Woodford County extension offer financial tips

Staff Writer
Woodford Times

The last couple of years have been rough on everyone, but those who already traded a paycheck for retirement are particularly vulnerable to volatile stock markets, inflation, and other economic events. Karen Chan, University of Illinois Extension Educator, suggests eight tips that might help keep your retirement on an even financial keel.

Tip #1: Know the amounts and types of income you receive.

As a retiree, you may get income from a variety of sources and it can be hard to know how much income you have each year. Start by looking at your income tax return and 1099 statements from last year. You might have a fixed income from Social Security, a pension, or annuity payments. But you may also have sources that vary such as distributions from retirement plans and other investment income accounts.  

Tip #2: Keep track of expenses.

Track all of your expenses for a few months whenever you go through a major life change. Retirement is a major life change. So is moving, losing a spouse, or going through the worst economic crisis since the Great Depression.

Tip #3: Plan for surprises.

Set aside some money each month is for the unexpected – you break your glasses or the dog gets sick. You also need an emergency fund for bigger unexpected expenses: the roof has to be replaced, the car needs a major repair, or you have large medical deductibles or co-pays.

Tip #4: Know how much you owe, and how much you own.

Calculate your net worth (what you own minus what you owe) once a year. It will show you whether you’re making progress, or falling behind. Use the tool at http://web.extension.uiuc.edu/toughtimes/ under Assessing Your Financial Situation.

Tip #5: Protect against big, bad things.

Protect against major financial threats with insurance such as Medicare and Medigap, long term care, auto, and homeowners insurance. Choose larger deductibles and higher coverage limits, to keep the cost manageable while protecting against larger claims.

Tip #6: Use your financial power wisely.

Adult children may ask you to help with a down payment on a home, financing for a business, or money to live on if they lost their job. If you have a clear picture of your own financial situation, you can make an informed decision about whether (or how much) you can help without sacrificing your own financial security.

Don’t cosign a loan unless you’re willing and able to make all the payments. Tell the person, “In order to cosign, I would have to know that I could make the payments, and I can’t do that.”

Tip #7: Follow sound investment practices.

Your investment plan should, at a minimum, address diversification, asset allocation, and liquidity. Once you’ve divided your assets appropriately between stocks, bonds, and cash, you will need to monitor changes in your allocation and rebalance periodically.

And watch out for scams and frauds. The Securities and Exchange Commission investigated “free lunch” investment seminars. They found that 100 percent of them were sales presentations, 50 percent used exaggerated or misleading claims, and 13 percent appeared to be fraudulent.

Tip #8: Get help when you need it.

There are many types of financial professionals. Credit counselors can help you set up a budget and negotiate with creditors. Investment advisers can help you select investments that are appropriate for your goals. Brokers can help you buy or sell securities. Financial planners (who may also be investment advisers) may review and make recommendations about many aspects of your finances: income taxes, investments, financing your retirement, estate planning, insurance, and job benefits.

U of I Extension’s free website, Choosing a Financial Professional (http://web.extension.uiuc.edu/financialpro/), can help you learn how to choose someone to meet your needs.