My Investing Blog

How Do You Earn Money From Affiliate Programs?

Maricel — Wed, 08 Feb 2012 18:36:46 +0000

Don’t let the title confuse you. This is just another way of earning passive income online via one type of internet marketing called affiliate marketing. Simply put, it’s the income derived when an affiliate website sends traffic or generates sales for a merchant website. Affiliate websites post links to merchant sites and are paid through a certain agreement. If the links bring traffic or sales, the merchant site pays the website according to the agreement. This works well with content-driven websites (blogs for example) that brings in high traffic. The higher the traffic to the website, the bigger is the chance for visitors to click on the links and generate sale.

Popularized by Amazon.com in 1996, they have grown very popular nowadays. A lot have even banded into affiliate program networks. But how do affiliate websites get paid?

Basically are paid according to three basic arrangements: pay-per-sale, pay-per-click or pay-per-lead. In the pay-per-sale arrangement, merchant pays the affiliate when it sends a customer that purchases something. It could be in terms of percentage of the sale or fixed amount per sale. In pay-per-click the affiliate gets paid for number of visitors “just clicking” on the link without necessarily generating sales. When an affiliate generates a lead, somebody gives the merchant site specific information that could lead to a sale; the affiliate gets paid via pay-per-lead scheme. There are a lot of other arrangements with some providing residual income for the affiliate. This happens when the visitor continues to pay from the merchant site.

Sounds easy? Let’s make it easier for you to earn as an affiliate from the traffic on your website, blog, etc. by mentioning the most popular merchant sites now that have successful affiliate programs:

Amazon.com of course tops the list! It has now more than 900,000 affiliate websites making it successful as the world’s largest on-line retailer.

Google AdSense lets you earn when it displays Google ads on your website. You can either earn via cost-per-click (also known as pay-per-click) or cost-per-thousand-impressions (unique page views). Launched in 2003, it has ever since become a favorite among affiliate marketers and online passive income earners.

PayDotCom now boasts of 400,000 affiliate websites and 1,000 new affiliates every day. It has received positive reviews and endorsements from online passive income blogs and affiliate marketing blogs.

ClickBank is actually an online digital retail store offering 50,000 products with over 100,000 affiliate sites. They pride themselves of up to 75% commission, presence in 200 countries and reliable tracking and payments. There are varied reviews on ClickBank especially on their payment schemes but suffice to say it is real and one can earn money from it.

There are still a lot out there and the number of affiliate programs and its networks grow daily. Don’t take my word for it; look for what’s best for your website or blog.

Affiliate programs are easy to set-up but they

do not earn money overnight. If you have an existing website or blog already, you can easily join any affiliate program. The good

thing about it is you can invest a few hours weekly and generate real passive income online. You can also get die-hard, turn into a pro and create multiple income streams from multiple websites. Bottom-line is you can earn money from it!

10 Easy Tips to Reduce Your Income Taxes

Jason — Tue, 07 Feb 2012 18:35:25 +0000

Photo by John Morgan

By Jason Van Steenwyk

In the end, it’s not about how much you earn, but about how much of it you get to keep. In most cases, this means that you want to minimize your current year tax bill. There are, however, cases where it is better to pay the tax bill now in order to avoid having to pay higher taxes in future years.

November and December are prime time for forward-thinking individuals and business owners to do some tax planning for the year. Moves you make now can pay off very quickly. Here are some of the things you can accomplish now, before the end of the year, to keep the tax man at bay.

Do an AMT assessment. AMT stands for “alternative minimum tax.” The AMT is a supplementary set of income tax rules designed to ensure that families with significant incomes can’t use deductions and tax loopholes to avoid income tax altogether. When it was first passed in 1969, it was only intended to affect the wealthiest families. But they never indexed it to inflation. As a result, more and more middle class families are falling prey to AMT rules. If you have a lot of deductions, you own your own home, you normally have a significant state income tax liability, or you have several children, and your household income has been on the rise, or you got a bonus, you may well have an AMT liability this year.

Contribute to an IRA. Provided you meet the income qualifications, a traditional IRA allows you to deduct up to $5,000 in contributions. Double that for married couples, and add another $1,000 each for qualifying individuals over the age of 55. Yes, the rules give you until April 15^th, 2012 to make your contribution for tax year 2011, and April 15^th, 2013 to make your contribution for 2012. But by contributing early, you give your investments that much more time to compound. You also set yourself up to make manageable monthly contributions to your IRA for 2013. Better yet, you don’t even have to itemize your deductions! Traditional IRA contributions are “above the line” adjustments to income. You can deduct the full contribution, provided you meet the income guidelines, even if you don’t itemize.

Pay your property tax early. These are normally deductible expenses. But if you are subject to the AMT, that deduction may be disallowed. If 2012 is likely to be an AMT year, but 2013 is not, you may be better off making the payment in 2012.

Cancel out your capital gains taxes. If you sold property at a gain in 2012, you will probably have some capital gains tax liability. For long-term gains, this tax maxes out at 15 percent of your gains. If you held the property for less than a year, however, expect to pay taxes at your higher marginal income tax rate, which could be as high as 35 percent. However, if you have investments outside of retirement accounts that lost money since you bought them, you can sell some or all of them and cancel out some or all of your capital gains taxes – a technique known as “tax loss harvesting.” If you have excess losses, you can deduct up to $3,000 in losses against income per year, carrying any additional losses forward to future years. Beware, however, of “wash sale” rules. To get the benefit of claiming a capital loss, you cannot repurchase the same or substantially identical securities for 30 days.
Use your Flexible Spending Account. If you have a flexible spending account at work, you may well lose that money at the end of the year. Now’s the time to schedule that Lasik surgery, or take care of that medical treatment you’ve been putting off. Otherwise, that money goes back to your employer and you lose the opportunity. Check with your HR department for your balance and to learn how the rules apply to you.
Bunch medical deductions. Did you have substantial medical bills in 2011? You can deduct medical expenses against your income, but only to the extent they exceed 7.5 percent of your income. If you expect more medical spending in the following 2012, try to commit the funds this year, bunching your expenses into a single tax year. This will allow you to maximize your deductions, which would be substantially reduced if you spread them out between 2011 and 2012. Actually, this strategy works with all kinds of itemized deductions. Miscellaneous (non-medical) itemized deductions have to exceed a threshold of 2 percent of your income for you to begin benefitting from the deduction. Whether the applicable threshold is 7.5 percent or 2 percent of your income, you want to concentrate as much deductible spending as you can into one year. Otherwise, you’ll have to get all the way through the threshold amount all over again next year before you can begin taking deductions.
Give. You can give up to $13,000 per year to any recipient you choose, without incurring any kind of tax liability (subject to a lifetime exemption of $1 million.) If you’re married, you and your spouse can give $13,000 each, for a total of $26,000 per recipient. A deliberate gifting strategy can be a great way to move money out of your taxable estate, as well as protect it from those who may target you in a lawsuit. It may also help you qualify for Medicaid in later years, provided you make the gift more than 5 years before applying for Medicaid benefits.
Pay down your mortgage. The interest you pay is normally deductible against income. By bumping up your payments in December, you can make a noticeable reduction in your tax bill for this year.
Put Off Profitable Sales. If you don’t have any capital losses to offset gains, try to put off selling property at a profit until after the end of the year. You may have some losses you can use to offset your gains next year, and you’re putting off the due date on capital gains tax liability.
Check Your RMDs. If you are over age 70, it’s time to pay close attention to required minimum distribution requirements. The IRS requires you to begin taking money out of your IRAs and 401(k)s beginning on April 1^st of the year following the year in which you turn 70½. Thereafter, you must take the distribution by December 31^st of each year. This will create an income tax liability for you, since distributions from these accounts are taxable. But the penalty if you miss the deadline is severe: If you blow your RMD, the IRS will assess a penalty of 50 percent of the amount you were supposed to have taken.

Remember, tax planning is complicated – even for professionals. Very few people who don’t do taxes for a living can efficiently keep track of all the tax issues, traps, pitfalls and planning opportunities that may arise. Except for the very simplest of cases, it almost always makes sense to invest in the services of a tax professional.

Understanding the Basics of Stocks and Bonds

Kristen — Tue, 07 Feb 2012 17:40:31 +0000

Photo credit: Alex E. Proimos

Whether you have some cash you want to directly invest or you are just trying to decide on the best plan for your retirement savings accounts, understanding how stocks and bonds work is critical. Although they seem intimidating, the concepts of stocks and bonds are actually quite simple for anyone to understand.

First, let’s start with stocks, which are what usually comes to mind when people think of investing. When a company wants to grow and needs capital, one technique it uses is going public and allowing individuals to buy shares of the company, represented by stock certificates. The shareholders take on partial ownership, with claim to a very small percentage of the company’s assets and earnings.

The confusing aspect of stocks is that their current prices are dependent on what people will pay for shares, not on how much the company has in physical assets or earnings. If people fear a company will perform poorly and start selling stocks, the price will decrease until demand rises again and individuals purchase stocks at that lower price. Therefore, stocks can be very volatile, increasing and decreasing in value throughout the day. However, in the long run, the stock market as a whole gains about 10 percent per year, making it a great long-term investment. This long-term gain is based primarily on actual earnings by the companies.

When investing in stocks, you can either select individual companies to include in your portfolio or buy an index, such as the S&P 500, to get a wide variety of stocks that will track market trends as a whole. The best strategy depends on whether you feel educated enough to select stocks on your own and how much you want to be paying attention to industry news and making decisions on when it is time to sell a stock.

Now, on to bonds. These are a way for a company to directly borrow from investors rather than selling shares of the company itself. When a company issues a bond, it promises to pay a percentage of interest to the bearer each year, in addition to buying the bond back for its face value after a specific number of years. Bonds are a bit of a gamble because the company could go under before the bond is bought back, but overall, they are less risky than stocks.

One of the interesting things about bonds is that their market price often varies from their face value. Depending on how well the company is doing and how many years are left until maturity, investors might offer to pay less than or more than the bond’s face value to buy a bond on the market.

Stocks and bonds are the two major types of long-term investments, along with mutual funds that are combinations of different stocks and bonds managed by a professional investor. Mutual funds are an easy way to invest without doing much legwork yourself. You can select funds with different balances of stocks and bonds to manage your risk and expected return based on your investing strategy.

Teaching The Entrepreneurial Mindset To Your Kids

Maricel — Mon, 06 Feb 2012 17:33:44 +0000

How are great entrepreneurs made? The answer is a classic nature versus nurture debate! Sure we have heard of successful, famous entrepreneurs and leaders, as well as well-known creative artists with the “CEO Disease”. People like Ted Turner, Pierre Peladeau, Abraham Lincoln, Vincent Van Gogh; even Steve Jobs was said to be diagnosed with this type of mental illness medically known as manic depression or bipolar disorder. Scientific evidence points to protein abnormalities in the brain linked to genetic origins as the cause of this disease that gives these successful people the kind of mindset to relentlessly pursue ideas and turn them into successful money-making ventures. A lot of entrepreneurs and people studying them argue that environmental exposure plays a bigger role in developing the entrepreneurial mindset; that the nurture part is even more significant than any natural predispositions.

Being a mother of two young boys, aged 9 and 5 years old, I tend to agree on the nurture part of raising kids to become successful entrepreneurs. Here’s what me and my husband have been doing with our kids.

Teach your kids to love money early on. “Money is the root of all evils”. Enough of this crap! We tell our kids that not knowing how to make money is the root of all evils. That not knowing how to manage your money is even more evil. You often hear my 9 year old discussing with his brother how to raise money to buy toys they want.

Teach them financial concepts at every opportunity. Then 4 years old, you would hear my oldest son talking inside the toy store: “Mom, I found this toy, the number at the back (he means price by the way) starts with 1 followed by two zeroes, that’s expensive right? Oh wait, here’s another one that starts with 1 followed by one zero then a period, I know this one we can buy!” Now 9 years old, before going to the toy store he asks: “What’s our budget this time Mom?” What’s more delightful is when he tells his younger brother that a certain toy is too expensive to buy!

Turn their passions into entrepreneurial opportunities. My oldest loves computer games so much. He does not only play them during his spare time but also create them on paper every chance he gets. He’d get so enthusiastic about creating games he ends-up asking me to hold a flashlight while drawing his games before bedtime so as not to disturb his already sleeping brother. We finally decided to buy him a game creator program (it pays to have a programmer for a husband) and told him he can create games in his spare time. We will create a website where he can post his games, told him that maybe he can generate income through advertisements first then from sales later. We got a big, approving grin from him!

Teach them to save early. They both have savings account from cash gifts, piggy bank savings but we have decided to follow Cameron Herold’s advice in his TED Talk on raising kids to be entrepreneurs and give them two piggy banks. All the money they earn or receive split into two, one for their savings, and the other for buying toys they want. Of course with a reminder on buying only toys appropriate for their age.

Encourage their obsessive tendencies as long as it is not alarming that will require medical attention. My 5 year old builds Lego creator toys very fast without looking at the manual. He relentlessly builds them until they perfectly fit together and looks like the pictures in the toy box. The same goes for cities he builds using wooden and magnetic blocks. We encourage him to speak what he think is wrong and why he is not yet satisfied with his creations. We offer suggestions and help him build them until he gives his nod of approval. I tell you, when we think everything is perfect, he proves us wrong every time by coming-up with a better design or lay-out. It sure tests our patience but he just won’t give-up until he is satisfied!

We know have a long way to go. Although our parents did not teach us financial education or entrepreneurship and we sure did not learn them from school; we’re glad we are teaching them to our kids.

Why Are So Many People Buying Gold?

Jason — Sun, 05 Feb 2012 18:29:05 +0000

by Jason Van Steenwyk

Photo Credit: Covilha

It seems like these days, gold is all you hear about on the radio. Talk radio and television is thick with advertisements hawking gold and precious metals as an investment. And these days, there’s even a thriving segment of the financial planning industry dedicated to helping people own gold in their IRAs and other retirement accounts.

So why the craze? Several reasons:

Crisis

We recently had a severe liquidity crunch that threatened to disrupt the entire financial system. When real estate prices collapsed, they took a lot of banks down with them. Other banks got nervous. Banks lend huge amounts of money to each other all the time – our system depends on banks covering each other when they have a limited short-term cash crunch. But with so many banks in trouble at the same time, many banks stopped lending. They couldn’t tell which banks would still be in a position to pay back the loans. The contagion spread to money markets – where cities, counties, states, and corporations borrow money from to make their payrolls. Only a massive intervention by the Treasury and Federal Reserve reassured lenders – otherwise paychecks would have bounced all over the country, causing an economic collapse.

The danger is not over yet, as of 2012, many investors feel. We could still see a replay in Europe, for example, as the euro is undergoing a severe crisis that may also endanger a number of major banks.

Over thousands of years, gold is the time-honored store of value. Governments rise and fall, currencies rise and become worthless. But gold has retained near universal acceptance as a medium of exchange and store of value. It is therefore an ideal hedge against the possibility of economic collapse.

Quantitative Easing

In order to stave off an even more severe recession, and to help encourage banks to lend, the Federal Reserve has been aggressively increasing the money supply, both by buying Treasury bonds on the open market for cash (technically, by crediting the reserves of banks, enabling them to lend more against their reserves), and by holding interest rates down. However, when you increase the money supply so much for so long, you run the risk of cheapening its value. Again, the Federal Reserve’s policy of quantitative easing – increasing the money supply in an attempt to stimulate the economy – risks flooding the market with too many dollars. This cheapens the dollar’s value against gold, land, and other goods that can’t be manufactured with the word of the Federal Reserve. When the dollar’s value falls, inflation is the result. When investors lose faith in the willingness of the Reserve to maintain the value of the dollar, they start trading their cash and paper money for gold and gold-backed assets. The price gold tends to rise with the increase in demand.

Speculation

Some investors want to buy gold or precious metals because it’s gone up recently. We call these “momentum traders,” though some of them may well be “dumb money getting lucky.” Protecting yourself against possible economic collapse and hedging against inflation are both excellent, rational reasons to own gold with part of your portfolio. But I would advise investing in anything today, just because it went up yesterday, for the same reason you can’t drive forward by looking in the rear view mirror.

Think of it: Gold is a rock. It does not create wealth. It does earn money. It does not pay a dividend. It is not so much an investment as a way to help protect yourself in case other elements of a traditional portfolio collapse.

That said, if uncertainty continues in Europe, if the U.S. Federal Reserve continues its aggressively easy, stimulative monetary policy, the price of gold and other precious metals may well continue to rise. On the other hand, a certain amount of ‘hot money’ may also have pushed the price of gold up beyond a sustainable level. In which case, gold prices may level off or decline. If the “hot money” panics and flees gold for something else, you could even see a sharp decline – though it’s impossible to imagine a reasonable scenario in which gold would fall to zero.

The bottom line – don’t rely on gold to make you rich. But it can help you survive and thrive when everyone around you is rapidly getting poor!

Can I Fund My Spouses IRA If They Don’t Work?

hank — Tue, 30 Aug 2011 16:00:26 +0000

Dear Hank – My wife is a stay at home mom. With a traditional IRA she is eligible for the “spousal IRA.” Can she open a Roth IRA as her spousal IRA, meaning I can invest $8,000 of my income, with half of that in her name? – Peter from Mississippi

Hey Peter – Good news – As long as one spouse has at least $8,000 of earned income, and your joint MAGI is under $160,000 (as you’ll reach your phase-out for ROTH in 2007) both spouses can contribute $4,000 ($8,000 total) to their respective Roth IRAs. Each spouse can contribute an additional $1,000 if he or she is age 50 or older by the end of 2007. So tap it out if you can! Thanks for the post!

Would you like to ask a question on MyInvestingBlog.com? I’m happy to answer it if I can – Contact me to submit the question.

Photo by: dittaeva

Interested in Going To Finance School?

Hank — Fri, 17 Dec 2010 02:39:20 +0000

A degree in finance will prepare one for a career in banking as well as a position with prestigious financial institutions or with the government. A degree in finance is often associated with obtaining careers accounting and banking, but a degree in finance offers the training that can lead to a career in many different management opportunities. Such a career involves decision-making for government agencies, private organizations, and stockholders. A finance career involves understanding a client’s fiscal objectives and then problem solving, locating solutions, and finding resources to reach those goals. The minimum level of education in order to obtain a professional career in finance would be a bachelor’s degree; however, many students choose to move on to a MBA finance program. This allows one to vastly improve their career options. And as with other degrees pursuing a degree in finance in an online program through one of the many online schools is a very attractive option as many students can receive training from online finance schools.

The most common finance training programs include concentrations in corporate finance, financial planning, insurance, money management, commercial banking, investment banking, money management, or real estate. All of these specializations within a finance career will each require a different set of strengths and skills. However, there are basic skills any student in finance should have. Students considering a degree in finance require strong skills in mathematics as well as solid analytical, interpersonal, and problem solving abilities. A good deal of training can also be completed on the job or via work-study or an internship program. Experience can sometimes be nearly as important as education in order for one to move up in the industry, but of course this depends on the nature of the specialization. For example banks typically promote from within the organization for positions such as a branch manager, whereas other financial managers may enter their area of specialization with a formal degree-training program.

Even though experience is important, a finance degree from an accredited school is crucial. Distance learning has many advantages for working professionals. Distance learning via online schools offers flexibility, allows a student to work around their existing schedule, allows students to keep their jobs and attend school, and is affordable. Getting professional certifications also allow for the opportunity to increase ones skills and qualifications and there are a variety of associations that offer professional certifications.

Online finance degree programs may offer classes in areas such as financial management, management information systems, corporate financial management, or organizational development. An MBA program in finance allows students to extend their education and focus on research, corporate development, and statistics. A finance MBA can often be completed in less than two years and allows a good opportunity for students who wish to further their finance career.

The schooling is worth it. The demand for experienced and degreed professionals in finance or financial advisers has risen especially as companies are confronted with a competitive economy. Insurance carriers and banks employ most of those with finance degrees, but financial managers can be found in nearly every area of industry. With the shifts in the economy the need for financial managers and those with areas of specialization in finance is expected to rise at least through the year 2014. The potential for growth in the securities and commodities industry is expected to be most favorable. The median annual earnings of financial managers was $81,880 in 2004.

Going to finance school is an option that can pay big dividends in a student’s future. There are a number of different programs and potential degrees that can fit nearly anyone’s interests. Online schools offer the flexibility and affordability to allow a student to pick the right area of specialization for them, learn at their own pace, and keep their existing job.

Getting Through Christmas Frugally

Hank — Fri, 03 Dec 2010 16:32:27 +0000

It is that time of the year again and you are all geared up to celebrate a grand Christmas. But the expected expenses mar your festive mood. Are you sure that you are financially prepared to enjoy this day? Well, worry not! You can very well celebrate Christmas this year by being a little more careful and responsible with your finances. Read on to know how you can celebrate a wonderful Christmas without breaking the bank.

Make your own gifts: Buying gifts for Christmas can be a very expensive affair. The best way to save your hard earned dollars is to make the gifts yourself rather than purchasing it. The idea is to be creative and you will be surprised at the amount you save up. Baked cookies, preparing chocolates at home or hand-made woolen stuffs are just some of the ideas which you can consider to celebrate a frugal Christmas.
Plan the expense for the dinner: Planning out the cost of the dinner will prevent you from overspending. Calculate the number of guests that you are inviting and plan the menu accordingly. A great idea is to ask the guests to share in the preparations. This will split the cost of the meal among the guests and the dinner won’t take a toll on your limited budget.
Budget your celebration: List out your planned expenses within your affordability so that you can avoid hardships later. This will help you to save money before the festive season so that you don’t have to buy gifts on credit. If you find that your expenses are exceeding your budget then you can look for some other alternatives.
Try frugal decoration: Keep the decoration theme simple so that it doesn’t take a toll on your pocket. This is a good time to pull out your old Christmas decorations and decorate your house with the same. How about using the old cards? Trim them in a pattern from the sides and hang them on the walls or windows. Use colorful wrapping paper to wrap up some empty boxes and pile them up in the centre of your table. Be innovative and you will be sure to weed out unnecessary expenditure.
Cut the shopping spree: You can always curb your expenditure by sticking to your budget. Frugal Christmas shoppers always finish under budget .You can try out dollar stores or local discount stores where you can purchase things at a discounted rate. A lot of people donate stuffs to thrift stores in December to get an end of the year tax deduction slip. Thus, it is a good time to visit these stores, too.

Stick to these points this year and you can be sure to celebrate a frugal, yet wonderful Christmas. Hosting Christmas on a tight budget is not difficult, all you need is a little determination and you can be sure to set an example that the value of this festival is not replaced by a commercial overkill!

Need Help Getting Rid of Tax Debt?

Hank — Sun, 25 Jul 2010 21:04:17 +0000

Taxes are nerve wracking for most people. With an increasing number of Americans falling into debt each day, tax debt greatly adds to the financial stress. Therefore, it’s very important to find ways to relieve yourself from the burden of tax debt. Read on to know how you can go about doing this successfully.

1) Seek help of a tax agent: A professional tax agent or a trustworthy accountant can help you to take control of your tax problems. Do not worry about the fees that you will have to pay to your tax agent as it will be menial compared to the much larger debt accumulation and IRS penalty fees later on. The worst thing you can do is to wait for things to get out of control. Meet with a professional after organizing all your financial papers, tax documents, spending records etc. This will help you to get rid of your tax debt as fast as possible.

2) File for an extension: If you are facing trouble filing your (federal) tax forms on time, you can file for an extension. You, or your accountant, can file Form 4868: Application for Automatic Extension of Time To File U.S. Income Tax Return. This helps you to extend your time by six months to file your taxes. You should file for form 4868 by April 15^th and you do not get extra time once your six month extension is over.

3) Set up a payment plan for your back taxes owed: Set up a payment plan with the IRS if you can’t pay your taxes in full this year or you still owe taxes from the previous year. But for this, you need to prove to the IRS that you will be unable to make your payments in full without experiencing economic hardship. Once you can meet this qualification, an affordable payment plan can be chalked out. This will satisfy both you and the tax collector.

4) Consider an Offer in Compromise (OIC): If you are unable to meet even the minimal fees of tax collectors, then you can go for an OIC. This is an agreement between you and the IRS that allows you to settle your tax debt by paying a one-time discounted settlement on the taxes that you owe. But the deal comes with a hitch; you need to sign an agreement which states that you promise to pay your taxes on time and in full for the next five years.

5) Submit a Penalty Abatement request to the IRS: If you can prove to the IRS that you have a valid reason for not paying your taxes on time, then a Penalty Abatement request can prevent the penalty fees from being imposed by the IRS for your unpaid tax debt. An accountant can help you draw up an accurate representation of your financial situation while submitting a Penalty Abatement request.

It is important to understand as much of the tax process as possible in order to take control of your tax debt. Prepare for your next year’s taxes from now to prevent your tax debt from snowballing. Take your accountant’s help, make quarterly tax payments ahead of time and create a budget which helps to keep little money aside each month to make your tax payments. These steps will surely help to keep your financial worries at bay!

How to Make a Flawless Retirement Plan?

Hank — Sat, 10 Jul 2010 00:14:13 +0000

With an increasing number of Americans struggling to clear off their debts and filing for bankruptcy, it has become more important than ever to chalk out a financial plan which can smoothly sail you out of the rough patches after your retirement.

Many people start planning for their retirement long before they actually retire. Yet, there are still a large number making some pretty big retirement mistakes. Read on to know if you are one of them.

Lack of proper planning: You need to have a good idea of how much you actually need to save up for your retirement. For this, you can start with a few basic steps by creating a rough estimate of your current expenses and dividing them into categories viz. fixed expenses such as home payment, utilities, taxes etc. and discretionary expenses which can cover groceries, clothing, entertainment and the like.
Based on the expenses that you know will significantly increase or decrease over the years, it becomes much easier now to estimate how much you would need for retirement lifestyle changes.
Making use of Social Security at the wrong time: Social Security benefits form a part of most people’s retirement plan resources. If you are uncertain about whether to start receiving Social Security benefits at early retirement (age 62) or waiting until full retirement (ages 65-67 or later), you can seek advice of a trusted financial advisor. He can also help you determine when to make withdrawals from other accounts.
Not saving enough money: According to a recent government report, an average U.S. household saves $60,000 for retirement. Many observers report that Americans do not save enough and that retirement savings are especially inadequate. This is said to be the case for households and workers, as well as business owners and the self-employed. Only half the work force is covered by an employer-sponsored pension plan and this share has not changed for almost three decades. Over 9 million self-employed individuals are without retirement plan coverage.
Premature use of money: Many employees making use of workplace retirement plan, cash out their 401(k) balances when they change jobs. Since borrowing and hardship withdrawals are allowed under the rules, people frequently tap into their balances. This greatly hampers the long term growth of their assets. However, rolling your 401(k) balances over to new employers or IRAs, during a job change, can be beneficial to you and help you save up for your post-retirement life.
Investment risks: Investing too much in stocks can be a risky affair. According to a report completed in 2008, most investors approaching retirement had more than 80 percent of their account balances in the wrong asset allocation. Here again, a financial advisor can help you in taking the right decision after assessing market trends so that you do not suffer any market loss.

Today it has become more important than ever to plan carefully for retirement. If you can avoid the planning mistakes, you can easily increase the long term effectiveness of your retirement savings. Make sure that you are on the right track to ensure a happy and peaceful retired life.