Save Money

Saving Money or Paying Off Debt: Which Is Better for Your Credit?

By | Debt, Save Money

When you’re working on your credit repair, each financial decision you make takes a little more forethought than usual. That’s because you can’t just look at the bottom line for your wallet, you also have to look at the bottom line for fixing your credit.

This is particularly true when you want to improve your credit while better utilizing some of your spare cash. Should you save it in the bank or use it to pay off your debt? We’ll go over the pros and cons of each option so you can figure out a plan that works for you.

Fix Credit by Saving Money

While there are certainly many reasons to pay off your debt, saving money can also have a helpful impact on the credit repair process. The main reason is that it prevents you from having to take on more debt somewhere down the line.

Think about it: if your credit cards are nearly maxed out (which is already hurting your credit score) and a financial emergency hits, what will you do with no extra cash on hand? You’ll probably completely max out the cards, or even worse, apply for new credit cards or payday loans. None of those are ideal choices.

They can, however, be avoided.

Creating an emergency fund keeps you from being forced to make more financial decisions that could harm your future further down the line. Most experts recommend a cash cushion of at least three months of expenses so that you have something to live off of in case you lose your job or have a medical problem that prohibits you from working. If you’re the sole breadwinner for your family or have several children, you might consider saving up to six months of expenses.

Yes, that sounds like a lot of cash. So if you’re just getting started saving up money, try to stash away at least $500. That amount may cover any one-off emergencies, like a sudden vehicle repair or short trip to the hospital.

Improve Credit by Paying Off Debt

Once you have a comfortable savings fund to cover an emergency (or a surprise job loss), you can focus on fixing credit through debt payoff. This can really help improve your credit score in a few different ways.

One way is that paying down debt lowers your debt utilization, which can raise your overall credit score. The more debt you have on each credit line, the more your score suffers. Once you start to pay down your debt, your credit utilization also lowers, which is a plus. In fact, your “amounts owed” can account for a full 30% of your credit score.

Also, if you have a lot of credit card debt, your credit mix can be affected, which is another factor considered part of your credit score. Typically, installment loans like a mortgage, student loan, or even an auto loan are viewed more favorably than credit cards. They’re not as risky since you have more skin in the game when it comes to paying them off. On top of that, having too much credit card debt can place a particularly large toll on your score if you don’t have much of a credit history yet. Either way, it’s a good reason to consider paying down your debt no matter how long your credit history may be.

As long as you’re not at financial risk with minimal cash reserves, paying down your debt can do wonders for your credit. The less you owe, the more you’ll begin to see your credit improve. Plus, early payoffs can lead to substantial savings in interest over the years.

Other Steps to Take for Credit Repair

Saving money and paying down your debt are both smart strategies for repairing your credit. But if you have credit errors on your credit report, your score will only go so high, even with these changes. Credit disputes are a way to get those credit errors permanently removed from your report. However, the process can be time intensive and tedious.

Ovation Credit offers a free consultation so you can find out how our credit professionals can assist you with the credit dispute process. Schedule yours by visiting our site for a free consultation and to get an idea of what negative errors could be removed from your credit report.


Retirement: Save a Million Dollars Right Now

By | Save Money


Retiring as a millionaire may be easier than you think. With the power of compounding interest, you can become a millionaire by putting aside just a few extra dollars each month.

How Much Do You Need to Save for Retirement?

Here’s how much you need to save each month and how long it will take to reach a million dollars if you invest in an S&P 500 index fund. These numbers assume the index matches its historical ten percent per year rate of return.

  • $100 per month = 45 years
  • $250 per month = 36 years
  • $500 per month = 29 years
  • $1,000 per month = 23 years
  • $2,000 per month = 17 years

The lesson learned? Anyone can become a millionaire by setting aside only a small amount of money each month over their working life. If you got a late start or want to retire early, you can still get there with smart budgeting.

Where to Save

Warren Buffet recommends S&P 500 funds because they let you own 500 of the strongest companies in the United States at a low cost. Other investors prefer to use total stock market index funds that own every stock on the stock market or to put some of their money into an international index fund to add diversification.

You may also want to consider a target-date fund which gives you a mix of U.S. stocks, international stocks and bonds and automatically lowers your risk as you get closer to retirement. No matter what you choose, how much and how early you save will be the biggest driver of your success.

How to Find the Money

It can be hard thinking about the future when money is tight, but small adjustments add up. Instead of buying things because they’re only $X per month, remember that only $X per month will make you a millionaire.

Simple steps like packing a brown bag lunch and skipping a barista-made coffee can save $10 to $20 per day. If you have credit card debt, paying it off sooner or consolidating it at a lower interest rate can turn money wasted on interest into retirement savings.

The most important thing to do is to start right now. Remember, the sooner you start, the easier it will be to become a millionaire.



7 Money-Saving Tips to Keep Your Finances on Track

By | Save Money

Are you someone that lies awake thinking about your credit card balance? Do you consider how late payments are affecting your credit score — or why you cannot seem to be saving any money? If you are often dipping into your overdraft, constantly living in the ‘red’ — it’s time to take positive action.

Money Saving Tips

You Can Improve Your Current Financial State

Regardless of your current financial state, you can experience a more stable financial future. In order to become financially independent, however, you must begin living on less than you earn — period. Even if you are in debt, you must live by this rule.

Just remember, it’s not the amount of money that makes you ‘rich’ — it’s how you manage that money. As you learn to acquire good finance habits and develop more effective money management skills, you too will experience greater financial freedom.

Seven Money-Saving Tips to Improve Your Finances

When you make a plan, you’d be amazed at what you can achieve. As you begin to accomplish small goals, you will gain greater motivation and self-confidence. You can take action today, improving your financial health for years to come.

1. Budget for expenses and saving

You need to sit down and crunch some numbers. Although your situation may be unique, the 50/30/20 rule is often useful. The concept here is that 50% of your income should be spent on the essentials, such as your fixed expenses; 30% should be used to purchase additional desired living expenses and optional extras; followed by 20% to pay off debt and to save.

Top tip: Make a spreadsheet based on your fixed (mortgage payments, utilities, car payments, etc.) and variable expenses (groceries, entertainment, gas, etc.) in relation to your income. This will help you see where you need to cut back so that you can tackle your debt and begin saving.

2. Reevaluate your bills

Although 10 extra dollars here and 15 extra dollars there may not seem like a big deal, it all adds up at the end of the month. Here are a few tips to get you back on-track:

  • When it comes to your utility bills, start comparing. If you are already with the best energy provider, then it’s time to become more energy efficient. Begin researching some of the top energy-saving tips, as outlined by the Department of Energy.
  • In relation to communications, be aware of where your money goes. Do you exceed your monthly mobile allowance each month? Then perhaps it’s time to switch to a package that makes more sense for your needs. Better yet, bundle your mobile phone, internet, and cable services for instant savings.

3. Effectively target your debt so that you can save

When aiming to save money, it may seem counterintuitive to address your debt — but this is a very important step. If you have debt that’s accumulating interest in the background, what’s the point of saving? Begin with the most expensive debts first, including credit cards and other loans that incur high penalties.

Prioritize, and when the most expensive debt is clear, you’ll already be in the habit of transferring x-amount each month. With your debt gone, those funds can now be transferred into a savings account. However, there isn’t a one size-fits-all strategy, so if you’re struggling to get out of debt and improve your credit score, you may want to consider professional credit services to get back on-track.

4. Learn to minimize

Your budget will quickly show where your money is going. Whether you often shop at department stores or love to shop online, it’s time to cut back. Spending, spending, and spending some more actually distracts us from what’s truly important to us. Get rid of clutter, sell off items you no longer need, and put that money into a savings account. You’ll feel like a major weight has been lifted from your shoulders.

5. Quit spending money you don’t have

Credit cards can be great — they can help you make timely payments and even gain cash back. But if you’re spending frivolously, your debt can quickly spiral out-of-control. Always remember that golden rule, ‘do not spend more money than you earn.’ If you only make $3000 a month, but are spending an average of $5500, you can clearly see where the problem lies. At that rate, you’ll not only go into deeper debt, but you’ll never be able to save a penny.

6. Save a little each month

Even if you make $25,000 a year, it’s still possible for you to save a substantial amount by the time you reach retirement. Equating to just over $2080 a month, if you saved $180 of that each month, after 50 years, you will have an additional $108,000. If you can’t imagine putting away $180 of your monthly income, then you need to revisit your budget and change your personal financial habits. Everyone can save — the difference is, not everyone can save based on their current spending habits.

7. Take advantage of customer reward programs

No matter where you live or where you shop, there are retailers that will reward you. Focus on places where you shop regardless — such as your local grocery store. Do they offer a points program? If you are spending $100 on your family’s groceries, you may as well benefit. In many cases, you’ll be able to use these points to get free groceries. Also, don’t be shy to coupon!

As you make small improvements each day, these will quickly add up, allowing you to develop better financial habits. And remember, having stacks of cash in the bank isn’t freedom — but being in control of what you have certainly is.


How to Save Money: 100 Great Tips to Get You Started

Freelancers – Follow These Tips & Better Your Finances in 2016

By | Budgeting, Personal Finance, Save Money, Your Credit

Get on Track this Year & On Top of Your Finances

Freelancing is both a blessing and a curse. As a freelancer you’re probably repeatedly told how lucky you are, how great it must be to be your own boss, and then there’s all that freedom. While freelancing does mean all those things it also means having to pay for your healthcare out of pocket, and often an uncertainty about where or when your next check will come from.

When it comes to personal finance, freelancers have to take extra care to stay on track. Still, more people are freelancing than ever before according to a recent survey from the Freelancers Union. They claim that 53 million Americans freelance, which is 34% of the population.

Whether you freelance full time or on the side, freelancing can be rewarding on a personal and financial level. Make the most of your freelancing efforts by staying on top of the following:

Report Your Income to the IRS

Paying your taxes is easy when you’re working for someone else. Taxes are automatically deducted from your pay, and you report your income at the end of the year when you file your taxes. When you freelance your expected to make estimated tax payments on a quarterly basis, which can get confusing especially if you have to pay both state and federal taxes.

Making estimated tax payments on time can be difficult when you freelance and paychecks don’t come in consistently. You might prioritize other expenses over these payments, but that may cause you to fall behind. Late payments can lead to back tax payments, penalties or an audit.

Making your payments on time is easier if you sign up for an online account. The IRS allows you to make federal tax payments on the EFTPS website.

Get Health Insurance

While health insurance may seem like an unnecessary expense when freelancing, especially if your young and healthy, out-of-pocket medical expenses can lead to significant debt. With the addition of Obamacare the federal government can now fine you $695 or 2.5% of your income for going without coverage.

Planning for Retirement

Many long-time freelancers have little if anything saved away for retirement. While corporations offer robust 401(k)s you might be finding it difficult to grow a retirement account. There are plenty of financial institutions and financial advisors who offer retirement advice and 401(k) management. It’s never too late to start saving for retirement.

Saving for Emergencies

While contract work is great it may not be consistent. Having an emergency fun or savings account is always a great idea, but it’s even more vital for freelancers. Short term loans and credit cards come with high interest rates and fees. By putting a small percentage of each paycheck away in a savings account can help you get through lean times.

It’s never too late to start managing your money better. Make the most out of your freelancing this year and master your personal finances.

How do you manage your freelance wages? Did you find this article helpful? Let us know in the comment section below.

Paying for College

By | Credit Repair, Save Money

For most families, paying for college is an extreme challenge given the rising cost of tuition at both public and private institutions. With rising tuition rates, the majority of students are left searching for ways to cut the cost of attending college. Many people consider education to be the most important investment you can make, but there are risks involved with borrowing a large amount of money without a secure return on investment in sight.

That being said, a majority of high school graduates will want to go on to college. Below are a few of the more popular ways to secure college funds, as well as some of the inherent dangers you should look out for.

Credit cards. Credit cards can play an essential role in helping families manage the flow of expenses during the college years. However, using credit cards to help with college funding is only a good idea if you are able to pay off the bill when it comes due. If you start to accrue debt from credit cards it becomes less effective, since credit card interest rates are typically higher than those of student loans, and many colleges apply surcharges when bills are paid with charge cards. In addition, if you fall behind on your payments, you could accrue compounding debt, additional fees, and a damaged credit score.

Home equity. In some cases, a home equity loan makes sense to cover the costs of tuition. You are likely to get a better rate than you would with a student loan, for example, plus this type of funding is tax deductible.

But as with any financial decision, there are risks. If you choose this route and take on additional debt, it lowers the amount of money you can save for retirement or investing. In addition, with a variable-rate loan, you are likely to lose those low interest rates as soon as they inevitably climb back to normal.

If you’re a parent considering this type of funding for your child’s education, you should think long and hard about the possible consequences for you. Depending on your overall financial outlook and age, it could be risky placing your financial future in the hands of your child, as this might take you off track from focusing on your own long-term financial goals.

Retirement funds. Most people look to their retirement accounts to draw funds for the cost of college. Traditional and Roth IRAs both allow for qualified withdrawals to pay for education costs, with varying penalties or tax breaks depending on age and type of account. However, most financial experts would agree this should be your last resort. Going this route could leave you with penalties and additional taxes upon distribution, not to mention dramatically reduce your ability to grow your wealth through compound interest.

Private student loans. Loans are, of course, the inevitable route to take when needing to cover the cost of college. Interest rates are usually at a decent level and lending guidelines are fair. Because private student loans generally require a co-signer, they leave both parties—students and parents—partly responsible. However, not all private student loans are created equal. There can be a wide variety in rates, fees and rules, so it can pay to shop around.

Financial aid/government student loans. These are the most common college funding options, as well as the most beneficial. Government funding tools can include grants, work-study programs and federal student loans. But not all students qualify for the same programs. It’s important to understand which programs you qualify for and identify how much of the money is free, how much is considered a loan, and whether any of the funding is associated with a work-study arrangement. Regarding the latter, if you’re depending on funds from a federal work-study program or grant, they can be subject to performance and personal finances. What’s more, qualification for this funding can change from year to year.

Altogether, paying for college can be a true burden for most families. However, a college education can also lead to a rewarding career path and high long-term earning potential. It’s important to assess the risks and rewards involved before taking on any additional financial responsibilities. If you’re already struggling to pay off debt and your credit is suffering as a result, you may be a good candidate for credit repair. Let us at Ovation help you. We offer a wide range of credit repair solutions to help meet your individual needs.

Contact us today to see how we can help.

How Millennials Can Retire Tax Free

By | Credit Repair, Save Money

retire-tax-freeIf you’re a millennial, the idea of retirement is far away and it doesn’t consume your time or energy thinking about or planning for it. However, with President Obama’s newest myRA account, there is now an easy savings option that may appeal to the millennial.

Roth IRA Lite

In many respects, the myRA is like a Roth IRA account. You can contribute up to $5,500 a year and you can only participate if your income is less than $191,000 (married) or $129,000 (single). In addition, the minimum opening balance for the account is $25. Like a Roth IRA, contributions don’t reduce your taxable income. However, the truth is that a myRA is more like a Roth IRA with training wheels because it has limited investment options. The ideal savings plan for a millennial that is comfortable exploring different investment options is a true Roth IRA, which will help you retire tax-free and give you more choices to grow your contributions.

Better than myRA?

The Roth IRA has two significant advantages for young people. First, unlike a traditional, pre-tax IRA or 401k, withdrawals in retirement aren’t taxed at high-income rates. As a matter of fact, with Roth IRAs, although you get no tax breaks for your contribution, withdrawals are tax-free.

When you do withdraw your funds from your Roth IRA, your income is likely going to be higher, and therefore your tax rate will likely be higher too. This makes waiting until retirement for your tax break more valuable than receiving one now, as with a 401k. The Roth option also provides a shield from tax and benefit penalties for higher-income retirees.

The second advantage of a Roth IRA for millennials is flexibility. As young adults, you might have unexpected expenses, such as graduate school, starting a business, or just making ends meet. If you withdraw funds from a traditional IRA, you will get hit with a 10 percent early-withdrawal fee. With a Roth IRA, meanwhile, you can get your money back without paying a stringent penalty.

What about 401k’s?

Most individuals believe that a 401k is the best instrument for creating retirement savings, and yes, it is a good place to start — but it is most beneficial when used in tandem with a Roth IRA. A 401k allows you to save generally up to 6 percent of your salary with an employer’s match. However, if you’re planning a decent retirement and have other savings goals, it’s important to save more than 6 percent a year. That’s where a Roth IRA can make up the difference.

Get Going!

If you are ready to start your Roth IRA, remember that in 2014 you are able to contribute $5,500 per person, provided that your adjusted gross income isn’t more than $114,000 for a single person or $181,000 for a couple.

If you’re already saving in a 401k and fully funding a Roth IRA and can still save more, then it’s important to build an emergency account of three to six months’ worth of expenses outside the Roth IRA, so you can leave the Roth account untouched and growing tax-free. Once your emergency account is established, consider maxing out your 401k to maximize your finances and set yourself up for the most success upon retirement.

Help is Available

If planning for retirement scares you, you aren’t alone. For most millennials, it seems so far off that it isn’t worth planning now. But the truth is, the earlier you start, the better and easier it will be for you in the future. If you’re struggling to save or to make ends meet, it’s likely your credit is also suffering. Let us at Ovation help you. We offer a wide range of credit repair solutions customized to meet your unique needs.

Contact us today to see how we can help.

MyRA: What You Need to Know

By | Personal Finance, Save Money

retirement-myraThere seems to be a lot of confusion surrounding the new MyRA account announced by President Barack Obama in his State of the Union address this year.

The basics. Essentially, it’s similar to a Roth IRA. Just like any other IRA, you can contribute up to $5,500 a year and you can only participate if your annual income is less than $191,000. In addition, the minimum opening balance for the account is $25 and contributions are made after taxes. You can also withdraw these contributions, tax-free, at any time with no penalty as long as you’re 59 ½ or older.

The difference. Even though there are many similarities, a MyRA is not the same as a Roth IRA. The biggest difference is the type of investment options in your account. A MyRA only offers one investment, the G fund, versus a Roth IRA, which offers thousands of mutual funds, ETF’s, and individual stocks.

The G fund. The G fund is a type of savings account (as opposed to a mutual fund). It pays a higher rate of interest than a typical consumer savings account, the balance never goes down and your money is covered by an FDIC-like guarantee.

The audience. MyRA certainly isn’t for everyone and is targeted mostly toward people who have no retirement savings.The maximum amount you can have on deposit in a MyRA account is $15,000. After that, you must transfer the funds over to a Roth IRA. The account will be available later this year and employers will start encouraging employees to participate and begin making contributions. This type of account is especially great for those who don’t have a retirement plan at work and are only able to contribute a little bit at a time.

Get it now. MyRA isn’t available yet but if you think you would be a great candidate, there are a few other options that are similar. First, you can sign up for TreasuryDirect and buy Series 1 US Savings Bonds. You can purchase these in small increments, but unlike the MyRA, these are not tax-free and there is a small penalty for withdrawing in less than five years. You can also open a Roth IRA at your bank or credit union. If you already have a savings account, most banks will allow you to convert that account into an IRA.

Why you need it. MyRA is a great way to kick off your savings career. It’s an easy way to slide into your savings routine and take the training wheels off.

Saving for retirement is no easy task, especially if you are not starting at an early age or starting over after several poor financial decisions that may have affected your credit or savings ability. The first step toward financial success is repairing your credit so that you have several options when it comes to your financial future.

If your credit is suffering, you might also consider credit repair options. Let us at Ovation help you. We offer a wide range of credit repair solutions, customized to meet your unique needs.

Contact us today to see how we can help.

Teaching Kids to Save

By | Budgeting, Save Money

teaching-kids-saveHealthy money habits are established at an early stage in life and it’s important for parents to help their kids develop these habits at an young age. Kids are clean slates, giving you the opportunity to teach them the type of healthy habits that will carry them through adulthood. Below are a few best practices to help you begin the process of teaching your kids how to save effectively.

Open a savings account.  At most banks, savings accounts can be opened at no cost for minors. In addition, if the minor opens an account at the same place that the parent banks, the issuing establishment might provide a waiver on any fees. Opening a savings account can help teach kids the importance of saving money (and beginning to build interest) for a large purchase in the future.

Match contributions. The easiest way to help your children see and understand the value of saving is to match the amount they save. This will show them that you also value saving and are wiling to invest in their smart decision.

Give them an allowance. Most parents have ditched the concept of an allowance, but if you want your kids to learn healthy saving habits, you are going to have to give them money to save. In addition, giving your kids an allowance helps them understand the concept that money is not disposable and that they must budget properly to pay for the things they want without running out of money too quickly.

Get a piggy bank. The concept of a piggy bank extends far beyond the bright pink pig sitting on your kid’s nightstand that he or she dumps pennies into at the end of every week. Today’s piggy banks are much more sophisticated. Many have slots for spending, saving, and donating. This type of bank can help teach kids about budgeting and categorizing money for different expenditures.

Play games. Kids like to have fun. If you help them have fun, they will enjoy learning much more. It’s easy to help them learn about saving money by making it a game. For example, put together a challenge for them, or instead, play online games that teach them basic principles such as separating wants from needs and avoiding impulse buys.

Go to the bank. The bank might seem like a boring place to you, but for a kid, it can be an educational experience.Let your kids help you and tell them what you are doing and why.

Invest. It’s important to set up a mutual fund or savings account for your child in order to teach them to be a saver, but a stock investment can teach them even more. It’s best to choose a company they are familiar with. This type of investment can help kids learn how to research stocks and save more money.

Helping kids learn how to save is a process, but can be done with these few best practices. Before you can teach your kids about saving effectively and investing wisely, it’s important that you are also doing the same. This helps set you up for financial security in the future. Financial security is mostly determined by your credit score, which can determine much of your buying power and future financial decisions. However, if you’re experiencing trouble with your credit score, you could be a candidate for credit repair. At Ovation, we offer a wide range of credit repair solutions, customized to meet your unique needs.

Contact us today to see how we can help.

Retirement Planning: What You Need to Know About Roth IRAs & 401ks

By | Credit Repair, Save Money

roth-ira-401kPlanning for your retirement can be tricky if you aren’t well versed on the ins and outs of this very important life goal. When it comes to your savings plan, there are many options available to you. Two of the newer options include the Roth IRA and the Roth 401k. Both offer tremendous benefits but can be very complex. Below are five things you need to know before opening these types of accounts.

Pay now, not later.

While traditional Roth IRAs and 401ks provide generous tax breaks, the difference lies in the timing. With traditional IRA contributions, you avoid taxes when you put money into your account and you must leave the money in until at least age 59 ½ to avoid a withdrawal penalty. With Roth IRAs, there are no tax breaks for contributions, but you withdraw the principal anytime, tax free. This results in a big benefit for those in a higher tax bracket during retirement years.

Understand the limits.

To be able to contribute to the Roth, you must have earned income in the year you contribute, and unlike traditional IRAs, you can keep contributing past age 70 ½. The maximum amount you can contribute to a Roth IRA annually is $5,500, with an extra $1,000 if you’re 50 or older. Keep in mind that higher income taxpayers (above $114,000 adjusted gross income for single filers and $181,000 for joint filers in 2014) are limited or not eligible to contribute to Roth IRAs. Consult a tax advisor to find out more.

Use your employer.

Recently, many employers have added a Roth option to their 401k plans. If you choose this route and make contributions to a Roth account through your employer, you won’t see any immediate tax savings, but your money will grow tax-free. A Roth 401k is a good option if your earnings are too high to contribute to a Roth IRA.

Consider a Roth conversion.

If you convert a traditional IRA account to a Roth, there is more potential for tax-free earnings. In the year you convert, you must pay tax on the full amount shifted into the Roth. It makes sense to convert if you expect your tax rate to be the same or higher in the future. It is also important to note that you will want to pay the tax owed on a conversion with money outside of the IRA. Drawing money from the IRA to pay the tax could result in an additional tax bill and a penalty if you are under age 59 ½. Be careful if you consider a conversion because it could trigger another tax event like boosting you into another tax bracket.

You must pass the test.

In order to receive tax-free and penalty free earnings, you must pass a couple of tests. First, you must be 59 1/2 or older.  If not, you will get hit with a 10% early withdrawal penalty and taxes if you take out earnings before age 59 ½. In addition, you must have had at least one Roth open for at least five years. There are some exceptions, like education expenses and first time home purchases. Again, consult a tax advisor for full details.

When it comes to retirement planning, it’s important to know your options. But having the right accounts in place is only the first step to building a solid foundation for yourself that will prepare you for financial success both now and in the future. It is also important to ensure that your credit is in good shape. Your credit is the one asset that will determine the majority of your financial decisions. If you are currently experiencing issues in this department, let us at Ovation help you.

We offer several credit repair solutions, customized to meet your unique needs. Contact us today to see how we can help.

Saving for Retirement and Credit Repair

By | Credit Repair, Save Money

retirement-saving-credit-repairEveryone knows that it’s important to save for retirement, but it can be difficult to know where to start. Without concrete goals for retirement savings, it’s difficult to plan for the future.  This article will give you a few tips to help you get started.

Have an Emergency Fund

Before you even start your retirement account, make sure you have at least a six-month emergency fund saved. It should be large enough to sustain you if you suddenly find yourself without a source of income. Having an emergency fund in place will save you from needing to use expensive forms of debt – like credit cards – to pay for essentials in a financial emergency.

Save at Least 10% for Retirement

Every time you get paid, feed your retirement account by setting aside 10% of your paycheck. The earlier you begin, the better. Starting to save for retirement in your twenties will net you far more money when it’s time to stop working than if you start in your thirties, forties or fifties. Remember the earlier you start, the more compound interest can build.

The Percentage of Bonds in Your Portfolio Should Equal Your Age

This is a general rule of thumb, but the closer you get to your target retirement age, the more you should distribute your investment portfolio toward less volatile investments like bonds. Earlier in life, you can afford greater volatility, but you want to make sure your portfolio won’t take a big hit in the years leading up to your retirement should the stock market decline.

Expect to Get 7%-8% Growth from a Diversified Stock Portfolio

Nothing is guaranteed, but your diversified stock portfolio should average 7%-8% growth. A properly diversified portfolio will result in more long-term gains for your investments by limiting volatility.

Plan on Replacing 70% to 80% of Your Pre-retirement Income

Although you may need to replace more – especially if you or your spouse currently have or anticipate special medical needs – plan to need 70% to 80% of your pre-retirement income to live off of in your “golden years.”  Keep in mind, though, some studies suggest that you may actually need as little as 35% of your pre-retirement income after retirement.

Save Eight Times Your Final Income for Retirement

Some investment firms recommend a retirement planning model that encourages you to set goals by age. It suggests that you should have saved eight times your income at 65, if that is your goal retirement age. Other benchmarks are one times your income at age 35, three times by 45, and five times by 55.

Plan on Withdrawing 4% from Your Retirement Savings Every Year of Retirement

Most retirement plans are built around the assumption that you will withdraw around four percent of your savings per year of retirement. The goal is to earn 7-8%, spend 4%, and invest the remainder to keep pace with inflation.

Every Situation is Unique

These tips are not written in stone. Everyone’s situation is different, and you need to make decisions that are the best for you. If you are struggling with your credit score, credit repair should be part of your retirement plan. Consider Ovation for your credit repair needs to get yourself in a situation where you can afford to give your savings more attention.

Call Now for a FREE Credit Consultation