retirement saving http://www.wisebread.com/taxonomy/term/11953/all en-US 4 Times Raiding Your Retirement Accounts Early Is Okay http://www.wisebread.com/4-times-raiding-your-retirement-accounts-early-is-okay <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/4-times-raiding-your-retirement-accounts-early-is-okay" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/retired-couple-finances-Dollarphotoclub_46844243.jpg" alt="retired couple finances" title="retired couple finances" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Borrowing from your retirement accounts should rarely be your first choice to cover unexpected expenses. Even if your need is severe, there are often better and cheaper ways that won't narrow your future.</p> <p>But the truth is that there are times when getting a loan from your retirement account isn't the worst choice you can make. If you're in one of the following situations, a loan from your retirement account might actually be a reasonable solution.</p> <h2>1. You're Facing Severe Financial Hardship</h2> <p>By &quot;severe financial hardship,&quot; I'm thinking the extreme of extremes here. If you're not sure you can keep the lights on or feed your family, a retirement loan is probably better than your alternatives.</p> <p>Even in this situation, though, you need to have a plan. Retirement loans must be repaid, and the money usually comes directly out of your paycheck. If you're not getting a regular paycheck, you need to figure out how to repay the money. You will also want to consider whether you want a &quot;hardship&quot; loan or a regular one. If you can prove the hardship, those loans are usually easier and faster but, depending on your company, they may have other drawbacks.</p> <h2>2. It Is Your Low-Cost Option</h2> <p>If you've calculated the costs of all of your loan options, and a loan from your retirement accounts is the cheapest option, then you need to consider taking it. However, it's important to remember that you cannot ever calculate the cost of a retirement loan accurately, because you don't know how much more money your retirement funds would have earned if you had left them in the account the whole time.</p> <p>Both <a href="http://money.usnews.com/money/blogs/alpha-consumer/2011/01/25/why-401k-loans-can-be-a-smart-move">credit card debt</a> and <a href="http://powertochange.com/world/paydayloan/">payday</a> loans are examples of potentially very high interest loans that could potentially be paid off cheaper with a retirement loan. It's often possible, though, to negotiate your credit card payments lower, or even to negotiate a lower amount that you can pay off instead of the total. Try these options before you take out a retirement loan.</p> <h2>3. You Can't Get a Regular Loan</h2> <p>If you have a bankruptcy or even a short sale on your financial record, your credit may be too low to even be able to get a conventional loan. If there's not another way to get the money that you need and you can't put off your need until later, then a loan from your retirement account may be what you need to get you through.</p> <p>Be sure that you're taking the overall tax situation into account when you consider this, though. You'll be charged a penalty for taking the money out, and the money may be taxed as income, too. Then, once it's repaid and you're taking it out for retirement, you may pay taxes on it again. Talk to someone about the specifics of your situation, so you know exactly what you're getting into. Unless your need is so urgent you cannot wait on a regular loan, all of this may be too much to pay!</p> <h2>4. You Are Making the Best Investment&hellip; Ever!</h2> <p>The most-controversial-but-still-probably-ok reason to take money out of your retirement accounts before retirement age is because you're making some kind of insane investment. Are you financing a business or putting yourself through school? Then the loan might be acceptable.</p> <p>As always, calculate the costs of the loan as best you can. While you can't absolutely calculate how much money you will make from a business or how much more you'll make with further education, do your research. If you're not going to improve your situation significantly or you find you can get a low-interest education loan instead, you're probably better off leaving your retirement money where it is.</p> <h2>Considerations Before You Take Out a Retirement Loan</h2> <p>Sure, there are times when a retirement loan is your best option. While it's never a great choice, it's a better choice when the following things are true.</p> <h3>When Your Retirement Is Already Secure</h3> <p>Do you know how much you plan on needing for retirement? Do you already have that, and more? If you know your retirement is secure, then a loan from those accounts that doesn't dip into the money you will need is a better choice than when you're taking money from your future self.</p> <h3>When You Love Your Job</h3> <p>Since retirement loans have to be repaid, it's always better to take one out when you're <a href="http://www.bankrate.com/finance/retirement/4-reasons-to-take-out-a-401k-loan-4.aspx">working a job you love</a> (and believe they plan to keep you there for a quite a while). If you want to quit &mdash; or you think you might get laid off or fired &mdash; a retirement loan is much more risky, since most companies will require you to pay off the entire balance within 60 days of your employment termination.</p> <h3>When You Need Money Fast</h3> <p>As long as you have the proper paperwork in place, you can usually get a loan from your retirement accounts fairly quickly. Since you won't have to apply or be approved, the process is more streamlined than with other loans. Sometimes, you won't have time to research all of your options or wait to hear back from a lender before you need your money, and in this case retirement loans can be your best choice.</p> <h3>When Your Need Is Short Term</h3> <p>If your retirement account loan is longer in duration, the negative effect on your retirement funds only grows. If, on the other hand, you take it out and can repay it in full in a matter of a few months, you've done minimal damage and covered your financial needs. In general, <a href="http://www.forbes.com/sites/learnvest/2014/03/28/the-skinny-on-borrowing-money-from-your-401k/2/">if your financial need will be over in less than a year</a> and you can repay the money quickly at that point, a retirement loan is a better idea than it is if you will have to repay it slowly over years and years.</p> <p><em>Have you ever taken a loan from your retirement accounts? How did it work out for you?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/sarah-winfrey">Sarah Winfrey</a> of <a href="http://www.wisebread.com/4-times-raiding-your-retirement-accounts-early-is-okay">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/you-may-be-putting-your-retirement-money-in-the-wrong-place">You May Be Putting Your Retirement Money in the Wrong Place</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/this-one-thing-will-get-you-to-1-million-tax-free">This One Thing Will Get You to $1 Million (Tax-Free!)</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-ways-to-boost-your-odds-of-retiring-early">5 Ways to Boost Your Odds of Retiring Early</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-dumb-401k-mistakes-smart-people-make">5 Dumb 401(k) Mistakes Smart People Make</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-investing-basics-that-can-make-you-rich">5 Investing Basics That Can Make You Rich</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment Retirement 401(k) retirement saving saving Mon, 12 Jan 2015 14:00:09 +0000 Sarah Winfrey 1277863 at http://www.wisebread.com You May Be Putting Your Retirement Money in the Wrong Place http://www.wisebread.com/you-may-be-putting-your-retirement-money-in-the-wrong-place <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/you-may-be-putting-your-retirement-money-in-the-wrong-place" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/man-reading-newspaper-122577774-small.jpg" alt="man reading newspaper" title="man reading newspaper" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>For many investors, their primary &mdash; if not only &mdash; retirement investment account is their workplace 401(k) plan. But if you also have an IRA, perhaps because you rolled over the balance of a workplace plan from a former employer, it's important to make sure your account is at the best broker. Making that determination depends mostly on the size of your portfolio, the types of investments you prefer, and how much trading you do. (See also: <a href="http://www.wisebread.com/begin-your-investing-career-right-with-some-mutual-fund-basics?ref=seealso">Begin Your Investment Career Right With Some Mutual Fund Basics</a>)</p> <p>Let's take a look at some of the variables.</p> <h2>Portfolio Size</h2> <p>If you're just getting started with investing, the minimum amounts required to open a brokerage account (where you'll be able to open an IRA and buy and sell stocks, mutual funds, and other types of investments) are a good starting point for choosing a broker.</p> <p>Several brokers require no minimums for opening an account, including TD Ameritrade, E*TRADE, and ShareBuilder. At Fidelity, the minimum to open an IRA is usually $2,500, but if you commit to investing $200 per month automatically, you can open an account with your first $200.</p> <h2>Preferred Investments</h2> <p>What types of investments do you want to make and how often do you plan to trade? The main investment choices are stocks or mutual funds.</p> <h3>Stock Investing</h3> <p>While I recommend mutual funds over individual stocks for most people because funds are inherently diversified and therefore usually less risky, if you prefer stocks you can usually find a broker running a promotion for a certain number of free trades. For example, OptionsHouse is offering 150 commission-free trades for those opening a new account. After that, their commission is a low $4.75 per trade. TradeKing's stock commissions are almost as low at $4.95 per trade.</p> <p>It doesn't take much money to invest in stocks since you can buy as little as one share. For example, as of this writing, one share of Microsoft could be purchased for a little over $45 plus commission. Of course, you'll need to invest in more than one company in order to be adequately diversified, so the lower the trading fees the better.</p> <h3>Mutual Fund Investing</h3> <p>All mutual funds have minimum initial investment amounts that need to be taken into account, often starting at $1,000. In many cases, you'll also pay a transaction fee (commission). However, this is an area where brokers distinguish themselves by offering a number of no transaction fee (NTF) funds. Fidelity, Schwab, and Scottrade are some of the leaders here. Fidelity, for example, offers nearly 3,000 NTF funds. The fee for investing in most of the other funds offered through Fidelity's platform is $49.95, although some cost $75.</p> <p>To make up for the fee income they forego by offering NTF funds, brokers typically charge a short-term trading fee if you sell certain NTF funds within 60 to 180 days. For its funds that such fees apply to, Fidelity's short-term period is 60 days, which is the shortest short-term trading period I'm aware of. If you sell any of those funds more quickly than that, you'll pay a fee of $75. Schwab's and Scottrade's short-term holding period is 90 days. TD Ameritrade requires that you hold some of its funds for at least 180 days.</p> <p>If you're a buy-and-hold investor, short-term holding period restrictions may not matter to you. But if your <a href="http://www.soundmindinvesting.com/visitor/2013/oct/level2.htm">investment strategy</a> calls for a certain amount of trading throughout the year, such restrictions, and the potential fees involved, can make a big difference.</p> <p>If you're strictly an index fund investor and are partial to the low-cost funds offered by Vanguard, the company that invented index funds, open your account there. The vast majority of Vanguard's mutual funds and exchange-traded funds are commission-free. You can buy Vanguard's funds through other brokers, but you'll usually have to pay a commission for doing so.</p> <h3>Exchange-Traded Funds</h3> <p>ETFs are considered a type of mutual fund since they hold multiple stocks or other funds. However, they are bought and sold in a fashion similar to stocks. Investors can purchase a single share, for example, and the commission structure is typically the same as what a broker charges for stocks. Here, too, some brokers offer a number of no-commission ETFs. Schwab, for example, offers over 100 ETFs that may be bought or sold without paying a fee. Fidelity offers 80. Some brokers charge a short-term redemption fee if you sell a commission-free ETF within a certain time frame.</p> <p>Stocks and funds. If you invest in both stocks and mutual funds, you'll want a broker that charges a reasonable commission for stock trades and offers a wide assortment of no transaction fee mutual funds. Whereas ShareBuilder offers both types of investments and charges just $6.95 per stock trade, its lineup of NTF mutual funds is very limited. In this situation, Fidelity, Schwab, or Scottrade may be better options.</p> <p>As you can see, there are lots of choices when it comes to brokerage houses, and this represents only a framework for making an informed choice. See if account minimums apply to you and make sure you understand the fees involved for making the types of investments you prefer and for trading them as frequently as you plan to. Be sure to look at more than just the commission schedule, understanding short-term holding period requirements as well.</p> <p><em>If you have investments outside of a work 401(k), where do you keep them? Please share in comments!</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/matt-bell">Matt Bell</a> of <a href="http://www.wisebread.com/you-may-be-putting-your-retirement-money-in-the-wrong-place">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-dumb-401k-mistakes-smart-people-make">5 Dumb 401(k) Mistakes Smart People Make</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/this-is-why-you-cant-postpone-planning-for-your-retirement-and-how-to-start">This Is Why You Can&#039;t Postpone Planning for Your Retirement (And How to Start)</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-ways-investing-sucks-and-why-you-should-do-it-anyway">7 Ways Investing Sucks (and Why You Should Do It Anyway)</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-times-raiding-your-retirement-accounts-early-is-okay">4 Times Raiding Your Retirement Accounts Early Is Okay</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/9-silly-reasons-people-dont-invest-but-should">9 Silly Reasons People Don&#039;t Invest (But Should)</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment 401(k) investing IRA retirement retirement saving saving Thu, 28 Aug 2014 13:00:11 +0000 Matt Bell 1196855 at http://www.wisebread.com 5 Investing Basics That Can Make You Rich http://www.wisebread.com/5-investing-basics-that-can-make-you-rich <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-investing-basics-that-can-make-you-rich" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/finances-152173891.jpg" alt="finances" title="finances" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p>So you want to become a better investor, build more wealth, and gain financial freedom?</p> <p>Great!</p> <p>Where do you begin? There&#39;s tons of advice out there about how to make money in the market. And sadly, not all of it is <em>good</em> advice. In fact, some of it is downright <em>damaging</em>. (See also: <a href="http://www.wisebread.com/10-investing-concepts-to-ignore-and-10-to-follow?ref=seealso">Investing Concepts to Ignore and to Follow</a>)</p> <p>But don&#39;t worry, there&#39;s good news: If you boil all the advice down to a few key fundamentals, what&#39;s left is a short list of true words of wisdom &mdash; real advice that&#39;ll put more money in your pocket over a lifetime of investing.</p> <h2>1. Start Early and Invest Regularly</h2> <p>If you start at age 25 and put in the maximum to your Roth IRA ($5,500 in 2014) every year for just 10 years (until you&#39;re 35, and then stop contributing), and your money grows by 8% each year, by the time you&#39;re 65 you&#39;ll have over $865,000. (See also: <a href="http://www.wisebread.com/retirement-planning-if-you-re-under-30?ref=seealso">Retirement Planning If You&rsquo;re Under 30</a>)</p> <p>But if you procrastinate for 10 years, start investing at age 35, and invest the maximum every year until you&#39;re 65 (30 years), you&#39;ll have just under $673,000 &mdash; a difference of over $192,000.</p> <p>How much would it hurt to lose $192,000?</p> <p>By starting a bit earlier, you put in less of your own cash, and end up with more money than if you started later and had to put in more of your own cash.</p> <h2>2. Choose Your Asset Allocation</h2> <p>This refers to how you split your money between the two main types of investments &mdash; stocks and bonds. (See also: <a href="http://www.wisebread.com/the-basics-of-asset-allocation?ref=seealso">Asset Allocation Basics</a>)</p> <p>To highlight the importance of this decision, here&#39;s what William Bernstein, author of &quot;<a href="http://www.amazon.com/gp/product/0071747052/ref=as_li_ss_tl?ie=UTF8&amp;camp=1789&amp;creative=390957&amp;creativeASIN=0071747052&amp;linkCode=as2&amp;tag=wisbre03-20">The Four Pillars of Investing</a>,&quot; says about it: &quot;The fundamental investment choice faced by any individual is the overall stock/bond mix.&quot;</p> <p>So how do you choose?</p> <p>Here&#39;s a rule of thumb recommended by John Bogle, founder of the Vanguard, the world&#39;s largest mutual fund company: Put your age in bonds. So if you&#39;re 30 years old, put 30% in bonds and 70% in stocks. Once you turn 60, put 60% in bonds and 40% in stocks.</p> <h2>3. Rebalance Yearly</h2> <p>Rebalancing means restoring your investment portfolio to its original asset allocation. For instance, if stocks have a good year, they&#39;ll increase in value and make up a larger percentage than your original allocation.</p> <p>To rebalance, simply sell the appropriate amount of your stocks and buy more bonds (or, to avoid capital gains tax on the sale, try this <a href="http://www.wisebread.com/one-simple-trick-to-get-the-best-tax-benefit-from-your-retirement-portfolio">contributions rebalancing trick</a>). By doing this, you&#39;re also following another investing idiom: buy low, and sell high.</p> <h2>4. Make Index Funds the Core (or All) of Your Portfolio</h2> <p>Here&#39;s what Warren Buffet, second richest man in America, has to say about the effectiveness of index funds for building wealth: &quot;Most investors, both institutional and individual, will find that the best way to own common stocks is through an index fund that charges minimal fees. Those following this path are sure to beat the net results (after fees and expenses) delivered by the great majority of investment professionals.&quot;</p> <h2>5. Keep Costs Down</h2> <p>When it comes to fund investing, your costs are the fund&#39;s expense ratio. According to a report from the Investment Company Institute, the average actively managed fund costs 0.92% a year. With index funds (see #4 above), however, you pay a lot less. The average index fund costs just 0.13% a year.</p> <p>Why does this matter?</p> <p>Suppose you invest $5,500 each year for the next 20 years. Also, let&#39;s assume that both the actively managed and index funds grow by 8% each year.</p> <p>If you chose the actively managed fund, at the end of the 20 years you&#39;d have just under $242,000 &mdash; a fair amount. But if you invested in the lower-cost index fund, you&#39;d have grown your wealth to the sum of over $267,000 &mdash; a difference of over $25,000.</p> <p>Could you use an extra $25,000?</p> <p>Following these investing fundamentals, and you&#39;ll be sure to gain the financial freedom you&#39;re seeking.</p> <p><em>Anything I&#39;ve missed? What additional fundamental investing rules do you follow?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/darren-wu">Darren Wu</a> of <a href="http://www.wisebread.com/5-investing-basics-that-can-make-you-rich">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/a-lot-of-people-dont-understand-what-an-investment-really-is-do-you">A Lot of People Don&#039;t Understand What an Investment Really Is. Do You?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-times-raiding-your-retirement-accounts-early-is-okay">4 Times Raiding Your Retirement Accounts Early Is Okay</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/you-may-be-putting-your-retirement-money-in-the-wrong-place">You May Be Putting Your Retirement Money in the Wrong Place</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-investing-lessons-you-must-teach-your-kids">10 Investing Lessons You Must Teach Your Kids</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-dumb-401k-mistakes-smart-people-make">5 Dumb 401(k) Mistakes Smart People Make</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment investing rules investment retirement saving saving Tue, 14 Jan 2014 10:36:16 +0000 Darren Wu 1111192 at http://www.wisebread.com Money Resolutions: 6 Ways to Take Control in 2013 http://www.wisebread.com/money-resolutions-6-ways-to-take-control-in-2013 <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/money-resolutions-6-ways-to-take-control-in-2013" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/8266321242_c8550950a4_z.jpg" alt="money" title="money" class="imagecache imagecache-250w" width="250" height="167" /></a> </div> </div> </div> <p>As the economy shows signs of life again and even the cynics concede that we might be on the road to a modest but sustained recovery, there&rsquo;s no better time to take a critical look at our savings strategies and investments. So with 2013 just around the corner, let&rsquo;s resolve look behind the curtain and start the New Year more motivated to save and more empowered by the knowledge of how we&rsquo;re doing financially. Here are six ways to take control of your cash in 2013. (See also: <a href="http://www.wisebread.com/25-small-new-year-s-resolutions-you-can-start-today">25 Small New Year's Resolutions You&nbsp;Can Start Today</a>)</p> <h2>1. Know Where Your Money Goes</h2> <p>Understanding where your money goes is the first step in taking control and taming unhealthy spending habits. Resolve to <a href="http://www.wisebread.com/the-i-knew-it-benefit-of-expense-tracking">track your spending</a> dollar by dollar for 30 days to discover the patterns that undermine saving success. You&rsquo;ll be surprised how little things add up to big bills when viewed monthly.</p> <h2>2. Choose a Savings Category</h2> <p>Sometimes it&rsquo;s easier to begin saving (or saving more aggressively) if we take it one category at a time. Start by reviewing parts of your budget like entertainment expenses, cell phone plans, or insurance coverage to see where there are opportunities to cut, consolidate, or get better rates. Review only one category every month and by the end of 12, those incremental changes will add up to significant savings.</p> <h2>3. Set Goals</h2> <p>We&rsquo;d all like to save more money, but without knowing what success looks like, it&rsquo;s hard to get motivated. Decide what your concrete goals are and how much you&rsquo;ll have to save monthly and yearly to reach them. Draw a line in the sand. Do you want to save $5,000 more a year starting in 2013? Supplement your 401(k) with a Roth IRA and contribute 3% of your earnings? Get specific, and don&rsquo;t be afraid to modify your plans as your goals change or earnings increase.</p> <h2>4. Simplify, Simplify, Simplify</h2> <p>Often, simplicity is the biggest financial gift we can give ourselves. Review how your assets are distributed. Do you have so many accounts that you can&rsquo;t effectively keep track of your assets and their performance? Do you have old 401(k) balances from previous employers that could be consolidated or rolled over to a qualifying IRA? Remember, sometimes less really is more.</p> <p>Simplify what you choose to invest in, too.</p> <ul> <li>Do you own intricate investment products that you don&rsquo;t understand?</li> <li>Invest in companies whose business models you can&rsquo;t comprehend?</li> </ul> <p>Complex accounting and complicated investments breed avoidance, and that puts you in a position of powerlessness. Resolve to take a critical look at where your money is parked and explore your options to consolidate, streamline, and simplify.</p> <h2>5. Don&rsquo;t Rely on a 401(k)</h2> <p>401(k) plans were never meant to be the sole savings vehicle for retirement. At best, a 401(k) is an important leg of a three-legged retirement stool that's also supported by Social Security and personal savings. Review and assess your retirement strategy with special focus on after-tax money and investments that won&rsquo;t be taxed upon withdrawal (assuming you meet the proper qualifying factors). As some economists are predicting inevitable tax increases across the board over the next several years, consider <a href="http://www.wisebread.com/7-surprising-facts-about-roth-iras">Roth IRAs</a> as a hedge against potentially higher tax burdens in retirement.</p> <h2>6. Watch Commissions and Expenses</h2> <p>Broker commissions and <a href="http://www.wisebread.com/boost-your-retirement-savings-avoid-401k-fees">management fees</a> are charges that often go unnoticed by new or novice investors. These fees can vary widely. Review your quarterly statements and pay special attention to the charges incurred in all your investments to better understand the value you&rsquo;re getting for your money.</p> <ul> <li>Does the performance of a particular fund warrant the charge?</li> <li>Would you be just as well-off in an index fund with a lower management fee?</li> </ul> <p>Though anytime is the right time to turn over a new financial leaf, the New Year plots it nicely on our calendars and in our psyches. Let 2013 be the year that you reject the idea that saving and managing your money has to be complicated, time-consuming, and painful. With a little planning and old-fashioned discipline, the end of 2013 can look even brighter than the end of 2012. Good luck.</p> <p><em>What are your financial goals for the new year? What resolutions have you made to take better control of your finances in 2013?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/kentin-waits">Kentin Waits</a> of <a href="http://www.wisebread.com/money-resolutions-6-ways-to-take-control-in-2013">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-4"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-save-26000-in-5-years-or-less">How to Save $26,000 in 5 Years or Less</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-ways-to-boost-your-odds-of-retiring-early">5 Ways to Boost Your Odds of Retiring Early</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-false-allure-of-compound-interest">The False Allure of Compound Interest</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/this-is-why-you-cant-postpone-planning-for-your-retirement-and-how-to-start">This Is Why You Can&#039;t Postpone Planning for Your Retirement (And How to Start)</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-tell-if-youre-on-track-for-retirement">How to Tell if You&#039;re on Track for Retirement</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Budgeting Investment Retirement financial management investing new year money resolutions retirement saving savings Wed, 26 Dec 2012 11:36:32 +0000 Kentin Waits 959824 at http://www.wisebread.com How to Save Without Goals http://www.wisebread.com/how-to-save-without-goals <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-save-without-goals" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/2457315858_32ffd98aec_z.jpg" alt="ship" title="ship" class="imagecache imagecache-250w" width="250" height="166" /></a> </div> </div> </div> <p>If you&rsquo;ve ever spoken to a financial planner or read a personal finance article, you&rsquo;ll know that it&rsquo;s critical to have goals. A person without goals &mdash; if you believe the experts &mdash; is like a rudderless boat, going nowhere in calm waters, tossed around in stormy weather, and sinking well before reaching shore. (See also: <a href="http://www.wisebread.com/setting-great-goals-and-achieving-them">Setting Great Goals...and Achieving Them</a>)</p> <p>But I believe you can save and invest without goals, successfully with these <a href="#basic_plan">basic</a> and <a href="#slightly-more-than-basic_plan">slightly-more-than-basic plans</a>.</p> <p>I could never articulate my life goals to a financial planner or advisor. My desire to have shelter, clothes, food, and money for incidental expenses along with time to pursue my interests seemed too simple to be classified as a worthy goal. My dream of becoming a <a href="http://www.wisebread.com/money-saving-book/about/">published author</a> seemed too ambitious and unlikely. A proper goal for a financial-planning discussion, I thought, would be to build a real estate empire or retire on a Caribbean island before I turned 30.</p> <p>How basic survival and high aspirations could combine to shape a financial plan was foreign to me. Really, though, I didn&rsquo;t grasp how spelling out my goals could yield a plan far superior to my longstanding one of saving, investing, and trying to live within my means.</p> <p>In the years following my early encounters with financial planners, I&rsquo;ve learned about life goals and financial plans:</p> <ul> <li>Lack of goals doesn&rsquo;t portend financial disaster (despite my inability to establish financial plan-worthy goals, I have a <a href="http://www.bankrate.com/brm/news/retirement/20071101_american_wealth_a1.asp">net worth well above the national average</a>).<br /> &nbsp;</li> <li>Goals aren&rsquo;t always reached in logical, sequential order.<br /> &nbsp;</li> <li>Priorities can shift dramatically from year to year, and opportunities can surface and appear erratically.<br /> &nbsp;</li> <li>Goals can influence better, but not perfect, decision making about personal finances.<br /> &nbsp;</li> <li>Great planning doesn&rsquo;t override the need for following good personal finance habits of saving, investing, minimizing or avoiding unnecessary debt, and living below one&rsquo;s means.</li> </ul> <p>So, if you haven&rsquo;t yet finalized your life&rsquo;s to-do list (or if you&rsquo;re not ready to share your dreams with a financial advisor), here are starter plans.</p> <p><a name="basic_plan">&nbsp;</a></p> <h2>Basic Plan</h2> <ul> <li>Open a savings account and put $25 in the account each month.<br /> &nbsp;</li> <li>Save money for your retirement: contribute to your company&rsquo;s 401(k) plan so that you can get matching funds (if available); open and fund a Roth IRA, up to the legal maximum each year.<br /> &nbsp;</li> <li>Get health insurance, either through your employer or purchased on your own, and buy <a href="http://www.wisebread.com/choosing-life-insurance-term-or-permanent">life insurance</a> if you have a family (or plan to have a family).<br /> &nbsp;</li> <li>Pay off debt. Start with credit card debt and then pay off car loans, student loans, and mortgages.&nbsp;<br /> &nbsp;</li> <li>Buy some stocks or bonds with any extra money you might have.</li> </ul> <p><a name="slightly-more-than-basic_plan">&nbsp;</a></p> <h2>Slightly-More-Than-Basic Plan</h2> <h3>Savings Accounts</h3> <ul> <li>Open a savings account and set up direct deposits of $25 each month. If you can&rsquo;t afford $25, then start with $10; if you can afford more, go to $50 or $100.<br /> &nbsp;</li> <li>Save for non-monthly expenses. Start putting funds aside for these bills, which will probably include car insurance, life insurance, and vacations. You&rsquo;ll need $100-300 per month or possibly more.<br /> &nbsp;</li> <li>Save for major purchases, such as <a href="http://www.wisebread.com/the-joy-of-buying-a-new-car-9-car-buying-tips">a new (or used) car</a> or <a href="http://www.wisebread.com/what-it-really-costs-to-own-a-home">home improvement project</a>. Set aside a few hundred dollars each month.<br /> &nbsp;</li> <li>Build an <a href="http://www.wisebread.com/figuring-the-size-of-your-emergency-fund">emergency savings fund</a> of at least $1,000 up to $5,000 or more to an amount that equals monthly expenses multiplied by six months.&nbsp;&nbsp;</li> </ul> <h3>Retirement Accounts</h3> <ul> <li>Open and fund a <a href="http://www.wisebread.com/3-6-months-of-living-expenses-0">Roth IRA</a>, up to the legal maximum each year. Set up an account with an online discount brokerage firm such as TD Ameritrade or E*Trade.<br /> &nbsp;</li> <li>Make contributions to your 401(k), if your company offers one. Scrutinizing investment options and administrative costs is useful, but optional for this slightly-more-than-basic plan. Contribute the maximum amount or whatever will reap the full company match.<br /> &nbsp;</li> <li>Open and fund a traditional IRA, up to the legal maximum each year.</li> </ul> <h3>Insurance</h3> <ul> <li>If you&rsquo;re just getting started, don&rsquo;t spend all your money on personal insurance but cover the basics.<br /> &nbsp;</li> <li>Get health insurance so that an accident or sudden illness won&rsquo;t incur huge bills that may take years to pay. Buy coverage through your employer or consider a <a href="http://www.wisebread.com/why-i-heart-my-high-deductible-health-insurance-plan">high-deductible plan</a> that keeps monthly expenses low. But pay attention to the <a href="http://www.wisebread.com/health-insurance-two-other-numbers-to-look-at">policy limit</a> to make sure you are really protected from a crisis.<br /> &nbsp;</li> <li>Buy some <a href="http://www.wisebread.com/how-and-why-to-buy-life-insurance">life insurance</a> worth 5-10 times your annual income, if you have family members who depend on your income.</li> </ul> <h3>Debt</h3> <ul> <li>Tackle credit card debt first, as this type of debt usually carries the highest interest rate. Even if you have a great rate now, teaser rates expire and often skyrocket to really high rates (20-29%) later. You&rsquo;ll also want to keep a low balance or even a zero balance so that you can possibly use your card for unexpected expenses.&nbsp;<br /> &nbsp;</li> <li>Make payments on car loans and student loans on time but don&rsquo;t feel pressured to pay them off early, especially if you have a low interest rate.<br /> &nbsp;</li> <li>Get settled personally and professionally before buying a house and taking on a mortgage. Don&rsquo;t rush to pay off this loan either, though paying a bit extra on the principal can <a href="http://www.wisebread.com/diy-mortgage-acceleration">speed up the payoff.</a><br /> &nbsp;</li> <li>Realize that what matters most about debt is not how quickly you pay off loans but whether debt temporarily sustains an <a href="http://www.wisebread.com/have-style-not-a-lifestyle">unaffordable lifestyle</a>.</li> </ul> <h3>More</h3> <p>If you've got extra money to save and invest,</p> <ul> <li>Buy some bonds or <a href="http://www.wisebread.com/treasury-bills-for-ordinary-folks">Treasury bills</a><br /> &nbsp;</li> <li>Invest in <a href="http://www.wisebread.com/down-to-earth-financial-advice-from-a-mountain-climbing-adviser">index funds</a> or <a href="http://www.wisebread.com/15-investing-tips-from-a-1-wall-street-stock-picker">individual stocks</a><br /> &nbsp;</li> <li>Open a <a href="http://www.wisebread.com/slow-drip-into-investing">DRIP account</a> with your favorite company<br /> &nbsp;</li> <li>Buy <a href="http://www.wisebread.com/so-you-want-to-be-a-landlord-part-i">rental property</a><br /> &nbsp;</li> <li>Save for your children&rsquo;s college education by opening and funding an <a href="http://www.wisebread.com/529-plans-for-college-expenses-what-s-cool-and-what-s-quirky">Education IRA or 529 savings plan</a>.<br /> &nbsp;</li> <li>Give money to charity<br /> &nbsp;</li> <li>Learn about tax laws and <a href="http://www.wisebread.com/certainties-death-taxes-and-change">changes in tax laws</a>, which will impact this year&rsquo;s cash flow as well as future income.</li> </ul> <p>This pseudo plan is a placeholder, which can be modified to your particular needs&hellip;until you have defined your goals and can see how life goals should mesh with financial plans.</p> <p>To learn about ways that goals can influence financial planning, see these articles:</p> <ul> <li><a href="http://www.wisebread.com/goal-setting-getting-out-of-debt-once-and-for-all">Goal Setting, Getting Out of Debt Once and For All </a></li> <li><a href="http://www.wisebread.com/9-signs-you-need-to-fire-your-financial-planner">9 Signs You Need to Fire Your Financial Planner</a> (Nora says that a planner should always ask about goals before creating a plan or recommending products)</li> <li><a href="http://www.wisebread.com/the-false-goal-of-maximizing-investment-returns">The False Goal of Maximizing Investment Returns</a></li> <li><a href="http://www.wisebread.com/when-not-to-put-money-in-your-401-k">When Not to Put Money in Your 401(k)</a></li> <li><a href="http://www.bankrate.com/finance/financial-literacy/use-investments-to-reach-your-goals-1.aspx">Use Investments to Reach your Goals</a> (I&nbsp;particularly liked the recommendation to &quot;explore even those desires you wouldn't normally consider discussing with a financial planner.&quot;</li> </ul> <p><em>Have you succeeded or floundered with or without a plan?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/julie-rains">Julie Rains</a> of <a href="http://www.wisebread.com/how-to-save-without-goals">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-5"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/21-things-that-young-adults-absolutely-need-to-know-about-money">21 Things That Young Adults Absolutely Need to Know About Money</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-things-people-who-are-good-with-money-never-say">5 Things People Who Are Good With Money Never Say</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/73-easy-ways-to-save-money-today">73 Easy Ways to Save Money Today</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/9-signs-you-need-to-fire-your-financial-planner">9 Signs You Need to Fire Your Financial Planner</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/15-personal-finance-rules-you-should-be-breaking">15 Personal Finance Rules You Should Be Breaking</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance financial planning retirement saving saving savings accounts Mon, 29 Mar 2010 14:00:03 +0000 Julie Rains 6033 at http://www.wisebread.com