Archive for the ‘Personal Finance’ category

Personal Finance and Your Future: Your Retirement Account

January 21st, 2010

Some people do not feel they have the money needed right now to live on. If you are employed, you should be thinking about your retirement. Social Security will not be enough. Your employer may not be offering you a pension. It is up to you to start looking at retirement right here and now, even if it means just a few dollars per paycheck.

Compound Interest

The sooner you start to invest in your retirement, the less difficult it is to accumulate the amount of retirement investment you need and want to have to pay for your expenses. The reason behind this is compound interest. When you put money into an account earning 2 percent interest, that 2 percent not only applies to the initial investment, but also to any interest earings you have in the previous period. For simplicity sake, if you have $1000 in a retirement account at just 2 percent interest, you would have $1020 after the first cycle. This time around, that 2 percent is applied to the $1020 and after the cycle ends, $1040.40. On a larger scale and with better investments, this build up in value over time is substantial. The sooner you start saving, the more time there is for compound interest to work on your behalf.

Types of Retirement Accounts

There are a number of retirement accounts available to you. Each one offers something different and is for a specific person. Take a look at a few of the options you have and their advantages.

401K: This common employer based account makes retirement savings easy. You choose the amount you deduct pretax from your paycheck and deposit into your retirement account. Like other employer based accounts, your employer may match any amount of that investment. Your money grows tax free throughout its lifetime until you start to withdraw it.

Traditional IRA:Perhaps your employer does not offer this type of benefit to you. That is no problem. You can set up your own IRA in a local credit union, bank or investment firm. You are able to deposit up to your limit (based on your age and the tax year) each year. The funds go itno your traditional IRA before taxation and you are taxed only when you begin to withdraw from your accounts during retirement.

Roth IRA: With a Roth IRA, the funds you put into your account are taxed prior to being placed into the account. Then, the funds grow tax free throughout your lifetime. You do not have to pay taxes later when you withdraw these funds. All of the funds within your account are in fact your own for retirement.

You Don’t Have Enough

Many people believe they just do not have enough money to start an IRA or a 401k and therefore they just do not believe they can put money away for retirement. Even a small amount per paycheck will make a difference in your future. Try for $20 out of your paycheck. Increase this as you get more comfortable with having less in your paycheck. Chances are good you will not notice it and it will provide you with an outstanding way to pay for your retirement expenses long term.

Going without a retirement account is not a good idea. It puts you in a position of having to worry about how you will pay your bills. Or, you could become one of the ever growing statistics in which elderly parents are relying on their children to care for them in old age. Start today to plan for your retirement.

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Personal Finance: Establishing the New Year’s Goals

January 5th, 2010

With the New Year upon us, there are many things individuals and families need to take into consideration outside of the resolutions you may make to lose weight or to spend more time together. Everyone can utilize this time of the year to look back at their financial goals and look forward with new ones. Each person is unique: some want to save more; others want to pay down debt. There may be an important big purchase coming up this year. On the other hand, you may want to think about retirement a bit closer. The New Year brings opportunity. What will you do with it?

Minimize The Crush Of Debt

Beyond anything else, individuals need to focus on their debt. Not only does it physically tax the body through stress, but it is holding you back from living a debt free lifestyle. Consider the following goals to help you reduce your debt:

  1. Spend less overall. Find one way that you can spend 10 percent less of your budget.
  2. Avoid credit cards. Try to use a cash only system when purchasing anything. It will teach you how to be a better saver, too. Make the drastic decision to cut up credit cards if you cannot control spending otherwise.
  3. Pay an extra 25 percent on your monthly payments. Perhaps you are not sure you can do this. Use the funds you cut out of your budget to make it happen.
  4. Contact each of your lenders and request a rate reduction. They may say no, but they may say yes and a yes can save you thousands of dollars over the life of your loan.
  5. Commit to no new credit cards, loans, pay day loans or other debts in the coming year. This commitment to yourself could change your financial future.

Which of these (or all of them) can you tackle in the New Year?

Save More

The second most common goal people have when planning goals for the new year is save more money. Of course, this is a great idea. The problem is, many people do not actually put in place strategies to make it happen. Just saying you will save more money will not help you. Consider the following goals. Which can help you to get more money in the bank?

  1. Take the time to invest in yourself first. If you do not have a 401K or an IRA, or other retirement savings account, find out if your employer offers one. This money comes directly out of your paycheck, has tax advantages and it is not something you need to think about. Did you know you could withdraw from most accounts, without penalty for big expenses such as medical care and down payments on homes?
  2. Focus on the shopping cart. As you walk through the grocery store or department store, keep a calculator in hand. Each item that goes needs tallied as you go. Why bother with this? You are more conscious of how much you are spending. When you see the bill approaching your budget limit, take items out as you need to.
  3. Save more at home. Read up on how to be environmentally friendly and energy use conscious. Find ways to cut costs at home. Is your water heater set too high? Are you using too much electricity during the day? Will a programmable thermostat cut your bill?

Although this is the time of year to be thinking about tomorrow, make sure you put your New Years plan in place today. Write it down. Give yourself specific goals to reach per week or month. As you go along, you will find yourself spending less, paying down debt, and putting more money away so you can achieve your long-term goals.

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Posted in Personal Finance, Saving Money