Smart debt management

 

   Debt, debt, debt why do so many people have a problem with this one? Credit is too easy to get for most of us. Many of us got credit card offers as soon as we turned 18. I think the words "charge it" need to be replaced with "save up for." When we charge a purchase without the funds to pay off the balance every month, we give the interest income we could have saved to the credit card company. When you can't pay the bill for a purchase at the end of the month, "save up for" that purchase instead with an interest bearing savings account. We want interest payments coming in not going out. The compounding effect of this over time is astounding. Finwiz.

Don't forget brokerage accounts.

  I've talked about 401k's,Roth IRA's,and traditional IRA's. All of which have tax advantages but don't forget brokerage accounts. Brokerage accounts don't have any limit on how much you can save annually. Brokerage accounts are setup through
 a broker to allow you to purchase securities such as stocks, bonds, mutual funds, and money markets, etc. The money sits in a money market or cash account until you are ready to invest it in securities. There are fees for purchasing securities which vary depending on the company you choose for your account. Brokerage accounts can also offer check writing, debit, and ATM cards for access to money in the account. Since there are no tax-advantages of a brokerage account, money can be withdrawn at any time. These accounts are perfect for additional savings that you want to invest in your baskets. Have a great week, Finwiz.

Fill two baskets

  When you start to fund your savings vehicle, it's a good idea to keep your risk tolerance in mind. Stocks and stock mutual funds carry more risk and thus will fluctuate more in price than a bond, Treasury note, or bank deposit. Filling two saving baskets makes it easy to manage your risk tolerance for these two investment categories. Fill your basket with only stocks, and you might not have enough to retire due to a market crash. Fill your basket with only bonds and CD's, and your savings might not grow fast enough to retire when you want to. Fill two baskets and you can control the volatility of your portfolio. I prefer a half/ half approach. If you can handle more fluctuation and want the potential for higher returns, a 70% stocks/30% bonds allocation may work for you. If you can't stand seeing your investments move up and down, a 20% stocks/80% bonds allocation might be best. The decision rests with you. As your tolerance changes, you can move assets between baskets. See you next time, Finwiz.

What are you saving for? Set goals and make plans

    

                                                 Once you've set up a savings vehicle, it's a good idea to set goals and make plans. IRA's and 401k's are saving vehicles for the long term and shouldn't be tapped until you retire. There are severe penalties, in most cases, for withdrawing funds before 59 1/2.  Setting a goal for how much you want for retirement is a must. Find an interest calculator online and experiment with monthly contribution amounts to get an idea of how much you need to be saving monthly to reach those goals. Make a plan for how you can consistently fund your account by that amount each and every month, tenacity is a must! Increase your monthly contribution when you get a raise, and you won't even lower your take home pay. More saving ideas soon from Finwiz.

You can't save at work, now what?

  If you don't have a 401k option at work or haven't been on the job long enough to qualify don't worry you have options. You can contribute to an IRA a.k.a an individual retirement account and or a Roth IRA. There are income limits so check your individual qualifications. Most of us qualify and can contribute up to $5,000($6,000 if age 50+) per year. Depending on your household income contributions reduce your taxable income just like a 401k plan. The easiest way to get ahead is to open 401k and IRA accounts. Have a great day, Finwiz.

Where to save first?

 

    I was asked "If I’m just starting to save, where should I put my money first?” Job, Job, Job, it all starts at work, take advantage of those 401k accounts. When a company matches some or all of your contribution you've made an instant return on your savings. When they don't contribute or match, you should still contribute. Contributions reduce your taxable income at tax time, so you still get an instant savings. Reducing your taxable income is a big part of saving for you future. Look for more posts on saving and tax strategy in the future from the Finwiz.

Everybody Can Save

    People tell me all the time that they don't make enough money to save.  Consider the following scenario:
Times are tough and there are not many jobs out there.  Your boss approaches and says, "Things are tough.  You need to take a 10% pay cut, or I will have to let you go."  Would you take the cut or quit in an environment where there are few job prospects.  I have never had anyone say they would quit the job.  Everyone would take the cut.  So you have just told me that you could already be saving 10% of your paycheck. 
     The fact that you are not already doing this is just a lack of will or tenacity.  Not that you don't make enough money.  Feel free to comment.  Look for more posts in the near future from the Finwiz.