Feel more confident about living the retirement you want, no matter what age or life stage you’re in.

Retirement planning isn’t only for the retired. Rather, it’s a long game that requires consistent saving and intentional investing — at every life stage.

Wherever you are in your retirement journey, your Ameriprise financial advisor is prepared to help you stay on track to reach your retirement goals and provide personalized retirement advice specific to your age and unique situation.

Here are seven essential retirement tips by age that can help you prepare right now.

In this article:

• Under age 50 
• Age 50 – 62 
• Age 62+
• Questions to ask your Ameriprise financial advisor

Under age 50

1. Envision your ideal retirement

It’s challenging to plan for retirement unless you know your ideal retirement lifestyle. So, think about how you want to enjoy your days. Maybe you want to continue working. Or do you want to travel, volunteer or become a professional grandparent? Perhaps you’ll build a cabin on a lake?

You can’t start thinking about your retirement too soon or obtain advice for retirement too early. Even if you think your goals might shift in the years ahead, thinking about them today gets the conversation started and helps you plan.

2. Identify your retirement numbers

Once you know what you want to be doing in your retirement years, you can figure out a rough estimation of how much you may need to save. To figure out your retirement numbers, use our retirement planner calculator to help identify specific savings targets.

For example, let’s say you’re 35 years old, earn $100,000 a year and have $200,000 in your 401(k). You might determine you need $2 million saved by the time you’re 65. To get there, you may only need to invest $550 per month, assuming a 7% annual rate of return.

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Advice spotlight

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Even if you don’t know exactly what you want to do in retirement, starting early with investing is key.

The longer the time horizon, the more you can benefit from the power of compounding returns.

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3. Save money at every opportunity

With rising retirement costs and longer life expectancies, you may need more money than you think. So, consider saving as much as you can during your earning years. Workplace-sponsored 401(k) and 403(b) plans let employees invest a percentage of their income for retirement on an after and tax-deferred basis. Plus, your employer may match a percentage of your contribution. Aim to save at least 15% of your gross pay, if possible. If you’re not there yet, consider increasing your retirement savings contribution with every pay raise.

4. Go beyond the workplace with a Roth IRA

Beyond a 401(k) or 403(b), there are other tax-advantaged ways to save for retirement that aren’t tied to an employer. Consider opening a Roth IRA, which allows for after-tax savings and tax-free income in retirement, when certain conditions are met. This may help you hedge against the possibility of future tax increases.

However, Roth IRAs do have income limits and if you earn too much to contribute directly to one, there are alternate options. You could simply contribute to a traditional IRA, which does not have income limits, or consider a strategy such as a backdoor Roth IRA. Consult with your tax professional to determine if this strategy is appropriate for you.

5. Keep your asset allocation in check by regularly rebalancing

Asset allocation is the strategic apportioning of different assets types — including stocks, bonds, alternative investments and cash — in your portfolio, based on your financial goals, risk tolerance and time horizon. The general goal is to help diversify your portfolio, keep you invested and soften the effects of big market fluctuations.

However, over time, market swings can throw your portfolio’s asset allocation out of balance. That’s why it’s important to regularly rebalance your portfolio. Rebalancing brings your investments back into alignment with your risk tolerance and long-term strategy, helping you stay on track toward your goals.

6. Steer clear of emotional investing

As investors, our emotions tend to follow market cycles. When markets rise, our outlook improves, and we are inclined to invest more. When markets turn down, our outlook becomes more pessimistic, and we are inclined to invest less. Some investors may even pull out of the stock market just as it reaches its low, missing out on potential gains as it rises again.

Bottom line: Emotions can cause us to do the opposite of what we should do. That’s why regularly investing, and staying invested, over the long-term is a smart approach for most investors.

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Advice spotlight

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Dollar-cost averaging can help you avoid making emotional decisions based on market turbulence.

With this strategy, you automatically invest a set amount of money at regular intervals, regardless of what the market is doing. This systematic investing approach can help you resist the impulse to sideline money when markets become challenging.

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7. Consider insurance to help reduce your worries

Even with a smart saving and investing strategy, unexpected events can occur. You could experience an illness that prevents you from working and earning an income. Or your home could be damaged in a storm. To protect yourself against these risks, consider how insurance — whether it’s life insurance, disability income insurance, long-term care coverage or auto, home and umbrella life policies — can help. With sufficient protection, you can focus on planning for the future, without worrying too much about life’s uncertainties.

Age 50 – 62

1. Add details to your goals

Start planning for the retirement lifestyle you’ve long strived for. You may have decided to spend your retirement years traveling, volunteering or becoming a professional grandparent. Now that you’re a little bit closer to retirement, get more specific and start to refine your retirement vision.

2. Catch up if you need to

Prioritize saving as you near retirement. Max out contributions to your retirement accounts as much as you can. If you’re between 50 and 64 years old, you’re eligible to make extra “catch-up” contributions to your 401(k) and IRA to help you meet your retirement goals.

3. Consider consolidating retirement accounts

By this point, you may be juggling multiple retirement accounts, making it difficult for you to manage your money and have a full financial picture. Consider the pros and cons of consolidating these accounts before retirement so you can easily and effectively tap into your money when you need it.

4. Plan for health care expenses

Health care expenses are an often-overlooked expenditure in retirement planning, but these costs can be significant. Medicare wasn’t designed to cover health care expenses in full and retirees are responsible for paying for deductibles and copayments, as well as dental and vision care.

As such, start thinking about how you’ll cover health costs in retirement, and consider funding a health savings account (HSA), if you’re enrolled in a high-deductible health plan. An HSA is a tax-advantaged account that enables you to use pre-tax money to cover eligible, out-of-pocket medical expenses. However, any distributions taken prior to age 65 that are not used for eligible medical expenses are subject to income tax and a penalty.

5. Start planning for retirement income

Your retirement can last for decades, and you’ll want to have multiple income streams to help ensure your retirement savings endures. At this point in your journey, you may want to consider strategies like tax diversification or purchasing an annuity, which can provide a steady income stream throughout your lifetime, or adding dividend-paying stocks to your portfolio.

6. Investigate long-term care

Medicare does not cover extended stays in nursing homes and other long-term care facilities. However, about 70% of Americans who reach age 65 will need long-term care at some point, according to the Department of Health and Human Services.¹ In your 50s and early 60s, consider purchasing coverage that could help pay for the cost of a long stay in a facility or in-home care. It’s typically more cost-effective to lock in premiums while you’re younger.

7. Reevaluate how you invest

How you invested when you were 40 is not necessarily how you should invest at 50 or 60. Your risk tolerance changes over time, and as you get closer to your retirement, it’s smart to focus on preserving your wealth, as much as growing it. At this point, you may want to revisit your portfolio’s asset allocation and consider how your shorter time horizon may affect your risk tolerance and investment mix. For example, as retirement draws closer, it’s not uncommon for retirees to shift from a more aggressive allocation to a more conservative one.

Age 62+

1. Be strategic with your Medicare and Social Security benefits

As you enter your retirement years, continue to review your progress and assess your position. You will not only want to consider strategic adjustments to your portfolio, but also think about the big upcoming retirement milestones, such as enrolling in Medicare and deciding when to file for Social Security.

2. Establish a spending plan

In the year leading up to retirement, consider tracking your expenses so you can better understand how much income you’ll need to withdraw in retirement. For many retirees, the transition from earning income to withdrawing income can be an adjustment, so creating a spending plan can be helpful for managing expenses.

3. Create a sustainable withdrawal strategy

Once you know the amount of income you’ll need, create a withdrawal strategy that accounts for your different income sources, your required minimum distributions (RMDs) at the appropriate age and your financial goals. While a general rule for withdrawing money from retirement savings is to take out up to 4% each year, everyone’s situation is unique. After years of accumulating assets in your retirement accounts, it may feel strange to switch to this phase, but it’s important to remember that you’ve worked hard to get to this point. 

4. Take advantage of tax diversification

How you withdraw from your various taxable and tax-deferred accounts in retirement — and which you tap first, second and so on — determines the taxes you owe and may help your assets last longer. It’s generally wise to tap taxable savings before tax-advantaged retirement accounts, but every person’s situation is unique. For example, there may be tax benefits to withdrawing from several different types of retirement savings accounts at the same time. Consult with your tax professional to determine the strategy that is appropriate for you.

5. Make your retirement savings last

A common mistake retirees make is shifting a big portion of their retirement assets to cash and fixed-income investments. Since you have less time to recover from market downturns, investing more conservatively in retirement can be wise. However, you don’t want the purchasing power of your investment portfolio to be eroded by inflation. Retirement can last more than 30 years, so it’s important to take steps to help your retirement savings last longer.

6. Prepare for the long run

Planning for your later years is crucial. People often only plan for their early retirement years when they can travel the world or enjoy their favorite activities. But those activities may not be as realistic as you age. Think through how you hope to spend your later retirement years and work through some unexpected scenarios. Then you can take steps to prepare, such as securing long-term care coverage to help pay for any services you may need or making modifications to your home to make it more accessible as you age.

7. Keep checking in with your goals and finances

Don’t leave your retirement on autopilot. Priorities often change over the course of retirement for many reasons. Reviewing your goals periodically can help you feel more confident that you can continue to live the retirement you want.

Prepare for retirement — at every life stage

Your Ameriprise financial advisor is prepared to provide you with retirement advice by age and recommend strategies to help you stay on track — so you can enjoy the retirement you’ve always envisioned.

There are many benefits to reading more books, but perhaps my favorite is this: A good book can give you a new way to interpret your past experiences.

Whenever you learn a new mental model or idea, it’s like the “software” in your brain gets updated. Suddenly, you can run all of your old data points through a new program. You can learn new lessons from old moments. As Patrick O’Shaughnessy says, “Reading changes the past.”

Of course, this is only true if you internalize and remember insights from the books you read. Knowledge will only compound if it is retained. In other words, what matters is not simply reading more books, but getting more out of each book you read.

Gaining knowledge is not the only reason to read, of course. Reading for pleasure or entertainment can be a wonderful use of time, but this article is about reading to learn. With that in mind, I’d like to share some of the best reading comprehension strategies I’ve found.

1. Quit More Books

It doesn’t take long to figure out if something is worth reading. Skilled writing and high-quality ideas stick out.

As a result, most people should probably start more books than they do. This doesn’t mean you need to read each book page-by-page. You can skim the table of contents, chapter titles, and subheadings. Pick an interesting section and dive in for a few pages. Maybe flip through the book and glance at any bolded points or tables. In ten minutes, you’ll have a reasonable idea of how good it is.

Then comes the crucial step: Quit books quickly and without guilt or shame.

Life is too short to waste it on average books. The opportunity cost is too high. There are so many amazing things to read. I think Patrick Collison, the founder of Stripe, put it nicely when he said, “Life is too short to not read the very best book you know of right now.”

Here’s my recommendation:

Start more books. Quit most of them. Read the great ones twice.

2. Choose Books You Can Use Instantly

One way to improve reading comprehension is to choose books you can immediately apply. Putting the ideas you read into action is one of the best ways to secure them in your mind. Practice is a very effective form of learning.

Choosing a book that you can use also provides a strong incentive to pay attention and remember the material. That’s particularly true when something important hangs in the balance. If you’re starting a business, for example, then you have a lot of motivation to get everything you can out of the sales book you’re reading. Similarly, someone who works in biology might read The Origin of Species more carefully than a random reader because it connects directly to their daily work.

Of course, not every book is a practical, how-to guide that you can apply immediately, and that’s fine. You can find wisdom in many different books. But I do find that I’m more likely to remember books that are relevant to my daily life.

3. Create Searchable Notes

Keep notes on what you read. You can do this however you like. It doesn’t need to be a big production or a complicated system. Just do something to emphasize the important points and passages.

I do this in different ways depending on the format I’m consuming. I highlight passages when reading on Kindle. I type out interesting quotes as I listen to audiobooks. I dog-ear pages and transcribe notes when reading a print book.

But here’s the real key: store your notes in a searchable format.

There is no need to leave the task of reading comprehension solely up to your memory. I keep my notes in Evernote. I prefer Evernote over other options because 1) it is instantly searchable, 2) it is easy to use across multiple devices, and 3) you can create and save notes even when you’re not connected to the internet.

I get my notes into Evernote in three ways:

I. Audiobook: I create a new Evernote file for each book and then type my notes directly into that file as I listen.

II. Ebook: I highlight passages on my Kindle Paperwhite and use a program called Clippings to export all of my Kindle highlights directly into Evernote. Then, I add a summary of the book and any additional thoughts before posting it to my book summaries page.

III. Print: Similar to my audiobook strategy, I type my notes as I read. If I come across a longer passage I want to transcribe, I place the book on a book stand as I type. (Typing notes while reading a print book can be annoying because you are always putting the book down and picking it back up, but this is the best solution I’ve found.)

Of course, your notes don’t have to be digital to be “searchable.” For example, you can use Post-It Notes to tag certain pages for future reference. As another option, Ryan Holiday suggests storing each note on an index card and categorizing them by the topic or book.

The core idea is the same: Keeping searchable notes is essential for returning to ideas easily. An idea is only useful if you can find it when you need it.

4. Combine Knowledge Trees

One way to imagine a book is like a knowledge tree with a few fundamental concepts forming the trunk and the details forming the branches. You can learn more and improve reading comprehension by “linking branches” and integrating your current book with other knowledge trees.

For example:

• While reading The Tell-Tale Brain by neuroscientist V.S. Ramachandran, I discovered that one of his key points connected to a previous idea I learned from social work researcher Brené Brown.
• In my notes for The Subtle Art of Not Giving a F*ck, I noted how Mark Manson’s idea of “killing yourself” overlaps with Paul Graham’s essay on keeping your identity small.
• As I read Mastery by George Leonard, I realized that while this book was about the process of improvement, it also shed some light on the connection between genetics and performance.

I added each insight to my notes for that particular book.

Connections like these help you remember what you read by “hooking” new information onto concepts and ideas you already understand. As Charlie Munger says, “If you get into the mental habit of relating what you’re reading to the basic structure of the underlying ideas being demonstrated, you gradually accumulate some wisdom.”

When you read something that reminds you of another topic or immediately sparks a connection or idea, don’t allow that thought to come and go without notice. Write about what you’ve learned and how it connects to other ideas.

5. Write a Short Summary

As soon as I finish a book, I challenge myself to summarize the entire text in just three sentences. This constraint is just a game, of course, but it forces me to consider what was really important about the book.

Some questions I consider when summarizing a book include:

• What are the main ideas?
• If I implemented one idea from this book right now, which one would it be?
• How would I describe the book to a friend?

In many cases, I find that I can usually get just as much useful information from reading my one-paragraph summary and reviewing my notes as I would if I read the entire book again.

If you feel like you can’t squeeze the whole book into three sentences, consider using the Feynman Technique.

The Feynman Technique is a note-taking strategy named after the Nobel Prize-winning physicist Richard Feynman. It’s pretty simple: Write the name of the book at the top of a blank sheet of paper, then write down how you’d explain the book to someone who had never heard of it.

If you find yourself stuck or if you see that there are holes in your understanding, review your notes or go back to the text and try again. Keep writing it out until you have a good handle on the main ideas and feel confident in your explanation.

I’ve found that almost nothing reveals gaps in my thinking better than writing about an idea as if I am explaining it to a beginner. Ben Carlson, a financial analyst, says something similar, “I find the best way to figure out what I’ve learned from a book is to write something about it.”

6. Surround the Topic

I often think of the quote by Thomas Aquinas, “Beware the man of a single book.”

If you only read one book on a topic and use that as the basis for your beliefs for an entire category of life, well, how sound are those beliefs? How accurate and complete is your knowledge?

Reading a book takes effort, but too often, people use one book or one article as the basis for an entire belief system. This is even more true (and more difficult to overcome) when it comes to using our one, individual experience as the basis for our beliefs. As Morgan Housel noted, “Your personal experiences make up maybe 0.00000001% of what’s happened in the world but maybe 80% of how you think the world works. We’re all biased to our own personal history.”

One way to attack this problem is to read a variety of books on the same topic. Dig in from different angles, look at the same problem through the eyes of various authors, and try to transcend the boundary of your own experience.

7. Read It Twice

I’d like to finish by returning to an idea I mentioned near the beginning of this article: read the great books twice. The philosopher Karl Popper explained the benefits nicely, “Anything worth reading is not only worth reading twice, but worth reading again and again. If a book is worthwhile, then you will always be able to make new discoveries in it and find things in it that you didn’t notice before, even though you have read it many times.”

Additionally, revisiting great books is helpful because the problems you deal with change over time. Sure, when you read a book twice maybe you’ll catch some stuff you missed the first time around, but it’s more likely that new passages and ideas will be relevant to you. It’s only natural for different sentences to leap out at you depending on the point you are at in life.

You read the same book, but you never read it the same way. As Charles Chu noted, “I always return home to the same few authors. And, no matter how many times I return, I always find they have something new to say.”

Of course, even if you didn’t get something new out of each reading, it would still be worthwhile to revisit great books because ideas need to be repeated to be remembered. The writer David Cain says, “When we only learn something once, we don’t really learn it—at least not well enough for it to change us much. It may inspire momentarily, but then becomes quickly overrun by the decades of habits and conditioning that preceded it.” Returning to great ideas cements them in your mind.

Nassim Taleb sums things up with a rule for all readers: “A good book gets better at the second reading. A great book at the third. Any book not worth rereading isn’t worth reading.”

Learn about the benefits of digitizing your documents and how to do it.

Table of Contents

As your business grows from a startup into a more established operation, the amount of paper you deal with tends to grow right along with it. Filing cabinets fill up, paperwork takes over valuable space and finding the document you need can become frustrating and time-consuming.

Searching for document management software and not sure where to start? Tell us a little more about your business and get customized quotes from qualified providers.

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Fill out this questionnaire to find vendors that meet your needs.

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One solution is to move toward a paperless office. By using digital conversion tools, businesses can turn paper documents into electronic files that are stored in the cloud or on a local server. We’ll walk through what document digitization involves and explain how it can help businesses stay organized, reduce costs and run more efficiently.

What is document digitization?

Document digitization is the process of capturing images of paper documents and converting them into digital files using scanning and capture software. OCR, or optical character recognition, turns those scanned images into searchable, editable text. You may also hear this process referred to as document scanning or document imaging.

Once documents are digitized, businesses can add more information, known as key index fields or metadata, to help better organize and manage files. This helps meet data retention requirements and supports storing documents in a computerized filing system.

After documents have been scanned, checked for accuracy and made editable, many paper originals can be destroyed. Some records, however, must remain in physical form to comply with state record retention laws (such as paycheck recordkeeping requirements) or other legal stipulations.

Tip

The best document management software helps businesses store digital files in one central location, with features like advanced search, security controls and workflow automation to keep documents organized and easy to access.

What are the business benefits of digitizing documents?

Document digitization can bring businesses the following advantages:

• Share documents easily: It’s faster to share digital documents than paper ones. Files can be emailed or shared online, so more than one person or team can access the same document at the same time, which makes workplace collaboration easier, especially for remote or hybrid teams.
• Store information safely: Digitized documents make it easier to store and protect records securely. Digital files can be backed up on remote servers and protected with access controls and security measures. Unlike paper documents, digital files are far less likely to be lost, misplaced or damaged, and they’re easier to archive and manage in an organized way.
• Incorporate digital elements: Scanning allows information to be captured from paper files, films, tapes and other physical media. Data can also be read from barcodes, RFID tags, QR codes or other scannable sources. The scanned information can then be used with document management systems, ERP software, management information system software, the best CRM software and other business applications.
• Save time and money: Digitizing documents eliminates the need to search through file rooms or store paper records in warehouses. Instead, documents can be accessed with just a few clicks. Cutting back on paper use, storage space and manual handling can lead to meaningful cost savings over time. In fact, some estimates suggest that storing and managing a paper document can cost more than 200 times as much as keeping a digital one, underscoring how much businesses can save by going paperless. 
• Improve customer service: Digitized documents can be indexed with key index fields or metadata, making it easier and faster to find the information needed to help customers. Jennifer Graham, co-founder of Total Document Solutions, agrees that quick searches are a major time-saver for customer service teams. “With the benefit of OCR or ICR, the ability to search for key text or information strings comes within seconds,” Graham noted.
• Minimize storage space: Moving away from paper records reduces the need for filing cabinets and storage rooms. “This opens possibilities for repurposing the area for more productive, revenue-generating activities,” Graham pointed out.
• Meet compliance regulations: Some industries require certain records to be maintained in digital form. Document scanning can help businesses meet these compliance requirements quickly and cost-effectively.
• Reduce paper waste: Digitizing documents can cut down on paper use dramatically, helping businesses reduce waste and support a more sustainable business model.
• Increase file accessibility: Digital files can be stored in the cloud or shared securely, so authorized users can access them whether they’re in the office or working remotely. Because the files are searchable and editable, it’s much easier to find what you need.
• Create automation opportunities: Digitizing documents can streamline day-to-day operations by reducing manual tasks. Graham noted that many businesses are surprised by how easily they can automate processes like sorting documents, managing approvals and sending reminders.

Did You Know?

File management best practices include choosing a clear, consistent naming system to make documents easier to find through search. For example, files can be organized by project name or date.

What documents can you digitize?

There’s no real limit to the types of documents you can digitize. That said, if you’re planning a larger effort to convert paper records into electronic files, it helps to start with documents that are used most often or take up the most space, such as:

• Official correspondence
• Financial papers
• Contractual agreements
• Medical records
• HR files
• Bills and invoices
• Survey maps
• Other large documents

Once documents are scanned, the next step is adding descriptive information so they’re easy to identify and retrieve later. Using OCR or ICR (Intelligent Character Recognition) technology, scanned images can be converted into readable text that can be searched, shared and used across different applications.

How are documents digitized?

The following tools can help you digitize your documents.

Multifunction devices

If your documents don’t require high-resolution scanning, a multifunction device you already have in the office may be enough. For example, an office printer with scanning capabilities lets employees digitize paper documents quickly without added cost.

Dedicated scanners

For businesses that scan documents frequently or in large volumes, a dedicated scanner can be a better fit. These devices typically offer higher resolution, faster scanning speeds and more flexibility for handling different paper sizes and document types.

Scanning apps

If you don’t have a scanner or need to scan documents on the go, a smartphone app can be a practical option. It uses your phone’s camera to capture clear images and keep paperwork organized.

FYI

If you use a scanning app for business documents, take time to review its storage options, search features and security measures to make sure it meets your needs before downloading.

Document scanning services

Outsourcing document scanning can make sense for businesses with a large backlog of paper files. Professional scanning services handle the time-consuming work of preparing, scanning and indexing documents, which can help companies digitize records efficiently without pulling internal staff away from other responsibilities.

Here are the different types of document scanning services and some of the use cases they specialize in:

1. Bulk scanning: Bulk-scanning services use high-quality devices to scan large volumes of documents quickly. There is no need to convert each page individually, which significantly reduces the scanning time.
2. Large-format scanning: This type of scanning service specializes in capturing superior-quality images of large physical documents, such as those measuring 54 x 72 inches. You can customize the scanned documents’ color, size, resolution and file type. Examples of such files include posters, maps and architectural plans.
3. OCR processing: OCR processing services provide fully editable scanned image files. OCR technology converts scanned images into text-searchable documents, allowing you to edit text easily without affecting the original font style.
4. Microfiche and microfilm scanning: These services convert data stored on tapes and microfilms to indexable digital files, making it easier to share, store, access and retrieve digital files.
5. Off-site and on-site scanning: Off-site scanning services digitize documents at their facilities. If you entrust classified or sensitive documents to such a service, verify that it passed numerous clearances, such as FBI background checks and fingerprinting. Alternatively, you can choose an on-site service to perform such scans. However, on-site scanning can be slower and more expensive than off-site scanning, as high-volume equipment is usually too large and sensitive to transport to a client location.
6. Medical record scanning: When it comes to paper vs. electronic medical records, there’s no question that electronic records are more convenient and secure. Still, any provider you select to scan medical records must comply with HIPAA laws.
7. HR, accounting and legal: Specialized departments can benefit from document scanning services that securely organize highly confidential employee documents, detailed bookkeeping records, and legal files in one place. Scanned documents can be accessed exclusively by the appropriate department or shared for collaboration when permissions are enabled within the document repository.

Tip

Building a customized Microsoft document management system can be a convenient solution for companies that work predominantly with Microsoft applications.

What are the biggest barriers to digitizing documents?

Small companies often want to go digital but hesitate because of what’s involved — and what’s at stake. Graham noted that small businesses face several common challenges when considering document digitization. “The biggest barrier to convincing a small company to digitize its documents often comes down to a mix of perceived costs, lack of familiarity with the process and resistance to change,” Graham explained.

• Cost concerns: Digitizing documents can feel overwhelming for a small business, especially when budgets are tight. Expenses like hiring a scanning provider, paying for a cloud storage service and not seeing an immediate return can cause hesitation. “Many small companies perceive digitization as expensive due to the cost of scanning hardware, software solutions and cloud storage,” Graham noted. “Some worry about recurring costs like subscription fees for document management systems or data migration services.”
• Awareness of the process: Many small businesses don’t have a clear picture of how digitization works, which can make the process seem more complicated than it really is. Without that understanding, it’s easy to focus on perceived costs instead of the benefits. Graham said educating businesses about the process can help highlight advantages like improved efficiency, stronger security and long-term cost savings.
• Resistance to change: Small businesses may be comfortable with their existing paper-based systems and hesitant to adopt something new. While that’s understandable, Graham said concerns about learning new technology or disrupting daily routines shouldn’t stop companies from taking advantage of the benefits that digitization offers.

What are the greatest risks of not digitizing documents?

Putting off digitization can leave your business exposed to several avoidable risks, including the following:

• Document loss: Physical documents are easy to misplace and vulnerable to damage or human error. “Unlike digital files, physical documents often have no backup, making recovery sometimes impossible,” Graham cautioned.
• Decreased efficiency: Searching for, filing and managing paper documents takes time and can require additional staff just to stay organized. Relying on paper can slow communication, delay decision-making and disrupt workflows. “Many physical filing systems cannot manage version control,” Graham warned. “This becomes especially challenging when a small company needs to produce an ‘official’ record during an audit or legal review.”
• Higher operational costs: Maintaining a paper-based system often leads to ongoing expenses that add up over time, such as:
  • Physical space for filing systems, including office space or off-site storage
  • Office supplies like paper, ink and folders for printing and copying
  • Additional staff time or overtime spent managing paper documents
  • Security measures to protect sensitive physical records
  • Environmental costs tied to paper use and disposal

You know that a budget is an incredible tool for reducing your debt and building your savings. But the thought of creating a budget from scratch can be overwhelming.

It’s possible to start with something simple. The simplest budget, the 80/20 budget, advocates committing 20% of your income to savings and 80% to everything else. Similarly, the 50/30/20 budget has you put 20% into savings, then divides the remaining portion into 50% for needs and 30% for wants.

But if you need something a little more specific and structured than that (but don’t want to commit to a full budget worksheet), there is a happy medium. The following five-category budget allows you to break down your spending into simple, basic categories, so you can see where your spending should line up and make adjustments if necessary. If you follow this budget, you’ll automatically be putting aside a portion of your money to both debt pay-down and savings, helping you reach your financial goals that much sooner.¹

Housing

One of the most important budget categories is what you spend on the place you live. Ideally, housing should take up no more than 35% of your take-home income.

Note

Your housing budget includes the mortgage or rent, plus every other housing-related expense: home repairs and maintenance; property taxes; utilities such as electricity, gas, water, and sewer; and homeowners or renters insurance.

If you live in a high-cost-of-living area, hitting this figure might be more of a struggle.² If you truly can’t trim your housing costs to 35% or less of your overall budget, you must look for ways to trim the other categories of your budget. Or, you may even reconsider your living situation: Could it be time to refinance, downsize, or take on a roommate? The important thing is that you have room in your budget for the necessities of life, including saving for the future.

Transportation

You might love luxury cars, which is fine as long as transportation expenses take up no more than 15% of your take-home income. If you have a car, you also have to account for the maintenance and upkeep of that car—not just the expense of your auto loan, if you have one.

Note

Remember, transportation isn’t just your car payment. It includes everything: gasoline, oil changes, car washes, tune-ups, and car repairs such as a new radiator or timing belt.

Your transportation costs also include the amount you pay for parking, and if you ride public transportation, the amount that you pay for bus, train, or subway fare.

Other Living Expenses

Other living expenses, which are predominantly discretionary expenses, should take up to 25% of your income. This includes recreational activities such as eating at restaurants, buying concert tickets, buying new clothes, going to sporting events, and taking the family on a nice vacation.

Your cell phone plan, cable bill, and other monthly subscriptions also fall into this category, unless you need them for work. Look for ways to cut down on miscellaneous expenses if your spending outpaces your earning.

Savings

The saying “pay yourself first” is a good motto. With each paycheck, budget to save 10% of your pay. You might even set up a separate account that’s less accessible, to reduce the temptation to spend this money; consider putting it in a money-market account or high-yield savings account so you can earn a little interest.

Your savings are predominantly for an emergency fund, retirement, and investments such as a new home or the kids’ future education.

Debt Payoff

Debt payoff should consume up to 15% of your income. This includes your credit cards or student loans. It does not include your mortgage payment or car payment, which are listed under “housing” and “transportation.” It does include any extra payments you’re making toward your mortgage and car loan beyond the minimum.

The 80/20 budget and the 50/30/20 budget both advocate savings rates of 20%, but under these budgets, “savings” included debt pay-down.

In this five-category budget, your savings and debt are listed as two separate categories. With 10% for one and 15% for the other, you’re actually spending 25% (in total) on a combination of savings and debt pay-down.

This is even more aggressive and ambitious than the other two budget models recommend. Use this five-category budget if you would like to create a workable budget that’s slightly more detailed and effective, but not overly detailed or complex.

A debt management plan groups several credit card debts into one payment, cuts your interest rate and creates a three- to five-year repayment plan. 

 

If you’re having trouble paying your credit card bills every month, a debt management plan from a nonprofit credit counseling agency might be the help you need.

A debt management plan is a way to help you pay down credit card debt while saving on interest. It has less of an effect on your credit score than other debt payoff options, like debt settlement or bankruptcy.

What is a debt management plan?

A debt management plan is a type of financial product offered by credit counseling agencies that can help you pay off unsecured debts, like credit cards and personal loans. Secured debts — such as mortgages or car loans — and student loan debt aren’t covered.

A debt management plan lumps your debt payments into a single payment with a reduced interest rate. This gives you a structured path to pay off the debt over three to five years.

There’s no credit score requirement to enroll in a debt management plan. But you’ll need to show steady income that covers both your basic expenses and regular payments toward your debts. 

How does a debt management plan work?

Once you enroll in a debt management plan, a credit counselor will contact each creditor to notify them and make itself the payer on your account. The counselor may seek concessions from each creditor, which can include lower interest rates and monthly payments or no late fees.

Each month, your payment will go electronically to the counseling agency, which then pays your creditors on your behalf.

You’ll likely pay a one-time enrollment fee as well as a recurring monthly fee for each credit account in the plan. Fees vary between agencies (see table below). Even with fees, your overall monthly payment should be lower.

As part of the debt management plan, you’ll need to close any enrolled credit accounts, though you may be able to leave one account open for emergency expenses. You won’t be able to open new lines of credit while you’re enrolled in the plan.

🤓Nerdy Tip

Want to see how a debt management plan works in practice? Some providers maintain examples on their website, using information based on their average client. See an example scenario here, from credit counseling agency Money Management International.

Where to get a debt management plan

Debt management plans are offered by credit counseling agencies. Look for an agency that’s a nonprofit and accredited by the National Foundation for Credit Counseling (NFCC).

These four agencies offer debt management plans nation-wide and are each members of the NFCC. 

Agency	Average fees
American Consumer Credit Counseling	Enrollment fee: $39.Average monthly fee: $25.Total fees for the first month: $64.
Cambridge Credit Counseling	Average enrollment fee: $40.Average monthly fee: $30.Total fees for the first month: $70.
GreenPath Financial Wellness	Average enrollment fee: $35.Average monthly fee: $31.Total fees for the first month: $66.
Money Management International	Average enrollment fee: $38.Average monthly fee: $27.Total fees for the first month: $65.

Once you reach out to an agency, expect a counselor to go over your financial situation thoroughly. They may discuss other options with you, like a debt consolidation loan (more on these loans lower down), in addition to a debt management plan. 

Don’t feel pressured to sign up the same day any program is offered. Take time to think about it.

Is a debt management plan right for you?

A debt management plan works best if you are someone who has overwhelming credit card debt and your debt-to-income ratio is 43% or more. That means your total monthly debt payments take up 43% or more of your monthly income before taxes and deductions are removed.

Consider these pros and cons of debt management plans before making the decision to enroll.

Pros of debt management plans

• Saves on interest: A credit counselor will try to negotiate lower interest rates as part of your enrollment in the debt management plan. Less interest means it’ll be easier for you to pay down debt, since more money will go to the principal. 
• Simplifies debt: Instead of juggling multiple due dates per month, you’ll have only one monthly payment with a debt management plan.
• Gives you a plan: Credit card debt can feel overwhelming, but a debt management plan gives you structure. If you make all payments on time, you know you’ll be out of debt when the program ends.
• Reduces temptation: Having to live without credit cards — and not being able to apply for new credit — might be an advantage if you struggle with overspending.

Cons of debt management plans

• Requires multi-year commitment: A three- to five-year commitment is a long time to keep up with your monthly payment. Before enrolling, make sure you can commit to the payment amount for the duration of the plan. 
• Limits access to credit: Having little to no access to credit cards for up to five years, as well as not being able to open new lines of credit, may be anxiety-inducing for some borrowers.

How does a debt management plan affect your credit?

Your credit score might initially drop, as accounts are closed and you have less available credit. Enrollment in a debt management plan will be noted on your credit report, but it’s supposed to be treated as neutral in credit scoring.

Long term, as you get a handle on your finances, your credit score is likely to climb.

Alternatives to using a debt management plan

A debt management plan is only one debt relief option when debt seems overwhelming, and it might not be the right one for you. Consider other alternatives to debt management plans.

Debt consolidation loans

A debt consolidation loan is a type of personal loan where you use the money from the loan to pay off all your debts at once. You then repay the loan at a fixed interest rate over a set term, usually one to seven years. 

These loans are a good choice if you can qualify for a lower rate than the average rate across your existing debts. Debt consolidation loans for bad credit are available from online lenders and credit unions.

Debt settlement

Debt settlement is the process of negotiating down your debts to a lower amount than you owe. You may negotiate this settlement on your own or hire a third party to help, like a debt settlement company. 

Debt settlement can seriously damage your credit score and it isn’t always successful, so only consider it once you’ve ruled out other debt payoff strategies.

Bankruptcy

Bankruptcy may be an option if your debt exceeds 40% of your income and you don’t have a plan to pay it off in five years. Speak with a bankruptcy attorney first (consultations are usually free), before considering this option.