Strategies to Avoid Post Holiday Debt

Strategies to Avoid Post Holiday Debt

Tis the season to gather with family and friends, attend festive parties, exchange thoughtful gifts and donate to worthy causes. While a credit card with an open balance might feel like an invitation to a holiday super-splurge, the last thing you want to do is give yourself the gift of debt in 2022.

An unpaid credit card balance of $1,000 with an interest rate of 18% can take over five years to pay off, when you make only minimum payments (of about 2.5%). Why burden yourself when you can develop a spending strategy that avoids wallet-busting expenses altogether? Here are tips to keep your holiday spending off the naughty list.

A Budget Is Your Best Friend

It may sound simple, but it’s important to start with a basic, comprehensive holiday budget. Begin by knowing your limits. Prioritize your expenses and include all costs, such as:

  • Gifts for family, friends, coworkers and the people who make your life better 
  • Extra groceries, beverages and gifts for parties and holiday gatherings
  •   Holiday outfits, haircuts and accessories.
  • Special concerts, events and activities with the kids
  • Cards, postage and gift shipping
  • Dining out and holiday entertaining.
  • Holiday decorations, wrapping paper, ribbons, gift bags and bows.
  • Donations to your favorite charitable organizations.

Manage Money Wisely. Shop with a fixed amount of cash so you can’t overindulge. While it’s convenient to make purchases with your credit card — and cashback bonuses can be enticing — it’s no bonus if you end up paying interest charges and late fees. And always, ALWAYS shop with a list. It can be tempting to overspend and purchase unplanned “doorbuster” items during big holiday sales and promotions.

Team Up with Family and Friends. Instead of buying gifts for everyone in your family or work group, set up a gift exchange and draw names to help curb expenses. Agree on a price limit for gifts among family, friends and other groups.

Get Creative, but Be Careful. Sometimes a homemade present, such as nicely packaged baked goods or a knitted scarf and hat in a festive gift bag, can mean so much more than a store-bought gift. But be wary of costly ingredients and expensive supplies. Sometimes food and craft items can exceed budget limits, too.

Happy Holidays and Beyond

Make this holiday season a December to remember — and not because of the big credit card bill you get in the mail in January — by avoiding budget overruns and unwanted interest payments. There’s no need to take the joy out of celebrations: Plan ahead instead. For more information and tips for budgeting and financial planning, contact your WellCents financial professional.

Source

https://www.debt.com/credit-card-debt/how-long-to-pay-off-credit-card-balance/

 

 

 

 

6 Reasons We Overspend

6 Reasons We Overspend

You begin every month with the best intentions. You make a budget and plan to stick to it. So how come you find yourself coming up short by the time the next payday rolls around?

1. Impulse purchases. Have you ever gone into a store to pick up one small item and left with a bag stuffed full of merchandise you didn’t intend to buy?

What you can do. Impulse purchases are more likely when you’re rushed, tired or under stress. Try to avoid online or in-person shopping under these circumstances, and always bring a list to the grocery store.

2. Missed savings opportunities. Don’t you hate finding out that the very thing you just bought was available from another retailer at a lower price?

What you can do. Think twice about squeezing in some quick online shopping during your lunch hour. Plan purchases well ahead of time and give yourself the opportunity to comparison shop for the best deal. Purchase from stores that have a price protection policy in case your item goes on sale later.

3. Buying on credit. It can be easier to overspend when you use plastic, especially when it doesn’t feel like “real money.” And you can quickly lose track of growing card balances that make even the items you buy on sale a lousy deal after factoring in hefty interest charges.

What you can do. Pay cash whenever you can — and bring only enough money for items you plan to buy. Be careful about reflexively using credit cards for a cashback or travel benefit. You may find it’s not worth it in the long run. You can also use your debit card, which is more likely to make you stay within your available balance. If you do use credit cards, pay off balances in full each month.

4. Unexpected expenses. Sometimes we spend too much because we don’t anticipate purchases that we probably could have — like a car repair for a vehicle with 150,000 miles.

What you can do. This is why it’s so important to establish an emergency fund to cover at minimum three-to-six months of regular expenses (more is better if you can) or an occasional big repair bill. And beef up your savings target if your car or house or computer is older.

5. Falling for a sales pitch. It’s the cliché of the pushy used car salesman that comes to mind, but coming across slick or aggressive salespeople is sadly a common experience. Sometimes, they can persuade us to act against our better judgment.

What you can do. Know your limits in advance. Set a cutoff for purchases and be willing to walk away. You can always fake an emergency phone call or restroom trip to buy yourself time before you pull the trigger on a purchase. Remember that you can always come back later to buy.

6. Impulsive holiday or vacation spending. It’s easy to get swept up in the moment during holidays or your annual summer trip to the theme park, especially when you want to make special memories for loved ones.

What you can do. Include holiday and vacation spending in your household budget. Put a little bit aside each month before the event. You can also open a separate special occasion fund.

Simply having a budget isn’t enough — you have to stick to it to get the benefits. Talk to a WellCents financial professional to help you crunch your numbers and figure out a sensible strategy to stay the course.

Ease Into Retirement With a Smart Pre-game Strategy

Ease Into Retirement With a Smart Pre-game Strategy

Retirement is a major milestone — a moment to turn a new page to a chapter you’ve probably dreamed about for decades. People look forward to unencumbered schedules, freedom to travel, spending more time with relatives or moving to a dream home on the beach. Retirees often have big expectations about what a life of leisure may bring only to find out that they miss the routine and camaraderie of going to work each day. Or that moving to their favorite vacation destination means leaving all their friends behind.

It’s not uncommon for retirees to experience a surge of well-being and happiness directly after retirement, followed by a decline in life satisfaction as time passes. But you can avoid some of the stress and anxiety that retirement can bring with a smart pre-retirement strategy to help smooth out the transition.

Dip Your Toe in Retirement Waters

The day after you retire might seem like plunging into the deep end of the pool – your daily work-life routine suddenly stops cold. So, instead of jumping in, consider wading into retirement with a transitional job. Maybe your current employer will let you step down to part-time work for several months — or you can explore a new opportunity with a bridge job that keeps you in the workforce (and keeps your retirement account growing) while lightening your schedule. Your WellCents financial professional can help you figure out how much income you’ll need in order to make a gradual transition into retirement.

Retire to Something Else

Prior to your last day at work, make plans and lay the groundwork for what you’ll retire to — not just the job you’ll retire from. Join a community or volunteer organization now. Get to know them and what the possibilities are so that when you retire you’ve already found a group you like, and are ready to fully engage in — or ramp up — your participation. 

Relocate With Confidence

Moving closer to children and grandchildren or relocating to a favorite vacation destination can sound like the perfect retirement plan. But it can also lead to disappointment — family may be busy with other activities or your vacation spot might be lonely without a group of friends. Invest in your new community before you make the big move. Plan longer trips to the area so that you can take part in local activities, meet people, start new friendships and have something to do outside of your family circle.

Invest in Prep

Just like the time and financial investment you make toward retirement readiness, investing effort and energy into retirement prep can yield big rewards. Talk to your spouse, family and friends about the dream you have in mind for your golden years and discuss how it aligns with theirs. Make a plan and start investing in your dream well before your last day of work. Contact your WellCents financial professional to check your financial readiness and figure out the best time to kick off your retirement pre-game.

Source: https://www.apa.org/monitor/2014/01/retiring-minds

 

Holiday Gifts That Won’t Break Your Budget

Holiday Gifts That Won’t Break Your Budget

You’ve done a good job of sticking to your financial plan all year, but when it comes to holiday gift giving, it’s easy to let good intentions knock you off your savings path. According to the National Retail Federation, Americans spend about $1,000 on winter holiday gifts. That can be a real budget-buster, but meaningful gifts don’t have to come with a hefty price tag. We’ve got some $25-or-less gift ideas for everyone on your list.

Celebrate Coworkers
Office gifts are part of work culture. Maybe you manage a team and want to give your group a token of appreciation. Or you know one person who always gives gifts, and you want to return the favor. A work-appropriate gift that won’t put your account in arrears could be a nicely bound notebook, a quality writing pen or a gift bag of color-coordinated office supplies like paper clips, magnets and Post-it notes. Keep it professional but fun to brighten your coworkers’ day.

Seasonal Presents to Service Providers
Postal workers, hair stylists and even your GrubHub driver are people you might want to thank during the holidays. A batch of your favorite cookies presented in a festive box or tin is a low-cost way to show your gratitude for a year of good service. Make it extra special by including a handwritten note and a copy of the recipe.

Thank Your Terrific Teachers
Whether it’s your child’s 4th grade teacher or your yoga instructor, there’s lots of reasons to give extra thanks to the people who help us learn and grow. A pick-me-up, like a $10 gift card to a coffee shop, can help any teacher start their day off right. Make it more meaningful by supporting a local business close to your favorite teacher’s place of employment. Bakeries, ice-cream parlors or tea shops often offer gift certificates or cards that you can package in a pretty envelope or decorated box for that personal touch. 

Great Gifts for Grandparents
Grandparents, aunts, uncles, cousins — you want to remember your extended family in your holiday giving, but the costs can add up. Go for truly personal, budget-conscious family gifts by using the photos you take during the year to make photo-mugs, photo-calendars or even a family photo t-shirt! You can look online for low-cost, photo-personalized gift services. And at some big-box stores or national pharmacies, you can connect your camera or thumb drive to their in-store kiosk for easy ordering and processing.

Treat Yourself Too
No one should fault you for indulging in a holiday gift to yourself, but you should be as mindful here as you are in your presents to others. Money you receive as gifts (and funds you save by using our budget gift ideas!) can add up to a special treat and an end-of-year contribution to your retirement savings account. Talk to your WellCents financial professional about how catch-up contributions can help maximize your retirement savings and give your future self the gift that keeps on giving — a more financially secure retirement. 

Closing the Gender Retirement Gap

Closing the Gender Retirement Gap

Ensuring you have enough income during retirement is hard enough, but it can be even harder if you’re a woman. Some causes are obvious; others less so. But no matter the underlying reasons, there are things women can do to help close the gender retirement gap.

 

A Multifaceted Problem

The underlying causes of the retirement gap for women are complex. First, women continue to earn roughly $.80 for every $1 that men earn in a comparable job.1 That not only reduces the amount of income they can save, but it can also lower Social Security contributions and their employers’ matching contributions to a 401(k) or other retirement plan, further shrinking funds available to them during retirement.

 

Studies have shown that women generally take more time away from the workforce for childcare (5.5 years versus just .5 years for men).2 And later in life, women often take more time out to help care for aging parents (1.2 years versus .6 years).3 Fewer years of earning can translate to shortfalls during retirement.

 

In addition, research suggests women tend to be more conservative in how they invest the money they do save.4 Overall, women generally own fewer stocks and exchange-traded funds (ETFs), and their investments weigh more heavily to cash and money market accounts. This can lead to lower investment yields over time and less retirement savings overall.

 

As a group, women have been hit harder by the economic impacts of the COVID-19 pandemic than men. In December 2020, the U.S. economy lost 140,000 jobs — all of them attributed to women.5 This was partly due to women being overrepresented in service jobs (e.g., restaurants and retail) but school closures and their impact on childcare have likely exacerbated the issue.

 

Finally, on average, women live longer than men. In the U.S., they live five years longer (seven years longer worldwide).6 While options such as cohabitating later in life or living with children or other relatives are common, many women end up living alone for years during retirement. Since this is typically more expensive than sharing expenses with a spouse, partner or roommate, women should factor in the added cost of living alone when evaluating how much money they’ll need in retirement.

 

But what can be done?

 

Fix #1: Know Your Numbers

The first step toward closing your own retirement gap is gauging how big it is to begin with. And to do that, you need to know your numbers. Look at your portfolio performance and its projected balance at retirement, expected Social Security benefits, anticipated healthcare and other costs of living. Don’t forget to include your debt in the overall picture. Ultimately, you need to project whether your sources of income will cover the expenses you’ll incur for the length and type of retirement you want. If you need help, your financial advisor can help walk you through the numbers.

 

Fix #2: Ramp Up Savings

Because women often work fewer years, earn less and live longer than men, they generally need to save more of their income during the years they are working. That means increasing contribution levels to 401(k), 403(b) or other retirement accounts as well as making catch-up contributions once they become eligible.

 

Fix #3: Reevaluate Risk

Especially for women in their 30s, 40s and early 50s who may be more than a decade away from retirement, weighting stocks more heavily in their portfolio may lead to higher gains. Higher gains over more years equals more income in retirement. Especially if you’re more than a decade out from exiting the workforce, speak to your advisor about whether taking on a little more risk makes sense in your particular situation.

 

Fix #4: Manage Debt

Retiring with debt — from children’s college expenses, medical debt, credit cards, a HELOC or large mortgage — can make budgeting a lot harder. Take stock of your long-term obligations and, while you’re still employed, create a plan to reduce or eliminate that debt well before retirement. Talk to your financial advisor about this in detail. While they may have access to your retirement account balances, they won’t know what your debts are unless you tell them. Come up with a manageable program that keeps you on track with savings, but also frees you from the burden of excessive debt.

 

Fix #5: Be Proactive

There may be no better way to narrow the gender retirement gap than for women to take an active role in understanding and managing all aspects of their finances, including their retirement planning. Improve your financial literacy by making an appointment with your financial advisor to get a clearer picture of where you are now and how to plan for the retirement you want to someday enjoy. 


1. https://www.forbes.com/advisor/retirement/retirement-gender-income-gap/

2. https://www.tiaa.org/public/pdf/gendergap-whitepaper-b2c.pdf 

3. https://www.tiaa.org/public/pdf/gendergap-whitepaper-b2c.pdf 

4. https://www.tiaa.org/public/pdf/gendergap-whitepaper-b2c.pdf 

5. https://fortune.com/2021/01/08/covid-job-losses-women-december-us-unemployment-rate/

6: https://www.health.harvard.edu/blog/why-men-often-die-earlier-than-women-201602199137


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