Financial and Lifestyle Insights- Part 2

 In this post, I continue my discussion of tips from webinars, podcasts, and virtual conferences that I heard during the last quarter of 2021. Below are 13 of my key take-aways:

Avoid Complacency- Take proactive steps to stay on top of your finances. One webinar speaker recommended checking your bank balance daily because daily swipes on a debit card add up and many people have no idea how much money they have at a particular point in time or how much they are spending on “small stuff.”

Consider “UnRetirement”- Think about what you want to do in later life. A long retirement is a terrible thing to waste! Some older adults are choosing to continue working by “job crafting” work that provides flexible schedules and freedom from administrative tasks. Benefits include meaning and purpose, social engagement, mental activity, and creativity.

Mitigate Investment Risk- Create a diversified investment portfolio through all types of market cycles to buffer market volatility and mitigate various types of investment risk. Continue to expect market volatility related to the pandemic as different COVID variants (e.g., Delta, Omicron) emerge and weigh against a global economic recovery.

Schedule Structured Time- Create a framework for yourself and put regular activities (e.g., exercise) on a calendar. This is especially true for people who have had their time use change as a result of COVID-19 or retirement. Schedule activities to create daily time structure. It can help reduce the anxiety associated with feeling adrift and “unmoored.”

Beware Online Investment Advice- Ask questions about “influencers” who provide financial advice on social media. Do they have any credentials? Is the content creator trying to sell something (e.g., some influencers sell online courses)? Does something sound too good to be true? and Can you verify the information presented from reputable sources?

Rethink Your View of AFS- Reconsider how you view alternative financial services (AFS). It is a myth that people use AFS because they don’t know any better. Many Americans live with income volatility, especially from second jobs. Some people use AFS because they live “on the edge” and bills can be paid immediately vs. waiting for a check to clear.

Plan Around Inflation- Consider the impact of inflation on purchasing decisions made in 2022. The U.S. economy recovered faster than many producers expected last year and inflation is expected to remain elevated before moderating. Used car prices had one of the biggest price increases in the core inflation rate, which strips out food and energy. Consumers might consider postponing a car purchase, if they are able to, and “sit out” the current inflationary period.

Think Tax Efficiency- Plan ahead to pay the least amount of taxes legally due on retirement savings. Tax efficiency can have a significant impact on portfolio longevity. The aim is to pay taxes at the lowest possible tax rate and avoid being pushed into higher tax brackets with required minimum distributions (RMDs). Roth IRA conversions can help do this if someone can pay taxes at a lower tax rate today and avoid taxes at a higher tax rate on multiple streams of income later.  

Be or Find a Financial Role Model- Share your financial successes with others and look for role models that look like you. Otherwise, the concept of “building wealth” feels unattainable and people develop a “That is something for rich people” attitude. Authentic role models show others that success is possible. Examples really matter!

Make Plans for Long-Term Care- Consider your “default option.” Do family members accept the obligation to provide care? If not, then what?  Fear of long-term care  expenses often holds older adults back from spending their retirement savings “in case they need it.” A proactive plan (e.g., LTC insurance or self-insurance) can help alleviate this fear.

Consider Your Computer- Windows 11 arrived during 2021 and Windows 10 support will end on October 14, 2025. That gives computer users almost four years to prepare. Most likely, if your computer is 3+ years old, it cannot be updated to Windows 11. There is a PC Health Check app from Microsoft that can tell you if your computer can run Windows 11.

Juice Your Credit Score- Consistently pay bills on time and keep your credit utilization ratio (i.e. credit used divided by total amount of credit available) low. Closing accounts will reduce the amount of credit available and could increase your utilization ratio. Young people cannot get “perfect” scores because they have not used credit for a long enough time.

Reframe “Retirement”-  Young workers will likely respond better to the words “financial freedom” or FI (financial independence) than “retirement.”  One webinar speaker noted that it is time to “retire the word retirement” and instead uses the phrase “F U Money” with young adults, an acronym for “Future You Money” and saving for your future self.