MANAGING WHAT YOU OWN AND WHAT YOU OWE

MANAGING WHAT YOU OWN AND WHAT YOU OWE


Professionals say that retirement income should be 60-80
percent of current income to maintain the same Standard of
Living. If your financial picture does not correspond to this
guideline, you might prepare a budget and a cash flow statement
based on income and expenses during the preceding 6 to 12
months in order to identify gaps in income and find ways to cut
spending.

On the expense side:

* List current expenses such as housing, food, health
care, transportation costs, and other financial
obligations.

* Include a contribution to savings. Experts recommend
a reserve fund to cover 6 months of basic expenses.

* Itemize personal expenses for such things as clothing,
travel, entertainment, and hobbies.

* Develop habits such as price shopping, menu planning,
coupon dipping, and monitoring your use of credit
to guard against overspending.

On the income side:

* Think through contingency plans in case expenses begin to
outpace income or one partner becomes seriously ill.

* Remember that credit histories in your individual names
can be invaluable in retirement, or in the event of
widowhood or divorce. Credit can be essential to meet
unexpected or emergency expenses.

Federal regulations prohibit age and gender discrimination
in the granting of credit. Lenders must treat all income alike,
whether from employment, retirement benefits, or other reliable
sources. Still, it may be easier to get a national credit or
charge card in your own name while you are employed. If you
have never been employed, you can still build a credit history
by becoming an "authorized user" on your spouse's account.

* Consider selling assets or converting life insurance into
cash as another possible way to meet expenses.

* Investigate Home Equity Conversion (HEC) as an option if
you own or nearly own your home and need money. There are
several kinds of home equity conversion loan plans,
including Deferred Payment Loans and Reverse Mortgages,
where you borrow against home equity and receive monthly
or periodic cash payments.

Unlike home equity loans or lines of credit, reverse
mortgages involve no monthly repayments as long as you live in
your home or until a predetermined date. These plans do involve
costs for application fees, closing costs, and interest, and
they may affect eligibility for public benefits programs such
as Medicaid. Generally, you can decide how to spend the money.
Reverse mortgage plans are not all the same, so it is important
to read the loan documents carefully. Check with a trained HEC
counselor, other financial advisor, or an attorney before
deciding whether home equity conversion is appropriate.