A DIY retirement community requires careful planning and diplomacy. sirtravelalot / Shutterstock.com
Editor’s Note: This story originally appeared on Living on the Cheap. A few years ago, Marianne Kilkenny’s elderly parents moved into an assisted living community. That got her thinking about her own plans, because she didn’t want to end up in a similar community or a facility run by a company. Kilkenny, 65, the founder of Women For Living in Community, is among a growing number of baby boomers…
Avoid retirement disaster and ensure you’re financially prepared to leave your 9-to-5. Monkey Business Images / Shutterstock.com
Editor’s Note: This story originally appeared on The Penny Hoarder. Being mentally ready for retirement is different from being financially prepared. If you don’t have a solid grasp of your budget and a sound financial plan in place, retirement can be a disappointing experience. Imagine surviving on instant noodles and scraping by in your golden years — it doesn’t sound like fun.
I’ll soon be buying a new house that’s going to cost more every month than my current home. To be sure I was ready, I “practiced” making the payments. Find out more.
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I’ve been in the market to buy a new house, and the process of finding an affordable property has not been easy. There are around 18% fewer homes for sale this year compared to last year, and the average interest rate on a 30-year fixed-rate mortgage was 7.09% as of Aug. 17, 2023, which is one of the highest rates in recent years.
With few houses to choose from and an expensive loan, I’m going to end up taking out a mortgage that leaves me with higher housing costs than I had before. Increasing housing costs is a big deal because a mortgage is a 30-year commitment. By buying a costlier house, I’d be reducing my available funds for the next three decades.
I wanted to make sure I was really ready to do that, so here’s what I did.
Before I moved forward with buying a costlier house, I took a close look at exactly what my new expenses would be. That’s important because purchasing a more expensive house doesn’t just increase my mortgage payments. It also means I’ll be paying more for property taxes and more for homeowners insurance. These costs are directly affected by the value of the home.
Once I knew exactly how much extra I’d have to spend each month, I practiced making the extra housing payments. This is a step I would recommend absolutely everyone take if they’ll be upping their home expenses, whether you’re renting a more expensive place or buying one. Here’s how to do it:
Figure out exactly what the difference will be between your current housing costs and your new ones, including all added expenses such as property taxes, homeowners insurance, utilities, and maintenance. So, for example, if your current total costs are $1,500 a month and you’ll be spending $1,800 a month at your new place, you’d be increasing your payment by $300. Add the extra to your savings account each month and treat this as a required bill. With the above example, that would mean making your regular housing payments and then transferring $300 a month into savings.
I did this “practice” exercise for five months before moving forward with making an offer, and I’d recommend doing it for at least that long — if not for six months or longer.
Practicing making larger housing payments before you actually commit to a new mortgage loan is a really great way to make sure you don’t regret increasing your housing expenses.
In theory, it can feel pretty easy to absorb an extra $300 or $500 or whatever amount into your budget. But, in practice, it can mean making uncomfortable sacrifices. Once you’ve taken out a mortgage or signed a lease, it’s too late to just back out if it turns out you really can’t afford what you thought you could.
By practicing the payments ahead of time, you’ll see how it feels to live with less once you’ve moved up in the world. If you don’t really miss the money, then you’re good to upgrade. If you struggle, it’s way better to know that before you make a big commitment. Of course, as an added bonus, you can also keep that extra money you’ve put into savings to help you with the costs of your move.
If you’re thinking about buying or renting a more expensive house, start making your practice payments today so you’ll be ready to make an informed choice when moving time comes.
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Some businesses see a summer boom followed by a slowdown. Read on for ways to manage in that scenario.
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Some small businesses enjoy a steady stream of revenue all year round. But there are many businesses that earn the bulk of their revenue during the summer months.
Some seasonal businesses earn 70% of their annual revenue within just a few months, says the U.S. Chamber of Commerce. But that can pose a challenge. If you expect revenue to slow down substantially, it becomes all the more important to stretch the extra income you bring in during the summer months. And here are a few strategies you can employ to do that.
Parting with employees who work hard and with whom you’ve developed personal relationships with can be difficult. But if you don’t expect your business to be able to sustain its summertime revenue, then it’s hard to justify the cost of retaining your full staff.
That doesn’t mean you have to cut ties completely, though. It may be possible to see if some hires are willing to work fewer hours. And if you hired employees on a seasonal basis to begin with, there shouldn’t be an issue, because ideally, you set the expectation from the start that come fall, those jobs would come to an end.
When things are busy, it’s natural to try to hand off as many tasks as possible. But once business slows down, it may be time to reassess the extent to which you outsource different tasks, whether it’s marketing, accounting, or something else.
Do a review of your full-time employees and assess their respective skills. Also, ask them how many hours each week they think they can conceivably free up to help out with tasks you’d otherwise be inclined to outsource. If you happen to have an internal copywriter, for example, they may be able to help take over creating marketing content so you don’t have to hire an outside firm and rack up a huge tab for their services.
During the summer, when things are busy, you may be inclined to spring for things like iced coffee for your staff and group outings or workshops. But those extras might have to go so you can stretch your summer revenue further and make sure you’re able to cover your most essential expenses.
Take a look at your banking records and see what you can comfortably afford. And if you’re worried that cutting extras will result in backlash, be open with your staff about why you’re doing it. Your employees are apt to appreciate the fact that you’re prioritizing payroll over perks like on-site yoga classes.
Remember, too, that showing signs of appreciation can go a long way. Thanking workers individually sends the message that you’re acknowledging their effort — even if you can’t reward them with a perk that costs money.
Many businesses see revenue peak during the summer months and falter after the season is over. But you can make it so that summertime revenue is able to sustain your venture until peak season rolls around for you again.
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Sticking to only the brands you know at Costco could hurt you. Read on to see why.
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When I initially joined Costco, I didn’t spring for an Executive membership even though I knew that getting one would mean scoring cash back on my purchases. Back then, we had a kid-free household, so it didn’t make sense to buy the more expensive membership when we didn’t visit Costco so frequently.
That decision wasn’t a bad one. But a different decision I made during my first year as a Costco member is one I later came to regret.
I’ve always been happy to eat at a hole-in-the-wall restaurant, and I’ve never been someone to splurge on expensive clothing. That just doesn’t align with my financial priorities.
But there was a time when I was more particular about the food and medication brands I brought home. And so when I first joined Costco, I pretty much walked past any Kirkland products I saw on the shelves. I preferred to stick to the brands I knew and liked, even though they commonly cost more.
But I changed my tune about Kirkland products several years back. And I’m glad I did, because it’s resulted in a lot of savings for me.
Kirkland is Costco’s signature brand. It was introduced in 1995 and has expanded considerably through the years.
These days, you can find the Kirkland label on everything from medications to pantry staples to baked goods. And you can commonly save money on the items you’re buying by choosing Kirkland over a brand name.
When I first joined Costco, I wouldn’t have dreamed of buying Kirkland-labeled snacks or pills. I just had it in my head that sticking to the brands I was already familiar with was a better idea.
But then I decided to give Kirkland a try due to the savings involved. And lo and behold, I found that the quality was just as good.
These days, I regularly load up on Kirkland items. It’s not even a question. And as a result, my Costco bills tend to be lower.
Case in point: Buying Advil in bulk at Costco online will cost you $0.07 per pill (note that store prices can differ from those listed online). Buying Kirkland Signature Ibuprofen online will result in a cost of just $0.01 per pill.
This is just one example. But the Kirkland version of whatever you’re buying will often be cheaper than the fancy brand that spends money on marketing. So it could pay to at least give a few Kirkland items a try and see if they work for you.
Granted, they may not always be the items you prefer. While I have no problem scooping up Kirkland products in general, I won’t stray from Bounty as my go-to paper towel brand. I’ve tried the Kirkland version, and to me, it’s just not as good.
But that’s probably the only exception. So if you’re eager to slash your Costco bills, give Kirkland a go. The worst that’ll happen is you won’t love the product and you’ll know not to buy it the next time. And if you’re really dissatisfied, you can always take your purchase to customer service and ask for a refund.
Costco is really good about issuing refunds in those situations provided you don’t take advantage by frequently returning purchases based on simply not liking them. So there’s really very little risk involved.
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The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.
This writer uses 529 plans sparingly. Read on to see why.
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Like many parents, I find the idea of paying for college daunting. For the 2022-2023 academic year, the average cost of tuition and fees at private colleges was a whopping $39,723, according to U.S. News & World Report. That’s almost $160,000 for a four-year degree, and it doesn’t even include room and board.
Of course, there are options outside of private college. But even in-state schools aren’t such a bargain anymore.
For the previous academic year, the average cost of tuition and fees was $22,953 for out-of-state students at public colleges and $10,423 for in-state residents at public schools. So even the “cheapest” option of the bunch doesn’t look so cheap to me.
It’s for this reason that I’ve been saving for college since my kids were born. And I made a point to open a 529 plan for each of them at a young age.
But I actually keep the majority of my kids’ college savings in a regular brokerage account, not a 529 plan. Here’s why.
My oldest child is a good seven years away from college, and I have no idea what the costs are going to look like at the time. And I fear that they’ll continue to rise.
But I also have no idea what colleges my kids will want to attend, or if they’ll even want to attend. And that’s why I refuse to put more than a small portion of their college savings into a 529.
The upside of a 529 plan is that you get to enjoy tax-free gains on your investments. With a regular brokerage account, gains are taxed year after year.
But if you take a withdrawal from a 529 plan for non-education purposes, you’ll get penalized 10% on the gains portion of your account. You won’t get penalized on your principal contributions because they go in on an after-tax basis.
But even so, if you save and invest well for college over many years, it’s conceivable that you could end up with $200,000 in gains in a 529 plan. So facing a 10% penalty on that sum means losing $20,000.
That’s why I’d rather keep most of my kids’ college savings in a regular brokerage account and forgo the tax savings. That way, if my kids opt out of college, they can use that money to start a business or whatever else they might need it for. (Or hey, I could even decide that I’m taking it back and using it for my own retirement.)
The idea of tax-free gains is appealing, and that’s what makes 529 plans a good college savings choice to a degree. But I’d caution anyone in the process of saving for college against overfunding these plans. You don’t want to get stuck in a situation where you’re looking at penalties because your college costs are less than expected and you now have extra money to deal with.
That said, a recent change to 529 plan rules allows you to roll up to $35,000 per beneficiary into a Roth IRA. This limits your risk to a nice degree, and it’s a very positive update. But it still pays to be careful with the amount of money you put into a 529 plan.
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