Financial Milestones – Roadmap For Success

While there are many financial milestones to celebrate at every age, some of the most significant milestones could be life-changing.

From getting that first paying job to putting a college degree into practice, these milestones can form some of the greatest memories and set a financial foundation for success later in life.

Knowing what financial milestones are important will help you get a head start on planning and be able to work toward a successful financial life.

Your Financial Milestones Roadmap

Financial Milestones

Becoming an Adult (18-29)

What many people don’t realize is that between the ages of 18 and 29, you should be working on your first financial milestones. On top of landing your first job and buying a new car, you may take out student loans to attend college. To qualify for good interest rates, you’ll need to start building your credit. You could take out a line of credit or get your first credit card, as long as you use it responsibly. If you’ve already made some mistakes with credit, don’t stress too much, you are still fresh in the financial path so use this time to invest in credit repair to get yourself back on track.

Pay any loans or student debt on time each month, and be mindful that any debt you obtain will need to be paid back in the end. You may also plan to move out of your parents’ house and want to start looking for a home to rent or buy. Having good credit will make these goals easier to obtain. A great way to build credit while paying rent, is to use a rent-reporting service to get your rent payments on your credit report.

You should also start planning a budget and learn about investing. You may have the opportunity to start a 401(k) — especially if it is available through your employer and sometimes they will match a certain percentage, you should definitely take advantage of this. If a 401(k) is not provided through your employer you can look into a Roth IRA for your investments, if you have the option to do both, you should. This will give you a solid financial foundation that will carry you far later in life.

In Your 30s

By your 30s, you should be enjoying a comfortable place to live and perhaps owning your own home. You may have several retirement accounts, whether you have a 401(k) or a Roth IRA, continue making contributions to those funds and increasing that amount when you can in order to get the most return. If I said I would give you free money wouldn’t you take it? Keep improve your knowledge of investing by studying up on exchange-traded funds, stocks and bonds, as well as funds that can be matched by your employer. If you are fortunate enough to work for a company that has matching 401(k) make sure you are maxing out that opportunity.

This may be a good time to diversify your investments, choosing from a variety of stock options and markets, such as real estate or commodities. You should also be investing in yourself, pursuing an advanced degree or professional development that will accelerate your career.

In Your 40s

By your 40s, your retirement accounts will continue to accrue, and you should have started investing or saving money for your children’s college expenses. Look into a 529 plan or other college savings plans to see which one suits you best. Max out your retirement funds so that you can leverage them later in life, and contribute up to 6-8 percent of your earnings to get the most out of employer matches.

Reward yourself for achieving financial stability, make sure to make a “vacation” savings account so you can be enjoying this hard work you have been doing. Discuss health care needs with your parents in order to avoid surprises later on. Also it may be a good idea to start an investment account that is separate from other accounts, and set it up to automatically draw funds. With the help of a financial advisor, you can turn these funds into moderate-risk investments that you’ll benefit from down the road.



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In Your 50s

By your 50s, you may have started thinking about retirement and be counting down the years to the big day. Sit down and make some calculations to determine your family’s current financial needs, how much you will need in your retirement, and what your goals are for this stage and on in your life.

For your financial milestones, consider buying a vacation home, timeshare or rental property, which you can lease out in order to generate extra income. Learn about financial options available, such as Social Security, Medicare and pension benefits. Resist the urge to withdraw funds from your retirement accounts prematurely, unless you are prepared to pay large penalties.

In Your 60s

By your 60s, you may decide to retire. Your golden years can also be a time of resilience or unpredictable life changes, so each individual will face something different at this stage. You can start collecting Social Security and planning for the long term, so your retirement and health care funds last as long as you need them. Make sure your will is filed and updated. You may also want to consider changes at home, whether that means modifying your house to age in place or moving to a retirement home or supported community.

In Your 70s and Older

By your 70s, you will likely be well into your retirement years. It might even be beneficial to produce hobby work on the side and sell it at community fairs. This is a crucial time to look at your finances to decide if you need to cut back on spending or if you can be generous with charitable gifts. Ensure that any withdrawals follow a predictable, stable plan, and use your money wisely. By your 80s or 90s, your life will have changed more than you ever imagined it could. This might be a good time to downsize and move into a smaller home that suits your life as it is now. If your retirement funds have made it this far and you can still afford some degree of charitable giving, you’ve done well.

Tracking your financial milestones and setting goals, will help relieve the financial stress that pursues when you have not prepared yourself. With careful planning, saving and investing, you can ensure that both you and your family will be cared for well into the future.

Resources:
Reuters
Money
The Balance
Clark

Protect Your Credit from Other People’s Credit Problems

Many people think its just about building your credit but you also have to protect your credit. Whether you already have great credit or have been steadily improving your score over the years, you’ve worked hard to get where you are. It can be tempting to use your good score to help loved ones when they come to you for assistance, but doing so can damage your credit standing. If you want to protect your credit and financial future, you should think hard before you help someone out. Simply say no when there’s a chance your assistance could hurt your credit. Read these 6 tips before you agree to “help” a friend or family member.

Protect Your Credit

1. Think Carefully Before Cosigning

If you have family members or close friends with bad credit, they might ask you to cosign with them on a loan at some point. Maybe they need to buy a car or get a rental lease and need your help. But the problem is that if they default on the loan or rental contract, their credit won’t be the only thing affected. As a cosigner, you’ll be expected to make any payments they default on. If you can’t make those payments, your credit will be negatively affected. For this reason, you should protect your credit by avoiding cosigning for loved ones, especially if you know they have a history of not making their payments on time. The only exception is if you can afford to pay for the loan yourself should the worst occur, and if you know your loved one is responsible with money and just needs help establishing credit.

2. Don’t Let Other People Use Your Credit Cards

Just as you shouldn’t give just anyone access to your good credit, you also shouldn’t let others use your cards. Maybe someone has asked you if they can become an authorized user on your credit card, or perhaps they want you to make a major purchase on your card and they promise they’ll pay you back. Either way, the debt is yours in the long run. If they suddenly can’t repay the amount they used on your credit card, you’re responsible for it. This means you either have to pay for the bill yourself or allow your credit to be ruined when you don’t pay it.

3. Don’t Rent with Unreliable People

If you need to rent a house or apartment and need a roommate, make sure you can trust him or her to help you pay rent on time every month. Otherwise, you’ll end up with late fees, and your landlord may even report you and your roommate to the credit bureaus once you’re more than a month late on rent. So if you have a best friend who is frequently unemployed and can rarely pay bills on time, do yourself (and your credit score) a favor and don’t rent with him or her–unless you can afford to pay the entire rent by yourself every month. And of course, if you own a house and you want to rent it out, perform a credit check on your new renters to make sure they have a history of paying bills on time.

4. Don’t Make a Habit of Lending Money to Friends or Family

The rule of thumb for lending money is to only lend what you can afford to lose. This means if you lend someone $500, you’d better not be depending on getting that back, because you probably won’t. If you have the money to lend, just give it as a gift if you feel the need to help a friend or family member. However, if the same people are constantly asking you for money, giving it to them may be enabling them. Instead of being a crutch for their bad money management habits, offer to help them make a budget or find a second job to pay their bills. This will protect your credit and go farther than lending them money every once in a while.

5. Build Up an Emergency Fund

Sometimes bad things happen that are out of your control, and you can’t help that. But what you can do is be prepared, and usually having extra money on hand is part of that. For example, maybe you picked a great roommate who can normally pay her bills, but she lost her job and won’t be able to pay rent this month. If you can’t cover the full payment, your credit could be affected and you might even be evicted. Having at least three months’ worth of expenses in savings will help you keep a roof over your head while your roommate finds a new job. Of course, it will also help you in case your own emergency occurs, such as if your car breaks down, you lose your job or you have a sudden health crisis.

6. Protect Your Credit by Focusing on Your Own Financial Goals

Having an emergency fund is a good start if you want to improve your financial security. But you should also have other goals when it comes to money. For instance, buying your own home is a great goal to have if you want to invest in your future rather than throw away money on rent every month. If you already own a house, upgrading it every few years is a good way to improve your investment, so you should save up money to do that. And if you have any debt–such as credit cards or student loans–you should have a plan to pay it all off so you spend as little as possible on interest.

If you need help improving your credit–or want to tell a loved one where to go for financial help–come to Ovation Credit Services. We offer a free credit consultation, so contact us today to get started!

Sources:

https://blog.equifax.com/credit/should-i-co-sign-on-a-loan-for-a-family-member/

https://www.nerdwallet.com/blog/finance/money-rules-of-thumb/

http://www.investopedia.com/financial-edge/1011/top-5-ways-to-protect-yourself-against-problem-renters.aspx

Buying A Home: 5 Reasons to Buy Now

Buying a home is a big step in anyone’s life. Whether you are considering your first home, moving to a new place, or changing up your residence, purchasing a new home can be stressful and expensive. Picking the right time to take the leap can be a challenge. After all, what if a better home comes available next week or something changes in your personal life? However, sometimes the climate is particularly well-suited to buying a home – and that time is now.

Read on for our top reasons why you shouldn’t wait to buy a home in 2017.

Buying a Home

1. Interest Rates are on the Rise

The first thing you need to know is that interest rates are rising. In June, the Federal Reserve announced its third short-term interest rate hike in six months. USA Today interviewed three economists after the increase. The each said that they expect interest rates to increase by another quarter-point before the end of the year – making for a full percentage point increase in 12 months. Right now, 30-year fixed mortgage interest rates are close to a seven-month low – buoyed by weaker central banks abroad – but the low prices will not hold. “Fixed-rate mortgage rates are likely to gradually edge higher over the next six to 12 months,” explains CoreLogic chief economist Frank Nothaft, “Rates are likely to rise to 4.25 percent to 4.50 percent by the end of 2017” – and that is only the beginning. Chief economist for the Mortgage Bankers Association, Mike Fratantoni, is estimating that 30-year rates will be over 5 percent before the end of 2018.

Nothaft put the mortgage rate increases into perspective: “For example, with fixed-rate loan rates up by 0.5 [percentage point] since last summer, and house prices in national indexes up at least 5 percnet, the monthly principal and interest payment is more than 10 percent higher than it was last summer, adding to affordability challenges for first-time buyers.”

2. The Federal Reserve Takes Action

But wait. There’s more. The Federal Reserve is not only increasing interest rates. It is also divesting many of its mortgage-backed securities. “During the financial crisis, the Fed lowered short-term rates to zero. In an effort to further stimulate the economy by lowering long-term interest rates, such as mortgage rates, it began buying mortgage-backed securities. Higher demand raises bond prices, resulting in lower yields,” writes USA Today. “The Fed now holds more than $1.7 trillion in mortgage-backed securities, about one-third of all those outstanding.”

By selling off some of its portfolio, the Fed can get back to business as usual. This might streamline things for the Federal Reserve but it could spell trouble for home buyers. When the Fed adjusts its balance sheet like this, it puts pressure on mortgage rates. This action could push interest rates higher even if the Fed makes only minimal hikes going forward.

3. Home Inventories are Shrinking

There is also an issue with regard to home inventories. As of November 2016, there were almost 1.9 million homes for sale (1.85 to be exact). It might sound like a lot but that is almost 10 percent fewer homes than the year before. Moreover, the decrease in home inventories is not a blip. The number of homes for sale in the United States has been on a steady decline since the housing bubble burst so many years ago – and it looks as though the decrease will continue.

“Real estate experts predict that inventory will continue to shrink, at least for the foreseeable future. That means that in most areas of the country, buyers have more homes to choose from today than they will next year. Or even next month” says Realtor. “Bottom line: Every day you wait to start looking for a new home, you face stiffer competition for fewer homes.”

4. Home Prices are Increasing

This leads to the next issue – home prices are on the rise. “We are at a very, very unusual and historic time again… if you recall, we were in a historic time when prices were falling and rates were falling and we had a lot of inventory, and so buyers sort of had their pick of the litter, right?” says Chicago Association of Realtors president Matt Silver. “Now it’s the exact opposite.” With more competition for homes, it becomes a seller’s market. While it’s impossible to predict just how high home prices will go, Charles Nathanson of Kellogg School of Management says that when prices start to rise in a given year, they usually continue to rise the next year by an average of 70 percent or so of the amount they rose in the previous year.

5. Missed Opportunities

It costs money to buy a home. In addition to your new mortgage payment, you have closing costs, home insurance, maintenance and real estate taxes to consider – and that’s after the down payment – but the cost of postponing buying a home can be even steeper. Realtor economist Jonathan Smoke says that waiting just one year will cost you almost $19,000 between rising mortgage rates and increase in home prices. Over three years, that benefit is just under $55,000. Now, put this cost over 30 years and compound it and the financial benefit of buying a home today is over $217,000.

With the Federal Reserve’s current agenda, shrinking home inventories, and rising real estate prices, there is a huge cost of missed opportunities when you postpone buying a home. So, what are you waiting on? Ovation Credit Services can help make sure your credit report is mortgage ready. Contact us today for a free consultation.

Sources

Bundrick, Hal, “What the Latest Fed Rate Hike Means for Mortgage Rates,” USA Today, June 14, 2017. [Accessed: https://www.usatoday.com/story/money/personalfinance/2017/06/14/nerdwallet-mortgage-rates-fed-rate-hike-home-buyers-sellers/397475001/]

Gordon, Lisa, “3 Crucial Reasons You Should Buy a Home Before 2017 Ends,” Realtor, January 23, 2017. [Accessed: http://www.realtor.com/advice/buy/reasons-buy-a-home-2017/]

McGuire, Nneka, “Should You Buy a Home in 2017? Here’s What 3 Experts Say,” Chicago Tribune, May 24, 2017. [Accessed: http://www.chicagotribune.com/classified/realestate/ct-re-0528-experts-say-buy-now-20170525-story.html]

Stults, Rachel, “$217,726: That’s What You’ll Save (Give or Take) If You Buy a Home Now,” Realtor, May 28, 2015. [Accessed: http://www.realtor.com/news/trends/financial-benefit-buying-a-home-now/]