retirement savings http://www.wisebread.com/taxonomy/term/8983/all en-US It's Never Too Late to Fix These 5 Money Mistakes From Your Past http://www.wisebread.com/its-never-too-late-to-fix-these-5-money-mistakes-from-your-past <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/its-never-too-late-to-fix-these-5-money-mistakes-from-your-past" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-637362030.jpg" alt="Fixing money mistakes from his past" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Making mistakes is part of life, and this is particularly true when it comes to finance. Since money is such a taboo topic in our culture, we often have to learn good money behavior through trial and error.</p> <p>The problem is that our culture also considers errors as something to regret, rather than opportunities to learn. This can land us in a shame-filled cycle of inaction.</p> <p>Forgiving yourself for financial mistakes is not the same as condoning or ignoring them. It's simply giving yourself the opportunity to move on from the past. Stop beating yourself up over these common youthful money mistakes and take action to fix them instead.</p> <h2>1. Taking on too much student debt</h2> <p>Taking out a student loan has become the default method for the majority of college students to pay for their education. According to a 2016 Market Watch report, &quot;about <a href="http://www.marketwatch.com/story/americas-growing-student-loan-debt-crisis-2016-01-15" target="_blank">40 million Americans</a> hold student loans and about 70 percent of bachelor's degree recipients graduate with debt.&quot;</p> <p>With the near ubiquity of student loans, however, comes the problem of students taking on more debt than they need or can comfortably pay off once they graduate. Student loans can feel like an easy way to pay for more school than you can afford, or even a way to fund things you don't <em>really </em>need, like your own apartment or spring break vacations.</p> <p>This can be exacerbated by the fact that college students and their parents don't always completely understand the differences between types of student loans, which can leave them all the more susceptible to overwhelming debt.</p> <h3>How to fix it</h3> <p>If you are kicking yourself for running up a student loan tab that you can't afford, start your journey to self-forgiveness by investigating your repayment options. The first step is to call your lender and explain the situation. If you have federal student loans, you may be eligible for a <a href="http://www.wisebread.com/which-student-loan-repayment-plan-saves-you-the-most?ref=internal" target="_blank">modification of your repayment plan</a> based on your income. Even if you have private loans, talking with your lender can let you know what <a href="http://www.wisebread.com/3-things-you-must-know-about-repaying-your-private-student-loans?ref=internal" target="_blank">options are available</a> that will give you more breathing room.</p> <p>Once you have made whatever changes you can to your repayment plan, then take the time to write down everything you got for the money you borrowed. For instance, in addition to your education, you might list the friends and connections you made at college, the experiences you had, the insights you gained about yourself and your area of study, and the way the loans allowed you to focus on college instead of tuition.</p> <p>This exercise will give you a chance to feel gratitude for the loans. You are now the beneficiary of your younger self's choices &mdash; both the good and the bad. Recognizing all of the benefits you got from your student loans will help you move from being angry at yourself, to looking at your current loan payments as a gift to your younger self.</p> <h2>2. Not budgeting or building an emergency fund</h2> <p>I don't know a single person who did not immediately begin spending money hand over fist after landing their first well-paid job. That means anything from immediately purchasing an expensive car to relying on restaurants for meals rather than cooking. Even people who carefully budget their money when working for low salaries have a tendency to start making it rain as soon as their paychecks get bigger.</p> <p>This can cause problems in two ways. Sometimes, the good salary doesn't last forever because of a layoff or other change in your financial circumstances. And sometimes, you keep making good money, but your lifestyle continues to inflate &mdash; which means you can never seem to get ahead.</p> <p>In either case, the lack of a budget and an <a href="http://www.wisebread.com/a-step-by-step-guide-to-creating-your-emergency-fund?ref=internal" target="_blank">emergency fund</a> means that a financial blow can turn into a crisis, leaving you cursing yourself for every unnecessary purchase you made when the money was good.</p> <h3>How to fix it</h3> <p>Budgeting may be the last thing on your mind when the lack of money hits the fan, but <a href="http://www.wisebread.com/build-your-first-budget-in-5-easy-steps?ref=internal" target="_blank">creating a budget</a> is exactly what you need to do in an emergency. Don't waste your time beating yourself up for the spending choices you made before the financial crisis &mdash; just sit down with your bank statements, credit card accounts, and bills, and figure out your income and outflow. Learning to budget in the middle of a crisis might be painful, but it will ultimately help you feel in control of your money.</p> <p>Once you have a budget system in place, it's time to start looking back on your spending habits. What did you buy that you now regret? Why do you regret it? Do you feel regret now only because an emergency came up and you didn't have the funds, or do you actually feel the purchase itself added nothing to your life? If you truly regret the purchase, why did you make it?</p> <p>It can hurt to ask yourself these questions, which is why it is important to regard your past purchases with curiosity and compassion, rather than guilt or anger at yourself. But once you have answered these questions, you will have a better understanding of why you made those unnecessary purchases &mdash; which will help you avoid the same spending traps in the future. Understanding the reasons behind your bad money habits can help you develop financial mindfulness to make better choices going forward.</p> <h2>3. Not saving for retirement</h2> <p>Most people don't think to start <a href="http://www.wisebread.com/10-signs-you-arent-saving-enough-for-retirement?ref=internal" target="_blank">putting money aside for retirement</a> when they are young. In your 20s and 30s, not only does retirement seem too far away to worry about, but you've got plenty of competing needs that seem more important.</p> <p>Of course, if you read <em>any </em>advice on retirement, it's clear that saving as much money as you can when you are young is the best route to a secure retirement. Unfortunately, this advice can feel like it's meant to shame anyone who didn't start funding their 401(k) on the day they started their first job. That's not helpful to late funders.</p> <h3>How to fix it</h3> <p>When it comes to retirement, we should all save early and save often. Unfortunately, financial advice tends to beat the &quot;save early&quot; drum so much that it's easy to believe that there is such a thing as &quot;too old to start saving for retirement.&quot; But as long as you are bringing in an income, you can save for your retirement. Write down your future goals and your vision of retirement, so you can get excited about saving. Then you can let go of the anger at your younger self, and start putting money in your retirement accounts today, tomorrow, and beyond. (See also: <a href="http://www.wisebread.com/7-retirement-planning-steps-late-starters-must-make?ref=seealso" target="_blank">7 Retirement Planning Steps Late Starters Must Make</a>)</p> <h2>4. Racking up credit card debt</h2> <p>I got my first credit card in college. Though I tried to pay off the bill every month, it got away from me pretty quickly. Sometime in my senior year of college, when I realized that there was no way I could pay off my bill, I made the decision to just let the debt rack up, since I'd have a good-paying job after graduation and could take care of it then.</p> <p>Of course, after I graduated, I was unable to find a job for about three months, and the first job I did land was working retail for $8.25 an hour. My credit card debt crept up even more.</p> <p>My youthful problems with credit card debt are incredibly common. When you get your first sweet taste of credit, it's pretty hard to stop using the plastic even when your budget can't handle your charges. The fact that you're not required to pay off the cringe-inducing full amount allows you to assume the problem will take care of itself, as I did.</p> <p>Then, one day, you realize that you are in debt up to your eyeballs with nothing to show for it, and you are kicking yourself for your youthful credit card spending.</p> <h3>How to fix it</h3> <p>Start by recognizing the fact that humans are not wired to be able to handle the combination of instant gratification plus delayed payment. Young adults are particularly susceptible to this, which is the very reason why credit card companies have been banned from college campuses.</p> <p>Once you recognize this, it becomes much easier to start digging yourself out of the hole. You can much more easily leave your credit cards at home and remove them from your favorite e-tailer sites when you realize the cost of their convenience. Sending extra money to your credit card each month also starts feeling like steps toward freedom. (See also: <a href="http://www.wisebread.com/5-ways-to-pay-off-high-interest-credit-card-debt?ref=seealso" target="_blank">5 Ways to Pay Off High Interest Credit Card Debt</a>)</p> <h2>5. Buying too much car</h2> <p>Buying a new car for yourself can be one of the most satisfying moments in young adulthood. You can finally choose the car <em>you</em> want to drive, rather than making do with a beater or your parents' minivan. So it's very easy to go hog-wild when you're in a position to buy a new car. You can get the horsepower, or the luxury, or the bells-and-whistles you've always dreamed of having.</p> <p>But the monthly payments end up being a bigger deal than they seemed when you were in the showroom, and your high-end car keeps needing expensive maintenance and insurance. When you realize how much you could have saved if you opted for that reliable low-key sedan instead, you want to kick your younger, flashy self.</p> <h3>How to fix it</h3> <p>Once you have forgiven yourself for putting too much emphasis (and money) on your car, you can start thinking more rationally about your transportation needs. If your vehicle is just a means to get from point A to point B, then what do you really need from it? What's the minimum that would be acceptable for your transportation?</p> <p>Going through this thought exercise allows you to think about what you really need, and will help you do the research necessary to find the right car for your life. Then you can trade in your too-much car for something more appropriate, or drive something that meets your barest of needs until you have paid off the mistake of buying too much car.</p> <p>And don't forget &mdash; you can always put some racing stripes on &ldquo;Old Reliable&rdquo; if you want it to represent you. Loving your car doesn't have to be expensive.</p> <h2>Let it go</h2> <p>Feeling shame over things you did in the past is a way of letting your mistakes continue to hurt you. Yes, you may have screwed up when you were younger and it might be hurting your bottom line right now. But you give that old mistake far more power over your future if you continue to beat yourself up for it instead of simply accepting it and doing what you can to bounce back from it. Step out of regret and into action today.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/emily-guy-birken">Emily Guy Birken</a> of <a href="http://www.wisebread.com/its-never-too-late-to-fix-these-5-money-mistakes-from-your-past">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/5-money-moves-to-make-before-moving-out-on-your-own">5 Money Moves to Make Before Moving Out on Your Own</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/8-personal-finance-resolutions-anyone-can-master">8 Personal Finance Resolutions Anyone Can Master</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/4-new-year-budget-resolutions-you-should-make-now">4 New Year Budget Resolutions You Should Make Now</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/7-critical-money-mistakes-people-make-in-their-40s">7 Critical Money Mistakes People Make in Their 40s</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/8-valuable-rights-you-might-lose-when-you-refinance-student-loans">8 Valuable Rights You Might Lose When You Refinance Student Loans</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance budgeting debt emergency funds forgiveness missteps money mistakes retirement savings student loans young youth Fri, 31 Mar 2017 09:00:15 +0000 Emily Guy Birken 1918286 at http://www.wisebread.com 8 Money Moves to Make Before You Start Investing http://www.wisebread.com/8-money-moves-to-make-before-you-start-investing <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/8-money-moves-to-make-before-you-start-investing" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/coins_growing_plants_67145371.jpg" alt="Finding money moves to make before you start investing" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>I'm a staunch advocate for investing &mdash; especially if the alternative is piling up money in a savings account just to have &quot;savings.&quot; Savings are great, but you only need so much in that offensively low-interest account. Put the excess to work, hopefully making even more money out of your investment. Before you take that plunge, however, there are a few financial matters you need to mind.</p> <h2>1. Organize Your Budget and Expenses</h2> <p>If you're considering making an investment &mdash; whatever it may be &mdash; you should have a solid handle on how much money is coming in and going out on a monthly basis. You want to make sure you can afford the investment without teetering on the edge of debt, but this also is a good time to find any weak spots in your budget so you can address them accordingly. Online money-tracking services like Mint.com can make this task much easier on you, and help you stay on track over the long term.</p> <p>&quot;When you know where your money goes, you are in control and can be thoughtful about aligning spending with priorities,&quot; says Carla Dearing CEO of SUM180, an online financial planning service. &quot;Mint, for example, gives you complete access to your data through the website and your mobile device, whether you use iOS or Android. Better yet, Mint keeps an eye on your money for you. It even sends alerts to remind you to pay your bills or when you go over budget.&quot;</p> <h2>2. Get That Emergency Fund in Order &mdash; Stat!</h2> <p>In almost every &quot;money moves&quot; article I write, the &quot;emergency fund&quot; usually pops up somewhere. That's because it's a critical and indispensable part of your overall financial picture. You should have a sizable cushion in the bank to cover life's little mishaps, and that &quot;should&quot; becomes a &quot;must&quot; when you add investing to the equation. If you don't have an emergency fund, you have no business investing &mdash; bottom line.</p> <p>Just how much dough are we talking for an emergency fund to be considered satisfactory? Six times your monthly expenses, according to Dearing.</p> <p><strong>&quot;</strong>Be disciplined about saving a little every month until your emergency fund is where it needs to be, even if it means sacrificing little luxuries once in a while,&quot; she says. &quot;Remember to replenish the account every time you use it. Having your cushion ready whenever you need it will give you a great sense of security and freedom. It will also free you up to work on other savings goals without getting derailed by unexpected expenses.&quot;</p> <h2>3. Pay Off Your High-Interest Debts</h2> <p>You don't need to be completely out of debt before you start investing. Many financial advisers argue that you should be debt free before you start investing, but that's just not true. Most people don't pay off their homes for up to 30 years, and you wouldn't want to wait that long before you start a retirement fund.</p> <p>You should, however, pay off your high-interest debts. They'll drag you down faster than the Titanic.</p> <p>&quot;Whether it's a credit card or student loan, it doesn't make any sense to invest and make a market average return of 7% annually while you're paying 20% on credit debt,&quot; says Nick Braun, founder of a pet insurance company. &quot;Pay off your high-interest debts first, then start using excess income to save for the future.&quot;</p> <p>See also: <a href="http://www.wisebread.com/fastest-way-to-pay-off-10000-in-credit-card-debt?utm_source=wisebread&amp;utm_medium=seealso2&amp;utm_campaign=article">Fastest Way to Pay Off Your Credit Card Debt</a></p> <h2>4. Contribute to Your Retirement Savings</h2> <p>Retirement savings <em>is</em> an investment. It may not seem like it now, because what you're funding seems so far away &mdash; but you'll see it as such when you reach retirement age. Which is why, before you start throwing money at other investment opportunities, you need to invest in yourself. If you don't have a retirement account set up yet, make that a priority. If you have one currently, like a 401K, for instance, take advantage of free, pretax contribution opportunities where available, like matching funds from your employer. Then max those contributions out so you don't miss a single cent.</p> <h2>5. Contribute to an HSA</h2> <p>If you have a health insurance policy that comes with a qualifying Health Savings Account, take full advantage of it and fully fund it.</p> <p>&quot;Most contributions are tax-deductible, and withdrawals to pay qualifying medical expenses &mdash; at any time in life &mdash; are tax-free,&quot; explains Kevin Gallegos, vice president of Freedom Financial Network in Phoenix. &quot;These accounts are essentially emergency funds devoted to health care costs, and so savings have a double benefit of tax relief and savings.&quot;</p> <h2>6. Refinance Your Student Loans</h2> <p>Are student loans holding you back from building your savings or investment accounts or from making other types of investments? Free up some of your budget by <a href="http://www.wisebread.com/should-you-refinance-your-student-loan?ref=internal">refinancing your loans</a> for a lower monthly payment.</p> <p>&quot;The average Class of 2016 graduate owes more than $37,000 in student loan debt,&quot; says financial expert Michael Blattman, professor at University of Maryland. &quot;With 43 million borrowers nationwide, Americans owe nearly $1.3 trillion in student loan debt. Individually, this crushing debt delays borrowers' life decisions, such as getting married, investing in the stock market, buying a house, or having children. Collectively, it's hampering the U.S. economy.&quot;</p> <p>You don't, however, have to be part of these statistics. Take back some of your financial freedom by making a call to your loan provider(s) to discuss refinance options that are right for you.</p> <h2>7. Get Started on a Taxable Investment Portfolio</h2> <p>After you've maxed out your retirement accounts, Dearing suggests starting a taxable investment portfolio. You can get started investing with just a few simple steps.</p> <p>To get set up, call one of the high-quality, low-fee money management companies, like Vanguard, Fidelity, or T. Rowe Price, tell them about yourself, and ask them to tell you what type of account or fund you need, and what minimum investment requirements apply. These companies, which are the gold standard in the financial services industry, are extremely knowledgeable and committed to serving their clients (who, in the case of Vanguard, are also their shareholders).</p> <p>&quot;Companies like this get you started with a comprehensive, diversified, low-cost fund that will serve you well as a beginning investor,&quot; says Dearing. &quot;Follow their recommendations and you won't go wrong.&quot;</p> <h2>8. Set Savings Goals for Your Taxable Investment Portfolio</h2> <p>Once you have your taxable investment portfolio established, set goals &mdash; $10,000, then $25,000 and, eventually, $100,000.</p> <p>&quot;When you are just starting out, choose one or two tax-advantaged funds, like the Vanguard Total Stock Market ETF or the Vanguard Small Cap Index ETF, or similar index funds,&quot; Dearing suggests. &quot;These passively managed funds do a minimum amount of buying and selling &mdash; what the industry calls 'churning' &mdash; which translates into significantly less taxable investment income for you to deal with each year. They also tend to outperform most actively managed mutual funds over time.&quot;</p> <p>Revisiting the goal aspect of this equation, it helps to have a contribution target in place so you have a solid idea of what you're trying to achieve. Likewise, make sure that it's a goal that you <em>can</em> achieve. $10,000 may take a while to reach, but you can do it. If that goal is too steep for you right now, start smaller. There's no harm in that. The most important part of this is that you set the bar just high enough to accomplish it and be motivated by your success to continuing striving further.</p> <p><em>Do you have additional suggestions on money moves to make before investing? I'd love to hear your thoughts in the comments below.</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/mikey-rox">Mikey Rox</a> of <a href="http://www.wisebread.com/8-money-moves-to-make-before-you-start-investing">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/7-money-moves-to-make-as-soon-as-you-conquer-debt">7 Money Moves to Make as Soon as You Conquer Debt</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/the-3-rules-every-mediocre-investor-must-know">The 3 Rules Every Mediocre Investor Must Know</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-essentials-for-building-a-profitable-portfolio">5 Essentials for Building a Profitable Portfolio</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/your-loss-aversion-is-costing-you-more-than-your-fomo">Your Loss Aversion Is Costing You More Than Your FOMO</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/with-micro-investing-your-smartphone-pays-you">With Micro-Investing, Your Smartphone Pays YOU</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment advice emergency funds health savings account money moves Paying Off Debt portfolio retirement savings stock market student loans Wed, 17 Aug 2016 09:00:08 +0000 Mikey Rox 1771628 at http://www.wisebread.com With Micro-Investing, Your Smartphone Pays YOU http://www.wisebread.com/with-micro-investing-your-smartphone-pays-you <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/with-micro-investing-your-smartphone-pays-you" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_happy_phone_93826397.jpg" alt="Woman using micro-investing and getting her phone to pay her" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Approximately two-thirds of Millennials do not have any money invested in the stock market due to concerns about risk, putting them at a distinct disadvantage when it comes to retirement. Without regular returns and compound interest, young professionals will need to sock away a much larger amount of <a href="http://www.wisebread.com/are-you-making-the-biggest-investment-risk-of-all">money to retire</a>.</p> <p>But new, micro-investing apps can help Millennials dip their toes into the stock market. Because the invested amounts are small, and the apps make investing accessible, young adults are more likely to start contributing money and earning returns.</p> <h2>What Is Micro-Investing?</h2> <p>Micro-investing, where users invest tiny amounts of money on a regular basis, allows people to start investing with relatively small sums. Some brokerages have investment minimums as high as $1,000; for those just starting out or battling debt, coming up with that first $1,000 can be overwhelming.</p> <p>With micro-investing, your account is linked to your debit card or bank account. Every time you make a purchase, such as your morning coffee, the apps round up the purchase and the difference is invested in stocks. While the amounts are negligible and you are likely not even going to notice the withdrawals from your account, small investments build over time and help you develop the habit of saving and investing.</p> <p>These innovative apps and platforms make investing simple and easy to do, even if you are new to financial management.</p> <h2>Acorns</h2> <p><a href="https://www.acorns.com/">Acorns</a>' name is derived from the saying &quot;From little acorns mighty oaks grow.&quot; Its goal is to empower people to build a large nest egg from small, regular investments. The app links to any credit card or debit card. When you make a purchase, the app rounds up and deposits your change into a portfolio of exchange-traded funds (ETFs). There are different portfolios available depending on your risk tolerance, from conservative to aggressive. If you do not know where to begin, Acorns also provides recommendations based on your age and target retirement date. There are no minimum account balances or commission fees, but there is a monthly cost of $1 and a management fee of 0.5%.</p> <h2>Robin Hood</h2> <p><a href="https://www.robinhood.com/">Robin Hood</a> is one of the few apps that offers zero-commission stock trading. It features a simple and intuitive design and allows you to connect to your bank account and make recurring deposits. You can shop for specific stocks or sell shares directly from your phone. Each day, the menu will show you how much you have earned on the market. Once you are ready to withdrawal money, the funds are easily transferred to your bank with the touch of a button.</p> <h2>Stash</h2> <p><a href="https://www.stashinvest.com/start-investing/wisebread">Stash</a> is one of the newest apps on the market. Their motto is if you have $5, two minutes, and a phone, you can be an investor. It is a tool that allows you to buy fractional shares, rather than having to pay the entire amount for a single share yourself. You can pick investments based on what is <a href="http://www.wisebread.com/a-simple-guide-to-socially-responsible-investing">important to you</a>, such as clean energy or fair trade. Stash charges $1 a month with no commissions. <strong>Special offer: <a href="https://www.stashinvest.com/start-investing/wisebread">Wise Bread users can get $5 to get started with Stash</a>!</strong></p> <p>For Millennials spooked by the stock market and traditional stock market investments, micro-investing apps can be a useful tool to help them test the waters and get used to regular investing. These apps enable users to start investing with just small amounts, eliminating one of the main barriers to entering the stock market. With regular contributions and patience, over time, these small amounts can grow to substantial amounts of money.</p> <p><em>Are you a micro or macro investor?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/kat-tretina">Kat Tretina</a> of <a href="http://www.wisebread.com/with-micro-investing-your-smartphone-pays-you">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/3-ways-technology-makes-personal-finances-easier">3 Ways Technology Makes Personal Finances Easier</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/8-money-moves-to-make-before-you-start-investing">8 Money Moves to Make Before You Start Investing</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-reasons-millennials-should-stop-being-afraid-of-the-stock-market">7 Reasons Millennials Should Stop Being Afraid of the Stock Market</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/are-you-making-the-biggest-investment-risk-of-all">Are You Making the Biggest Investment Risk of All?</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/is-it-finally-time-to-invest-in-marijuana-stocks">Is It Finally Time to Invest in Marijuana Stocks?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment Technology fractional shares micro-investing millennials retirement savings rounding up spare change stock market Mon, 15 Aug 2016 10:00:07 +0000 Kat Tretina 1771547 at http://www.wisebread.com 13 Money Goals You Can Still Reach by 2017 http://www.wisebread.com/13-money-goals-you-can-still-reach-by-2017 <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/13-money-goals-you-can-still-reach-by-2017" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/money_2016_78370695.jpg" alt="Finding money goals you can still reach by 2017" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>We've passed the halfway point of 2016, and maybe you're down on yourself because you haven't achieved some of your annual financial goals. Life can sometimes derail our money-saving plans &mdash; and that can make you feel like a failure. But the year isn't over yet. So chin up, buttercup! It's never too late to give your money a makeover, like with these 13 money goals that are still attainable by 2017.</p> <h2>1. Increase Your Emergency Fund</h2> <p>Whether you want to increase your fund by $500 or $1,000, there's still time to build your bank account.</p> <p>Ideally, you should have about three to six months' of income in reserves. If you're not in a position to save this much, aim for an emergency fund sufficient to help you get through most unexpected expenses, like a home or car repair. You'll have to make a few sacrifices, such as spending less on entertainment or shopping less, but with five months left in the year, you can hit this goal by saving $100 to $200 a month.</p> <h2>2. Start Planning for Retirement</h2> <p>Your retirement account isn't going to grow itself. The older we get, the more important it is to plan for the future. If you haven't started saving for retirement yet, now's the time to get serious. Talk to your employer about enrolling in the company's 401K plan. If this isn't an option, open an Individual Retirement Account (IRA) through your bank or with the help of a financial adviser.</p> <h2>3. Increase Retirement Contributions</h2> <p>Then again, maybe you're already saving for retirement, but feel now's the time to increase your contribution. Whether you're currently contributing 2% or 5% of your income to a retirement account, set a goal of increasing your contribution by at least 1% before the end of the year.</p> <h2>4. Reduce Expenses</h2> <p>It's easier to attain money goals when you reduce expenses and free up cash. For the next four to five months, eliminate or reduce at least one expense a month. This can include downgrading your cable package or getting rid of cable altogether (it's a common trend these days), using coupons to lower your grocery bill, or riding your bike or carpooling to work a few days a week to save on transportation costs. The savings add up quickly, and before you know it you'll have a bigger bank account.</p> <h2>5. Create a Second Income Stream</h2> <p>Our income isn't always enough to meet our money goals. Rather than complain about your situation, think creatively about ways to increase your income. Working a side hustle a few days a week can generate money to build your savings account, pay off debt, or start saving for retirement.</p> <p>If you're an expert in your field, offer consulting on the side. Or if you have excellent writing skills, look into <a href="http://www.wisebread.com/22-websites-that-will-pay-you-to-write-for-them?ref=internal">freelance writing opportunities</a> and share your knowledge. Don't think your second income stream has to be glamorous, either. If you don't mind odd jobs or getting your hands dirty, you can make extra money around the neighborhood cleaning houses, doing handyman work, or cutting grass.</p> <h2>6. Give Up a Costly Habit</h2> <p>Bad habits are expensive.</p> <p>Before the end of the year, make a concerted effort to eliminate at least one bad habit. This includes things like drinking too much alcohol and smoking, as well as habits that aren't as dangerous to your health but detrimental to your finances. Do you have a routine of stopping for coffee and breakfast every morning on the way to work? If you can eliminate this $5 daily purchase from your budget, you'll save about $25 a week, or $100 a month.</p> <h2>7. Simplify Your Life</h2> <p>Less can be more. If you're tired of clutter or feel the stuff you own takes too much of your time and energy, set a goal to simplify and unload a few possessions. Selling off items can put extra cash in your pocket, plus you can save money on storage fees and free up space in your house, garage, attic, or basement.</p> <h2>8. Give to Charity</h2> <p>It's not too late to make a charitable donation and give back. While you're simplifying and decluttering your life, consider donating a few items to your favorite organization. You'll not only help someone in need, you can write off charitable donations on your tax return and lower your tax bill.</p> <h2>9. Purchase Life Insurance</h2> <p>Life insurance is necessary for everyone, but especially for people with children and other dependents who rely on their income. A policy can cover the cost of a funeral and burial, plus pay off any expenses you leave behind, such as a mortgage and credit cards.</p> <p>There are no hard-and-fast rules regarding the amount of coverage to purchase, but some money experts recommend a policy that's eight to 10 times your income. If you already have a policy, review your coverage to make sure it's adequate for your needs. If you don't have a policy, it's time to get one.</p> <h2>10. Budget Your Money</h2> <p>If you overspend every month and can't get ahead, the problem could be poor budgeting. The truth is, attaining many of your money goals by 2017 will require an airtight budget. You have to know what's coming in and what's going out before you can come up with a plan for your personal finances. Now's the time to put pen to paper and review your income and expenses to determine a reasonable amount to spend in various spending categories, such as food, transportation, entertainment, shopping, etc.</p> <h2>11. Say No to Credit Card Debt</h2> <p>Credit cards are simple and convenient, but they're also a source of pain and suffering if you let balances grow out of control. Before the end of the year, come up with a plan to pay off or pay down at least one credit card. Don't stop until you're debt free. (See also: <a href="http://www.wisebread.com/when-to-do-a-balance-transfer-to-pay-off-credit-card-debt?utm_source=wisebread&amp;utm_medium=seealso&amp;utm_campaign=seealso">How to Get Rid of Interest on Your Credit Card Debt</a>)</p> <p>You can achieve this goal by paying more than your minimums every month. Or negotiate a <a href="http://www.wisebread.com/the-best-low-interest-rate-credit-cards?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=article">lower interest rate</a> with your creditors so that more of monthly payments go toward reducing the principal. Since the amounts we owe make up 30% of our credit scores, paying off credit cards also <a href="http://www.wisebread.com/how-to-use-credit-cards-to-improve-your-credit-score?utm_source=wisebread&amp;utm_medium=internal&amp;utm_campaign=article">increases your credit score</a>.</p> <h2>12. Automate Your Finances</h2> <p>Paying bills on time also contributes to a higher credit score. Forgetting a due date and paying late can result in late fees, and when bills arrive 30 or more days past due, your credit score suffers. To avoid these situations, automate your finances. Set up automatic bill payments between your bank and creditors and you'll never miss another due date.</p> <h2>13. Check Your Credit Report</h2> <p>Everyone should check their credit reports at least once a year and dispute erroneous information. If it's been more than 12 months since you last reviewed your reports, visit&nbsp;<a href="http://annualcreditreport.com">AnnualCreditReport.com</a> today and get a free copy of your reports from each of the three bureaus. Credit report mistakes and fraudulent activity can drive down your FICO score and trigger credit rejections and higher interest rates on loans and credit cards &mdash; and when you're charged higher interest rates, you pay more for credit.</p> <p><em>What are some of your money goals that you'd like to reach by the end of the year? How do you plan to meet those goals? Let's discuss in the comments below.</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/mikey-rox">Mikey Rox</a> of <a href="http://www.wisebread.com/13-money-goals-you-can-still-reach-by-2017">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/8-money-moments-that-should-be-on-everyones-bucket-list">8 Money Moments That Should Be On Everyone&#039;s Bucket List</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/its-never-too-late-to-fix-these-5-money-mistakes-from-your-past">It&#039;s Never Too Late to Fix These 5 Money Mistakes From Your Past</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/8-financial-decisions-youll-never-regret">8 Financial Decisions You&#039;ll Never Regret</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/8-personal-finance-resolutions-anyone-can-master">8 Personal Finance Resolutions Anyone Can Master</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/13-financial-gifts-to-give-yourself-this-holiday-season">13 Financial Gifts to Give Yourself This Holiday Season</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance 2016 2017 bad habits clutter credit reports donating emergency funds goals investments nest egg retirement savings simplifying Fri, 12 Aug 2016 09:00:08 +0000 Mikey Rox 1770701 at http://www.wisebread.com 6 Terrible Money Situations You Need to Stop Getting Yourself Into http://www.wisebread.com/6-terrible-money-situations-you-need-to-stop-getting-yourself-into <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/6-terrible-money-situations-you-need-to-stop-getting-yourself-into" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_money_wallet_87621441.jpg" alt="Woman getting herself into terrible money situations" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>When it comes to money, I know I can be my own best friend and my own worst enemy. Most of the time, I'm frugal, intentional, careful, and deliberate with my money. But, every once in awhile, it's like I forget all of those principles. Maybe I want something badly, even though I can't afford it. Or I am tired and it's easier to spend than to think first.</p> <p>Now, I've never gone totally off the rails financially. But I can see where these acts of &mdash; let's call them what they really are &mdash; self-sabotage &mdash; undermine the principles I desire to live by.</p> <p>As I've gotten older, I've gotten better at staying out of these situations, and I know you can do the same. Here are some of the places where I've gotten into trouble in the past.</p> <h2>1. Overspending</h2> <p>It's hard to live within your means. It just is. There's so much that you want, and that doesn't even take into account what you need. But overspending &mdash; spending more than you make &mdash; is a sure way to get into deep financial trouble.</p> <p>Even if you don't get into debt, and some overspenders don't, you'll end up living paycheck to paycheck, juggling which bills need to be paid so that nothing gets turned off this month. That life isn't any fun at all, even though spending the money might be a blast. Besides, eventually some large expense will come up, and you'll end up in debt because you won't have the money saved to cover it.</p> <h2>2. Credit Card Debt</h2> <p>This usually comes as a result of overspending for a period of time. When you get used to spending, it starts to feel natural to just put something on your card. Do this enough times, and you'll find yourself with a bill you can't cover at the end of the month.</p> <p>The problem with credit card debt is that it feels deceptive. Sure, there's interest to pay, but the minimum payment looks so small. It might take you a while, but paying it off feels entirely doable.</p> <p>However, you'll end up paying forever and paying a lot in interest. And even those minimum payments can add up. Maybe you can handle one or two of them, but get three or four (or 10), and making the payments becomes a lot more financial stress than you need.</p> <p>See also: <a href="http://www.wisebread.com/fastest-way-to-pay-off-10000-in-credit-card-debt?utm_source=wisebread&amp;utm_medium=seealso2&amp;utm_campaign=article">The Fastest Way to Pay Off Credit Card Debt</a></p> <h2>3. Not Saving for Retirement</h2> <p>It's easy to prioritize everything else over retirement. When you're young, retiring feels like such a long way off that it's easy to wait too long to get started. And when you're older, it's easy to spend or save for your kids rather than for yourself. Many parents panic about paying for college and end up putting their savings there rather than into their retirement accounts.</p> <p>Most &quot;real&quot; jobs come with some sort of retirement account and, often, with a matching plan from the employer. Take full advantage of this as soon as you are eligible. If possible, have the money deducted from your paycheck automatically, so you don't even have a choice in where it goes each month.</p> <h2>4. Buying Too Many Toys</h2> <p>This probably comes with the territory of overspending, but it seems like a specific trap that you can fall into. Many people (myself included) tend to live pretty frugally most of the time, but are willing to spend quite a bit of money on a toy. This can be something like sports equipment, a designer purse, a new car, technology, and other splurges.</p> <p>I think that a lot of us live such stressful lives that we feel like we deserve something that will help us rest or, at least, make us feel better about ourselves. So we spend a lot on an item based on the idea that it will improve our lives. Even if it does actually help us de-stress, the financial impact can cause as much or more stress in the long run.</p> <p>It's much better to save up for a toy, or rent one, or ask friends and family to contribute to a fund toward it for your birthday or another holiday. That way you will actually lower your overall stress levels, rather than adding to them.</p> <h2>5. Going Out Too Much</h2> <p>Sure, it's fun to get dinner and drinks with your friends. And it's probably a good idea to go to happy hour with the coworkers here and there, to forge connections and get to know people. But when you're doing it every night, those bills are going to add up.</p> <p>You don't need to deprive yourself to make good decisions about when and where you spend when it comes to eating (and drinking) out. Lowering your spending can be as simple as ordering an appetizer and a beer instead of a meal and a cocktail. You can get creative, too. Some of my friends and I take turns hosting a meal along with one or two signature drinks and the overall cost is much lower than what we'd spend if we met at restaurants.</p> <h2>6. Spending to Save</h2> <p>Sure, there are times when it's worthwhile to spend a bit more on a quality product so that you don't have to buy another one anytime soon. But I've also seen this as an excuse to spend way too much. Not sure how this might apply to you?</p> <p><span style="font-size: 13px; line-height: 1.7em;">What about when your car dies? Y</span><span style="font-size: 13px; line-height: 1.7em;">ou might legitimately need a new one. But it's a trap to believe the voices that say, &quot;Buy a brand-new car. That way you will save, in the long run, on maintenance costs.&quot; Instead, you can buy a car off a two or three -year lease. You still get the benefits of low maintenance, but you save a lot off the initial price.</span></p> <p>Or, maybe, you see a pair of nice new boots in the store. They're high quality, and you think to yourself, &quot;Sure, that's a lot of money. But if I buy those, I won't have to buy boots for several years.&quot; That might be true, but before you purchase, think about how many pairs of boots you already have sitting in your closet.</p> <p>Sometimes, buying quality is the way to go. But other times, it's an excuse we use to let ourselves spend more than we should.</p> <p><em>What financial traps do you tend to fall into? How do you keep yourself from jumping into them with both feet?</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/6-terrible-money-situations-you-need-to-stop-getting-yourself-into">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/10-ways-you-disrespect-your-money">10 Ways You Disrespect Your 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/10-golden-rules-of-personal-finance-everyone-should-know">10 Golden Rules of Personal Finance Everyone Should Know</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/its-never-too-late-to-fix-these-5-money-mistakes-from-your-past">It&#039;s Never Too Late to Fix These 5 Money Mistakes From Your Past</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/12-everyday-money-tasks-youve-been-doing-wrong">12 Everyday Money Tasks You&#039;ve Been Doing Wrong</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/the-10-biggest-lies-we-tell-ourselves-about-money">The 10 Biggest Lies We Tell Ourselves About Money</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Shopping debt going out money traps overspending retail therapy retirement savings stress shopping Tue, 02 Aug 2016 09:00:11 +0000 Sarah Winfrey 1763991 at http://www.wisebread.com Best Money Tips: Things You Can Save for Retirement Besides Money http://www.wisebread.com/best-money-tips-things-you-can-save-for-retirement-besides-money <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/best-money-tips-things-you-can-save-for-retirement-besides-money" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/couple_paying_bills_000046468662.jpg" alt="Couple finding things to save for retirement besides money" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Welcome to Wise Bread's <a href="http://www.wisebread.com/topic/best-money-tips">Best Money Tips</a> Roundup! Today we found things you can save for retirement besides money, ways social media is making you poor, and changes to the homebuying process that you need to know about.</p> <h2>Top 5 Articles</h2> <p><a href="https://aboutlife.com/blog/Retirement/Save-For-Retirement-Besides-Money">3 Things to Save For Retirement Besides Money</a> &mdash; If you plan to do some traveling after you retire, save up your airmiles, hotel rewards and points, and discounted gift cards to use in your golden years. [aboutLife]</p> <p><a href="http://creativemoney.biz/2015/11/10/is-social-media-making-you-poor/">Is Social Media Making You Poor?</a> &mdash; With social media, it's easy to compare the life you lead to the seemingly perfect lives of the friends you follow. But remember, not everything is as it seems; most photos are carefully framed and edited, and what you see might not be the reality. [Creative Money]</p> <p><a href="http://www.forbes.com/sites/learnvest/2015/11/12/house-hunting-again-3-need-to-know-ways-the-process-has-changed/">House Hunting Again? 3 Need-to-Know Ways The Process Has Changed</a> &mdash; There are new specialty mortgages that can help cover improvement costs if you buy a fixer-upper. [Forbes]</p> <p><a href="http://www.popsugar.com/smart-living/Cyber-Monday-2015-39047972">12 Things Major Retailers Have Released About Cyber Monday</a> &mdash; Expect deep discounts at eBay &mdash; up to 90%! [PopSugar Smart Living]</p> <p><a href="http://inexpensively.com/articles/budgeting-your-thanksgiving-dinner/">Budgeting Your Thanksgiving Dinner</a> &mdash; Once you have a menu, create a master ingredient list that includes everything you need for every recipe, with quantities. Then, check your pantry! [Inexpensively]</p> <p>Other Essential Reading</p> <p><a href="http://www.thefrugaltoad.com/frugal-living/downsizing-your-living-quarters-the-trend-towards-smaller-homes">Downsizing Your Living Quarters: The Trend Towards Smaller Homes</a> &mdash; Tiny homes are easier to maintain, leave a smaller environmental footprint, and tend to be more budget-friendly. [The Frugal Toad]</p> <p><a href="http://www.moneyunder30.com/keep-money-at-one-bank-or-not">Should You Keep All Of Your Money At One Bank? Probably Not</a> &mdash;Reaching your financial goals become much easier when you make it more difficult to borrow money from yourself for things you don't really need. [Money Under 30]</p> <p><a href="http://blog.allstate.com/5-ways-to-make-your-small-space-feel-bigger/">5 Ways to Make Your Small Space Feel Bigger</a> &mdash; Use a neutral palette for your walls with brighter focal points to make your home seem bigger. [The Allstate Blog]</p> <p><a href="http://www.sidehustlehq.com/how-to-avoid-side-hustle-burnout/">How to Avoid Side Hustle Burnout</a> &mdash; Don't let your side hustle take over your life. If you want to maintain a healthy work-life balance, be sure to set a time limit for work and separate your personal and professional spaces. [Side Hustle HQ]</p> <p><a href="http://parentingsquad.com/5-tips-to-help-parents-prep-for-the-holiday-season-rush">5 Tips to Help Parents Prep for the Holiday Season Rush</a> &mdash; Don't try to do everything by yourself. Ask your spouse and kids to pitch in! [Parenting Squad]</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/amy-lu">Amy Lu</a> of <a href="http://www.wisebread.com/best-money-tips-things-you-can-save-for-retirement-besides-money">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/left-a-job-do-a-rollover">Left a job? Do a rollover.</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/how-much-money-will-you-need-to-retire">How Much Money Will You Need to Retire?</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/put-off-saving-for-retirement">Put Off Saving for Retirement</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/14-ways-to-retire-early">14 Ways to Retire Early</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-retire-during-a-recession">How to Retire During a Recession</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement best money tips retirement savings Fri, 13 Nov 2015 19:15:13 +0000 Amy Lu 1612001 at http://www.wisebread.com 5 Simple Ways to Boost an Underperforming 401(k) http://www.wisebread.com/5-simple-ways-to-boost-an-underperforming-401k <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-simple-ways-to-boost-an-underperforming-401k" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/piggy-bank-chalkboard-retirement-savings-growth-Dollarphotoclub_77966716.jpg" alt="piggy bank retirement savings" title="piggy bank retirement savings" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>There are about 52 million Americans saving up for retirement using a 401(k). While this is an impressive number, it doesn't tell the full picture of the state of U.S. retirement planning. (See also: <a href="http://www.wisebread.com/12-things-you-didnt-know-about-retirement?ref=seealso">12 Things You Didn't Know About Retirement</a>)</p> <p>In 2014, the average U.S. worker had only accumulated in their 401(k) enough for $4,000 annual retirement income, or about $333 monthly. That's an alarmingly low figure.</p> <p>Here are five simple ways to boost those underperforming 401(k) plans.</p> <h2>1. Switch Actively Managed Funds to Index Funds</h2> <p>When allocating the funds in their 401(k), folks often choose accounts that promise high returns. In other words, they look to beat the market.</p> <p>Stop it.</p> <p>Chasing those high returns is eating away your 401(k) contributions. Funds that try to outperform the market, also known as actively managed funds, generally have higher fees than those that seek to simply track market performance, known as index funds.</p> <p>While investing in index funds may sound like a boring investment strategy, consider these three facts:</p> <ul> <li>While the average expense ratio for actively managed U.S. mutual funds is 1.32%, the Vanguard Total Stock Market Index (VTSMX), the largest index mutual fund, charges just 0.17% per year.<br /> &nbsp;</li> <li>Warren Buffett's will stipulates that 90% of his assets be invested in a very low-cost <a href="http://www.berkshirehathaway.com/2013ar/2013ar.pdf">S&amp;P 500 index fund</a>.<br /> &nbsp;</li> <li>Mad Money's Jim Cramer has gone on the record about the benefits of index investing: &quot;After a lifetime of picking stocks, I have to admit that Bogle's arguments in favor of the index fund have me thinking of joining him rather than trying to beat him.&quot; John &quot;Jack&quot; Bogle, the founder of Vanguard, has championed low-cost index investing since the 1970s.</li> </ul> <h2>2. Stop Playing Stock Trader</h2> <p>Would you hire a plumber to fix your car?</p> <p>Definitely not!</p> <p>So, why are you insisting on trading the stocks and accounts in your 401(k)?</p> <p>A nationwide <a href="http://pressroom.aboutschwab.com/press-release/schwab-corporate-retirement-services-news/workers-bank-401k-retirement-need-help-makin">survey of 401(k) participants</a> found that:</p> <ul> <li>52% of American workers find explanations of their 401(k) investments more confusing than explanations of their health care benefits;<br /> &nbsp;</li> <li>46% don't know what their best investment options are; and<br /> &nbsp;</li> <li>34% feel a lot of stress over allocating their 401(k) monies.</li> </ul> <p>If you're still unconvinced about the negatives of actively trading your account, remember that the average actively managed mutual fund has an average <a href="http://www.fool.com/School/MutualFunds/Performance/Record.htm">annual return of 2% less</a> than that of the stock market. A sample of <a href="http://money.usnews.com/money/personal-finance/mutual-funds/articles/2012/06/18/some-401k-plans-let-you-take-the-wheelif-you-dare">self-directed account holders</a> showed that 76% of their account returns underperformed the S&amp;P, and 72% underperformed the core model of their plans.</p> <p>On top of that, some 401(k) plans may charge you additional fees for self-directed brokerage options. Now that's a double whammy for playing stock trader. Instead, request a one-on-one appointment with your plan's administrator (over half of retirement plans offer individual investment advice) to go over your retirement saving strategy, and stick to it. (See also: <a href="http://www.wisebread.com/this-is-the-basic-intro-to-having-a-retirement-fund-that-everyone-needs-to-read?ref=seealso">This Is the Basic Intro to Having a Retirement Fund That Everyone Needs to Read</a>)</p> <h2>3. Consolidate 401(k) Balances</h2> <p>The term &quot;four-year career&quot; has gone from oxymoron to a reality for younger generations. According to data from the Bureau of Labor Statistics, today's average worker <a href="http://www.forbes.com/sites/jeannemeister/2012/08/14/job-hopping-is-the-new-normal-for-millennials-three-ways-to-prevent-a-human-resource-nightmare/">stays on the job</a> for 4.4 years. And for younger workers, that time period is cut in half.</p> <p>This means that there are many workers who have several 401(k) plans laying around. Since not all 401(k)s are alike, it's a good idea to consolidate all those balances into a single account. It will simplify your life and make it easier to keep track of your nest egg's performance.</p> <p>While there are several criteria to evaluate plans, there are two that lead the pack:</p> <ul> <li>Choose the plan with the lowest expense ratio. A good rule of thumb is that your total expense ratio should be no more than 1%.<br /> &nbsp;</li> <li>Evaluate the additional perks that may become available for maintaining a larger balance at a single institution.</li> </ul> <h2>4. Maximize Employer Contributions to Your 401(k)</h2> <p>Vanguard reports that the <a href="https://pressroom.vanguard.com/content/nonindexed/How_America_Saves_2014.pdf">most common matching formula</a> for employers is $0.50 on the dollar on the first 6% of pay. This means that an employee with a $50,000 annual salary would receive a $1,500 boost to her 401(k), if she were to maximize her contributions.</p> <p>It's in your best interest to bump up your savings to the full 6% (or the applicable maximum of your plan) of your pay. If you don't use it, you are missing out on <em>free </em>retirement cash.</p> <p>Additionally, ask your plan sponsor about a couple of key plan details: true-up and vesting schedule.</p> <h3>True-Up Feature</h3> <p>Some companies have complicated contribution matching formulas, so a true-up feature helps you maximize the amount of possible matching funds under your 401(k)'s guidelines. This feature is particularly useful for those employees that wait for big bonuses to make a contribution to their retirement accounts.</p> <h3>Vesting Schedule for Employer Contributions</h3> <p>Employer contributions to your 401(k) plan may be subject to a vesting period. If you change jobs before the vesting period, you lose your employer's contributions to your retirement plan.</p> <h2>5. Ask Your Plan Administrator for Lower Fees</h2> <p>If you're using an employer-sponsored 401(k), then ask your plan's sponsor to renegotiate operating expenses. During the 2013-2014 period, more than 75% of employers attempted to <a href="http://www.kiplinger.com/article/investing/T001-C000-S002-employers-trim-401k-fees.html#buTvG5muw7udQ0Hw.99">cut 401(k) expenses</a>, so your request is nothing out of the ordinary.</p> <p>Find out why your plan administrator is choosing the funds that the're choosing. If there is no record of legitimate reasons, then you have ammunition to demand a re-evaluation of current fees and class shares. The lower your plan's fees, the better your returns.</p> <p><em>What have you done to boost an underperforming 401(k)?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/damian-davila">Damian Davila</a> of <a href="http://www.wisebread.com/5-simple-ways-to-boost-an-underperforming-401k">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/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-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/6-reasons-every-millennial-needs-a-roth-ira">6 Reasons Every Millennial Needs a Roth IRA</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/left-a-job-do-a-rollover">Left a job? Do a rollover.</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/half-of-americans-are-wrong-about-their-retirement-savings">Half of Americans Are Wrong About Their Retirement Savings</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401(k) investing retirement savings saving Tue, 03 Mar 2015 14:00:09 +0000 Damian Davila 1315320 at http://www.wisebread.com 14 Ways to Retire Early http://www.wisebread.com/14-ways-to-retire-early <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/14-ways-to-retire-early" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/seniors-beach-3630112-small.jpg" alt="relaxing" title="relaxing" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p>It seems like the economy is making it more difficult for people to retire at 65. That's true in some ways, but what if you had more control over your own retirement than you realized?</p> <p>What if there were some practical things that you could do that would enable you to retire closer to 60 instead of 70? While we can't control the economy around us, there are some practical financial things we can do to round down our retirement age. (See also: <a href="http://www.wisebread.com/retirement-planning-if-you-re-under-30?ref=seealso">Retirement Planning if You're Under 30</a>)</p> <h2>1. Know What You'll Need to Live On</h2> <p>Simply knowing what your monthly expenses will be during your retirement years can be helpful when it comes to planning when exactly you'll be able to quit working. This <a href="https://personal.vanguard.com/us/insights/retirement/tool/retirement-expense-worksheet">worksheet from Vanguard</a> covers most expenses and will give you a rough estimate of what you'll need to live on a monthly basis.</p> <p>Let's assume that currently you're 27 years old and earning around $35,000 per year. We'll also assume (generously) that between a 401(k), savings, and other assets, you already have $30,000 saved.</p> <p>According to <a href="http://money.cnn.com/calculator/retirement/retirement-need/">CNN's retirement calculator</a>, if you can save 15% of your income, you can retire at 65. That's $5250 a year or $438 a month at your starting income. (The calculator assumes that your income will grow at an annual rate of 3.8%, so your savings in actual dollar amounts should also increase each year.)</p> <p>Now, if you knock your hopeful retirement age down to 60, 15% of your income suddenly isn't enough, as it falls quite short of what you'll need. It's not until you're saving 21% of your income that you make the cut to retire at 60. That's $7350 a year or $613 a month.</p> <p>So your challenge is to increase your savings by 6%, or $175 a month.</p> <h2>2. Start Early</h2> <p>Starting to plan and save for retirement in any capacity is far easier in your mid-20s than your 40s or 50s. The earlier you start, the more time your money will have to accumulate and grow.</p> <p>In the retirement calculator above, the starting age was set to 27. Knock that number down to 24, and you can get away with saving 19% instead of 21%.</p> <h2>3. Contribute a Weekly Amount to a Long-Term, Low-Risk Investment</h2> <p>If you start early, contributing as little as $20 a week to a money market mutual fund can grow to five figures (six if you start with a five-figure initial balance) by the time you're ready to retire.</p> <p>Depending on your income and what you're saving already, $20 a week is $80 a month (plus two bonus weeks every year!), which gets us almost halfway to $175.</p> <h2>4. Save Your Salary Increases After a Certain Point</h2> <p>Our habit is to increase our income and upgrade, always hovering at the ceiling of what we can afford. If you get to a certain point where you're content with your lifestyle and living situation, stop upgrading when your salary increases, and instead, save that increased amount every year as a lump sum for your retirement accounts.</p> <p>If you've been saving 21% of $35,000 (or even 15%), it's okay to loosen up a little. But keep your eyes on the prize. (See also: <a href="http://www.wisebread.com/lifestyle-inflation-the-ultimate-financial-trap?ref=seealso">Lifestyle Inflation: The Ultimate Money Trap</a>)</p> <h2>5. Keep Your Living Expenses Low</h2> <p>Keeping your living expenses capped will allow you to put more money aside for retirement and contribute more to investment accounts or a 401(k).</p> <p>Stay practical for this one.</p> <p>Start with a <a href="http://www.wisebread.com/build-your-first-budget-in-5-easy-steps">simple budget plan</a> and then carve out unnecessary expenses. You also can work to <a href="http://www.wisebread.com/4-ways-to-win-the-war-against-this-summers-electric-bill">lower your utility bill</a>, which can save anywhere from $30 to $100 per month. (See also: <a href="http://www.wisebread.com/5-things-you-can-do-in-15-minutes-that-could-save-you-1500-this-year?ref=seealso">Save $1,500 a Year in 15 Minutes</a>)</p> <h2>6. Pay Off the Principal on Your House</h2> <p>If you can get your house paid off, you'll free up all the money that would normally go to a mortgage payment every month, which can go to retirement savings. Also, the more principal you've paid, the more you get to keep when and if you sell your house.</p> <h2>7. Take a State- or Federal-Level Government Job</h2> <p>Those who were born after 1970 and work for the state or federal government have a minimum retirement age (MRA) of 57, and often retire before 60 with a pension. These employees are entitled to <a href="http://en.wikipedia.org/wiki/Public_employee_pension_plans_in_the_United_States">public employee pension plans</a>, though they vary by state.</p> <h2>8. Max Your 401(k) Contribution</h2> <p>If you have a 401(k) and can afford to contribute more, try to contribute as much as your employer will match.</p> <p>If you're able to contribute an extra $1,500 a year total (starting when you're 25) that will give you roughly an extra $15,000 a year to live on if you want to retire at age 60.</p> <h2>9. Downsize Your Home When the Market Is Good</h2> <p>This can be a particularly good move if your house is paid off and the kids are all grown and moved out. Assuming the market is good, sell your home at a profit and move into a place that's smaller, cheaper, and better suited for just a couple people. Odds are that you'll have a sizeable amount to put away; perhaps even enough to get you through a year or two. (See also: <a href="http://www.wisebread.com/this-is-how-you-downsize-your-home-and-start-living-a-better-life?ref=seealso">How to Downsize and Live a Better Life</a>)</p> <h2>10. Move to a State With Lower Taxes</h2> <p>Some states are easier to retire in than others. <a href="https://turbotax.intuit.com/tax-tools/tax-tips/Taxes-101/States-with-the-Highest-and-Lowest-Taxes/INF23232.html">Property, income, and sales tax</a> should all be taken into consideration if you plan to move. Reduced taxes mean reduced living expenses which means your retirement dollars go farther.</p> <h2>11. Exercise and Manage Your Health</h2> <p>One way that you can help to prevent increased expenses in your later years is to exercise and take care of your body. If you do, you might be able to qualify for cheaper health insurance plans and be less susceptible to increases in your monthly premiums. (See also: <a href="http://www.wisebread.com/live-long-and-prosper-with-these-15-small-healthy-habits?ref=seealso">Live Longer With These Small Healthy Habits</a>)</p> <h2>12. Start a Roth IRA</h2> <p>A Roth IRA is a retirement account that allows you to contribute after-tax money. The appeal over a traditional IRA is that withdrawals won't be taxed in retirement, and that your contributions can be withdrawn anytime without penalty (with some caveats), for emergencies.</p> <h2>13. Work the Tough Hours While You're Young</h2> <p>Working overtime and weekends, and doing what you can to bring in more cash flow is much easier in your 20s and 30s than when you're older. Work those hours now and put money away so that you can wind down as you get closer to retirement age.</p> <h2>14. Cultivate a Skill That You Can Do Part-Time in Retirement</h2> <p>Many people work part time in their retirement, if for nothing else as a means to kill time. Try to plan for a way to continue to bring home a paycheck even after you've retired. This can mean continuing in your line of work part time or perhaps going from a business owner to a consultant for another company. It also means your retirement funds won't be your sole means of support.</p> <h2>Planning Ahead</h2> <p>The most important thing you can do when it comes to securing your retirement is to do as much advanced planning as you can. While certain things can't be predicted, like exact living expenses or the cost of insurance, you don't have to wait until your 50s to start putting money away.</p> <p>Be prudent when you're still young, and you'll make an early retirement far easier.</p> <p><em>Do you have other ideas on how to retire early? Let me know in the comments below.</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/mikey-rox">Mikey Rox</a> of <a href="http://www.wisebread.com/14-ways-to-retire-early">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/5-simple-ways-to-boost-an-underperforming-401k">5 Simple Ways to Boost an Underperforming 401(k)</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-reasons-people-dont-retire-early-and-how-you-can">4 Reasons People Don&#039;t Retire Early — and How You Can</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/50-ways-to-save-money-on-clothing">50 Ways to Update Your Wardrobe for Cheap</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/how-are-people-retiring-in-their-30s">How Are People Retiring in Their 30s?!</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/4-reasons-early-retirement-might-be-financially-risky">4 Reasons Early Retirement Might Be Financially Risky</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> General Tips Retirement early retirement retirement savings saving Mon, 07 Apr 2014 08:36:22 +0000 Mikey Rox 1134347 at http://www.wisebread.com Why Canada’s TFSA Is Totally Awesome http://www.wisebread.com/why-canada-s-tfsa-is-totally-awesome <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/why-canada-s-tfsa-is-totally-awesome" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/old-couple-enjoying-retirement.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p>In a recent article, I <a href="http://www.wisebread.com/canada-and-us-retirement-showdown-which-offers-more-for-retirees">compared the Canadian and American retirement systems</a>, and while I tried to include as much as I could, a lot of people jumped on my omission of the Tax Free Savings Account (TFSA). I left it out because, strictly speaking, a TFSA is not a retirement savings vehicle. But I should&rsquo;ve included it anyway for one simple reason&nbsp;&mdash; TFSAs are totally awesome, especially for investors. That&rsquo;s because if you put your investment in one of these, you don&rsquo;t have to pay capital gains tax. For regular people, that&rsquo;s as close as you can get to the benefits of an account in some tropical, offshore banking center (which, let&rsquo;s face it, probably wouldn&rsquo;t be interested in a $3,000 deposit anyway).</p> <p>According to a poll released by the Bank of Montreal in November, about 38% of Canadians have a TFSA account. If you aren&rsquo;t in that group, you&rsquo;re missing out. Here I&rsquo;ll go over this relative newcomer to Canadian financial (and yes, retirement) planning.</p> <h2>TFSA 101</h2> <p>First things first &mdash; the <a href="http://www.standardlife.ca/en/individual/solutions/tfsa/">TFSA</a> is poorly named and, as a result, many people assume that it&rsquo;s a savings account. In fact, the TFSA isn&rsquo;t an account at all; it&rsquo;s more like a label that can be applied to all kinds of financial accounts, including regular savings accounts, stock trading accounts, mutual funds, bonds, and even certain types of small business shares. In other words, it isn&rsquo;t just for saving. In fact, the TFSA&rsquo;s tax-free capital gains mean you get the greatest advantage by using it to invest. Unlike virtually every other kind of account you could put your money into, if you use a TFSA, you won&rsquo;t have to pay tax on any interest, dividends or capital gains you earn. Ever. </p> <p>Of course, there are some limits. When the TFSA was introduced in 2009, every Canadian over the age of 18 got $5,000 of contribution room. Like a Registered Retirement Savings Plan (RRSP), this contribution room continues to accumulate each year, and remains open whether you use it or not. So, if you&rsquo;ve never contributed to a TFSA, you could deposit as much as $25,500 in 2013 (the contribution was increased to $5,500 this year). Plus, that contribution room <i>never</i> goes away, even when you spend the money, which you can do without penalty whenever you choose. You could sock some money away for your retirement or pull it out and spend it on a nice vacation. Your choice. And hey, if you do manage a solid capital gain during the year, it might just be a very affordable trip!</p> <h2>Tax-Deferred Versus Tax-Free</h2> <p>What many people don&rsquo;t understand about TFSAs is the tax implications, which explains why, according to the BMO poll, many people don&rsquo;t use them effectively. So here&rsquo;s a rundown.</p> <p>TFSAs are tax free. That means that if you contribute $5,500 this year, make a great stock pick, and end up with $10,000 in your account by the end of the year, you can avoid paying what would normally amount to $675 in capital gains tax (assuming a 30% income tax rate). Pretty sweet, right?</p> <p>Now take the RRSP. If you contribute $5,500 to this type of account instead, you can deduct that $5,500 from your taxable income, which could mean a tax refund. So, essentially, the money you contribute to an RRSP has not been taxed. However, if your contribution grows to $10,000, you will pay income tax on that amount when you withdraw it (which hopefully happens when you&rsquo;re retired). The logic behind deferring your taxes until retirement is that many people have less income during retirement, and therefore a lower tax rate.</p> <h2>Why the TFSA Is Totally Awesome</h2> <p>What really sets the TFSA apart is that it&rsquo;s flexible. You can use it to save money for short-term goals, or to save for longer term dreams like a new home or even retirement, and you withdraw that money whenever you want. Plus, if you&rsquo;re already maxing out your RRSP, a TFSA gives a little extra incentive to save more. For those with lower incomes who might not benefit from an RRSP&rsquo;s tax deduction, it also provides another option.</p> <p>Whether you&rsquo;re making big bucks trading stocks and other investments or just racking up a little interest, a TFSA means you won&rsquo;t have to pay taxes on those gains. In other words, a Tax Free Savings Account is about as close as you can get to a free lunch in the investing world. And what budget-savvy person ever turns down one of those?<b><br /> </b></p> <p>This post was made possible by support from&nbsp;<a href="http://www.standardlife.ca/" target="_blank">Standard Life</a>, a leading provider of&nbsp;<a href="http://www.standardlife.ca/prpp/index.html" target="_blank">Canadian pension plans</a></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tara-struyk">Tara Struyk</a> of <a href="http://www.wisebread.com/why-canada-s-tfsa-is-totally-awesome">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/how-much-money-will-you-need-to-retire">How Much Money Will You Need to Retire?</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/how-to-make-sure-you-dont-run-out-of-money-in-retirement">How to Make Sure You Don&#039;t Run Out of Money in Retirement</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/8-questions-financial-advisers-hear-most-often">8 Questions Financial Advisers Hear Most Often</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/how-are-people-retiring-in-their-30s">How Are People Retiring in Their 30s?!</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/4-reasons-why-a-roth-ira-may-be-better-than-your-401k">4 Reasons Why a Roth IRA May be Better Than Your 401(k)</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment Retirement Canada retirement savings savings plans Thu, 25 Apr 2013 10:24:33 +0000 Tara Struyk 973633 at http://www.wisebread.com Is Building an Emergency Fund Always a Good Idea? http://www.wisebread.com/is-building-an-emergency-fund-always-a-good-idea <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/is-building-an-emergency-fund-always-a-good-idea" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/7658205070_cb49629afd_z.jpg" alt="crumpled cash" title="crumpled cash" class="imagecache imagecache-250w" width="250" height="167" /></a> </div> </div> </div> <p>The Great Recession of 2007 drove home the common-sense notion of being prepared. Specifically, it gave a lot of traction to the idea of having a 6-8 month emergency fund. Today, nearly every financial advisor parrots the same call &mdash; everyone everywhere should have months and months of living expenses socked away in an easily accessible account.</p> <p>But is building an emergency fund always a good idea? And does the wisdom behind the advice translate to every financial situation? I don't think so. (See also:&nbsp;<a href="http://www.wisebread.com/put-off-saving-for-retirement">Put Off Saving for Retirement</a>)</p> <p>At the risk of sounding heretical, I humbly assert that every financial circumstance is unique and creating a hefty, low-interest, immediately-accessible emergency fund might not be the smartest way to manage your money. Here are a few situations where it just might be okay to skip scrimping and saving to build an emergency fund.</p> <h3>You Have High-Interest Consumer Debt</h3> <p>Unlike an emergency, your creditors are a sure thing. If you have <a href="http://www.wisebread.com/why-we-take-on-credit-card-debt">credit card debt</a>, those high interest rates will be applied month in and month out. But the interest you'll get from a bank on a savings account is something akin to not-worth-mentioning. Get more bang for your buck by paying off your credit cards first.</p> <h3>You Have No Retirement Savings</h3> <p>If you're young and trying to decide between funding a Roth IRA or 401(k) account and putting money away in case of emergency, bank on your retirement. The time horizon is long enough that you'll see real growth from compounding interest. Plus, with 401(k)'s company match and Roth IRA's tax-free growth, both types of savings vehicles can be powerful wealth producers over the long term.</p> <h3>You Have No Debt and Low Expenses</h3> <p>On the other side of the coin, if you have no debt and very low expenses, an emergency fund may not be the critical lifeline for you that it is for others. In an emergency, low overhead works in your favor and modest financial obligations can be met in a variety of ways besides a savings &quot;super-fund.&quot; Redirect that cash toward <a href="http://www.wisebread.com/7-great-investments-for-first-timers">investments</a> that offer better long term returns.</p> <h3>You Have Investments That Are Accessed Easily and Without Penalty</h3> <p>Panicked about not having money saved for the what-ifs in life? Relax &mdash; maybe you already have an emergency fund and just don't realize it. Investment dollars that you can withdraw without penalty achieve the same goal (and may be earning a higher interest rate in the meantime).</p> <h3>You Have Flexible Finances</h3> <p>If you're financially flexible and can easily contract in the event of a temporary layoff or unforeseen income hiccup, maybe an emergency fund isn't an absolute essential. Having some serious wiggle room financially has some real rewards &mdash; and not needing a huge emergency fund is one of them.</p> <p>None of this advice is meant to suggest that preparation is a bad idea. Being financially alert helps us survive, thrive, and <a href="http://www.wisebread.com/bestdeals">seize amazing deals</a> when they come our way. But bloated emergency funds, built only by ignoring other wealth producing opportunities and applied in one-size-fits-all fashion just don't make sense. In other words, sometimes the best preparation is knowing what we don't need to prepare for.</p> <p><em>Do you have an emergency fund? Is your fund in a traditional savings account or another type of investment?</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/is-building-an-emergency-fund-always-a-good-idea">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/when-to-use-savings-to-pay-off-debt">When to Use Savings to Pay Off Debt</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/a-step-by-step-guide-to-creating-your-emergency-fund">A Step-by-Step Guide to Creating Your Emergency Fund</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/left-a-job-do-a-rollover">Left a job? Do a rollover.</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/8-money-moments-that-should-be-on-everyones-bucket-list">8 Money Moments That Should Be On Everyone&#039;s Bucket List</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/emergency-plan-better-than-an-emergency-fund">Emergency Plan: Better Than an Emergency Fund</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance debt free emergency fund retirement savings Wed, 27 Feb 2013 11:40:22 +0000 Kentin Waits 967979 at http://www.wisebread.com Best Money Tips: Retirement Questions People Forget to Ask http://www.wisebread.com/best-money-tips-retirement-questions-people-forget-to-ask <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/best-money-tips-retirement-questions-people-forget-to-ask" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/3952984450_953c33c096_z.jpg" alt="questions" title="questions" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p>Welcome to Wise Bread's <a href="http://www.wisebread.com/topic/best-money-tips">Best Money Tips</a> Roundup! Today we found some stellar articles on important (but often forgotten) retirement questions, easy part-time jobs, and work-life balance tips.</p> <h2>Top 5 Articles</h2> <p><a href="http://wealthpilgrim.com/questions-retirement-people/">9 Crucial Questions about Retirement People Forget To Ask</a> &mdash; Are you really going to retire? If you stay active and continue to work after retirement, you might be able to factor in some side income. [Wealth Pilgrim]</p> <p><a href="http://beingfrugal.net/7-easy-part-time-jobs/">7 Easy Part Time Jobs</a> &mdash; If you love early mornings, consider being a paper delivery person. [Being Frugal]</p> <p><a href="http://www.savvysugar.com/How-Have-Work-Life-Balance-18939472">Work-Life Balance Tips for Newbies</a> &mdash; It's a pretty good day when you achieve something and enjoy something. [SavvySugar]</p> <p><a href="http://www.thewisdomjournal.com/Blog/top-car-insurance-myths-how-many-have-you-fallen-for">Top Car Insurance Myths: How many have YOU fallen for?</a> &mdash; Driving a red car will not raise your insurance rates. [The Wisdom Journal]</p> <p><a href="http://www.canajunfinances.com/2012/08/14/what-did-the-olympic-closing-ceremonies-teach-us-financially">What Did the Olympic Closing Ceremonies Teach Us Financially?</a> &mdash; You can't please everyone, so stop trying. Ignore the comments on what you're doing. [Canadian Personal Finance Blog]</p> <h2>Other Essential Reading</h2> <p><a href="http://freefrombroke.com/how-to-negotiate-to-lower-your-credit-card-interest-rates">How to Negotiate to Lower Your Credit Card Interest Rates</a> &mdash; Clearly and firmly tell the customer service rep that you want your interest rate lowered. Don't be meek! [Free From Broke]</p> <p><a href="http://seedebtrun.com/2012/08/diy-wall-art-for-your-living-room.html">DIY Wall Art For Your Living Room</a> &mdash; Even the not-very-artistic can do this project using blank canvasses, leftover paint, and a wall decal kit. [See Debt Run]</p> <p><a href="http://parentingsquad.com/save-on-school-supplies">Save on School Supplies</a> &mdash; Use the SaleLocator app to the find the closest in-store sales. [Parenting Squad]</p> <p><a href="http://www.freemoneyfinance.com/2012/08/5-perks-to-negotiate-when-a-raise-isnt-an-option.html">5 Perks to Negotiate When a Raise Isn't an Option</a> &mdash; Ask for a flexible work schedule if you don't like your usual hours. [Free Money Finance]</p> <p><a href="http://knsfinancial.com/10-conveniences-you-can-probably-do-without/">10 Conveniences You Can Probably Do Without</a> &mdash; Unless it's for business, a cell phone Internet plan is probably not something you need. [Faithful With A Few]</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/amy-lu">Amy Lu</a> of <a href="http://www.wisebread.com/best-money-tips-retirement-questions-people-forget-to-ask">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/left-a-job-do-a-rollover">Left a job? Do a rollover.</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/how-much-money-will-you-need-to-retire">How Much Money Will You Need to Retire?</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/14-ways-to-retire-early">14 Ways to Retire 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/put-off-saving-for-retirement">Put Off Saving for Retirement</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/why-canada-s-tfsa-is-totally-awesome">Why Canada’s TFSA Is Totally Awesome</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement best money tips retirement savings Fri, 17 Aug 2012 10:00:43 +0000 Amy Lu 951919 at http://www.wisebread.com How Much Money Will You Need to Retire? http://www.wisebread.com/how-much-money-will-you-need-to-retire <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-much-money-will-you-need-to-retire" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/retirement-planning-piggy-bank.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="167" /></a> </div> </div> </div> <p><em>This article was made possible by support from </em><a href="http://r1.fmpub.net/?r=http%3A%2F%2Fad.doubleclick.net%2Fclk%3B258577129%3B76092346%3Bw&amp;k4=3837&amp;k5={banner_id}"><em>OppenheimerFunds</em></a><em>.</em></p> <p>Planning for retirement seems like a daunting task. Calculations can be complex, especially if you want to be precise in projecting yearly cash flows over your lifetime. And considering all aspects of your financial picture can be overwhelming and confusing if you're uncertain about income needs, investment returns, inflation, <a href="http://www.wisebread.com/certainties-death-taxes-and-change">tax rules</a>, and government programs in retirement.</p> <p>To make this process easy, I&rsquo;ve put together a downloadable spreadsheet entitled &ldquo;<a href="http://static2.killeraces.com/files/fruganomics/retirement_planning_worksheet.xls">Retirement Planning in 4 Easy Steps</a>&rdquo; that should take just a few minutes to complete. You should have a clearer picture of your financial future and what steps you can now take so that you can live retirement in the style you want. (Note that for illustration, I have populated the spreadsheet with income and investment numbers.)</p> <h3>Step 1: Determine Annual Income Needed From Financial Investments During Retirement</h3> <p>Financial experts estimate that you will need <a href="http://money.usnews.com/money/blogs/On-Retirement/2012/02/22/retirement-gotchas-experts-rarely-talk-about">75% to 85%</a> of your current annual income in retirement. These percentages may seem high, especially if you have acquired all the assets you think you&rsquo;ll ever need by retirement age. Further, you might think that many expenses will disappear, like your mortgage payment, or they&rsquo;ll shrink dramatically, like your grocery bill when your kids move away. But you&rsquo;ll still have to pay property taxes, insurance, and maintenance on your house. Plus, higher expenses for healthcare and personal care may cancel out grocery savings, particularly if a family member develops a chronic illness.</p> <p>Fortunately, you may have sources of annual income other than retirement accounts, like a pension or business revenue. Your retirement savings or nest egg, then, just needs to cover the difference between total income needed for retirement and income from other sources.</p> <p>To determine annual income needed from financial investments, enter this information in the spreadsheet: current annual income, expected income from other sources, and percentage income needed in retirement, going lower if you plan to live frugally and will have paid off debt and higher if you desire to live luxuriously or will still have a mortgage in those later years.</p> <h3>Step 2: Calculate the Future Value of Current Retirement Savings and Annual Contributions to Retirement Funds</h3> <p>If you&rsquo;ve already set aside money for retirement and are regularly saving money each year, figure out what those investments will be worth when you retire.</p> <p>Enter the value of the retirement savings now, annual contributions to retirement savings, age now and at retirement, and expected investment return during your working years. Calculate the future value of your retirement savings if you simply stick to this plan of investment.</p> <h3>Step 3: Determine the Investment Value Needed to Fund Retirement Expenses</h3> <p>There are two schools of thought in determining the investment value needed for retirement. One approach is to save enough to spend investment returns and draw down the principal each year, depleting savings over your lifetime; ideally, you&rsquo;ll die about the time you run out of money. The other method is to build a nest egg that allows you to live off the investment earnings and preserve the principal in case you live longer than expected. To keep the calculations simple, I have chosen the second method.</p> <p>Enter your expected investment return in retirement and calculate the amount needed to generate the annual income to cover retirement expenses as specified in Step 1.</p> <h3>Step 4: Figure Out How Much to Increase Annual Savings to Meet Your Retirement Goals</h3> <p>After calculating how much investment in retirement savings you need, figure out how much extra to save to reach your goals. First, determine the shortage (or surplus if that applies); then calculate the additional amount to save and invest each year.</p> <p>This approach is fairly simple, but ignores taxes, <a href="http://www.wisebread.com/how-to-understand-and-protect-yourself-from-inflation">inflation</a>, and investment risk. Inflation, in particular, can dramatically increase expenses and change retirement scenarios; for example, consider how inflation at 1% and 2% during your working years could increase later requirements for income, investment needed, and annual savings contributions.</p> <style>td {border: 1px solid gray;}</style><table cellspacing="0" cellpadding="0" border="1"> <tbody> <tr> <td width="220" valign="top"> <p>Inflation/Changes in Retirement Scenarios</p> </td> <td width="57" valign="top"> <p align="center">0%</p> </td> <td width="77" valign="top"> <p align="center">1%</p> </td> <td width="81" valign="top"> <p align="center">2%</p> </td> </tr> <tr> <td width="220" valign="top"> <p>Income to Be Funded From Investments</p> </td> <td width="57" valign="top"> <p align="right">$50,000</p> </td> <td width="77" valign="top"> <p align="right">$67,000</p> </td> <td width="81" valign="top"> <p align="right">$91,000</p> </td> </tr> <tr> <td width="220" valign="top"> <p>Investment Needed</p> </td> <td width="57" valign="top"> <p align="right">$625,000</p> </td> <td width="77" valign="top"> <p align="right">$838,000</p> </td> <td width="81" valign="top"> <p align="right">$1,138,000</p> </td> </tr> <tr> <td width="220" valign="top"> <p>Additional Savings Needed Per Year</p> </td> <td width="57" valign="top"> <p align="right">$5,120</p> </td> <td width="77" valign="top"> <p align="right">$7,800</p> </td> <td width="81" valign="top"> <p align="right">$11,600</p> </td> </tr> </tbody> </table> <p>To keep pace with inflation, consider increasing your savings as your income grows and pursuing higher investment returns during your working years, or discovering ways to reduce expenses in retirement.</p> <p>Fluctuations in investment returns can also affect the viability of retirement plans. For simplicity, the spreadsheet uses a reasonable but not guaranteed investment return during your working years (6%) and a slightly higher rate in retirement (8%). But if the investment return was 7% or 6% in retirement, you would have to save more each year.&nbsp;</p> <table cellspacing="0" cellpadding="0" border="1"> <tbody> <tr> <td width="242" valign="top"> <p>Investment Returns/Changes in Retirement Scenarios</p> </td> <td width="61" valign="top"> <p align="center">8%</p> </td> <td width="66" valign="top"> <p align="center">7%</p> </td> <td width="72" valign="top"> <p align="center">6%</p> </td> </tr> <tr> <td width="242" valign="top"> <p>Investment Needed</p> </td> <td width="61" valign="top"> <p align="right">$625,000</p> </td> <td width="66" valign="top"> <p align="right">$714,000</p> </td> <td width="72" valign="top"> <p align="right">$833,000</p> </td> </tr> <tr> <td width="242" valign="top"> <p>Additional Savings Needed Per Year</p> </td> <td width="61" valign="top"> <p align="right">$5,120</p> </td> <td width="66" valign="top"> <p align="right">$6,300</p> </td> <td width="72" valign="top"> <p align="right">$7,800</p> </td> </tr> </tbody> </table> <p>To earn such returns and still protect your retirement funds, allocate your money to higher-return, higher-risk investments, such as stocks, mutual funds, ETFs, etc. (keeping in mind that these investments may lose rather than gain in value) and lower-risk, lower-return savings, such as bank CDs, savings accounts, money market funds, treasury bills, or corporate bonds. To generate an overall return of 7%, for example, equities of $400,000 would need to earn 10% combined with a 1% return of $200,000 in a savings account.</p> <p>So don&rsquo;t ignore retirement-planning wild-cards like inflation or uneven investment growth. But don&rsquo;t let fear or uncertainty about the future keep you from taking easy steps toward retirement now.</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-much-money-will-you-need-to-retire">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-6"> <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/why-canada-s-tfsa-is-totally-awesome">Why Canada’s TFSA Is Totally Awesome</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/how-to-make-sure-you-dont-run-out-of-money-in-retirement">How to Make Sure You Don&#039;t Run Out of Money in Retirement</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-financial-moves-now-that-youll-regret-when-you-retire">5 Financial Moves Now That You&#039;ll Regret When You Retire</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/8-questions-financial-advisers-hear-most-often">8 Questions Financial Advisers Hear Most Often</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/8-investments-that-may-soar-during-trumps-term">8 Investments That May Soar During Trump&#039;s Term</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment Retirement acheiving goals inflation retirement savings Tue, 26 Jun 2012 10:36:09 +0000 Julie Rains 935251 at http://www.wisebread.com How to Retire During a Recession http://www.wisebread.com/how-to-retire-during-a-recession <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-retire-during-a-recession" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/grandparents_palm_trees.jpg" alt="Grandparents" title="Grandparents" class="imagecache imagecache-250w" width="250" height="188" /></a> </div> </div> </div> <p>If there&rsquo;s any group more worried about the long-term effects of the recession than new grads, it&rsquo;s the soon-to-retire. The economy is forcing nearly everyone to reevaluate their financial plans and goals and (for better or for worse) is making most of us settle in for a few more years of work before we can retire.</p> <p>As I listen to all the talking heads discuss new strategies for working longer and later in life, it seems that the old three-legged stool model of retirement is all but obsolete. The three legs of retirement &mdash; Social Security, an employer-sponsored retirement plan, and personal savings &mdash; are shaky at best. Economic forces have reduced both personal savings rates and retirement plan balances. And just keeping the bills paid has cut into the new money we can contribute.</p> <p>So is there a way to retire in the middle of a recession? Maybe. By reconsidering the three-legged stool model and taking a bit more aggressive and holistic approach to retirement planning, jumping off the work treadmill might still be possible. Here are the five steps that can help you prepare for retirement during a recession. (See also: <a href="http://www.wisebread.com/deciding-what-you-want-out-of-retirement">Deciding What You Want Out of Retirement</a>)</p> <h2>1. Pay Off Your Mortgage</h2> <p>Paying off our largest fixed expenses well before retirement is an obvious, but seldom discussed part of a real retirement strategy. Saving more for retirement depends on knocking out the big bills and devoting more money and energy to personal savings and other asset-building activities. Don&rsquo;t discount the valuable peace-of-mind that mortgage-free living can give you as you settle into retirement.</p> <h2>2. Downsize and Downshift</h2> <p>Many financial advisers base their retirement calculations on replacing enough income through savings to support pre-retirement lifestyles. But is this realistic? What exactly do we sacrifice in putting off retirement until we have enough in savings to support our current standard of living? Maybe enjoying our golden years is enough of a reward to sacrifice a few of life&rsquo;s luxuries. A more modest home, a smaller budget, a used car, and fewer vacations all seem like worthy trades for time and a bit of freedom.</p> <h2>3. Save More</h2> <p>Of course, savings is always an essential component of a retirement plan, and saving more is usually a winning strategy. Many financial experts see the writing on the wall with pre-tax 401(k) contributions and are now advising their clients to redirect a larger share of money to <a href="http://www.wisebread.com/4-reasons-why-a-roth-ira-may-be-better-than-your-401k">Roth IRAs</a>. Personal tax rates are bound to increase and the old advice of socking away pretax money while we&rsquo;re young and enjoying a lower tax rate upon withdrawal at age 59&frac12; may not hold true much longer. Whatever vehicle or approach you choose, having more choices later in life typically means crunching the numbers and saving till it hurts.</p> <h2>4. Get Creative</h2> <p>Getting creative with expenses and income may be the unspoken fourth leg of the new retirement stool. Solutions like trading a large home for a small duplex can reduce expenses and provide rental income. Phasing out of our careers slowly, going part-time, or switching to contractor or consultant status is another way to test to the waters of retirement while still keeping the money coming in.</p> <h2>5. Supplement</h2> <p>Even post-retirement, some folks are choosing to go back to work part-time in their previous fields or explore new, lower-stress jobs. The days of all-or-nothing retirement may be over, but that doesn&rsquo;t mean that it&rsquo;s not possible to thoroughly enjoy the retirement part of semi-retirement. <a href="http://www.wisebread.com/making-extra-cash">Extra income</a> during these years can supplement personal savings and help retirees feel engaged and plugged in to their local communities.</p> <p>For those of us who believed that retirement would be as simple as that old three-legged model, the rules seem to have been suddenly and unfairly changed. Still, retirement is possible &mdash; maybe just not in the form we anticipated or as quickly as we had expected. The new retirement stool is made of up of many legs, and we&rsquo;re responsible for the stability of most of them. The time to start planning is now.</p> <p>How have your retirement plans changed in the last three or four years? Do you expect to enjoy the kind of the retirement your parents have? What advice would you give middle-aged readers who are rethinking their retirement strategies?</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/how-to-retire-during-a-recession">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/how-much-do-i-need-to-retire-how-much-can-i-spend">How much do I need to retire? How much can I spend?</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/how-to-make-sure-you-dont-run-out-of-money-in-retirement">How to Make Sure You Don&#039;t Run Out of Money in Retirement</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-retirement-planning-steps-late-starters-must-make">7 Retirement Planning Steps Late Starters Must Make</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-keys-to-an-early-retirement">4 Keys to an Early Retirement</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/left-a-job-do-a-rollover">Left a job? Do a rollover.</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement pensions recession retirement planning retirement savings Mon, 26 Dec 2011 10:48:14 +0000 Kentin Waits 838006 at http://www.wisebread.com Put Off Saving for Retirement http://www.wisebread.com/put-off-saving-for-retirement <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/put-off-saving-for-retirement" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/2752876301_00aa6a71fa_z.jpg" alt="Island Beach" title="Island Beach" class="imagecache imagecache-250w" width="250" height="188" /></a> </div> </div> </div> <p>Here's an unpopular idea. Everybody knows that you should start saving for retirement as early as possible, because everybody's seen the calculation where you put aside a few dollars every month starting at age 20 and with compound interest have a huge amount by the time you're 65. (See also: <a href="http://www.wisebread.com/dont-despair-over-small-retirement-savings">Don't Despair Over Small Retirement Savings</a>)</p> <p>There are three big problems with this scenario.</p> <p>The first is that, right now anyway, it's impossible to earn any interest. That's not generally true, but it is true that you can't assume that any particular rate of return is going to be possible. (If only I were as rich as I'd imagined I might be when I did these sorts of calculations in the early 1980s, when long-term government bonds were paying 14%!)</p> <p>The second is that there are certain phases of your life when you really need the money, and one of them is when you're first starting out. When you're trying to set up housekeeping for the first time &mdash; buying pots and dishes and furniture (not to mention paying off your student loans) &mdash; a few hundred dollars is going to make a much bigger difference to your standard of living than it will make when you're retired (even with compound interest).</p> <p>The third is that people's incomes are low when they're young. Even with compounding, the ultimate contribution of those small, early deposits is insignificant, compared to the amount of money you can sock away in the last few years of your career.</p> <p>The real reason to start saving for retirement early is to <em>establish the habit of saving</em>. So, let me be clear &mdash; I'm not recommended that you put off <em>saving</em>. I'm just recommending that you put off saving <em>for retirement</em>. By all means, start saving early. Save for an <a href="http://www.wisebread.com/figuring-the-size-of-your-emergency-fund">emergency fund</a>. Save for down payments on a house and a car. Save for a vacation. Save for a luxury item you really, really want. Develop that habit of saving. Then, in a few years, when your income is a little higher and your household a bit better established, go ahead and start saving for retirement.</p> <p>Your retirement will be just as secure, and your first few years will be a lot more comfortable.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/philip-brewer">Philip Brewer</a> of <a href="http://www.wisebread.com/put-off-saving-for-retirement">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-7"> <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-biggest-ways-millennials-risk-their-retirements">5 Biggest Ways Millennials Risk Their Retirements</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/left-a-job-do-a-rollover">Left a job? Do a rollover.</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/its-never-too-late-to-fix-these-5-money-mistakes-from-your-past">It&#039;s Never Too Late to Fix These 5 Money Mistakes From Your Past</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-of-the-fastest-ways-to-go-broke-in-retirement">4 of the Fastest Ways to Go Broke in Retirement</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/8-money-moves-to-make-before-you-start-investing">8 Money Moves to Make Before You Start Investing</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement emergency fund retirement savings student loans Tue, 13 Dec 2011 11:00:17 +0000 Philip Brewer 819655 at http://www.wisebread.com 3 Options To Help Business Owners Catch Up On Retirement Savings http://www.wisebread.com/small-business/3-options-to-help-business-owners-catch-up-on-retirement-savings <div class="field field-type-link field-field-url"> <div class="field-label">Link:&nbsp;</div> <div class="field-items"> <div class="field-item odd"> <a href="http://www.openforum.com/idea-hub/topics/money/article/3-options-to-help-business-owners-catch-up-on-retirement-savings" target="_blank">http://www.openforum.com/idea-hub/topics/money/article/3-options-to-help-busines...</a> </div> </div> </div> <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/small-business/3-options-to-help-business-owners-catch-up-on-retirement-savings" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock_000010283803Small.jpg" alt="Retirement nest eggs" title="Retirement nest eggs" class="imagecache imagecache-250w" width="250" height="183" /></a> </div> </div> </div> <p>As small businesses struggled over the last several years, many owners put retirement savings on the back burner. Now that businesses are on a more even keel, many owners are realizing that they have fallen behind in their retirement savings and want to catch up. The tax law offers a number of different tax-advantaged retirement savings plans in which contributions by the business are tax deductible (contributions by participants are excludable from income), and earnings on contributions are tax deferred &mdash; they are not taxed until distributions are made. Some plans may be better for playing catch-up than others.</p> <h3>Defined Benefit Plans</h3> <p>Defined benefit plans are pension plans that promise to pay a set amount to the owner or other participant at retirement. In order to meet this promise, an actuary calculates the contributions needed after factoring in retirement age, expected rate of return on investments, and other factors. The closer to retirement age, the more that must be contributed by the business to meet the promised pension.</p> <p>For 2011, the maximum promised pension amount is $195,000. In order to set aside sufficient funds to pay this pension for an owner who is now 50 years old, the contribution could be as high as about $172,000; for an owner 55 years old, the contribution could be as high as about $191,000. The allowable contribution is fully tax deductible.</p> <p><em>Advantages:</em> The chief benefit is the ability of a business owner to shelter significant dollars each year and ultimately have a nice pension at retirement. These plans work best for older owners with few employees, all of whom are younger workers. Defined benefit plans often are used by professionals, consultants, and other high earners who meet the appropriate demographics.</p> <p><em>Disadvantages:</em> Plans must be nondiscriminatory, so that if a business has employees, they too must be covered; this can be pricey for the business. There are also annual required filings and, in addition, extra costs unique to these plans that can add up to serious dollars. For details on annual actuary fees and premiums, visit the <a target="_blank" href="http://www.pbgc.gov/">Pension Benefit Guaranty Corporation</a>.</p> <h3>401(k) Plans Combined with Profit-Sharing Plans</h3> <p>Many companies today use 401(k) plans because they shift the primary burden for retirement savings to employees. Companies may make contributions to the plans, but often they are minimal. However, these plans can be combined with profit-sharing plans to maximize contributions for owners.</p> <p>An owner, age 52, wants to set aside the maximum amount for 2011. She can make a salary reduction contribution of $22,000 ($16,500 allowed for anyone, plus $5,500 for those age 50 and older). The business can also make a profit-sharing contribution of $32,500; the total amount added for retirement savings can be up to $54,500. To achieve the maximum contribution, compensation to the owner must be at least $245,000.</p> <p>These plans can be used for both a corporation and an unincorporated business. Even a self-employed person with no employees can have a solo 401(k) + profit-sharing plan and maximize contributions.</p> <p><em>Advantages:</em> The cost to the business for covering employees is limited; employees value the opportunity for retirement savings even though they may not all make contributions. These plans are suitable for any type of business.</p> <p><em>Disadvantages:</em> Again, plans must be nondiscriminatory, so if the company contributes to an owner&rsquo;s account, the same contribution percentage must be used for other plan participants. Like defined benefit plans, there are annual filings and other administrative costs on top of any company contributions.</p> <p>Use an <a target="_blank" href="http://www.dinkytown.net/java/Retire401kProfitShare.html">online calculator</a> to see how your savings can mount, depending on the contributions you make.</p> <h3>DB(k)</h3> <p>The Pension Protection Act of 2006 created a hybrid plan, called a DB(k), which combines a defined benefit plan funded by the company, with a 401(k)-like plan funded primarily by employees along with minimum company contributions. The plans can be used only by companies with two to 500 employees and are designed to entail less paperwork than some other types of plans.</p> <p>DB(k)s were set to debut in 2010. However, to date, there has been no comprehensive guidance from the IRS, so financial institutions have yet to design and implement these plans. (The <a target="_blank" href="http://www.irs.gov/irb/2011-01_IRB/ar11.html">IRS has said</a> it will issue determination letters for individually-designed plans.) Once they become mainstream, these plans could be a nice solution for some businesses. Stay tuned!</p> <h3>Tax Credit for Setting Up a Plan</h3> <p>If your company hasn&rsquo;t had a retirement plan in the past three years and you set one up now, you may take a tax credit for plan startup costs of up to $500 per year for the first three years of the plan. The credit is 50% of startup costs, which include costs for establishing or administering an eligible employer plan or costs for retirement-related education of employees about the plan.</p> <p>The credit applies only to small employers, which are companies with 100 or fewer employees who each received at least $5,000 of compensation during the year. However, no credit can be claimed if the only participants in the plan are the owner or owner and spouse.</p> <p>For more details about this tax credit, see instructions to <a target="_blank" href="http://www.irs.gov/pub/irs-access/f8881_accessible.pdf">Form 8881</a>, Credit for Small Employer Pension Plan Startup Costs.</p> <h3>Final Word</h3> <p>If you are uncertain which type of retirement plan to select for your situation, discuss your goals and concerns with a knowledgeable benefits expert.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/barbara-weltman">Barbara Weltman</a> of <a href="http://www.wisebread.com/small-business/3-options-to-help-business-owners-catch-up-on-retirement-savings">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/left-a-job-do-a-rollover">Left a job? Do a rollover.</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/250-tips-for-small-business-owners">250+ Tips for Small Business Owners</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-simple-ways-to-boost-an-underperforming-401k">5 Simple Ways to Boost an Underperforming 401(k)</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/the-5-best-credit-cards-for-small-businesses">Best Credit Cards for Small Businesses</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-biggest-ways-millennials-risk-their-retirements">5 Biggest Ways Millennials Risk Their Retirements</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Small Business Resource Center 401(k) DB(k) defined benefit plans retirement savings small business Thu, 05 May 2011 21:34:41 +0000 Barbara Weltman 532482 at http://www.wisebread.com