retirement planning | Debt Management Credit Counseling Corp.

Save Your Money

December 8, 2022August 11, 2013 by Aldo Gonzalez

Saving money is one of the single most important steps to achieving most of your financial goals in life and becoming financially sound. The sooner you begin to save, the better of you will be. Having a savings in place can also serve as a form of protection during a financial crisis such as job loss, unexpected medical expenses, death of a family member, etc.

A savings serves as your cash reserve or safety net when you need it. The key is to have it in place before the need arises. At the core of building adequate savings is debt avoidance.

You should try to save a minimum of 10 percent of your take home pay in addition to your retirement planning contributions. If you do this on a regular basis, you will become used to it and accustomed to living below your means. If you are able to save more then 10 percent, do it!

Also, you have 3 to 6 months worth of expenses saved up as your emergency fund. This amount includes all expenses, fixed and unfixed. For example, if in January you spent a combined total of $2500 on your mortgage, car loan, home utilities, insurance, food, credit card bill, and other expenses, then you would need to save three times that, or $7500 at the minimum.

Unfortunately, most people live paycheck to paycheck with little or no savings. Work to build your reserve as fast as possible. Consider automating your savings. Most payroll providers provide an auto transfer feature directly to your savings when you get paid.

Start saving as early as possible. The amount doesn’t matter in the beginning. Just start some place and be consistent. Condition yourself into not missing or needing that amount. Over time, your savings will grow due to your diligence. View your savings as another bill that has to be paid. Once you pay off a line of credit (car note, credit card, or mortgage), continue to pay that same amount toward your savings.

Before you know it, you will have the protection you need on the event of an emergency. By building your savings now, you will have a larger nest egg available when you need it.

DMCC is a 501 (c)3 nonprofit organization committed to educating consumers on financial issues and providing personal assistance to consumers who have become overextended with debt. Education is provided free of charge to consumers, as well as personal counseling to identify the best options for the repayment of their debt. To speak to a certified credit counselor, call toll-free 866-618-3328 or email contact@dmcconline.org.

Should You Refinance?

December 8, 2022July 13, 2013 by Aldo Gonzalez

Interest rates have fallen so much, it may seem like a no brainer to refinance your home mortgage.

The decision to refinance your mortgage isn’t one that should be taken lightly. Before deciding, you need to understand all that refinancing involves. Your home may be your most valuable financial asset, so you want to be careful when choosing a lender or broker and specific mortgage terms. Remember that, along with the potential benefits to refinancing, the interest rate isn’t the only thing to consider when shopping for a new loan. Refinancing, after all, isn’t free. There are the bank fees, the bills for a new appraisal and inspection, your lawyer’s fee, etc.

When you refinance, you pay off your existing mortgage and create a new one. You may even decide to combine both a primary mortgage and a second mortgage into a new loan. Refinancing may remind you of what you went through in obtaining your original mortgage, since you may encounter many of the same procedures–and the same types of costs–the second time around. It requires an application, credit check, new survey and title search, as well as an appraisal and inspection fees. As you know, this process can be quite lengthy and expensive.

Age is another consideration. Carrying a mortgage into retirement has traditionally been viewed as a bad idea – ideally, you should be as debt-free as possible when your income stops.

As a rule of thumb, it pays to refinance if you can get an interest rate at least two percentage points lower than what you are currently paying. However, every situation is different. Make sure to carefully weigh the benefits against the costs to make the best choice for your situation.

Ways To Build Your Financial Future

December 8, 2022July 10, 2013 by Aldo Gonzalez

You’re just out of college, starting your first job. Building long-term financial security is probably the last thing on your mind. But. young people just entering the workforce must not underestimate the importance of financial planning geared toward saving for the future.

One of the best deals is an employer-sponsored retirement plan such as a 401(k) plan, if available. These tax-advantaged plans allow you to make pretax contributions, and taxes aren’t owed on any earnings until they’re withdrawn. What’s more, Roth-style plans allow for after-tax contributions and tax-free withdrawals in retirement, provided certain eligibility requirements are met. Another big plus is direct contributions from each paycheck so you won’t miss the money as well as possible employer matches on a portion of your contributions.

If you’re already participating, think about either increasing contributions now or with each raise and promotion.

If a 401(k) isn’t available to you, shop around for individual retirement accounts (IRAs), both traditional and Roth, at banks or mutual fund firms. Generally, contributions to and income earned on traditional IRAs are tax deferred until retirement; Roth IRA contributions are made after taxes, but earnings thereon can be withdrawn tax-free upon retirement. Note that certain eligibility requirements apply and nonqualified taxable withdrawals made before age 59 1/2 are subject to a 10% penalty.