Five Reasons You Should Save for Retirement Now
March 27, 2013
By Nevin Adams, JD
Director, American Savings Education Program (ASEC), Employee Benefit Research Institute
It’s easy, in the normal press of life, to put off thinking about retirement, much less thinking about saving for a period of life many can hardly imagine. We all know we should do it—but some figure that it will take more time and energy than we can afford just now, some assume the process will provide a depressing, perhaps even insurmountable target, while others don’t even know how to get started.
Here are five reasons why you—or those you care about—should save for retirement now:
Because you don’t want to work forever.
If you want to stop working one day, you are going to have to think about how much income you will need to live after you are no longer working for a paycheck.
Because living in retirement isn’t free.
Many people assume that expenses will go down in retirement—and, in fact, a recent EBRI Issue Brief noted “With the age 65 expenditure as a benchmark, household expenditure are lower by 19 percent by age 75, and 34 percent by age 85….” On the other hand, there are changes in how we spend in retirement as well—and they aren’t always less. That same EBRI report notes that health-related expenses are the second-largest component in the budget of older Americans, and a component that steadily increases with age. “Health care expenses capture around 10 percent of the budget for those between 50–64, but increase to about 20 percent for those age 85 and over.” And those spending shifts don’t take into account the possibility of a need or desire to provide financial support to parents and/or children.
How to Train Your Willpower Muscles So You Can Stick to Your Budget
March 26, 2013
By Lila Quintiliani, AFC®
Military Saves Assistant Coordinator
Communication & Outreach
Lack of self-control; it’s one of the reasons we humans struggle with diets, budgets and interpersonal relationships. In the book “Willpower,” psychologist Roy F. Baumeister and science writer John Tierney explore the science behind why people struggle so much with self-control. It turns out we have a finite amount of willpower that can be depleted and then must be replenished. The good news, however, is that, just like a muscle, if we “exercise” our willpower, we can build it up to become stronger.
Learn restraint by practicing it
In the book, students who were the subjects of a study were able to seemingly acquire self-control when they were engaged in activities that required some effort – such as using a mouse with their non-dominant hand, watching their posture, or tracking eating. After doing this for a certain period of time, the students showed self-control in other areas of their life as well. In the financial realm, you could try tracking spending or perhaps catching up on some financial “homework,” such as checking on your TSP or IRA performance. However, it’s important not to try and tackle too much at once – if resistance is depleted too much, that’s when we are most vulnerable, whether it’s to spending sprees or red velvet cupcakes.
Part 2 of Side Accounts: What Are They and How to Use Them
How do you convince Monkey Brain to save for the holidays?
By Jason Hull
Hull Financial Planning
The best way to make sure that you’re setting aside money for your irregular but recurring expenses, such as the holiday season, vacation, a car replacement, insurance payments, health care deductibles, and the like, is to hide money from yourself.
Hide money? Am I telling you to go stuff money in a mattress?
Not exactly. Plus, if you did that and the house burned down, good luck convincing the insurance adjustor that you had a few C notes stashed away in the box springs.
Instead, what we do is set up a separate account for setting aside that money. It’s different from the account where you get your paychecks deposited into. Theoretically, it should be more difficult to access money from this account so that you don’t go spend it in a wild bender of a shopping spree, so, depending on how much self-control you have, this could mean going to another bank for this account.
5 Fast & Easy Ways to Save $50 per Month
If your overall financial picture needs to be improved, it's going to take some time. However, you've got to start somewhere, and your monthly expenses are a good place to begin. Saving $50 per month may not sound like much, but if you can find five different ways to do this, you'll have saved $3,000 in only one year. Here are five simple options:
1. Clip Coupons. Most folks simply do not realize the power of clipping coupons to save on groceries. If you take it to the level of extreme couponing, you can shave as much as 80% off your monthly bill. Pick up a few extra copies of the Sunday paper, and get the kids involved to find coupons for the items you buy the most. Then, shop on the days when your grocer doubles their value to maximize savings. Organize your coupons in a file folder by expiration date so you can be sure to use them before they expire.
2. Bring a Brown Bag Lunch to Work. Lunch is minor expense in the eyes of most, but it adds up fast. Let's say you eat out every work day and spend an average of $7. In one month, you've spent $140. Instead, pack some of last night's leftovers, or make a sandwich for yourself for a brown bag lunch. That way, you can easily cut your daily lunch expense in half, which saves much more than $50 over the course of a month.
3. Eliminate Your Landline Telephone. If you have a cell phone, you may not need a land line anymore. As long as you have a reliable Internet connection, you can pick up a device that connects to your computer and then to a telephone, such as a magicJack. The upfront cost is minimal (around $40), and an annual subscription costs less than $50.
Stretch Your BAH With These 6 Simple Steps
If there's one skill you should have in your money-saving arsenal, it would be knowing how to get the biggest bang for your buck when it comes to your BAH (Basic Allowance for Housing). When you’re stateside, you receive all of your BAH regardless of the amount of your rent, which means that if you spend less than your BAH, you pocket the rest. If that isn't motivation to live moderately, I don't know what is! Here are a few things you can do to make sure that you make the most of your BAH:
1. Make sure your rent does not exceed your BAH limit. Even better? Keep it under!
If at all possible, keep your rent under your BAH limit. Why? So you can cover some of your utility bills, too. If you can cover part of your water, electrical, or gas bill, that’s less money coming out of your base pay.
How to Make Sure You Have a Smooth Move
2. Cutting it close to your BAH limit? Negotiate with your landlord.
If the house or apartment you’re eyeing is just slightly outside of your BAH, don't be afraid to negotiate with the landlord! The same qualities that make military members are mark for predatory lenders (i.e. regular, salaried pay) make you a desirable tenant. Many landlords desire military members as tenants because we're typically low risk for non-payment. It’s also a good idea to have the local JAG (Judge Advocate General) office take a glance over your lease before you sign to make sure everything looks correct.
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