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July 26, 2021

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Denise and Chris Arand

Denise and Chris Arand

Executive Vice Presidents/Financial Strategists

2173 Salk Ave
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Carlsbad, CA 92008

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July 12, 2021

What’s Happening In The Housing Market

What’s Happening In The Housing Market

By now, you’ve heard the housing market horror stories.

Chances are you know someone who thought they’d found the perfect home at the perfect price, only to be wildly outbid at the last minute. Maybe you’ve been that someone.

So what’s going on? How did the housing market go from a pandemic-fueled lockdown to a frenzy?

It’s simple—the tight housing market has a lot to do with supply and demand.

It started in 2020 during the darkest days of the COVID-19 pandemic. To combat the economic crisis sparked by shutdowns, interest rates plummeted to an all-time low. At the same time, workers in cities started flocking to states with more reasonable costs of living. After all, their work situation was almost entirely remote—why shell out $2,000 per month for a broom closet in Manhattan when you could pay the same for a 4 bedroom, 2 bathroom house in Iowa?

Millennials were especially driven by the favorable market conditions. They were eager to buy houses and establish roots.

That’s the demand side. What about the supply?

Even before 2020, there was a drastic housing shortage in the United States to the tune of 2.5 million units.¹ Toss in shutdowns of construction companies and lumber mills, and you had a recipe for an even worse shortage. That equates to a sellers market—those selling can often expect massive payouts while buyers may have to face bidding wars and skyrocketing prices.

So what should you do?

The answer depends on the individual. Those looking to buy should be prepared for a lengthy (and expensive) process, and buying might not make sense unless you’re planning on staying in your new home for at least five years or more.

There’s no telling how long the market will continue its hot streak. Just make sure you have your finances in order and a clear strategy before you commit to making a massive purchase like a home in this climate.

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¹ “The U.S. Faces A Housing Shortage. Will 2021 Be A Turning Point?” Natalie Campisi, Forbes, Jan 4, 2021, https://www.forbes.com/advisor/mortgages/new-home-construction-forecast/

July 7, 2021

Keeping the House

Keeping the House

Life insurance can save your house.

Picture this…

A couple owns a beautiful home out in the suburbs. It’s where they’ve raised their children and made memories that will last a lifetime.

Until one of them passes away too soon. Suddenly, the whole picture shifts. See, they are a two income household. They relied on both income streams to buy groceries, cover children’s education… and pay the mortgage.

Now, the surviving partner isn’t simply coping with grief. They’re facing the potential loss of their house, with all of its memories and meaning, as well.

It’s not a far-fetched scenario. Death is one of the Five D’s of foreclosure—the others are divorce, disease, drugs, and denial.

Life insurance can help. It’s the safety net to have in place to protect your family from financial uncertainty and provide for their future.

That’s because the death benefit that’s paid out to your loved ones can cover the cost of mortgage payments, or possibly even pay off your mortgage entirely.

What does that look like in the scenario from earlier?

First, it prevents a personal tragedy from becoming a financial crisis. The last thing a grieving person needs is to have to cope with financial stress.

Second, it means that the grieving partner could keep the house if they so desire. After some time has passed, they can make plans on what the future of their life should look like, without undue financial restrictions.

If that’s a peace you would like to help provide to your family, contact me. We can review what life insurance would look like for you and your budget.

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April 12, 2021

Home Buying for Couples: A Starter Guide

Home Buying for Couples: A Starter Guide

Buying your first home is an exciting, yet daunting process.

You and your significant other already have a lot on your plate in planning this huge purchase—from deciding how much house you need to fitting it all into a budget. Read on for some tips that will help ease the process of buying a house as well as help you save money in the long run!

Evaluate your financial situation before you start house hunting. It’s important to know what kind of mortgage payment is feasible for the income in a household. You’ll also have to contend with hidden housing costs like property taxes, renovations, and repairs. Calculate your total income, and then subtract your current expenses. That’s how much you have at your disposal to handle the costs of homeownership.

Improve your credit score. If you’re a first-time homebuyer, your credit score is important—it can profoundly affect your ability to get approved for loans and mortgages! The higher that number goes up, the easier it may become to get approval from lenders. You can help yourself out by paying off any outstanding debt balances such as student loan payments, medical bills, and credit card debt before going house hunting.

Start saving for a downpayment. As a rule of thumb, you’ll want to put down at least 20% of the home’s purchase price. This can take years, especially if your budget is tight! However, it’s well worth it—you may avoid the hassle of paying private mortgage insurance (PMI), which can substantially add to your monthly housing payments. A sizeable downpayment can also lower your interest rate and reduce the size of your loan.¹

Decide how much house you need. This is a tough question to answer, but it’s crucial that both partners are united on this front. Otherwise, one partner might feel like a house doesn’t meet their needs. Sit down with your partner and discuss what exactly you desire out of your home. How many bedrooms will you need? Do you want a big yard or a small one? How close to work do you want to live? Hammer out the important details of what you want in a home before the shopping begins!

Decide on your budget. Knowing how much you can afford before shopping for a home will help narrow down the options. Typically, housing costs should account for no more than 30% of your budget. That includes your mortgage payment, repairs, HOA fees, and renovations. Spending more than 30% can endanger your financial wellness if your income ever decreases.

Buying a home can be an exciting time for couples. But it’s important to take the necessary steps before you start house hunting. Remember, you want your new home to be a source of joy, not financial stress! Do your homework, talk with your partner, and start saving!

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“Do you need to put 20 percent down on a house?,” Michele Lerner, HSH, Sep 2, 2018, https://www.hsh.com/first-time-homebuyer/down-payment-size.html

March 22, 2021

How to Manage High Costs of Living

How to Manage High Costs of Living

It’s no secret that living in a larger city can be more expensive than in other areas.

Depending on where you live, the cost of buying groceries, public transportation, and even rent can vary drastically! If you want to learn how to manage your finances when living in an area with a higher cost of living, read on…

Lower your housing costs. Keeping a roof over your head is probably your number one expense, especially if you live in a major city. The most straightforward way to free up cash flow, then, is to downsize your apartment or home size.

While that sounds simple, it’s not always easy, particularly if you own a house! But if your budget is too tight and it’s at all possible, moving to a cheaper home or apartment can be the single most effective way to cut your spending and increase your cash flow.

Consider moving to a cheaper area. To find less costly housing, you may choose to relocate to a new neighborhood. But be sure to keep tabs on the price of daily expenses like groceries or increased transportation costs in your new stomping grounds—just because housing is cheaper doesn’t mean everything else will be!

Take on a second job, like freelancing, dog walking, or babysitting. Fortunately, living in a high cost of living area might mean you have access to plenty of part-time or side work. Check out sites like Upwork, and leverage your social networks to find viable gigs.

If you live in an area that’s high cost and has poor employment opportunities, you may need to consider relocating entirely.

Trim your budget. Try using a free budgeting app like Mint or PocketGuard for this one! They’re easy-to-use tools that can help you identify problematic spending patterns. Once you know where you’re wasting money, you can develop a strategy for cutting costs.

Coping with a high cost of living can be challenging, especially if you love the lifestyle of a big city or your work requires you to live in a certain area. Using these strategies can help reduce the burden of living in an expensive neighborhood. Which one would be easiest for you to apply to your financial life?

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February 8, 2021

3 Steps to Reduce Debt with Limited Income

3 Steps to Reduce Debt with Limited Income

Is your income holding you back from paying down debt?

It may feel like necessities such as housing, groceries, and transportation are consuming your cash flow. So how can you pay down debt if you feel like you’re struggling to put food on the table?

Reducing debt with a limited income is certainly a challenge. But if you know the right strategies, it’s an obstacle that you can work to overcome. Read on for tips that can help you pay down debt, regardless of how much you earn.

Budget debt payments first. The next time you sit down to budget, start by allocating money for reducing your debt. It should be your number one priority. Then, budget for essential living expenses like housing, utilities, and groceries. If you need more cash flow, cut down on non-essential spending like dining out and purchasing new clothes.

Start a side gig. If cutting expenses alone doesn’t free up enough cash, explore ways to make more money. That doesn’t always mean starting a second job—after all, this is the golden age of side gigs! Here are just a few hustle ideas for your consideration…

■ Resell books, clothes, and shoes you might pick up from the thrift store on eBay ■ Rideshare or deliver groceries and food ■ House sit, baby sit, or pet sit for friends and neighbors

Ultimately, your ability to earn income is only limited by your creativity in solving problems. What other opportunities are there for you to help others and earn extra income?

Make more than minimum payments. Your debt will linger if you make only minimum payments. That’s because minimum payments are nearly erased by interest. You make a payment, but the interest may put you almost right back where you started.

Instead, choose one debt to eliminate at a time. You should start with the one with the smallest total balance or the highest interest rate. Keep making the minimum payments on your other debts, and target that one debt with the rest of your available financial resources. Once it’s gone, choose the next smallest balance. Rinse and repeat until your debts are gone.

The biggest takeaway is that if you’re working with a limited income, paying off debt has to become your number one financial goal. Devote as much of your budget towards it as possible and increase your earnings if you have to. But it’s well worth the effort—once your debt is gone, you’ll have significantly more income for building real wealth!

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January 20, 2021

What All Early Retirees Have in Common

What All Early Retirees Have in Common

Early retirees track both their net worth and annual spending… and you should too!

Why? Because those two pieces of information are critical to evaluating your current financial situation and understanding what separates you from your financial goals.

Retiring early takes meticulous preparation, a willingness to sacrifice temporary comfort, and consistency. Every financial decision must effectively move you closer to your goal or you run the risk of failure.

Ignorance about your net worth hampers your ability to make certain financial decisions wisely. It may cause you to save less, if you assume your net worth is closer to your retirement goal than it actually is. When the time comes to retire, you’ll be in for a shock!

Failing to monitor your expenses can lead to a similar outcome. What if you never identify the expenses that eat up the majority of your cash flow? You might swear off lattes or designer clothes, but you might miss bigger saving opportunities. There’s a reason that so many early retirees cut back on housing, transportation, and food–they’re the biggest drains on cash flow!¹

Here’s the takeaway—imitate early retirees and regularly evaluate your net worth and spending, regardless of when you plan to retire.

Knowing what you’re worth and what’s eating up your cash flow empowers you to make effective decisions that bring you closer to your lifestyle goals.

What’s your financial status? How close are you to achieving your goals? And what’s standing in your way?

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March 2, 2020

Cities vs. Suburbs

Cities vs. Suburbs

Deciding where to live is hard.

It’s a big decision that’s impacted by the financial situation you’re in and your personal preferences. That’s why it’s important to know what to expect from the options you’re weighing. Here’s a quick guide to the pros and cons of living in a city or a suburb!

Cities: Pros and Cons <br> There’s a reason people flock to cities. First and foremost, jobs tend to be easier to find in the city than anywhere else. That means there’s a high incentive to move into town close to where you work. But that’s not the only reason to go urban. Cities are often more walkable than suburbs or the country and often feature extensive public transit. All the culture, nights out, museums, and coffee shops that your city has to offer are all easily accessible either on foot or with a quick subway ride.

But there’s a price to pay for the convenience of city living. Urban housing is typically higher than other areas, and normal things like a date night dinner will probably be pricier than elsewhere. Crime is also higher in the city than the suburbs or the country, so situational awareness is a key skill to develop if you’re living in-town (1).

Suburbs: Pros and Cons <br> The suburbs are designed to give you access to the benefits of the city while offsetting some of the costs. For starters, your dollar will probably go farther for housing in the suburbs than it will in the city. Suburbs tend to be safer and offer more space, making it appealing to people looking to start a family or couples with kids. Plus, if you’re lucky, you could be a similar distance from the countryside as the city, so you’re flexible between choosing a night in the city or a hike in the woods!

However, it isn’t all sunshine and roses for suburbanites. Housing might be cheaper per square foot, but houses also tend to be larger. That means you can actually end up paying more for housing in the suburbs even though you’re technically getting a better deal square footage-wise. The other big downside is that transportation in the suburbs can be brutal. The cost of driving a car in traffic every day can be high, so much so that suburban transportation can be almost as expensive as urban housing (2). That’s not even factoring in the stress of dealing with traffic.

Deciding where to live comes down to what you prioritize and your stage of life. Are you a young professional with a new job downtown? It might make more sense to move closer to work and be near where everything is happening. The same might also hold for a recently retired couple looking for easy access to quality medical care and date spots. A young family looking for a safer space to raise kids, however, could potentially want to look further out for housing. Just take a few of the factors we discussed in this blog to heart before you make the big decision!

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October 30, 2019

Handling Debt Efficiently – Until It’s Gone

Handling Debt Efficiently – Until It’s Gone

It’s no secret that making purchases on credit cards will result in paying more for those items over time if you’re paying interest charges from month-to-month.

Despite this well-known fact, credit card debt is at an all-time high, rising another 3% this past year. The average American now owes over $6,300 in credit card debt. For households, the number is much higher, at nearly $16,000 per household. Add in an average mortgage of over $200,000, plus nearly $25,000 of non-mortgage debt (car loans, college loans, or other loans) and the molehill really is starting to look like a mountain.

The good news? You have the potential to handle your debt efficiently and deal with a molehill-sized molehill instead of a mountain-sized one.

Focus on the easiest target first.
Some types of debt don’t have an easy solution. While it’s possible to sell your home and find more affordable housing, actually following through with this might not be a great option. Selling your home is a huge decision and one that comes with expenses associated with the sale – it’s possible to lose money. Unless you find yourself with a job loss or similar long-term setback, often the best solution to paying down debt is to go after higher interest debt first. Then examine ways to cut your housing costs last.

Freeze your spending (literally, if it helps).
Due to its higher interest rate, credit card debt is usually the first thing to tackle when you decide to start eliminating debt. Let’s be honest, most of us might not even know where that money goes, but our credit card statement is a monthly reminder that it went somewhere. If credit card balances are a problem in your household, the first step is to cut back on your purchases made with credit, or stop paying with credit altogether. Some people cut up their cards to enforce discipline. Ever heard the recommendation to freeze your cards in a block of ice as a visual reminder of your commitment to quit credit? Another thing to do is to remove your card information from online shopping sites to help ensure you don’t make mindless purchases.

Set payment goals.
Paying the minimum amount on your credit card keeps the credit card company happy for 2 reasons. First, they’re happy that you made a payment on time. Second, they’re happy if you’re only paying the minimum because you might never pay off the balance, so they can keep collecting interest indefinitely. Reducing or stopping your spending with credit was the first step. The second step is to pay more than the minimum so that those balances start going down. Examine your budget to see where there’s room to reduce spending further, which will allow you to make higher payments on your credit cards and other types of debt. In most households, an honest look at the bank statement will reveal at least a few ways you might free up some money each month.

Have a sale. To get a jump-start if money is still tight, you might want to turn some unused household items into cash. Having a community yard sale or selling your items online through eBay or Offerup can turn your dust collectors into cash that you can then use toward reducing your balances.

Transfer balances prudently.
Consider balance transfers for small balances with high interest rates that you think you’ll be able to pay off quickly. Transferring that balance to a lower interest or no interest card can save on interest costs, freeing up more money to pay down the balances. The interest rates on balance transfers don’t stay low forever, however – typically for a year or less – so it’s important to make sure you can pay transferred balances off quickly. Also, check if there’s a balance transfer fee. Depending on the fee, moving those funds might not make sense.

Don’t punish yourself.
Getting serious about paying down debt may seem to require draconian measures. But there likely isn’t a need to just stay home eating tuna fish sandwiches with all the lights turned off. Often, all that’s required is an adjustment of old spending habits. If your drive home takes you past a mall where it would be too tempting to “just pick a little something up”, take a different route home. But it’s important to have a small treat occasionally as well. If you’re making progress on your debt, you deserve to reward yourself sometimes. All within your budget, of course!

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October 16, 2019

Tips on Managing Money for Couples

Tips on Managing Money for Couples

Couplehood can be a wonderful blessing, but – as you may know – it can have its challenges as well.

In fact, money matters are the leading cause of stress in modern relationships.¹ The age-old adage that love trumps riches may be true, but if money is tight or if a couple isn’t meeting their financial goals, there could be some unpleasant conversations (er, arguments) on the bumpy road to bliss with your partner or spouse.

These tips may help make the road to happiness a little easier.

1. Set a goal for debt-free living. <br> Certain types of debt can be difficult to avoid, such as mortgages or car payments, but other types of debt, like credit cards in particular, can grow like the proverbial snowball rolling down a hill. Credit card debt often comes about because of overspending or because insufficient savings forced the use of credit for an unexpected situation. Either way, you’ll have to get to the root of the cause or the snowball might get bigger. Starting an emergency fund or reigning in unnecessary spending – or both – can help get credit card balances under control so you can get them paid off.

2. Talk about money matters. <br> Having a conversation with your partner about money is probably not at the top of your list of fun-things-I-look-forward-to. This might cause many couples to put it off until the “right time”. If something is less than ideal in the way your finances are structured, not talking about it won’t make the problem go away. Instead, frustrations over money can fester, possibly turning a small issue into a larger problem. Discussing your thoughts and concerns about money with your partner regularly (and respectfully) is key to reaching an understanding of each other’s goals and priorities, and then melding them together for your goals as a couple.

3. Consider separate accounts with one joint account. <br> As a couple, most of your financial obligations will be faced together, including housing costs, monthly utilities and food expenses, and often auto expenses. In most households, these items ideally should be paid out of a joint account. But let’s face it, it’s no fun to have to ask permission or worry about what your partner thinks every time you buy a specialty coffee or want that new pair of shoes you’ve been eyeing. In addition to your main joint account, having separate accounts for each of you may help you maintain some independence and autonomy in regard to personal spending.

With these tips in mind, here’s to a little less stress so you can put your attention on other “couplehood” concerns… Like where you two are heading for dinner tonight – the usual hangout (which is always good), or that brand new place that just opened downtown? (Hint: This is a little bit of a trick question. The answer is – whichever place fits into the budget that you two have already decided on, together!)

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¹ “Fighting with your spouse? It’s probably about this,” Kelley Holland, CNBC, Feb 4 2015, https://www.cnbc.com/2015/02/04/money-is-the-leading-cause-of-stress-in-relationships.html

² “The Case for (and Against) Spouses Having Joint Checking Accounts,” Maryalene LaPonsie, U.S. News & World Report, Mar 7, 2019, https://money.usnews.com/banking/articles/the-case-for-and-against-spouses-having-joint-checking-accounts

April 15, 2019

Is a home really an investment?

Is a home really an investment?

The housing market has experienced major peaks and valleys over the past 15 years.

If you’re in the market for a new home, you might be wondering if buying a house is a good investment, or if it even should be considered an investment at all…

“Owning a home is the best investment you can make.”
We’ve all heard this common financial refrain: “Owning a home is the best investment you can make.” The problem with that piece of conventional wisdom is that technically a home isn’t an investment at all. An investment is something that (you hope) will earn you money. A house costs money. We may expect to save money over the long term by buying a home rather than renting, but we shouldn’t (typically) expect to earn money from buying a home.

So, a home normally shouldn’t be considered an investment, but it may offer some financial benefits. In other words, buying a home may be a good financial decision, but not a good investment. A home may cost much more than it gives back – especially at the beginning of ownership.

The costs of homeownership
One reason that buying a home may not be a good investment is that the cost of homeownership may be much higher than renting – especially at first. Many first time homebuyers are unprepared for the added expense of owning a home, plus the amount of time maintaining a home may often require. First-time homebuyers must be prepared to potentially deal with:

  • Higher utility costs
  • Lawn care
  • Regular maintenance such as painting or cleaning gutters
  • Emergency home repairs
  • Higher insurance costs
  • Private Mortgage Insurance (PMI) if you don’t provide a full 20 percent down payment

A long term commitment
Another problem with considering a house as an investment is that it may take many years to build equity. Mortgages are typically interest heavy in the beginning. You can expect to be well into the life of your mortgage before you may see any real equity in your home.

Having the choice to move without worrying about selling your home is a benefit of renting that homeowners don’t enjoy. The freedom to move for a career goal, romantic interest, or even just a lifestyle choice is mostly available to a renter but may be out of reach for a homeowner. So, be sure to consider your long term goals and aspirations before you start planning to buy a house.

When is buying a home the right move?
Buying a home in many cases can be an excellent financial decision. If you are committed to living in a specific area but the rent is very high, homeownership may have some benefits. Some of those may be:

  • Not having a landlord make decisions about your property
  • Tax savings
  • Building equity
  • A stable place to raise a family

Buying a home: Not always a good investment, but may be a good financial decision
Although buying a home may not pay you in high returns, it can be an excellent financial decision. If owning a home is one of your dreams, go for it. Just be aware of the costs as well as the benefits. If you’ve always wanted to own your own home, then the rewards can be myriad – dollars can’t measure joy and the priceless memories you’ll create with your family.

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This article is for informational purposes only and is not intended to promote any certain products, plans, or strategies for saving and/or investing that may be available to you. Market performance is based on many factors and cannot be predicted. Any examples used in this article are hypothetical. Before investing or enacting a savings or retirement strategy, seek the advice of a licensed financial professional, accountant, realtor, and/or tax expert to discuss your options.

October 29, 2018

How much home can you afford?

How much home can you afford?

For most households, buying a home means getting a mortgage, which means lenders play a big role in declaring how much house you can “afford”.

Many people take that calculation as a guide in choosing which house they want to buy, but after you’ve signed the papers and moved in, the lender might not be much help in working out the details of your family budget or making ends meet.

Let’s take a look behind the curtain. What is it that lenders look at when determining how large of a mortgage payment you can feasibly make?

The 28-36 Rule
Lenders look closely at income and debt when qualifying you for a certain mortgage amount. One of the rules of thumb at play is that housing expenses shouldn’t run more than 28% of your total gross income.[i] You also may hear this referred to as the “housing ratio” or the “front-end ratio”. The 28% rule is a good guideline – even for renters – and has been a common way to budget for household expenses over many generations. Using this rule of thumb, if your monthly income is $4,000, the average person would probably be able to afford up to $1,120 for a mortgage payment.

Lenders also check your total debt, which they call debt-to-income (DTI). Ideally, this should be below 36% of your income. You can calculate this on your own by dividing your monthly debt payments by your monthly income. For example, if your car loans, credit cards, and other debt payments add up to $2,000 per month and your gross income is $4,000 per month, it’s unlikely that you’ll qualify for a loan. Most likely you would need to get your monthly debt payments down to $1,440 (36% of $4,000) or under, or find a way to make more money to try to qualify.

Buying less home than you can afford
While the 28% and 36% rules are there to help provide safeguards for lenders – and for you, by extension – buying a home at the top end of your budget can still be risky business. If you purchase a home with a payment equal to the maximum amount your lender has determined, you may not be leaving much room for error, such as an unexpected job loss or other financial emergency. If something expensive breaks – like your furnace or the central air unit – that one event could be enough to bring down the whole house of cards. Consider buying a home with a mortgage payment below your maximum budget and think about upsizing later or if your income grows.

A home as an investment?
A lot of people will always think of their home as an investment in an asset – and in many cases it is – but it’s also an investment in your family’s comfort, safety, and well-being. In reality, homes usually don’t appreciate much more than the rate of inflation and – as the past decade has shown – they can even go down in value. Your home, as a financial tool, isn’t likely to make you rich. In fact, it may do the opposite, if your mortgage payment takes up so great a percentage of your monthly budget that there’s nothing left over to invest, pay down debt, save for a rainy day, or enjoy.

Homes are one of those areas where many discover that less can be more. Whether it’s your first home or you’re trading in the old house for a new one, you might be better served by looking at how big of a mortgage payment you can afford within your current budget, rather than setting your sights on the house your lender says you can afford.

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October 1, 2018

What Millennials can learn from Generation Z

What Millennials can learn from Generation Z

Millennials have been praised for having good financial habits despite facing some difficult economic challenges.

Extremely high housing prices, massive student loan debt, and stagnant wages are just a few of the financial hurdles Millennials have had to overcome.

GenZ, on the other hand – the generation right behind Millennials – exist in a different financial picture. Born between 1995 and 2015, they’re the first generation to grow up with mobile technology, and they’ve lived most of their lives under the shadow of the Great Recession. They have an air of self-reliance and frugality. They display financial grace, and they can deliver some valuable financial lessons for their Millennial predecessors.

Minimizing Student Loan Debt
Student loan debt is the elephant in the Millennial living room. Becoming saddled with massive student loan debt practically became a given if you were born a Millennial. The flipside is that Millennials are more educated than any previous generation.

Looking to learn from those who came before them, GenZ is much warier of incurring student loan debt. According to a study by the Center for Generational Kinetics[i], GenZ students may be more apt to try lower-cost options for higher education, such as community college or in-state university systems. And many are working their way through college, paying tuition as they go.

Finding ways to minimize student loan debt could help those Millennials who are still continuing their education.

Retirement Planning
With GenZ’s aversion to student loan debt, it’s not surprising this post-Millennial generation is very concerned with saving for retirement. They’re open to retirement planning and follow a “save now, spend later” principle when it comes to their finances.

This devotion to saving is something every generation can learn from.

Frugality: Effects of the Great Recession
Generation Z is a frugal bunch. They’re often compared to the Greatest Generation – those born approximately between 1910 and 1924 – in that they have a penchant for beginning to save as soon as they enter the workforce and start earning their own money.

Statistics show that 64 percent of GenZ have a savings account compared to 54 percent of older generations.[ii] They’re also bargain hunters. Whereas the Millennial generation was more inclined to pay top price for a brand they love, GenZ-ers know how to look for a deal.

The Financial Mark of a New Generation
It can be said the Millennial generation has been marked by their massive spending power. GenZ, on the other hand, is taking on a reputation for their saving power. A more conservative, old-school aura of frugality and personal responsibility defines this generation’s financial attitudes.

Turns out GenZ has a lot to teach all the generations about personal financial health. If you have a teenager in your life, you might want to take a closer look at how they’re thinking about their financial futures and seeing what you might learn!

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September 24, 2018

Inflation Over Time and What it Means for Retirement

Inflation Over Time and What it Means for Retirement

You may have thought that inflation is always bad, but did you know that sometimes it can be good?

Inflation is simply the difference in prices from one year to the next over time. It’s calculated as a percentage and it goes through cycles:

  • Two percent inflation is actually seen as economic growth and is considered “healthy” inflation.
  • As inflation expands beyond three percent it creates a peak and financial bubbles can form.
  • If the percentage falls below two percent, inflation may be seen as negative and recessions can develop.
  • Finally, there is a trough preceding another cycle expansion.

(If you want to geek out about inflation rates, check out a history from 1929 to 2020 at https://www.thebalance.com/u-s-inflation-rate-history-by-year-and-forecast-3306093.)

Good or bad, inflation should be a concern for everyone in the United States. The economy affects us all, but it can be particularly troubling for seniors living in retirement, or who are about to enter retirement. This is because retirement is usually based on a fixed income budget. Inflation can decrease the purchasing power of retirees, especially for goods and services that increase with inflation.

Here are some tips to protect your retirement income from the effects of inflation over time:

Maximize Your Social Security
Social security benefits have a cost of living/inflation increase built into the disbursement. So, as inflation goes up and the cost of living rises, so too does your social security.

This can be beneficial while you’re on a fixed retirement income. Because this is the only retirement investment with this feature, try to maximize your social security earnings by working until age 70 if you can.

Select Investments that May Grow When Inflation Rises
While living expenses such as gas, groceries, and utilities might rise with inflation, some investments may offer better returns as inflation rises. This is another reason a diverse retirement portfolio might be beneficial.

Minimize Expenses to Combat Rising Inflation
While none of us can affect the inflation rate itself, we can all work to minimize our expenses during our retirement years. Maximizing your income and minimizing your expenses is the name of the game when you’re living on a fixed budget.

Minimizing housing costs is a strategy to deal with inflation and rising prices. Downsize your home if possible. Perhaps investing in a renewable energy source may help save money on energy expenses. A simple kitchen garden can save you money on groceries – a budget item that can take a big hit from inflation.

The Ebb and Flow of Inflation Over Time
Over time, inflation waxes and wanes. A little planning, diversified investments, and consistent frugality may help you sail through inflation increases during your retirement years.

This article is for informational purposes only and is not intended to promote any certain products, plans, or strategies for saving and/or investing that may be available to you. Market performance is based on many factors and cannot be predicted. Before investing, talk with a financial professional to discuss your options.

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