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savings

Go Ahead, Be Selfish

by Jaime Thompson on September 24, 2010

nesteggWe teach our children to share, to find the joy in giving, and that the world doesn’t revolve around them. Just as we try to model the social behaviors we want our children to take into adulthood, financial ideas and habits start developing at a young age. Whether we are conscientiously teaching them or they are merely observing our dealings with money, they are learning.  However, I’m about to tell you to be selfish and teach your kids to do the same.

As parents we want the best for our children, but do we want to leave them with the financial burden of caring for us in our later years? We cannot sacrifice our retirement savings to “benefit” our children. I watch people put off their own retirement savings to put money in a college fund, pay for an extravagant vacation, or buy a new car, but who is going to pay your bills when you retire? Unless you plan on retiring in the next few years, the only thing you can be certain of is that the future of social security is uncertain. And with an enormous and continuously mounting national deficit we cannot expect the government to cover our expenses in retirement.  So assuming you are debt free and have a comfortable emergency fund, what should you do with the extra money you have each month?  First and foremost you should be putting money in a retirement fund. Yes, this means before you contribute to a college savings fund. If you work for a company that matches some of your 401k contributions, start there until you receive the full match (it’s free money!) and then put any other money you can into a Roth IRA*.  Once you maximize your retirement investments, then you can start putting money away for college.  Remember, your children can always get loans and scholarships to help pay for college, but nobody is going to give you a loan to pay your monthly bills in your retirement years.

*assuming you are eligible to contribute

(photo by scottwills)

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What’s In A Name?

by Jaime Thompson on September 18, 2010

Did you have a hard tinameme picking a name for your baby? Maybe you already have names picked out for your unborn children. What about your savings account? College fund? Vacation fund? Behavioral finance experts have found that earmarking your savings for a specific goal can have a big impact on your savings rate. In a 2009 study done by Amar Cheema and Dilip Soman, they found that labeling a college fund with a childs name nearly doubled how much was saved compared to those without a name attached. Cheema recommends opening multiple accounts and giving them labels to help motivate you to reach your goals. So, what will you be naming your savings account?

(photo by Vanderlin)

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Organize Schmorganize

by Jaime Thompson on September 7, 2010

file_cabinetsI know I know, organizing is no fun. Well unless you’re a Type A like me who actually considers it a sport. Last week I alluded to your organized file cabinet and this week we’ll delve into that a little further to get you on the right track if you aren’t already there.

First you’ll need a place to hang file folders. No, you don’t need an industrial sized metal clunker. The first file cabinet I ever had was something I picked up at one of those super stores for around $5. It’s plastic and fits in the bottom of a closet, perfect for a small space. Obviously you’ll need to get some hanging folders with a tab at the top to create labels. Find an hour or two, a good friend to help or some great music to listen to then get to it. The following list includes the basic categories you should start with. I recommend keeping each primary category in alphabetical order and the subcategories also in alphabetical order behind it. And you guessed it, keep papers in chronological order when applicable.

Banking (savings & checking)
Children (bank accounts)
Credit Card Debt (hopefully you don’t need this one!)
Household (mortgage/rent, utilities, phone)
Insurance (auto, home owners, life, disability)
Investments (brokerage accounts, college savings, retirement)
Legal (alimony, child support, copy of wills)
Medical (bills, claims, copy of power-of-attorney, receipts)
Tax Returns

I understand that space is often at a premium, but there are some documents you will need to keep forever. In the previous list I reference keeping a copy of some of the below documents in your file cabinet so they’re easy to get to, but originals should be stored in something more secure such as a fire proof box.

Birth and death certificates
Passports
Immunization records
Marriage papers (and divorce papers)
Will and Living Trust
Health Care Proxy
Insurance Policies
Real Estate

Once you accomplish this task, give yourself a pat on the back or a little treat as a reward. My hope for you is that you will start to find that peace and order in your environment will promote peace and order in your financial life.

(photo by jono dot com)

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Post image for Going Green to Save Green

Going Green to Save Green

by Jaime Thompson on August 28, 2010

We all know by now we should be using compact fluorescent light bulbs, unplugging electronics and appliances that aren’t in use, washing our clothes in cold water, and adjusting our thermostats when we aren’t home. These will all help save us money every month on our utility bills and it’s just better for our earth. But what other ways can we be green in our lives and help us keep more money in our pockets?

Some retailers will pay you to recycle! Office Depot and Staples offer a store credit for every ink or toner cartridge you recycle with them. M.A.C. cosmetics will give you a free lipstick when you return 6 of their primary packaging containers. Recyclingforcharities.com allows you to recycle electronics such as cell phones, cameras, and PDAs. You select the charity you want your unused product to benefit and then you can take a tax deduction (assuming you itemize your tax returns).

Another great idea is Freecycle.org where you can find items other people no longer need and get them for free! No, you aren’t going to find a brand new stainless steel fridge, but if you want to try your hand at camping, you can probably find someone who has an old tent lying around that they no longer use. In fact, it’s a great way to help clear out some things you no longer need but are still in usable condition. After all, we want to enjoy life, not just a garage full of clutter.

(Photo credit aussiegall)

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Somebody Save Me!

by Derek Sisterhen on July 26, 2010

If you could go back and talk to your teenage self, what would you say? I can think of a whole host of things. My guess is many of us would tell our teenage selves what to do differently.

“Don’t bother with that girl, she’s a heartbreaker…”

“Don’t ‘borrow’ mom and dad’s car without them knowing, you’ll get grounded for a month…”

What would you tell yourself about money? Maybe you’d impart some wisdom about credit cards, or mortgages, or how to buy furniture without financing it. Maybe you’d say you need to have a plan for your money.

Ultimately, I think we’d all agree that the most important lesson we’ve learned since growing out of that younger-looking body is that we should’ve saved more money. Even if it was just $20 here or $10 there; I have yet to meet someone upset by how much money they’ve saved.

I spoke to a group of 30 teenagers the other day on preparing for the financial responsibilities of life outside the nest. Did you know that if a 16-year old began saving $1,000 a year until she turned 21, that $6,000 would grow to nearly $550,000 at retirement age? If she puts that in a Roth IRA, that money is completely tax free. Why parents aren’t teaching their kids this simple, fundamental principle of wise financial management is beyond me.

I told the teenagers I met that the writing is on the wall – Social Security will be a shell of its current self when they retire. They understood that they are on their own for their retirement savings, but didn’t know where to begin.

So, if you could go back, what would you tell yourself? Is it any different than what you should be telling your kids right now?

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Our Piggy Banks Are Losing Weight!

by Derek Sisterhen on May 12, 2010

Long ago, in a galaxy far, far away, there was a time when people actually saved money. Indeed, they would take a certain portion of what they made from their income-producing jobs and hold it for later use.

What were these crazy people thinking? How different was their society compared to our own?

A tremendous personal financial shift occurred on the heels of the Great Depression. People – especially the young ones who grew up through the 1930s – began saving money like crazy. They justified it easily because the Depression didn’t give very much notice before it struck nor how deeply it would impact the country.

“Who knows when it will happen again? I’m going to save money,” they would say. So, in 1943, the personal savings rate was 27%.

Fast forward 80 years; welcome to the heels of the Great Recession. In March of 2010, the personal savings rate for American households was 2.7%. That’s down from 3% in February. (Personal savings is disposable income, or take-home pay, minus expenses.)

The talking heads will tell you that Americans are burdened by consumer debt, houses worth less than what they owe, and high unemployment. I think those are excuses made in the name of retaining a lifestyle that many of us incorrectly believed we could afford.

Remember your history: the 1920s were “roaring”; ironically the savings rate was similar to today’s. From debt usage to spending, there are many striking financial similarities between the 1920s and 2000s. What appears to be dissimilar is the response.

The rearview mirror of history gives us 20/20 vision. Perhaps in ten more years American piggy banks will plump back up. At this point on the timeline, there’s little evidence to support that we’re learning the lessons those folks did long, long ago in a galaxy that looks like my hometown.

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