Saturday, December 8, 2012

7 Ways Retirees Can Better Manage Their Finances

Finance (Photo credit: Tax Credits)

When you reach retirement age, it is very important that you manage your finances. If you won’t continue working and will stop as soon as you start to receive your state and/or company pension, it is vital that your finances are kept in order. Here is how you can stay on top of your finances.

Create a budget

It is imperative that you make a budget. By writing down all expenditures, you’ll know exactly how much money has to be paid every month. When this is compared to what your pension is, you’ll know about any spare capital. When you have a workable budget, you won’t spend beyond your means.

Pay bills within days of each other 

If you have many bills to pay throughout the month, it is recommended that they are taken out of your account within several days of each other and not sporadically. Utility companies might enable you to change when payment is taken out of your account and your local council might offer several days every month when council tax payments can be deducted. When bills are taken out of your account within a few days of each other, you’ll be able to manage your finances more effectively.

Clear your debts

If you have a considerable credit card bill or any other form of debt to pay, this should be cleared as soon as possible. Setting aside a particular amount of money in your budget every month, your debt levels can be reduced. When you no longer have debts, your credit history will improve.

Choose a credit card which charges a low rate of interest

You might have many credit cards. However, this isn’t necessary because you should only have one credit card. If you have a credit card which charges a significant rate of interest, your bill will be very high if you don’t pay back what you owe to your credit card company. If you want to have a credit card bill, you should choose one which charges a lower rate of interest. Therefore, even when you don’t pay your credit card bill on time, you won’t have to pay a lot in interest.

Pay off your mortgage quicker

Although you don’t want to have any mortgage payments left when you reach retirement age, this might not be possible. If you haven’t paid off your mortgage before you retire, you could arrange a meeting with a mortgage adviser. Providing help about how a mortgage can be paid off quicker than it is at the moment, it is in your best interests to pay off your mortgage as soon as possible. This is because you won’t be liable for mortgage repayments anymore and you’ll have extra capital which can be spent elsewhere.  

Choose an ISA

The current interest rate for savings accounts is very low and as little as 1% might be given. If you have a considerable sum of money in your savings account, you won’t get as much in interest. However, an Individual Savings Account (ISA) can help because you can take advantage of a much higher rate of interest. More than 2% can be offered and some ISA’s give a 2.5% rate of interest. It is recommended that you find out about ISA’s which are being offered by other banks than where you currently have a savings account. This is because you could find an ISA which offers a better interest rate.  

Shop at other supermarkets

You might be spending too much money on your weekly shopping bill. Many supermarkets, such as Aldi and Lidl, are cheaper than Asda and Tesco and the same quality produce can still be bought. You could discover that up to 40% can be saved when you shop elsewhere. In fact, you might wonder why you haven’t shopped at other supermarkets before.

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