Remember leisure suits? Remember bell bottoms? How about skinny ties?
Fashion sense changes. And so has money sense over the last couple of decades. But like the old song title: Everything Old Is New Again.
Over the past couple of decades we loaded up on debt, used our homes as piggy banks and became part of the “ownership” society investing more in real estate, mutual funds, stocks and our 401(k)s.
Like a pendulum, things change and old fashions that fell out of favor seem to come back into style.
Unfortunately, some of those fashions when it comes to money should never have been forgotten.
1.) Live Below Your Means: Easier said than done especially if living in a high tax or high cost state. But it’s worth remembering mom’s advice on this one.
2.) Skip the McMansion: They cost too much to heat, furnish and maintain. And they don’t produce any income for you (unless you consider taking on roommates). And who are you gonna get to buy the McMansion anyway when you want to downsize?
3.) Protect Your Credit: Use it sparingly and only if you can pay it off soon. Consider using a snowball method to get yourself out of debt (focusing on a credit card balance and then as that one gets paid off redirecting your payments to the next balance). And keep your credit score high by not closing out accounts. Use them every once in a while to keep them active. This will help maintain your credit score and allow you to qualify for better terms.
4.) Pensions Are A Thing of the Past: Secure your retirement income by saving in whatever tax-efficient options are available to you. This includes your 401k and IRA. Add a Roth IRA to stay diversified regarding future income taxes. Consider a lifetime income annuity – no frills, no bells and whistles, low expenses, laddered and divided among different insurers to reduce your risk.