How to Save for Retirement When You Don’t Have Much Money

It’s hard to think about saving for retirement when you’re having trouble making ends meet now. But save you must; you’re going to need a nest egg to crack open when you reach your golden years. If you’re living on a low income now, you’re going to use your savings that much more later on.

If you’re still in your 20s, you have time on your side — not only can you reasonably expect your income to increase as you progress further into your career, but you also have many more years to let your money grow through wise investments and compounded interest. Even if you’re older, savvy planning can help you accumulate a respectable retirement nest egg.

Contribute as much as you can as often as you can, and take advantage of any tax breaks that are available to you and any retirement programs offered by your employer. If you can, put off retiring to maximize your savings and Social Security. No matter what, try not to spend your retirement money until after you’ve retired.

Contribute Regularly and Consistently

When it comes to saving for your retirement, regular, consistent contributions are the magic bullet that will help you hit your target number. If you don’t make much money, you probably don’t have hundreds of dollars a month to stash away in an IRA, 401(k) or other retirement fund. But even if you can only contribute a little bit of money, it’s still better than nothing — and the longer you have until retirement, the more you can accumulate wealth.

If you’re in your 20s, your retirement plan contributions will pack a lot more punch, even if they’re relatively small. If you start saving at age 25 and save just $2,000 a year, assuming an eight percent rate of return on your investments, you’ll wind up with $560,000 by the time you’re old enough to retire. Even if you’re older or you can’t afford to save that much, you’ll be glad you saved what you could when you’re staring retirement in the face. Use a compound interest calculator to figure the rate at which your savings will grow.

Take Advantage of Tax Breaks and Employer Programs 2Saving for retirement has an added benefit, in that it can help you save money on your tax bill. Traditional IRA and 401(k) plans allow you to take a tax deduction in the year you make the contribution, which can be helpful if you’re living on a modest income and don’t expect to see a significant increase in your earnings in the future. You can use your bigger tax refunds to make additional contributions to your retirement savings accounts.

If your employer will match contributions to a 401(k) or other plan, do your best to max out those matched contributions. That’s extra retirement money that you don’t have to earn. Alternatively, if you can find a job that offers good retirement benefits, you may want to go ahead and take it. A generous retirement package can make planning retirement on a modest income much easier.

Put Off Retirement

The longer you delay retirement, the more time you’ll have to save money and the more time you’ll have to let your savings grow. For low-income workers, delaying retirement by just one year can increase your retirement income by as much as 16 percent. Even switching from full-time to part-time work after you reach normal retirement age can help you stretch your savings dollars.

You should also consider delaying the age at which you apply to collect Social Security benefits. For each year after retirement age you delay claiming benefits, you actually become eligible for more money. You’ll receive maximum benefits by waiting until you’re 70 to claim them. You can use the Social Security benefits calculator to get an idea of what your benefits will look like.

Don’t Touch the Money

As your retirement savings grows, avoid spending it unless you absolutely have to, to cover medical costs, death expenses or another emergency. You may be able to avoid early-withdrawal penalties if you use your retirement money for certain expenses, like college tuition, disability or a first home. But if you spend your retirement money, you won’t have it later, so make this decision carefully.

Saving for retirement on a low income isn’t easy, but it can be done. If you can put aside even a small amount of money regularly, avoid spending the money you do set aside, and maybe delay your retirement by a year or two, you could be relatively well off by the time you’re old enough to retire.

5 Myths About Trend Investing

Angile QuantOne of the most basic strategies for achieving the most gains in the stock market is to invest based on trends.  In the simplest terms, this strategy allows investors to capitalize on stocks moving in a particular direction. While it might seem that the obvious choice is to invest when a stock is on an upward trend — with the stocks earning progressively higher gains over a long period — but it’s also possible to make money in the short term on downward trending stocks, which have progressively lower highs.

Trend investing requires paying close attention to the technical aspects of trading, watching how certain stocks perform over time and accurately predicting whether the trend will continue, using tools like predefined trend searches. You can learn more about those tools here, but they aren’t the only factors to keep in mind when making your investment decisions. You should also understand certain myths that have tripped up other investors, so you can avoid the same mistakes.

Myth #1: Fundamental Trends Don’t Matter

Many investors focus on specific companies, watching a particular stock’s performance over time and investing based on those numbers. While that’s important, you also cannot underestimate the important of fundamental trends, or the overall shifts within the economy or an industry that can influence a stock’s performance.

For example, in the late 1990s and early 2000s, many publishers dismissed the rise of the e-book, claiming that consumers would never give up on printed books. Even when Amazon introduced the phenomenally successful Kindle e-reader, many publishing industry experts claimed it wouldn’t last. Today, e-books significantly outsell printed books, and those publishers that didn’t adjust their business models accordingly saw major losses. Bottom line? Even though a company might be doing great now, you cannot ignore the overall trends that influence sales and their impact on stock performance.

Myth #2: Trends are Permanent

Roller skating. Troll dolls. Boy bands. What do all of these things have in common? At one point or another, they were all the hottest thing going — and today, the only time you hear anything about them is when they appear on some list of nostalgic items. By definition, trends are impermanent things — even in the world of investments.

The stock that’s hot today might be in the tank tomorrow. The idea behind trend investing is to learn to identify when trends are reversing direction, and act accordingly. It’s important to identify the low points that are normal, and which signify an overall change. Understand that it’s very unlikely that a stock will continue in the same direction indefinitely.

Myth #3:You Will Always Make Large Gains

Trend investing is not the right strategy if you want to make huge gains quickly. In fact, you won’t always earn major dividends on the investments you make based on upward trends. Trends can happen slowly, so while you will steady gains, they may not appear immediately significant.

By the same token, you can lose money with a trend investing strategy. If you fail to predict shifts in trends accurately, or wait too long to act, you could risk any gains you have made. That is why you must be vigilant and aware of all of the factors influencing your investments.

Myth #4: Trend Investing Takes Away the Risk

Angile Quant 2Some investors rely on trends to guide their investments under the misguided impression that because a stock has made consistent gains, it will continue to do so — and therefore, you can confidently invest without fear. The truth is there is always risk when it comes to investing. You have to determine your own risk threshold and make choices accordingly, understanding that there is no such thing as a 100 percent guarantee that you’ll earn gains without any losses.

Myth #5: You Should Bet Everything on Trends

Trends are a useful — and effective — tool for making investment decisions, but you should never put all of your proverbial eggs in one basket. Risking everything on a particular trend is never a smart move, as trends shift quickly, and a single misstep could mean major losses. Regardless of how much you plan to invest and your overall goals, you should always maintain a diverse portfolio to protect against losses and changes in the market.

Trend investing is one of the most common, and smartest, ways to make investment decisions and maximize your money. Do not let misconceptions and myths take you off the path toward success.

Is Revolving Debt or Installment Loans Better for Your Credit

There are several types of loans available, with installment loans and revolving debt or revolving credit accounts being two of them. A big determining factor of being able to obtain either is your credit score. It is important to discuss your credit report with a financial advisor or credit counselor if you have a few blemishes. This will help you to re-establish yourself and determine which of these two loan types is best for your needs.

Installment Loan Basics

Installment loan amounts are determined based upon your credit score. Your income also plays a factor in this as you must have the ability to make the payments, plus interest. These are a good option when you need to make a large purchase such as a home or vehicle, or if you require home renovations. Installment loans are also available for a variety of personal reasons. The reason for the loan does play a small role in the determination of acceptance or not.

Revolving Debt Basics

Revolving debt, or lines of credit as it is commonly referred to, is ideal for persons with less than perfect credit. With this type of loan, you are not limited to a specific amount, you will have limits, but it is different than an installment loan. An example of revolving debt is credit cards. You do have a spending limit but you make purchases as needed, pay it off and continue to use the credit.

Which is better?

Installment loans are actually better for most consumers. This is because there is a set limit and a set payment schedule. Revolving credit is basically credit that is reusable as long as it is not at the limit. This creates more debt due to interest charges and other fees that apply. An installment loan puts a percentage of your payment toward the principal and a percentage toward the interest. The terms on installment loans are also much longer than revolving debt where interest continues to pile up.

Consumers have to make smart choices when it comes to money. This is because credit cards rack up hundreds of dollars in interest over the course of a year, depending on your assigned interest rate. These often cause financial trouble whereas there are more options for reconciliation with installment loans. Creditors are more willing to work with borrowers on installment loans, such as deferring a payment during a time of financial crisis.