Personal finance is an ongoing battle that we all struggle through, no matter how long we work or save. Creating rock-solid savings and spending habits takes a lifetime to perfect and leverage for personal gain. But there are a number of things that you can do as a saver entering your 60s and preparing for retirement that will set you up nicely for these golden years to come.
Create good spending habits.
It’s easy, no matter your age, to overextend your budget with the help of credit cards and bank lines of credit. Utilizing borrowed cash to pay for purchases is often a great way to advance yourself the capital for a major expense while your savings accrues interest in a stock market account or through bond holdings. However, going off track and buying above your immediate payback ability is easily done, and can ruin your immediate financial future if you aren’t careful. Seeking out tips for shopping smart is a great way to combat this — both in consumer purchases like groceries and clothing and in larger buys that occur every few years like a new car or large vacation spending.
One way to reinforce solid spending habits is to always do your grocery shopping with a list. Impulse buying is one of the worst offenders in our weekly or monthly budget, and the longer you spend in the store the worse your impulse becomes. Supermarkets are designed to suck you in and keep you wandering through the aisles for as long as possible. They play slow music, place the items that most often leave the store (bread, milk, meats, and vegetables) in opposite corners, and entice you to pick up an item or two while waiting in the checkout line. By entering the store with a plan every time you go shopping you can combat this psychological trick and save a heap of money in the long run.
Cut down on your bills.
Essentially all of your bills are negotiable to some extent. New regulations have introduced competition into the electricity and gas industry, and even your auto insurance and homeowner’s insurance can be adjusted with the help of market competition.
Policyholders have the freedom to shop around as their contracts come up for renewal, and there is no better time than now to begin leveraging quotes against one another in order to reduce the overall cost of your bills. Likewise, your electricity bill can be reduced by hundreds of dollars with a quick search through comparison sites that give you access to state law and pricing of other energy suppliers.
The truth is, you need to pay for these services, but because most consumers don’t spend the time doing research on the best available pricing, they end up paying out far more than they have to. You can find bargains on the same great service and the exact same policies with other companies — or maybe even your own — and switch providers on your car insurance policy, electric bill, even cable subscription in order to save yourself a ton of money. With services like cable and internet, you might even be able to leverage your desire to end the contract into free inclusions and a lower rate.
Internet, cable, and phone providers rely on customers sticking with their service to make money. It costs the firm nothing to keep you on their bandwidth because the network is so large that your upkeep fees are essentially zero. This means that when you call to say you want to cancel, the customer service representative is almost definitely preauthorized to offer you a lower rate to entice you to stay with the company. The cost of a client is frontloaded into the acquisition, so replacing you on the network with another household will cost them far more than the savings they are willing to extend to you to keep you. This way there is no need to send a technician out to a new home to install a box or a dish, run lines through the wall or show a new client how the remote works. They save all that hassle and expense by simply reducing your rate by 15 percent. The same basic model holds for insurance policies and energy suppliers, with some nuanced caveats.
Consider altering your investment strategy.
As you age, so must your investment strategy. As a younger investor, your goal should be to generate wealth as aggressively as possible. Investments largely are designed for retirement funding, so losses in the short term are essentially negligible when you consider the rate of return on the long horizon of the stock market, commodity valuation, and real estate property market’s growth factor. Inflation and sheer productive value drive prices up over the long term, so risk should be baked into a younger investor’s portfolio.
The same cannot be said for a 60-year-old’s investment profile. As you enter this new decade you will want to dial back the risks you take with your investments and keep a lot of money in steadier investment options. Unless the market has been incredibly kind to you and made you incredibly wealthy already, you will want to funnel most of these assets into long term growth or dividend assets classes, rather than explosive and volatile movers. Now is the time to lock in wealth, and real estate or blue-chip stock holdings accomplish this goal admirably. Commodities that grow at a slow yet steady pace will protect the principal of your investment while still providing you with regular payouts. Many retirees consider adding rental properties to their holdings for this reason. A rental home can make you the beneficiary of monthly income even after you end your relationship with your employer and stop drawing a paycheck.
Another great way to boost your cash flow is with a viatical settlement. Many retirees ask ‘what is viatical?’ It’s a relatively new term but is gaining a lot of steam as an avenue for tapping into your life insurance policy early. For those with chronic illnesses or other health complications and a life insurance policy in good standing a viatical settlement can give you a lump sum cash payout in exchange for the face value, or death benefit, of the policy. You typically earn 50 to 60 percent of the death benefit while selling the beneficiary rights to a third party, but then can stop paying the premiums and enjoy the cash without any strings attached. This can go towards home upgrades, your next vacation, or your activities of daily living. You can even channel the cash into your investment account in order to increase the dividend payouts you see every month or quarter and take advantage of the additional capital over the long term.
Think in retirement time.
Beating the supermarket hustle, rebalancing your investment portfolio, and renegotiating your monthly bills are all sage advice for any spender, but they are particularly important for those nearing retirement age. The more you can tighten up your budget, the more cash you will have to spend on things you enjoy. In retirement you have all the time in the world to spend on your hobbies, but as you age and stop working you risk having far less spending power than you did as a younger adult. Cutting frivolous expenses or overpayments can help you take advantage of both the additional time and your cash flow in order to spend time with the people you love and experiencing all the best things life has to offer.