rates, especially if the ARM has a relatively longer fixed-rate period.

Annual percentage rate, or APR, is a way of measuring the full cost a lender charges per year for funds. Typically associated with mortgages, loans and credit cards, APR combines the total amount of interest payable and the cost of other fees and charges, averaged over the term of the loan and expressed as a percentage.

An assessment establishes the value of an asset, such as a home or a vehicle, for taxation purposes. In some cases, an assessment is calculated to determine risk or the quality of a company’s asset management.

Arbitration is a process for resolving legal disputes without going to trial. Both consumers of a company’s products or services as well as employees of that company may be compelled into mandatory arbitration proceedings when they file a complaint against the company. As arbitration becomes increasingly widespread, it has also become more controversial because it tends to favor the company at the expense of the claimant.

Look for homebuying terms starting with the letter B next month!

New Year, New Goals

With the new year, it is common for people to start thinking about new year’s resolutions. Goal setting can actually be very beneficial to one’s success. It can improve your focus and help you accomplish a lot of different things.

1. Goals trigger behavior
2. Goals guide your focus
3. Goals sustain momentum
4. Goals align your focus
5. Goal setting promotes self-mastery

Being able to master goal setting can help build your integrity and truly promote people to start sticking to their word. Being that goal setting is mostly inner-integrity, accomplishing goals can certainly be easier said than done. 

With that said, HOME Inc. also provides counseling and education programs which focuses on setting goals, budgeting, and help set clients up for success. We are in the business of empowering families to create housing stability and we do that through 1:1 counseling and of course, goal setting. Let us help you through these adversities and conquer the year of 2020 together!

Bring on the new year!