Click here to play this game
Saturday, February 07, 2009
Thursday, February 05, 2009
5 common mistakes in a bad economy
By Bankrate.com
Consumers have plenty to worry about during a challenging economy, and making a wrong move in personal finances could make a bad situation worse. Obtaining cash through credit cards, retirement plans and home equity could end up being a costly quick fix. And complacency over personal investments and looming college costs could lead to missed opportunities for keeping hard-earned dollars.
Here's how to avoid some common pitfalls during an economic downturn.
1. Living la vida Visa. One of the most common responses to a financial crisis, such as a job loss, is to continue spending with credit cards, says Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling.
"We're great spenders but lousy savers," Cunningham says. "We're a hopeful lot of people. We keep thinking that our ship is going to come in."
But the reality is that it typically takes a job seeker one month to replace $10,000 of lost income, she says. So a prospective employee should expect it will take five months to replace a $50,000-a-year job.
1. Living la vida Visa. One of the most common responses to a financial crisis, such as a job loss, is to continue spending with credit cards, says Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling.
"We're great spenders but lousy savers," Cunningham says. "We're a hopeful lot of people. We keep thinking that our ship is going to come in."
But the reality is that it typically takes a job seeker one month to replace $10,000 of lost income, she says. So a prospective employee should expect it will take five months to replace a $50,000-a-year job.
Rather than continue a lifestyle financed by credit cards -- and compounding debt in the process -- consumers should "circle the wagons" by figuring out where they spend their money, Cunningham says.
Just as calorie-counters keep logs of every meal and snack, consumers should keep a meticulous watch on incidental purchases such as meals in restaurants, nights out at the movies, and, of course, gourmet cups of coffee. Think of it as an expense report to yourself.
"Nobody likes to do it, but you can do anything for 30 days," she says. "Tracking your spending is one of the most basic elements of financial stability."
Once consumers have a handle on spending, do they have go cold turkey on all of the good life's trappings? Not necessarily.
Cunningham suggests that cutting back on some expenses is better than cutting them out.
Comb through cable bills, cell phone plans, and other services for lower-cost alternatives. Folks who haven't watched HBO since the finale of "The Sopranos" or never started a conversation with a text message may rein a few bucks per month by dumping these options.
Just as calorie-counters keep logs of every meal and snack, consumers should keep a meticulous watch on incidental purchases such as meals in restaurants, nights out at the movies, and, of course, gourmet cups of coffee. Think of it as an expense report to yourself.
"Nobody likes to do it, but you can do anything for 30 days," she says. "Tracking your spending is one of the most basic elements of financial stability."
Once consumers have a handle on spending, do they have go cold turkey on all of the good life's trappings? Not necessarily.
Cunningham suggests that cutting back on some expenses is better than cutting them out.
Comb through cable bills, cell phone plans, and other services for lower-cost alternatives. Folks who haven't watched HBO since the finale of "The Sopranos" or never started a conversation with a text message may rein a few bucks per month by dumping these options.
2. Invading your nest egg. Economic downturns have a way of drying up consumers' liquidity. Meanwhile, creditors only get thirstier. But as tapped-out consumers have fewer options to get cash, they may be tempted to withdraw from an IRA or borrow from a 401(k) plan.
Taking cash out of a traditional IRA can lead to a double-whammy of a 10-percent penalty and taxes of at least 25 percent if the individual is younger than 59½, says Ira Marks, a Certified Financial Planner based in Lawrenceville, N.J.
For example, a couple with a combined yearly income of $100,000 who withdrew $25,000 would pay a $2,500 penalty, plus a tax of $6,250 for a total of $8,750, Marks says. State taxes would also be added.
Taxes and penalties would be more for a couple who earns more money. A couple who makes $200,000 annually would pay $10,833 for the same $25,000 withdrawal, Marks says.
There are exceptions, such as if the withdrawal is made to pay for medical expenses, he adds.
Another caveat to note: If the money is replaced within 60 days, there will be no taxes or penalties -- good to know if you need a quick infusion of cash for a college tuition payment before a commission check comes in, for example.
"But most people don't become aware of that until they are working with their tax preparers the following year," Marks says. By that time, the 60-day window to avoid losing money to taxes and the penalty has closed.
For a Roth IRA, a person younger than 59½ who withdraws the earnings within the first five years of opening the account would pay the 10-percent penalty and taxes. There is no penalty or tax assessed when direct contributions (not including rollover contributions) to a Roth IRA are withdrawn.
Consumers who may be leaving their jobs soon -- either voluntarily or not -- may want to think twice before borrowing against a 401(k) plan. Once an employee leaves a company, the loan turns into a taxable withdrawal, triggering the federal government's 10-percent penalty, Marks says.
3. Paying for college without applying for aid. An Aug. 20 Sallie Mae/Gallup survey found that one-fourth of families with children in college did not send in the Free Application for Federal Student Aid, or FAFSA, for the 2007-2008 school year.
"It's probably the simplest thing you can do to make sure you're not missing out on free money or low cost money," says Patricia Nash Christel, a Sallie Mae spokeswoman
For example, a couple with a combined yearly income of $100,000 who withdrew $25,000 would pay a $2,500 penalty, plus a tax of $6,250 for a total of $8,750, Marks says. State taxes would also be added.
Taxes and penalties would be more for a couple who earns more money. A couple who makes $200,000 annually would pay $10,833 for the same $25,000 withdrawal, Marks says.
There are exceptions, such as if the withdrawal is made to pay for medical expenses, he adds.
Another caveat to note: If the money is replaced within 60 days, there will be no taxes or penalties -- good to know if you need a quick infusion of cash for a college tuition payment before a commission check comes in, for example.
"But most people don't become aware of that until they are working with their tax preparers the following year," Marks says. By that time, the 60-day window to avoid losing money to taxes and the penalty has closed.
For a Roth IRA, a person younger than 59½ who withdraws the earnings within the first five years of opening the account would pay the 10-percent penalty and taxes. There is no penalty or tax assessed when direct contributions (not including rollover contributions) to a Roth IRA are withdrawn.
Consumers who may be leaving their jobs soon -- either voluntarily or not -- may want to think twice before borrowing against a 401(k) plan. Once an employee leaves a company, the loan turns into a taxable withdrawal, triggering the federal government's 10-percent penalty, Marks says.
3. Paying for college without applying for aid. An Aug. 20 Sallie Mae/Gallup survey found that one-fourth of families with children in college did not send in the Free Application for Federal Student Aid, or FAFSA, for the 2007-2008 school year.
"It's probably the simplest thing you can do to make sure you're not missing out on free money or low cost money," says Patricia Nash Christel, a Sallie Mae spokeswoman
The federal government uses the information on the form to determine an applicant's eligibility for Pell grants, subsidized Stafford loans and other financial aid, she says. Private organizations often use the information when awarding scholarships.
The survey also found that only 9 percent of the 1,404 families questioned reported using a 529 savings plan, a state-sponsored investment account that accumulates tax-free earnings. Those with a 529 plan used up to $8,000 toward last year's education costs, which on the average were $14,628, according to the survey.
Meanwhile, 38 percent of the families surveyed paid for tuition, room and board, and all other college-related expenses with personal income.
Christel says that parents are so committed to sending children to college, seeing it as an investment in their family's future, that they often give little thought to education costs and what happens after graduation, such as paying back loans and what the student's income will be after school ends.
Meanwhile, 38 percent of the families surveyed paid for tuition, room and board, and all other college-related expenses with personal income.
Christel says that parents are so committed to sending children to college, seeing it as an investment in their family's future, that they often give little thought to education costs and what happens after graduation, such as paying back loans and what the student's income will be after school ends.
4. Investing inertiaLong-term investing used to be easier: Pop the cash into the mutual funds and annuities and watch the returns rise like bread in an oven. But even consumers with a little dough are prone to avoiding the complex implications that the volatile stock market may have for their investments.
Lyle Benson, who owns a financial services firm in Baltimore, says that investors can get lulled into complacency when they should be reviewing their asset allocations to make sure they are keeping up with earnings targets.
While a portfolio should always have some amount of stocks to ensure growth in the long run, keeping too many stocks during a down market can be costly, Benson says. Sheltering cash in treasury bills or bonds can help a portfolio hold up in a bear market.
Older investors are often attracted to the low risk of CDs, especially since some analysts are projecting rates will increase in the coming months.
Benson advises investors to avoid locking in large amounts cash for periods longer than a year. An investor hasn't gained anything if living expenses increase 4 percent or 5 percent, and the deposit is locked in at 3.5 percent, he says. Depositing in new CDs every six months to a year will allow for rate changes.
"The idea is to have money coming due each year," Benson says.
Lyle Benson, who owns a financial services firm in Baltimore, says that investors can get lulled into complacency when they should be reviewing their asset allocations to make sure they are keeping up with earnings targets.
While a portfolio should always have some amount of stocks to ensure growth in the long run, keeping too many stocks during a down market can be costly, Benson says. Sheltering cash in treasury bills or bonds can help a portfolio hold up in a bear market.
Older investors are often attracted to the low risk of CDs, especially since some analysts are projecting rates will increase in the coming months.
Benson advises investors to avoid locking in large amounts cash for periods longer than a year. An investor hasn't gained anything if living expenses increase 4 percent or 5 percent, and the deposit is locked in at 3.5 percent, he says. Depositing in new CDs every six months to a year will allow for rate changes.
"The idea is to have money coming due each year," Benson says.
Tom Kelly, spokesman for JP Morgan Chase & Co., says that previously the bank had been originating loans at 95 percent to 100 percent of a home's value. But following the subprime mortgage meltdown, that threshold has dropped to 80 percent in most housing markets, Kelly says.
"So on a $200,000 home, the most you can expect is $160,000," he says. "Our standards are probably in line with other lenders."
Marks says he hopes people's spending habits would change as a result of the limits on home equity loans.
But in some cases, tapping into a home's value may be the only option to get cash.
David Certner, AARP's legislative counsel, says he expects people over the age of 62 to become more interested in reverse mortgages.
Living expenses will continue to increase, and seniors on fixed incomes and no assets other than their homes will need to establish cash flow.
A reverse mortgage allows a homeowner to receive nontaxable payments based on the value of a home with a mortgage that has been paid. It is sometimes described as a house paying the homeowner back.
"So on a $200,000 home, the most you can expect is $160,000," he says. "Our standards are probably in line with other lenders."
Marks says he hopes people's spending habits would change as a result of the limits on home equity loans.
But in some cases, tapping into a home's value may be the only option to get cash.
David Certner, AARP's legislative counsel, says he expects people over the age of 62 to become more interested in reverse mortgages.
Living expenses will continue to increase, and seniors on fixed incomes and no assets other than their homes will need to establish cash flow.
A reverse mortgage allows a homeowner to receive nontaxable payments based on the value of a home with a mortgage that has been paid. It is sometimes described as a house paying the homeowner back.
Certner says the U.S. Housing and Economic Recovery Act of 2008 makes reverse mortgages more attractive by:
Raising the amount of equity homeowners can borrow against.
Capping origination fees.
Protecting seniors against inappropriate practices by lenders.
However, a reverse mortgage should remain a "last resort" for seniors because it is still an expensive proposition, he says.
The new housing law allows a maximum of $6,000 for an origination fee. The fee is based on the law's new scale of 2 percent for the first $200,000 of home value, and 1 percent per $100,000 of remaining home value, Certner says. Previously, homeowners were charged 2 percent of the home's value.
A reverse mortgage could use up the entire value of a home, and the homeowner is responsible for property taxes and home maintenance, which is why Certner suggests considering all options before using a reverse mortgage.
"It may be more appropriate to sell your home and move," he says.
Previously, seniors had fallen prey to being sold annuities, long-term care insurance and other inappropriate products by the same agents who sold the reverse mortgages. The new housing law prohibits this practice, but Certner says seniors should remain on their guard.
"Those products are rarely in your interest," he says.
Raising the amount of equity homeowners can borrow against.
Capping origination fees.
Protecting seniors against inappropriate practices by lenders.
However, a reverse mortgage should remain a "last resort" for seniors because it is still an expensive proposition, he says.
The new housing law allows a maximum of $6,000 for an origination fee. The fee is based on the law's new scale of 2 percent for the first $200,000 of home value, and 1 percent per $100,000 of remaining home value, Certner says. Previously, homeowners were charged 2 percent of the home's value.
A reverse mortgage could use up the entire value of a home, and the homeowner is responsible for property taxes and home maintenance, which is why Certner suggests considering all options before using a reverse mortgage.
"It may be more appropriate to sell your home and move," he says.
Previously, seniors had fallen prey to being sold annuities, long-term care insurance and other inappropriate products by the same agents who sold the reverse mortgages. The new housing law prohibits this practice, but Certner says seniors should remain on their guard.
"Those products are rarely in your interest," he says.
Wednesday, February 04, 2009
How Real People Grow Their Wealth
For most people, wealth does not come in a windfall but instead gathers gradually as a result of years of hard work and diligence.
Bankrate readers offer their tips for growing wealth. You'll find no winning lottery numbers or surefire stock recommendations among them, but all are sensible suggestions for savings.
AP Photo/Bloomsburg Press Enterprise, Bill Hughes
AP Photo/Bloomsburg Press Enterprise, Bill Hughes
1. Grow Your Own Food
I have a plot in our local community garden that I share with two of my friends.
It is a fun, inexpensive hobby for us -- plus it keeps us active and teaches our children important life skills.
We keep our 20- by 30-foot parcel planted year-round, and it provides our three families with fresh, organic produce.
-- Anonymous
2. Set Limits and Stick to Them
I try to save at least three to four part-time paychecks so that I can elect to make a hefty payment on a credit card account and buy myself a little something I waited to get.
Also, I have inventoried my home and gathered up all half-full or almost empty bottles of lotions, soaps, hair creams, cleaning products and vowed not to make a purchase until we absolutely had not one drop of a particular thing. So I have not been to the store to buy these items -- including makeup and colognes.
I limit my driving and only buy $20 (of gas) at a time about once a week …so $80 a month. Not an ounce more.
As for groceries, I am using only fresh or frozen vegetables. At the store I purchase only the item that is $0.99 per pound and pull out my cookbook to find an exciting way to cook it and make great meals. Chicken can be cooked 100 different ways.
-- Sharon Dorsey
3. Buy Savings Bonds
I have always made a 10 percent deduction on my pay.
If you do it every week, you will see that you don't miss it. After a few years it can really accumulate into a nice sum of savings. The best vehicle is savings bonds. You buy them and just hold them.
-- Michael de Gennaro
4. Redirect Your Raises
Anytime I get a raise or a bonus, I don't have the additional money deposited into my checking account.
I have already proven I can live without the money, so first I direct it to my 401(k).
Once I maxed out my 401(k) contributions, my raises went directly into my HSA.
Once that was maxed out, they went directly into a savings account.
I now have my 401(k) fully invested, my HSA fully funded and a great emergency fund.
-- Sam Hohman
5. Split Raises in Half
Each and every job raise should be split -- half you keep and half is put into a monthly retirement vehicle. It is a foolproof way to retire early.
-- Chere
6. Track Spending
Tracking spending (even for 30 days) allows you to know exactly what you spend.
Have you ever gone to the ATM and two days later asked yourself, "I know I got $60 on Tuesday -- where did it go?"
You may remember some of it, but you will not remember all of it. Tracking spending takes out the guesswork and puts you firmly in control of your finances.
From there, it's easy to determine what you can cut or, better yet, what you can save.
-- Jude Gilford
7. Spend Less by Budgeting
We found that if we keep track of our spending on a month-to-month basis, we spend less.
We are also good at paying ourselves first through auto-pay on the paycheck that goes into savings and 401(k) accounts.
We also are good at putting our loose change in the change jar so that maybe we can take that trip someday.
-- Brenda
8. Save by Using Credit
My husband and I do not carry any significant amounts of cash -- have approximately $20 to $40 maximum in each wallet.
All purchases -- food, gasoline and nominal retail purchases -- are on the card. All credit purchases are paid up completely every billing. Savings are twofold: 30-day float and no credit card interest ever for the past 30 years or more. Our motto is, if we pay any interest charges, they must be tax-deductible!
I have a plot in our local community garden that I share with two of my friends.
It is a fun, inexpensive hobby for us -- plus it keeps us active and teaches our children important life skills.
We keep our 20- by 30-foot parcel planted year-round, and it provides our three families with fresh, organic produce.
-- Anonymous
2. Set Limits and Stick to Them
I try to save at least three to four part-time paychecks so that I can elect to make a hefty payment on a credit card account and buy myself a little something I waited to get.
Also, I have inventoried my home and gathered up all half-full or almost empty bottles of lotions, soaps, hair creams, cleaning products and vowed not to make a purchase until we absolutely had not one drop of a particular thing. So I have not been to the store to buy these items -- including makeup and colognes.
I limit my driving and only buy $20 (of gas) at a time about once a week …so $80 a month. Not an ounce more.
As for groceries, I am using only fresh or frozen vegetables. At the store I purchase only the item that is $0.99 per pound and pull out my cookbook to find an exciting way to cook it and make great meals. Chicken can be cooked 100 different ways.
-- Sharon Dorsey
3. Buy Savings Bonds
I have always made a 10 percent deduction on my pay.
If you do it every week, you will see that you don't miss it. After a few years it can really accumulate into a nice sum of savings. The best vehicle is savings bonds. You buy them and just hold them.
-- Michael de Gennaro
4. Redirect Your Raises
Anytime I get a raise or a bonus, I don't have the additional money deposited into my checking account.
I have already proven I can live without the money, so first I direct it to my 401(k).
Once I maxed out my 401(k) contributions, my raises went directly into my HSA.
Once that was maxed out, they went directly into a savings account.
I now have my 401(k) fully invested, my HSA fully funded and a great emergency fund.
-- Sam Hohman
5. Split Raises in Half
Each and every job raise should be split -- half you keep and half is put into a monthly retirement vehicle. It is a foolproof way to retire early.
-- Chere
6. Track Spending
Tracking spending (even for 30 days) allows you to know exactly what you spend.
Have you ever gone to the ATM and two days later asked yourself, "I know I got $60 on Tuesday -- where did it go?"
You may remember some of it, but you will not remember all of it. Tracking spending takes out the guesswork and puts you firmly in control of your finances.
From there, it's easy to determine what you can cut or, better yet, what you can save.
-- Jude Gilford
7. Spend Less by Budgeting
We found that if we keep track of our spending on a month-to-month basis, we spend less.
We are also good at paying ourselves first through auto-pay on the paycheck that goes into savings and 401(k) accounts.
We also are good at putting our loose change in the change jar so that maybe we can take that trip someday.
-- Brenda
8. Save by Using Credit
My husband and I do not carry any significant amounts of cash -- have approximately $20 to $40 maximum in each wallet.
All purchases -- food, gasoline and nominal retail purchases -- are on the card. All credit purchases are paid up completely every billing. Savings are twofold: 30-day float and no credit card interest ever for the past 30 years or more. Our motto is, if we pay any interest charges, they must be tax-deductible!
-- Kathleen McHugh
9. Take Advantage of Rewards
I charge all food, gas and household bills such as electricity, car loan and house insurance.
I pay the card off each month. I am left with reward points to turn into cash, restaurant certificates, gift cards at various stores and so on. I actually make $40 to $70 a month by doing this.
-- Diann Williams
10. Save With Coupons
Use coupons at the grocery store and put that money in a piggy bank. It's amazing how much it adds up.
Years ago the stores gave you cash back for coupons you used, but now it's just deducted from the balance you owe at the store and your receipt shows how much you saved. But you haven't really saved if you aren't actively saving that money -- you are just spending less.
Start saving by taking the amount of cash out of your wallet and putting it away.
-- Lisa Anderson
11. Use Direct Deposit
The best savings secret is using direct deposit from your paycheck into a savings account.
I also have direct deposit to an additional savings account at a bank that I don't frequent very often for my vacation and Christmas fund. Even small amounts add up if you leave it alone.
-- Karla
12. Leverage Automatic Savings
The key in our household is automatic deposits. Here are some examples:
A. Every month we have a set amount taken out of our checking account and put into our two children's college savings plans -- $50 each.
In this way we are setting aside $600 per year for each child for their college education. At $600 each year for 18 years we will have a lot more than I, or my parents, had saved for my college education. They will be expected to work, apply for scholarships and take out loans if necessary to help fund their education.
B. Part of our paychecks goes to various savings accounts automatically:
Savings accounts for each of our children (both are under age 8) to buy them clothes or other necessary items. We save $10 per month for each, so that is $120 per year for each child, plus birthday and Christmas money they receive from relatives helps toward clothing expenses.
A money market fund for future vacations to the tune of $50 every two weeks, which turns out to be $1,300 per year. We usually take a big vacation every two years, so we have at least $2,600. Any money not spent on a previous vacation is left in the account.
A money market fund for the down payment on our next vehicle. Whenever we pay off a vehicle, that money gets set aside instead of spent, currently $150 every two weeks, which turns out to be $3,900 per year. We try to go at least two to four years after paying off a vehicle before replacing it.
A savings account for Christmas spending; we save $80 per month, or $960 total, to put toward Christmas presents for family and friends.
C. We fund our 401(k)s directly through our employer, taken out of our paychecks pretax. Paying for our retirement comes first.
By having our money moving automatically around to various savings accounts or into the college funds or 401(k) plans, there is no way not to have that money available for those reasons.
-- Jen Richardson
13. Don't Touch the Money
I have a certain amount allotted to a bank account each payday that I do not use to pay bills, nor do I withdraw that account. I never miss the money because it is allotted before my pay is deposited.
-- Christina
14. Pay Attention to Progress
I keep a chart of my debts and assets, including school loans, car loan, mortgage, my savings account and 401(k).
Then I watch them closely, actually daily right now, to see my savings grow and my debts come down. At the top of the chart I put how much I originally owed, and it has been very motivating. My savings account shows me daily how much I'm earning -- by doing nothing!
I've always been a saver, but don't have much. For many years, I was a single mom with two children, no education and no child support -- earning $5 an hour in Southern California.
The kids are now on their own, and I've been at the same job for almost 10 years making a decent income. I just can't figure out why I didn't make the chart before. It has significantly helped me save while paying off my debts.
-- Cindy Troyer
15. Save a Little Each Week
I needed to save money for several long-term goals and ongoing bills, such as a new car, vacation fund, emergency vet fund for my pets and my personal emergency fund, and so on.
So I created an ING account for each fund. I started out the first week by putting $1 in each account. The second week I put $1 into each account plus an extra $1 into the personal emergency fund, third week went $1 into each account plus $2 into the personal account, and so on.
The second month I put $2 a week into each account plus the extra $1 into the savings. Third month was $3 into each account each week plus the extra.
Doesn't sound like much, but you slowly learn to live without the money -- paying yourself first!
At this point I am putting away almost $100 a week spread out over several accounts. Some accounts are just gathering funds for long-term goals, for instance a new car, while others get tapped into on a regular basis.
-- Alexis Heydt
16. Check Grocery Store Ads
I have found that one of the best ways to save a few bucks is to watch out for grocery store ads.
I retired about 10 years ago and love to grocery shop. At my local grocery market there is never a week that goes by that they don't have a great discount on something. I save on average $40 to $45 per week, or $1,300 to date this year.
Every item I buy is something to eat or use for the household. It beats the heck out of coupons.
-- David Swanger
I charge all food, gas and household bills such as electricity, car loan and house insurance.
I pay the card off each month. I am left with reward points to turn into cash, restaurant certificates, gift cards at various stores and so on. I actually make $40 to $70 a month by doing this.
-- Diann Williams
10. Save With Coupons
Use coupons at the grocery store and put that money in a piggy bank. It's amazing how much it adds up.
Years ago the stores gave you cash back for coupons you used, but now it's just deducted from the balance you owe at the store and your receipt shows how much you saved. But you haven't really saved if you aren't actively saving that money -- you are just spending less.
Start saving by taking the amount of cash out of your wallet and putting it away.
-- Lisa Anderson
11. Use Direct Deposit
The best savings secret is using direct deposit from your paycheck into a savings account.
I also have direct deposit to an additional savings account at a bank that I don't frequent very often for my vacation and Christmas fund. Even small amounts add up if you leave it alone.
-- Karla
12. Leverage Automatic Savings
The key in our household is automatic deposits. Here are some examples:
A. Every month we have a set amount taken out of our checking account and put into our two children's college savings plans -- $50 each.
In this way we are setting aside $600 per year for each child for their college education. At $600 each year for 18 years we will have a lot more than I, or my parents, had saved for my college education. They will be expected to work, apply for scholarships and take out loans if necessary to help fund their education.
B. Part of our paychecks goes to various savings accounts automatically:
Savings accounts for each of our children (both are under age 8) to buy them clothes or other necessary items. We save $10 per month for each, so that is $120 per year for each child, plus birthday and Christmas money they receive from relatives helps toward clothing expenses.
A money market fund for future vacations to the tune of $50 every two weeks, which turns out to be $1,300 per year. We usually take a big vacation every two years, so we have at least $2,600. Any money not spent on a previous vacation is left in the account.
A money market fund for the down payment on our next vehicle. Whenever we pay off a vehicle, that money gets set aside instead of spent, currently $150 every two weeks, which turns out to be $3,900 per year. We try to go at least two to four years after paying off a vehicle before replacing it.
A savings account for Christmas spending; we save $80 per month, or $960 total, to put toward Christmas presents for family and friends.
C. We fund our 401(k)s directly through our employer, taken out of our paychecks pretax. Paying for our retirement comes first.
By having our money moving automatically around to various savings accounts or into the college funds or 401(k) plans, there is no way not to have that money available for those reasons.
-- Jen Richardson
13. Don't Touch the Money
I have a certain amount allotted to a bank account each payday that I do not use to pay bills, nor do I withdraw that account. I never miss the money because it is allotted before my pay is deposited.
-- Christina
14. Pay Attention to Progress
I keep a chart of my debts and assets, including school loans, car loan, mortgage, my savings account and 401(k).
Then I watch them closely, actually daily right now, to see my savings grow and my debts come down. At the top of the chart I put how much I originally owed, and it has been very motivating. My savings account shows me daily how much I'm earning -- by doing nothing!
I've always been a saver, but don't have much. For many years, I was a single mom with two children, no education and no child support -- earning $5 an hour in Southern California.
The kids are now on their own, and I've been at the same job for almost 10 years making a decent income. I just can't figure out why I didn't make the chart before. It has significantly helped me save while paying off my debts.
-- Cindy Troyer
15. Save a Little Each Week
I needed to save money for several long-term goals and ongoing bills, such as a new car, vacation fund, emergency vet fund for my pets and my personal emergency fund, and so on.
So I created an ING account for each fund. I started out the first week by putting $1 in each account. The second week I put $1 into each account plus an extra $1 into the personal emergency fund, third week went $1 into each account plus $2 into the personal account, and so on.
The second month I put $2 a week into each account plus the extra $1 into the savings. Third month was $3 into each account each week plus the extra.
Doesn't sound like much, but you slowly learn to live without the money -- paying yourself first!
At this point I am putting away almost $100 a week spread out over several accounts. Some accounts are just gathering funds for long-term goals, for instance a new car, while others get tapped into on a regular basis.
-- Alexis Heydt
16. Check Grocery Store Ads
I have found that one of the best ways to save a few bucks is to watch out for grocery store ads.
I retired about 10 years ago and love to grocery shop. At my local grocery market there is never a week that goes by that they don't have a great discount on something. I save on average $40 to $45 per week, or $1,300 to date this year.
Every item I buy is something to eat or use for the household. It beats the heck out of coupons.
-- David Swanger
Subscribe to:
Posts (Atom)