The Progressive Income Tax: A Tale of Three Brothers

“The Progressive Income Tax” is one of those economic terms that gets bandied about, but few actually know what it means or how it works. This tale of three …
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Retiring soon? Do these things in the 5 years leading up to it and you’ll be much better off

It used to be that retirement was a fixed age point but, in the last couple of decades, that has changed and many people now retire over a longer period of time and many don’t retire completely.

Analysts these days have coined a new phrase, the “retirement red zone”, which is the five years before someone’s full retirement starts. In these five years leading up to quitting your job completely, there are certain things that you can do to get ready and make preparations so that, once that weekly paycheck isn’t coming in anymore, you’ll be sent to handle it.

The first thing that should be done, and as soon as possible, is to create a financial plan and learn how to budget as well. The value of learning how to budget and having a plan is enormous and will help you to see where you are financially as well as give you an idea of where you need to be.  This will obviously help you to see if you’re on the right track to getting there in the next five years. It will also answer the all-important question “can I afford to retire?”

Next is lining up a number of different retirement income sources. One of them will be your Social Security checks but you’d be very wise to not rely on them entirely. Anything you can do to monetize your skills and set up residual income streams now is an excellent idea and will help to pad your income during retirement.

Another is simply to maximize your 401(k), if you have one through your employer, and take full advantage of any matching program that they might have. Keep in mind that there are “catch-up” provisions that you can take advantage of as well and don’t leave any valuable retirement money on the table. In most cases you can contribution up to $ 5500 more using this one provision if you are 50 years old or older.

If you plan on retiring before you hit 65 you need to keep in mind that you won’t be eligible for Medicare and thus make sure that your health insurance is paid in full and any health care plan that you have through your work will continue to cover you during retirement. After 65 Medicare will be your primary insurer if you had an employer plan and your company might pick up some of the costs, but not always, so definitely check to be sure.

Remember also that Medicare, unfortunately, does not cover long-term care costs and be sure to have a strategy to take care of those if necessary. Considering that one out of two people will need some type of long-term care costs in their lifetime, having long-term care insurance is a very good idea. The fact is, healthcare costs usually increase towards the end of your retirement, which also happens to coincide with the end of your life, and you really need to be prepared for this as much as possible in order to not burden your family with the stress of huge health care bills.

Finally and most importantly you should do your best to pay off your debt before you retire. The unfortunate fact is that over half of all American workers are now going into retirement with debt, including mortgage debt on their homes. Credit cards and auto loans are also high on the list and, if you have an overly large amount of debt, paying it down now is vitally important.

Do these things in the years before you retire and you’ll find that you have a lot less stress, and fewer financial problems, once you get there.

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Do What You Love, Love What You Do

Do you have a favorite hobby or pastime? If not then you need to find one quick! There are many studies that shown taking up a hobby can ease stress, improve health, and just give one a sense of overall purpose. It’s probably no secret that one of my favorite hobbies is blogging. I spend time each week carefully planning out content that I want to write, social interactions and forming relationships with other bloggers, and of course the technical upkeep that comes along with any website. What makes me fortunate is that this hobby is also a nice side hustle that provides a little extra income for my time contributions. That doesn’t mean that all of my stress relieving hobbies come with a price tag though. In fact, I have several that cost me quite a few bucks, and might raise an eyebrow considering I’m a personal finance enthusiast. Just remember you can’t put a price tag on your health and enjoyment of life.

I love going to baseball games! I absolutely love the game of baseball, and the closest place for me to go and watch a professional game is about an hour from my house, which means lots of gas and miles on my car. Then once you get there you have to pay additional money for parking, food, drinking, and just about anything else other than breathing in the air.

Another favorite hobby of mine is gaming! While I am fortunate enough to have some brick and mortar casinos relatively close to me, they come with the same added annoyances as I described above. That’s why online establishments like 888casino are becoming more and more popular. You can avoid the time, money, and hassle that accompanies a crowded casino floor, all while enjoying your favorite games.

Going to the movies, or even renting a movie, has become one of my favorite things to do. With companies like Netflix you can pay a few measly dollars a month and have access to thousands of hours of entertainment available to you. As much as I enjoy going to the show, unless it’s a matinee price, it can be very expensive…especially for a family of four! Staying home, buying snacks, and watching a movie online is the way go!
Regardless of our stress relieving hobby, just know that there is always a more affordable way of going about it!


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Planning for Retirement

There are many different definitions of the “American Dream”, some say it’s a great job and nice house, others say it’s comfortably raising a family, yet my definition varies a bit from those. To me, the American Dream is about affording a comfortable retirement after hitting all of those milestones above. Owning a home is nice, and raising a family is paramount, but it’s your financial health after those achievements that truly matters most. Nobody wants to work forever, I know I certainly don’t, so saving and spending wisely from a young age is very important. Regardless of your income bracket it is clear that today’s generation is severely unprepared for retirement. In order to properly prepare for retirement please heed my suggestions below.

Take advantage of every retirement account you can! This means that if your employer offers a 401k plan with matching funds, then you better contribute enough to receive the full match. If you are able to max out your 401k that is even better. I’ve seen people that fail to contribute to their 401k plan and lose out on the employer match, this is like throwing away free money. If your employer offered you a raise today would you say no? If do you contribute to a 401k then don’t stop there. There are plenty of other IRA accounts (SEP, Traditional, Roth) that you may qualify for as well. The best part about these accounts is that each one offers some sort of tax advantage. Remember, the earlier you start the better off you will be. The power of compound interest can take a little bit of money and turn it into a lot.

While tax advantaged accounts are the next best thing to sliced bread, they aren’t the end all be all of retirement savings. After maxing out my 401k and IRA options, I opened up an online brokerage account that I fund with after-tax dollars. This allows me to aggressively save and invest for my medium term plans, rather than just for my long term retirement savings. Here you can engage in blue chip stocks or even index funds. My theory on these accounts is that they can be liquidated much easier than a retirement account, and they offer more aggressive savings options of a typical bank account. Don’t forget, you don’t want inflation eating up your savings either.

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Payday lenders find an unlikely supporter in Archbishop Welby!

Now the tables have been turned on Archbishop Welby, one of the sternest critics of payday lenders as he is forced to make a u-turn on his position that payday lenders should be forced out of business. This blog will examine the comments of the Archbishop and explain why he has now changed his mind and come out in SUPPORT of payday lending!


Wonga – a plague to modern society, or a helping hand in troubled times?

It is a rare occurrence that a member of the clergy is moved enough about private enterprise issues that he makes a public statement on the subject. However, so controversial is the subject of payday lending that Archbishop Welby, a senior figure in the Church of England made a series of statements on the subject. His position was that payday lenders like like Wonga should be forced out of business and that they contributed to spiralling debt and as such were a something of a modern plague! He felt that poor people were being taken advantage of and should have greater protections in place against lenders who charge high interest rates.


However, like many who weigh into the debates on payday lending, the Archbishop did not have all of his facts straight and he has now been forced to re-consider his position and retract his earlier statements, in favour of a more balanced approach which takes account of some of the advantages of using payday lenders, including the fact that although payday lenders can charge high interest rates, they provide a valuable service which keeps people from having to approach loan sharks who collect their repayments with violence and baseball bats.


Using payday lenders keeps people out of the hands of loan sharks

The Archbishop has now stated that forcing payday lenders out of business – something he advocated initially would have the consequence of forcing people into the hands of loan sharks who operate illegally. Research has indeed shown that the operation of loan sharks is on the rise.


The change of position has been welcomes by the payday lending sector who feel they have been demonised and unfairly picked on as the cause of social problems like poverty and social problems related to poverty. However, what is obvious is that spiralling poverty in the UK is a more complex issue than one that can merely be attributed to the use of payday lenders. Increasing taxation, public spending cuts and the decline in funding for essential services like the NHS and foodbanks are more relevant to the issue of rising poverty in the UK.


Hidden benefits of payday lenders

Payday lending, in fact has a number of hidden benefits for the poor which are rarely acknowledged, but which have been highlighted by the change of tune the Archbishop adopted recently on the subject of payday loans.


Take the subject of food poverty. Payday loans help reduce and alleviate the consequences of food poverty. Food poverty is on the rise in the UK and it means a situation where a household is so stretched financially that there is not enough food in the house to provide basic nutrition to growing children and poor families. Dozens of payday loans are used to provide food for hungry children whose parents do not have to wait until payday for the money to provide basic nutrition to their children, thanks to the services payday lenders provide. In most cases the short term loans are repaid within weeks so families experiencing food poverty are grateful for the assistance they can provide in an emergency.


Don’t criticise without thinking, why not ask users of payday lending services what they think?

Fuel poverty is another issue, which the services of payday lenders can help alleviate. Fuel poverty, like food poverty, too in on the rise in the UK. It is where families and households across the UK are so stretched financially that they are forced to switch off the heat to save money. When there are freezing conditions and cold temperatures, despite ongoing fuel poverty, you can’t turn to the government for immediate assistance – the best they can do in most situations like this is give you a form to fill out, but what help is this when you want to put money on the gas meter? Payday lenders provide a useful service for struggling families in cases of financial emergencies, which mean that – no questions asked – money is made available so basics like heat and fuel can be purchased immediately. You might even say that the government should subsidise payday lenders, until they can effectively address food and fuel poverty. If you as poor people, they would agree!


Why not get involved in today’s debate? Post here

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