Are You Really Ready to Retire?

So you’re approaching the tail end of your career and hopefully you’ve done your self the favor of investing in a 401k or other type of IRA, perhaps coupled with a portfolio of mutual funds, stocks and other investments, you may even be one of those lucky few who have a pension. I am sure that you may have some very well thought out day dreams about what your retirement will look like, but if you are in a state of debt those ideas are just that; fantasies. Keep in mind that your wealth is determined by the value of your assets minus the cost of your liabilities.

If you are 55 and have elephant debt (debt that is at least more than half of your net income) you are in a world of hurt. Here are the facts about your situation, you are debt heavy and your working years are numbered, now assuming you are not one of those tragic figures who currently finds himself unemployed you have a window of opportunity to salvage your retirement outlook and bring your retirement fantasies closer to fruition. Your first step on your escape from retirement limbo is to zap all unnecessary weigh-downs. Weigh-downs are avoidable expenses that are holding you back from becoming fiscally sound before retirement; cable or satellite bills, phone bills, smart phones, buying bottled water instead of getting a filter for your faucet, taking vacations, buying new cars instead of repairing your current ones, frivolous purchases, etc.

By now you are thinking that I’m telling you that you that you have to downgrade your lifestyle; the truth is that I am only telling you to take into account the many leaks that are in your financial boat and attempt to plug them up.

Instead of paying $30-$200 a month for cable or satellite get Netflix or Hulu for less than $10 a month do this and you save yourself $180-$2,280 a year. Instead of buying cases of bottled water for $4-$6 a case buy a faucet filter and save dramatically each year. Instead of paying for a redundant land line consolidate your phone service to just your cell phone, secondly unless you truly need a Smartphone for your work than just get a normal cell phone that does what it is supposed to do; make and receive phone calls, do these two steps and save your self at least $1,000 a year, if not far more. Hold off on taking a vacation for the time being and instead put the money towards saving you financial future, this will save you at least $1,200-$5,000 a year.

Assuming that your elephant debt was not caused by buying a luxury car, you have a yet another way to pay off your elephant debt; don’t buy a new car! Instead of buying a new car drive the one you have and keep up with regular maintenance, literally drive it till it dies and you will instantly generate a net savings for your self of at least $5,000 a year. Do all of these things and you will have at least $6,588 on the low end and up to $12,592 at the high-end.

Keep in mind that you probably have other weigh-down expenses that only you could know about and so I leave it to your judgment what your course of action should be regarding them. For some people cutting off weigh-down expenses alone will put them on the right track towards being financially solvent by the time they retire, the rest of us probably face dramatic changes to our operating procedure. If you own a boat or even a plane it may be the time to liquidate those assets in order to free up cash flow towards paying off debt. Now chances are that your kids have moved out and you no longer need as big of home as you have, you could capitalize on this situation and either rent out rooms or down size to a smaller home. Keep in mind that I only recommend down sizing in extreme cases when no other alternative is readily available. Remember your goal is to be in a position to actually achieve your dreams when you retire, you can’t hope to do that if you are weighed down by debt.


Choosing an Investment Option: What to Look for

The simplest answer is often the right one and this is also true for the features of a good investment option. When you are choosing an investment option you should be looking for an investment which returns more money than you originally invested, and which doesn’t require more of your time than you’re willing to invest.

This sounds very simple, but becomes decidedly more complex when you look at just how many different ways there are to increase your investment. Therefore, you should start your search for good investment opportunities by speaking to people who are well and truly entrenched in the industry – this includes brokers, friends who are investors, your financial planner or anyone with pertinent inside information to seek personal advice and a greater understanding of how investments work.

You may think you have to look for a long term investment, or one which is high risk, but a good investment is simply one which yields you more money than you started with. At the same time, you don’t always know how much your investment is worth because you don’t find this out until you sell it. Therefore, while there is always a risk involved because you never know when you will be liquidating your investment, and at what sort of profit, there are several criteria you can look for.

What to Look for in an Investment

1 – Secure initial capital

This is where the risk is involved, because if your initial capital is safe, and you come out of your investment with the original amount you invested, you’ve lost nothing but your time. However, if you lose your initial capital, then you have lost both your time, and your means to accumulate more passive income through investments.

Therefore, a good investment option will strike the balance between risk and reward, based on your financial situation, and the amount you are investing. If you are investing $100 you may opt for a riskier investment option than if you were investing $100,000 because you can afford to lose your initial capital in the first instance.

2 – Profit

Keeping in mind that inflation can be as much as 4% each year, for your investment to make a profit, it must be returning more than 4% annually. As a result, property investment can be a good choice if you are looking for a reliable property because values always increase over the long term.

While the property market fluctuates, there is usually no bad time to buy an investment property because prices are going to go up. The best property investment you can make is a swift one, so that your property can start accumulating capital growth and equity as soon as possible.

3 – Liquidity

Where property investment offers you strong profits for the future, if you want to get rich quickly from your investment, or easily liquidate it for cash or other investment options, you should look elsewhere because the time it takes you to sell your investment can eat into your profits.

However, when you invest in shares you can easily log into websites where you can buy and sell shares in a matter of minutes. Plus, the market for shares in large blue chip companies is strong and plentiful so there is little risk of being stuck with shares you don’t want or need.

4 – Benefits

While there are opportunities to make short term gains with some targeted buying and selling of investments, you’re often in it for the medium to long term. Therefore, you should also look for other benefits, besides the increase of your initial investment, to tide you over.

With property investment for example there are a myriad of tax benefits you can take advantage of because all of the expenses such as your loan interest, rates and maintenance are deductible on your tax, and you can also claim depreciation on items such as the hot water service of the property.

The costs associated with shares are also deductible, including the interest you pay on your margin loan if you have borrowed to invest. You can also reap tax benefits from franking credits, or imputation credits because the companies you are invested in have already paid tax on their profits, and so investors receive franking credits on their dividends. Your share dividends can be a way to supplement your income as many large companies pay their share holders monthly or quarterly dividends for each share.

There can also be significant benefit in having a diverse investment portfolio, scattered across property, shares, bonds and cash, and even simply making sure your shares are invested in a wide range of companies. This ensures that if one of your investments suffers a loss or fails, your overall investment profitability and return won’t be affected. This is also quite easy to achieve because in many cases you can buy small share parcels of just $500 to diversify your investments.

5 – Cash flow

The level of cash flow you need to achieve from your investment will depend on your financial situation, and the amount you are investing. For example, if you are investing in property with the aim to benefit at tax time, you need to still remember that your investment loan repayments must be paid each month, before you receive the benefits back.

Therefore, make sure you carefully analyze your budget and projected returns, remembering you may not always be able to rely on investment income to maintain your cash flow.

6 – Legitimacy

One way above all that you can ensure you are making a good investment, which will secure you good returns with manageable risk is that you are investing in a legitimate venture. There are countless scams circulating which promise investors big returns on their initial outlay, but if you don’t do your research, you are putting that initial capital at a very big risk, for not reward.

A long established, yet still popular investment scam to watch out for is a Ponzi scheme, where the scammer collects funds from new investors as part of an investment syndicate, and instead use those new funds to appear to pay returns to existing investors, without every actually investing anything.

You can easily find information on legitimate investment options because information about shares for example is available on the news, the television, the newspaper and financial websites. As a result, you can maintain an accurate picture of the value of your investment. Plus, when companies are listed on the stock exchange, they are required to report regularly to their shareholders through announcements, where they share details of their full and half year financials, and anything else which could affect share prices such as acquisitions and divestments, while also responding to any queries regarding movements in their share price.