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Jun
19

Retirement

By | Personal Finance Tips

You are throwing away money if you have the option to participate in a 401k retirement plan and aren’t doing so. And the earlier you start the better. Because of compounding interest, money socked away in a 401K retirement plan while you are young will be better spent than almost any other form of investment. Each dollar you save in your 20s can be worth ten times as much as a dollar saved in your 40s, so your 20s and 30s are prime time when it comes to saving for retirement, according to About.com.

If you start at age 25 and contribute the $14,000 maximum each year, you would have nearly $4 million by age 65, said John Demming, a spokesman for Vanguard in an article posted on www.kplctv.com, a Louisiana television station’s website. If you start saving in your 401K at age 40, you would have just over $1 million, he said in the article. Note: For 2006, the maximum was raised to $15,000.

A 401k retirement plan is basically a savings account financed by contributions out of your paycheck. The monies are contributed before taxes and then invested. The money is not taxed until you withdraw it from the account, ideally at retirement age. Early withdrawals are taxed and can incur a monetary penalty, except in a few special circumstances. If your employer offers a plan that matches your contribution, you can’t afford not to participate. That’s turning down free money.

According to Joshua Kennon’s “Your Guide to Investing for Beginners,” there can be a big payoff from companies, such as Starbucks, which sweetens its recruitment pot with matching percentages for 401k contributions, He writes, “… an employee working at the coffee giant for over ten years earning $100,000 that contributed $4,000 to their 401(k) would receive a $6,000 deposit in the account directly from the company (150% match on $4,000 contribution.) Anything the employee deposited above the 4% threshold would not receive a match.” According to kplctv.com, its worth checking out websites such as www.Smartmoney.com and www.morningstar.com that have online software and free calculators to help determine how much you should contribute to make your retirement goals.

So don’t walk, run to your HR department and get signed up. The sooner the better.

Jun
14

Creating a Budget

By | Personal Finance Tips

* Create a list of all of your monthly income. If you have any sources of income that are received annually then simply divide this number by 12. It is important to list all sources including alimony, child support, side jobs, etc. This figure will set the cap on your total budget.
* Create a list of all your monthly expenses. If an expense occurs less frequently, simply prorate it to fit a monthly format. Be sure to include such expenses as; housing, food, transportation, utilities, entertainment, etc. It is wise to track your spending for a full month during this stage of budgetary planning. Save your receipts and each evening write down your expenses for the day. This is the best way to gain an accurate reflection of actual expenses.
* Determine if your income covers all of your current expenses. If the answer is no, then expenses need to be reduced.
* Adjust expenses. This can be done in a variety of ways. Depending on the amount of the shortfall, it may be a simple matter of reducing some discretionary spending, such as entertainment, or food.(i.e. the number of times you eat out in a given month) If the deficit is larger then it may be a matter of downsizing your vehicle or your living arrangements. If your income covers all of your expenses then this is still a good opportunity to trim some of the fat off of your spending habits. This can help free up extra money for a variety of reasons ranging from, college educations for the kids, to a nice anniversary trip with your wife.
* Add new categories if necessary. Three areas that are often overlooked are 1) debt reduction 2) retirement savings and 3) emergency savings. An emergency fund will ensure that there is an adequate amount available to cover an unforeseen even (i.e. the car breaks down) should it arise. This will prevent the use of credit which can quickly break a personal budget.

Sep
10

When Should You Consider A Short Sell

By | Personal Finance Tips

Faced with looming debt due to illness, job loss or a skyrocketing mortgage payment after an adjustable rate mortgage resets, many homeowners are considering short selling their home. This is when you are “upside down” on your mortgage – meaning you owe more than the home is worth – and trying to sell it anyway.…
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