Invest, but are you happy?

Whether you're planning for retirement or already there, the key to a happy retirement is to make your money last. Some investors have a pension and Social Security to live on, while others rely solely on investments and savings. Regardless of your financial situation, it's important to know where your money is going and how much you can safe spend each month. Let's look at some ways to do that.

Do you have a budget?

If you don't already have a budget for your monthly expenses, it's time to set one up. Start by writing down everything--income, expenses, and saving on a piece of paper or in your favorite journal. This will allow you to see what percentage of your income you're spending on groceries, rent, utilities, etc., and how much is left over for savings.

Once you've created this initial snapshot, revisit your budget after three months and determine whether changes need to be made. Are there places where you're spending more than you'd like? If so, what are some ways you could cut back? You can also create your own Excel or Google spreadsheet to track your spending and income. It's worth taking the time to get to know how much money is coming ir every month, and where it goes. Without this knowledge, you'll be traveling through retirement blind from a money standpoint.

Expect the unexpected!

When creating your budget, plan for emergencies. Unexpecting expenses will occur at some point in time, so having a plan in place can make it easier to deal with them when they happen. A good rule of thumb is to save 10% of your income each month for emergencies. A retirement budget isn't set in stone--it should change as your needs change. But if you develop and stick to one, it can help make your retirement years happier and worry-free.

Use cost-effective investment vehicles, such as target date funds. For retirement savings, target date funds can be a cost-effective investment vehicle. Target date funds have a long-term investment horizon and contain a mix of stocks, bonds, and cash. Target date funds are not as risky as some other types of investments but can still provide significant growth potential to help you achieve your retirement goals.

Target date funds

Target date funds are particularly appealing for people who don't want to manage their own investments or don't have the time or interest to do so. These types of mutual funds offer an "all in one" approach--you put your money in the fund, and it takes care of itself as you get closer to retirement. You decide which target date is relevant based on when you plan to retire and how much risk you're comfortable with during your investing years before retirement (the earlier the target date, the more aggressive).

When the target year nears, many fund providers automatically move their investors into a less aggressive portfolio that is more appropriate for someone preparing for retirement. One thing that's important to remember: not all target date funds are created equally. So, do some research before selecting one--some fund providers have significantly better track records than others.

Avoid spending traps

Avoid spending traps, such as maintaining more house than you need. The urge to overspend on a home--or not to downsize when your children leave the nest--can be powerful. How about the extra bathroom with its never-quite-used sitting area? But you need to be ruthless about this. You don't have an unlimited income stream - you can't afford too many extra square feet, nor can you afford to fill those square feet with expensive furniture and other items that will sit unused and gather dust. This means living in a home that is the right size for your lifestyle (and budget). Be sure to maintain it, so it doesn't deteriorate or become poorly maintained, because that often has an impact on resale values and marketability.

Rebates & savings

Take advantage of rebates and savings whenever possible. You don't have to be a coupon fanatic, but you should take advantage of rebates and savings whenever possible. Some ideas include: Savings's coupons - these can be found in newspapers or online. Coupon sites - there are many websites dedicated to highlighting great deals and rebate opportunities. Cashback apps and browser plug-ins - apps such as Rakuten and Honey can help you save money on online purchases by giving you a percentage back as cash. For example, Rakuten will give users $10 for every $100 spent on Amazon.com when a user uses the app to shop. Price comparison websites - sites like PriceGrabber and Nextag will compare Prices from different vendors.

Avoiding the holiday debt

With the previous holiday season in the history books, many people find themselves taking out personal loans or paying high-interest rates on their credit cards for all those holiday purchases. While it often feels lovely to give and see the smiles on all the faces of your loved ones, it can be stressful paying for all those purchases when the credit card bills arrive. Fortunately, you don't have to make the same mistake twice.

Avoid Holiday Debt by saving now! The most straightforward and obvious tip to avoid holiday debt is to save money for the holidays as early as possible. Unfortunately, many people get caught up in life and don't plan for the holiday season. Then, when it arrives, it can be hard to find the extra money for all those purchases, which leads to taking on debt.

Instead, add up last year's holiday expenses. Add about 10% or so to that amount to account for inflation and to give some extra breathing room. Next, divide that amount by the months left in the year. Open a separate savings account (or designate an account you already have for holiday savings) and put that calculated sum in your new account.

For example, suppose it's January, and you estimate that your expenses last year on gifts were $500. Add 10% to that for $550. Open a new bank account and contribute $550 in expected costs divided by 12 months per year, or about $45 monthly, to that bank account. You'll have $550 by the end of December, and instead of paying a lump sum of $550, you'll have merely contributed $45 monthly to these gifts -- a much more manageable amount. Please don't touch it throughout the year. Then, when the holiday season comes around, you can use that fund to pay for your gifts, parties, and more!

Plan your "circus" fund?

Building a budget that meets all of your personal finance goals is not an easy task. Whether you're just starting with your savings goals or you've been dutifully depositing part of your paycheck into your 401k, it's essential to make sure your budget includes funds you can use for your enjoyment. While an emergency fund should be used for unexpected expenses, creating a "circus fund" will ensure you get some enjoyment out of life.

The fact of the matter is that future of any economy looks pretty bleak. Everything is more expensive! Owning a house seems like an unattainable dream. Student loan debt doesn't seem to budge no matter how many payments you pay. For many young people, the prospect of spending a lifetime just trying to survive is impossibly overwhelming. All of this is exponentially more disheartening if you find yourself living paycheck to paycheck, even after you make drastic changes to your lifestyle.

Some personal finance experts are a bit out of touch with the reality of how costly it is to live in today's society. Millennials have withstood a decade of advice telling them to cut back on Starbucks and avocado toast, all while financial experts have overlooked just how detrimental inflation has been to working-class people. But even if these finance experts have good intentions to help young people save for future, retirement and an emergency fund shouldn't be your only savings goals.

A happiness fund is a small portion of your budget that you can use to save up for the things that make you happy. Want to go to a concert or finally take a trip or vacation? Or maybe you have simpler desires, like adding another item to your collection. Whatever it is that makes you happy, you should make room for that happiness in your budget.

But how much of your earnings should go toward your fund that makes you happy? Truthfully, exact percentage of what you should save specifically for your happiness goals will depend on your gross monthly income and your basic living expenses. After you pay for housing, transportation, food, and necessities, a good portion of your earnings should be rightfully allocated to your retirement account and your emergency funds.

Happy reading!

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