Key steps to help you toward a safe, secure, and fun retirement (part 1)

Retirement planning is a multi-step process that needs a long term run. To have a safe, secure, and fun retirement, you need to build the financial cushion that will fund it all. The fun part is the reason why it makes sense to pay attention to the serious and perhaps the most boring part: planning how you’ll get there. Let’s start building a solid retirement plan by learning the five steps below.

1. Understand Your Time Horizon

You need to start planning for retirement by thinking about your retirement goals and the total time you have to meet them. Your current age and expected retirement age defines the initial groundwork of an effective retirement strategy. The longer the time from today to retirement, the higher the level of risk your portfolio can withstand. Moreover, you need returns that outpace inflation to maintain your purchasing power during retirement.

Generally, the older you get, the more your portfolio should focus on income and the preservation of capital, which means that a higher allocation in securities, that won’t give you the returns of stocks but will make it less volatile and provide the income for you to use to live on. You will also have less concern about inflation and less issues about the rise in the cost of living than a much younger professional who has just entered the workforce.

In addition, you should break up your retirement plan into various components. For example, you should break up the investment strategy into three periods: two years until retirement, saving and paying for education of your children, and living expenses. A multi-stage retirement plan has to integrate various time horizons, as well as the corresponding liquidity needs, in order to determine the optimal allocation strategy. You should also rebalance your portfolio over time when your time horizon changes.

Seven Financial Lessons the COVID-19 Pandemic Teaches Us (part 2)

4. Debt stinks

For many of us, car loans and credit card balances reflect a lifestyle that we can’t easily afford. We attempt to “keep up with the Joneses,” but they probably can’t afford their lifestyle either. Therefore, we are chasing a façade. And what we can find at the end of the chase is a massive burden. And although you hate the burden, you still have to pay your bills. In tight financial times, the burden feels even heavier. We don’t have enough money to pay the bills, and the accumulation of late fees and interest makes the debt even greater. Debt certainly does stink.

5. Saving for retirement is not for the faint of heart

During bull markets, overconfidence can lead to bad financial decision-making. During bear markets, it is fear. If the market dips, your emotions will beg you to abandon your investment plan and sell it all. This is a big mistake. What leads to successful retirement investing is discipline and a long-term mindset. We need to let our brains override our emotions.

6. Financial margin is a key

Debt-free living, retirement savings, and emergency funds are all worth pursuing. However, to chase after these things, we need financial margin and living paycheck-to-paycheck won’t get us there. We should learn to maintain our existing standard of living at the same time our income increases. Don’t let the number on our paycheck determine the amount we spend.

7. Generosity changes lives

Where and when there is great darkness, light shines even brighter. We have seen the impact that even seemingly small acts of generosity can have on our community. It matters for them and it also matters for us. We frequently regret past purchases but we rarely regret past generosity. Generosity should be a financial priority for all of us.

Tottenham borrow £175 million to ease financial pressure due to COVID-19 pandemic

Tottenham FC has confirmed they have borrowed £175 million from the Bank of England to ease their financial burden due to the COVID-19 pandemic. The crisis has caused financial issues across the football world and a lot of clubs are in dire conditions with a few on the verge of bankruptcy.

Tottenham, like all football clubs in the world, have seen their revenue affected by the coronavirus seriously with them forced to deal without match-day and broadcasting income. Moreover, with the Tottenham Hotspur Stadium doubling up as a multi-purpose venue with boxing matches and NFL matches staged, the club lost further income. That consists of income from two NFL games and a heavyweight title fight alongside many other events.

That has caused some serious problems for the club and it has caused them to take a £175 million loan from the Bank of England under the Covid Corporate Financing Facility (CCFF) of the government. The loan has been confirmed by both Tottenham and the Bank of England with the Athletic reporting that they are among the few clubs who qualify for the CCFF initiative. The report also added that the North London side has projected losses of £200 million between mid-March and June 2021.

The Spurs has stated that the money will not be used to player acquisitions, but to make sure that the club has the “financial flexibility and additional working capital” in order to repay the debt on their stadium. The pandemic has forced the club to take drastic measures when they used the government’s furlough scheme to help them pay non-playing staff. However, the North Londoners were forced to reverse their decision after facing criticism which meant that only Daniel Levy and board members have taken a pay cut.

That includes the first team squad with Tottenham who is unable to come to an agreement to a pay cut or a wage deferral with their players. But the Athletic has reported that there could be more financial issues with the Premier League set to return broadcast money even if the season continues on.

Seven Financial Lessons the COVID-19 Pandemic Teaches Us (part 1)

During these times, many have found themselves stuck at home, wondering what they could have done differently and how to let that knowledge better their decision-making in the future. Financially, the COVID-19 pandemic has provided its fair share of lessons, which we would have rather not learned by such a hard way. However, the point should be to move forward wiser and more determined than ever before rather than to dwell on regretful mistakes.  So what lessons have we learned these days?

1. Overconfidence leads to poor financial decision-making

It is astounding that the difference a few weeks can make. Not too long ago, the financial market was reaching new heights at the same time unemployment was hitting rock-bottom lows. All seemed good. And many people were making financial decisions as if nothing could change – spending more, saving less, selecting riskier investments, and accumulating debt. However, everything has changed and it exposed the fragile financial house having been built. Fact shows that overconfidence leads to poor financial decision-making and is too aggressive in some areas. We must be wiser.

2. Everyone needs an emergency fund

Financial experts have emphasized the importance of emergency funds for some time. The reason is that a financial emergency is not a matter of whether or not but when. An adequate emergency fund can get you through times as your income is low or even nonexistent. Those with money set aside for an emergency are better able to weather this crisis.

3. Developing multiple streams of income is important

There are many reasons why people get side gigs: to save for the future, pay down debt, or give away more. What the pandemic has taught us is that multiple streams of income not only help us reach our financial goals during good times but they also help us make it through times under the common economy tanks and layoffs. The additional income streams also provide an opportunity to generate some income even if we lost a job.

What caused the 2008 financial crisis?

The unexpected COVID-19 pandemic has made financial markets around the world fall free, causing fears of a recession that will rival the financial crisis in 2008 when world leaders strive to stave off economic calamity.

The peril signs have naturally raised questions about the similarity of the current situation with the 2008 financial crisis, which is known as the worst economic downturn since the Great Depression.

However, the 2008 crisis was different from the ongoing economic issues due to social distancing regulations and lockdowns quarantines.

WHAT TRIGGERS AN ECONOMIC DOWNTURN?

The worst economic downturn since the Great Depression was triggered by the overheating of the housing markets. The reason was that banks and other lenders approved mortgages, sometimes to borrowers that had poor credit histories, which drove up home prices to astronomical levels. Then banks sold the risky mortgage-backed securities to other financial organizations.

Lehman Brothers, Bear Stearns, Morgan Stanley, and Merrill Lynch, and many other big financial conglomerates all became lenders of mortgages. A 2018 paper published by the University of California Berkeley showed that Citigroup held onto $43 billion of high-risk mortgage-backed securities, UBS $50 billion, Morgan Stanley $11 billion, and Merrill Lynch $32 billion by the summer of 2007.

WHAT HAPPENS DURING A CRISIS?

The mentioned paper also said, “Since these institutions were producing and investing in risky loans, they were thus extremely vulnerable when housing prices dropped and foreclosures increased in 2007.”

Due to a glut of new homes on the market, housing prices across the U.S. started to plummet, which means that homeowners and their mortgage lenders were suddenly underwater since they owed on the mortgage more than the estimated value of their property. Owners lost their homes after having defaulted on their mortgage payments while banks holding the securities were pushed toward bankruptcy.

That the mortgage industry collapsed shocked not only the U.S. but also the global economy, the authors of the UC Berkeley paper wrote. If it had not been for the strong intervention of the government, U.S. homeowners and workers would have experienced even greater losses.