Category Archives: Finance

Top 10 Ways to Save

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1. Get a FREE checking account! Most national and local banks now offer free checking products. If you already have a checking account make sure it’s all free, and if it’s not; make it free or change banks. A lot of people don’t understand the real power that banks have over your money. They insure it up to $100,000.00 so that you don’t have to walk around with all those bills in your pockets.

2. No more NSF’s for you! Pretend that $100.00 is really $0.00. Meaning if you go under $100.00 you have to bring it back up to $100.00. This very useful trick makes you NEVER have to pay an insufficient funds penalty (NSF fee.) I have known many people that have saved hundreds of dollars and sometimes thousands because they have implemented this trick.

3.Open a high yield savings account. There are so many online banks such as www.INGDirect.com and Emigrantdirect.com that offer extremely high yield APY (Annual Percentage Yield) usually over 4.5%. Before you go online for savings account shopping, make sure your local bank isn’t offering a product that will compare. All real online banks offer insurance up to $100,000.00 just like your regular brick and mortar branch. If you are looking for the highest rates possible www.bankrate.com will be able to help you out a ton. Just remember that sometimes an online bank such as INGDirect might not have the highest APY but they have some of the best customer service in the industry, and also offer other savings tools that you can only get with an INGDirect savings account. So do your research!

4. Pay bills online. You might not think that saving a few dollars a month on stamps is worth it, but have you also thought of the fact that your bank INSURES the check? If you were to send it through regular mail and it is lost your out of luck. With eBanking, which is usually FREE with your checking account, you no longer have to worry about late charges, stamps, and lost mail.

5. Direct Deposit it! Does your job offer direct deposit? Ask your financial or human resource department if it’s available. This not only saves you a ton of time by not having to go to the bank and wait in line, but saves you money. How? Well it is proven that if you cash your check you are more likely to spend money on stupid stuff. Less anxiety. More time. More money. Direct Deposit. It’s a beautiful thing.

6. 401(k) is the 1st step to riches. This is one of those things I can’t stress more about. Ask your HR department if you have an active 401(k) or 403(b) programs. It’s like having a free raise at work if they have a matching program. Here’s an example: lets just say that you put in 5% of your pay into a 401(k) (sponsored by your company) your company can sometimes match up to that 5%. That’s a 5% raise without doing anything at all! This is also pretax money, *UNLESS your in a Roth 401(k)* which usually also lowers your taxes.

7. Shop around. It still confuses me to this day that some people still don’t shop around when purchasing items such as a computer. They will complain about wanting a raise, yet they go to the first place they find and spend too much on a product or service. Did you know that getting a raise by two dollars usually puts only one dollar after Uncle Sam gets his part? Did you also know that saving $50-$100 for a computer pretty much just gave you a raise of $100-$200 dollars? Think about it. You have the internet now, so you don’t have any excuses paying too much for big ticket items. This also applies to insurance. So shop around and have fun doing it.

8. Getting a productive and cheap hobby. Something as simple as working out or reading can have serious effects on your spending habits. Finding something that occupies your time and gives you a sense of accomplishment will not only save you money but it promotes a healthy lifestyle.

9. Stop smoking! This is not only for smokers but also to the non-smokers. Do you have something in your life that you use on daily basis that costs a ton of money that you could seriously live without? Something like going to get coffee in the morning, buying a Twix bar at lunch, buying a pack of cigarettes, or buying a Fuji water for $2.00!! Seriously people its water…. Cutting out some items that you usually purchase on a daily basis can give you a ton of money at the end of the month. Seriously try this for one month and tell me you don’t see your savings account balance going straight up.

10. 10-15% Factor. Pay yourself first and save10-15% of your income before you spend it. If you make this automatic using your online savings account or direct depositing a portion of your check into your savings account you won’t even miss that money. Another great thing about this savings tip is you can realistically blow all your money on anything you want if you are at least saving 10%. If you are paid on a bi-weekly basis try saving 10% on your first check, and then doing 15% on the last. Most of the time commissions, bonuses, and overtime are tied to the final check of the month and by saving that extra money you will definitely see your savings go up and up.

Social inSecurity

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Even though this topic applies to an older audience, this will be heavily debated subject in the next two decades. As a young man I know that this social program will probably be depleted by the time I retire, but most people my age that do not save for their retirement still believe the government will support them in the years they can no longer work.

According to USA Today, “Last year, that rate sank to -0.5%. Households spent $41.6 billion more than they earned. The rate’s last dip into negative territory was in 1933, when banks were closed and breadlines were long. In January, the savings rate fell further, to -0.7%.” This seems like a scary statement, but it draws a vivid picture of our future. How is the younger generation supposed to save when our parents spend more than what they make?

Another scary statistic is that the percentage of households putting money into their savings fell to 56.1% in 2004, down from 59.2% in 2001. It gives me shivers down my spine thinking about what long-term effects this will have on America. Unless this cycle is broken, and our generation starts to save, our country will be in financial ruin.

This program was created to help the retirees have financial benefits post retirement. The big problem is that the government did not predict some huge factors contributing to the downfall of the plan such as: women in the workplace lowering the birth rate (the biggest factor), men and woman living past the age of 60, inflation, and the rapid development of foreign countries. President Bush tried to put together a plan to reform Social Security that would update the program, but of course was shot down. This program MUST be reformed so that our generation of non-savers will still have a forced savings plan.

Even though I personally think the government should not have a huge role in our retirement, many people do. I also think that when you look at the program itself it looks like an illegal Pyramid Scheme. That is just my opinion. Read what the SEC describes as a pyramid scheme and then you cannot tell me there aren’t any similarities between both programs. In conclusion, I think that we need to save for ourselves and hope others will catch on before they have to retire. Finish rich by early saving and let the wonder of compound interest take its course.

I will address how to save for retirement correctly in a future financial post.

Save while you’re Broke. Spend when you’re Rich

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I know many of you might not be looking at the day you retire, but maybe by planning now you could be very rich later on. Most people when they are young (high school ’til graduation year in college) have most of their things purchased and paid for by their parents such as: car, insurance, cell phone, medical, rent, clothing, and probably some other things. This is the perfect time in life to begin saving the most you can. There are three saving methods that people age 18-25 should consider. They are easy, flexible, and will benefit you in the long run.

First being an IRA (Individual Retirement Accounts), specifically the Roth IRA. This retirement account is aimed directly at younger people trying to save money while they are working. *Go to this website for the specifics* The most important benefit about the Roth IRA is that the money that is put into the account will grow TAX-FREE for life by using after tax money. This is the only true savings vehicle that you will never have to pay taxes on EVER as long as you follow the guidelines properly. Here is a real example on what can happen if you put $150.00 a month into an Roth IRA at age 18 at 10% compounded yearly. At 50 years old you will have $421,250., and at the tender age of 59 you will have 1,117,325. Why such a huge jump in 9 years? The incredible miracle of compound interest. It is what makes starting to save early such a wonderful thing. This website shows you how powerful a retirement account can be. Even if you end up having a hundred million dollars in interest you will NEVER pay any kind of taxes. INGDirect, Sharebuilder, Scottrade, and Fedelity are great companies that will offer you some great deals on IRA’s. Check them out and start as early as you can.

Saving for a home of your own should be a priority in most people’s lives. I don’t know many people that want to live in their parent’s house or an apartment till the day they die. Most people make the mistake of saving much too late for their homes and have to take out a bigger mortgage then originally planned. Saving early in a high yield savings account through INGDirect can really help you make the transition from an apartment to a house much easier. Usually, you want to have either 10-20% of the purchase amount in cash when buying a house. Realistically, 10% is a great down payment, so aim for 10%. For example, if your first house costs $130,000 you will need $13,000 to purchase it unless you have wonderful credit. Remember your first house doesn’t have to be your dream house, so DO NOT buy a house that you know you cannot afford, even if the mortgage company says you can. Houses make some of the best long-term investments possible. Read “ The Automatic Millionaire Homeowner” if you really want to start jumping in the real estate market.

The final savings vehicle usually will only be offered if you work for a medium or large company, but this savings program alone will make you want to work for corporate America. It is called the 401(k) plan (or 403(b) if you are working for non-profit). If you’re company offers a matching contribution plan, you CANNOT pass up this golden opportunity to make a ton of money. When you purchase in to the 401(k) Plan, most companies will match a certain amount, usually 4-6%, of your eligible contribution. For example if you were to make $2000 a month and you put 5% of your pay into the 401(k) plan (a hundred dollars a month) your company would usually match that contribution of $100. That is a direct 100% return on your money. You can’t get much better than that. So if you work for a company that offers a matching contribution (do not enroll unless they offer a matching program – I will talk more about this in a later discussion) enroll in it today!

These savings vehicles will make you so completely rich that you will not have to worry about Social Security at all. Remember if you want to be rich follow my advice, but if you want to work ’til you’re eighty and live paycheck to paycheck be my guest. Just don’t complain when all your friends are sitting at the beach while you are still working because they read this post and started saving.

Paying Back Student Loans. The Easy Way

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Finally, you are done with school, you got a great job, and your parents cut the financial umbilical cord. You’re finally on your own, but those student loans that you took out for “school necessities” want their money back. Now it’s time to prepare a smart plan to pay back your debt. What are you’re options? What are the terms that you quickly signed? How much money will it really cost you? These are relevant questions that I will answer and some of the best ways to get started on your student loan pay-back journey.

First, I must say that student loans are usually a great debt to have if you used the money wisely. This loan is one of the best investments you will ever make. Some of you might be saying “Jeremie, what do you mean? I took out a loan. How can that be a great investment?” The reason why student loans are such a great investment is because you invested the money in your education – in other words, the money you will receive having a college degree is higher than just having a high school diploma. According to the Census Bureau, college graduates receive over one million dollars more than a high school graduate. Now isn’t that a great return on investment? There are many other advantages to higher education. Check them out here.

Your options after taking out the loans could take many hours of reading so I picked out the real important ones. One of the first things you do is decide whether or not to consolidate your student loans. This is a no brainer. If you consolidate all of your Federal Stafford loans (the most common student loan) you will lock in a good interest rate, good repayment options, and save a ton of money.

Choosing your repayment schedule is a very hard thing to decide when you consolidate. The terms are usually ten to thirty years. The shorter the term, the higher the payments, but the less interest you will pay over the life of the loan. If your loan has a longer term, you will have lower payments and pay more interest over the life of the loan.

Example: Loan amount $35,000/ Interest 4.25%/ Term 10, 20& 30 years.
10 years your monthly payment would be $358.53 and total interest would be $8,024
20 years your monthly payment would be $216.73 and total interest would be $17,016
30 years your monthly payment would be $172.18 and total interest would be $26,984.

You will have to decide whether or not you can afford the larger payments. I recommend going for the 20 year term and paying it off in 15 years if you can.

*This example was taken out of one the best personal finance books for younger people. “Suze Orman’s The Money Book for the Young Fabulous & Broke” This is a MANDOTORY must read. She’s my favorite author and coach, so please buy the book and start watching her show.*

Do you have a huge student loan over $50,000.0 and you just can’t afford the monthly payments? Do you feel like you are drowning in debt, and you feel like you cannot get out? Well, unfortunately you cannot file for bankruptcy and get rid of this debt. It stays with you till the day you die. So pay it off. This is an contract you signed when you agreed to the terms of the loan. Be good to the student loan people and they will be good to you. If you cannot afford the payments call and ask if there is a flexible payment plan that they can qualify you for. *Remember if you took out a loan have the common courtesy to pay it all back.* If you don’t think you are ready to get yourself in that kind of debt do not get a student loan.

Here are some great ways to save even more money with student loans. Have them auto debit your checking account to save .25% If you also make three years of consecutive on time payments your interest rate will drop a whole percentage point. That’s a 1.25% reduction for doing almost nothing. Another thing to remember is that a lot of the interest on your student loan is tax deductible. Make sure you talk with your tax advisor to see if you qualify for this incredible deduction. *Most people will qualify for this deduction unless you make over $50,000 *

This should lead you in a good direction on how to handle student loan debt. Like I said before, read Suze Orman’s book “The Money Book for the Young Fabulous & Broke” and actually use the advice she gives in the book. If you apply the tactics she writes about correctly, there is almost no chance you will retire broke. Remember there are three organizations you don’t mess around with. The IRS, the Mafia (ha), and The Student Loan Lenders.

Credit Cards. The Good, the Bad, and the Ugly

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Is the point of credit cards ruining people’s lives, or are people’s lifestyles ruining the point of credit cards. Most people say that credit cards are destructive pieces of plastic that can dig you deeper and deeper into a hole of never-ending debt. This is not always so – personally, credit cards gave me a wonderful credit score that allowed me purchase a house when I was 20 without a huge down payment. If used correctly, credit cards can be your best friend. They will help you save money, build credit, and give you perks if you use the card for legitimate purchases.

Credit cards wield a powerful affect on your credit score. They make up a huge portion of the over all score; therefore you should not mess up with credit cards. They can either make or break you. There are many credit cards out there that have all sorts of benefits and perks. To pick out the best credit card for you go to Creditcard.com and select what attributes you want in a credit card. If you want to use a credit card, but think you will abuse its power (buy now – pay later) think of it as a debit card for the first year. When you make a purchase pay it off immediately when you get back home. This system worked for me, and it made me realize that my credit purchases directly affect my checking account. When your checking account is depleted, don’t go off buying a ton of stuff. There are good purchases and stupid purchases. Be wise and stay safe.

10 bad habits that lead to debt disaster according to Bankrate (along with Jeremie’s input):

1. Misusing balance transfers. – Moving credit card balances over to prevent you from having to pay the balance in full is an awful idea. Pay it off when you get the bill.

2. Not checking credit reports. – Always check your credit reports yearly. They allow you to see it for free at Annual Credit Reports so check it out. If you find any mistakes – correct them ASAP.

3. Failing to alert creditors about a financial hardship. – Make sure you talk to someone if you have a life changing event that will prevent you from making payments such as: job loss, personal injury, death in the family, ect.

4. Thinking of “budget” as a dirty word. – Budgets work for some people, but I believe in the “pay yourself first” method, so budgets are not on the top of my priority list.

5. Using retail store credit cards to make use of discounts. – Using retail cards for discounts is sometimes a great thing on big purchases, but do not open a credit card at every retail store, and remember the extremely high interest rates on those cards.

6. Procrastinating on creating an emergency fund. – Always have a six to eight month emergency fund to protect yourself from job loss, or personal injury.

7. Paying bills in no particular order. Pay your important bills first. Mortgage, rent, and utility bills always come first. Credit comes second.

8. Charging purchases instead of paying in cash or with a debit card. – I believe in the total opposite. If you can afford it pay in credit, then pay off your balances. This builds your credit, and, depending on your card, can give you cash back.

9. Making credit card payments late. – This will not happen to you, because you’ve registered to pay your bills online, RIGHT? Late payments can ruin your credit, and you lose a ton of money in late fees.

10. Making the minimum payments only. – This will make you so poor. If you had a $5000.00 balance at 13.5%, it would take you 28 years paying the minimum payment. Pay your balances in full!