Archive for the ‘Young Married’ Category

Roth IRA: Great Retirement Option

March 22, 2009

The Roth IRA is a great way to invest for the future. It gives the investor more options than most other investment types. If you don’t have a 401K at work, a Roth IRA is probably your best choice. The main thing a Roth gives you is options. Below are the main advantages to having a Roth IRA.
1) Contributions Grow Tax Free.  Any money you put in a Roth IRA can be withdrawn without tax consequences.  While you are taxes at ordinary tax rates when withdrawing 401K money, this is not so with the Roth.  Being able to withdraw this money at retirement with Uncle Sam getting a slice is a good deal.

2) Contributions can be used to fund college expenses.  This is one of those options that make this investment great.  You can use contribututions to pay for your college or your children’s college.  Our financial needs change due to circumatances.  Even if you desire to use this for retirement, if your financial picture changes you can use this to help fund Suzie’s first year in college.

3) Contributions can help with the purchase of a first home.  Here is another great option provided by this investment.  Money inside a Roth IRA can be used as down payment toward your first home purchase. 

4) Roth IRA assets can be passed to your heirs tax free. What a comfort knowing that your children won’t lose a portion of your estate to the government!  If you have a Roth IRA, this money will pass to your designated survivor without tax consequences. 

5) Contributions (not earnings) can withdrawn at anytime without tax consequences.  You never know what is around the corner.  If a costly financial issue drains your emergency fund, you can use money in a Roth (contributions) as a back up.

I hope you can see a Roth IRA is a GREAT investment tool.  If you’re interested in reaping any of the benefits above, open one real soon.  You won’t regret it.

4 Signs Your Budget Is Broke

March 8, 2009

Budget means different things to different people. To many it’s a bad word. It means constraint and limits. Something we don’t like to think about. Whether you have one or not your money still goes somewhere. A budget is simply a drill sergeant for your money. It tells your money what to do and where to go. How are you managing your money? Are all the bills getting paid on time? Does your current system work? Below are some signs that your budget may be broke.

1) You’re paying overdraft fees.  If you’re paying overdraft fees, something is definitely wrong.  Having your account run over is a sign that you’re overspending somewhere.  An overdraft comes with additonal fees for your mistake.  This is a sign that some fine tuning is needed.

2) Using credit cards to purchase everyday items.  Going to your credit cards for things such as groceries and gas is a sign that things are out of balance.  Unless you pay the card off at the end of every month, you are paying for these items with interest added. Not smart.  If you’re regularly going to plastic because the account runs dry, it’s time for change.

3) Poor record keeping.  Put simply, not writing your transactions in your checkbook can be a hazard to your financial health. It’s not uncommon for me to find 10 or more unrecorded transactions in our checkbook every month.  This is very easy to do if both spouses use a debit card but only one carries the checkbook.  If you have suggestions, please leave a comment on this item.

4) It’s not in writing.  It’s imperative that you have your budget in writing.  You need to have groupings for expenses such as insurance, housing, food, medical care, and automobile just to name a few.  Not having a written budget is like going on a vacation with no road map.  

In summary, a budget is a must if you want to get the most from your money.  Money that doesn’t have a destination quite simply gets blown on non-essential items.  If you’ve seen some of these signs in your own finances, it’s time to make some adjustments.  Banks have enough money as it is.  Don’t let them get their hands on anymore of yours.  Be on the lookout for some solutions in my next post.

7 Tips – Getting Off The Credit Card Treadmill

February 19, 2009

Ever wondered if you’ll be free of those credit card payments?  Do those payments linger around like  a friend who has long worn out their welcome?  Below you will find 7 tips that will help you put an end to credit card debt.

1) Have an Emergency Fund.  One of the reasons folks use credit cards are for emergencies.  The car breaks down. The dryer stops working.  Having a minimum of $1000 in your emergency fund allows you to handle these expenses without going to the credit card. 

2) Stop Charging.  You simply won’t get ahead until you do this.  Implement number 1 and you can accomplish number 2. 

3) Pay More Than the Minimum.   Paying more allows you to do 2 things: 1) Pay the credit card off much faster; 2) Saves you hundreds of dollars in interest paid.  Below is an example of the momentum you can have by following this practice:

$5000.00 Visa Balance, 13% apy, paying the minimum payment $100.00. Result: Pay it off in 6 years, pay a total of $2, 123 in interest, total amount paid: $7,123.00!

Same as above except paying $200 month (100 extra) a month.  Result: Pay it of in 2 years, 5 months, $788,98 in interest, total amount paid, $5788.00! 

4) Buy Needs, Not Wants.  We need food, clothing, and shelter. If your current appliances and cars work, you don’t need the newest version.

5) Pay with cash.  Dave Ramsey says we pay 18% more when we purchase with plastic.  Watching real money leave your hand makes you a wiser shopper.

6) Don’t take them with you.  You can’t use what you don’t have. 

7) Cut them up.  Enough said.

Dentistry & Money: A Comparison

February 11, 2009

Have you ever connected dentistry and your finances?  Think about it for a minute.  Nobody likes to talk about their money problems. Nobody likes to face that dreaded dental exam.  If you think about the principles behind dentistry you can find some real connections to your finances.  Below are some common themes that connect dentistry and money.

Prevention.  We’ve all heard the phrase that an ounce of prevention is equal to a pound of cure.  Brushing those teeth regularly is equal to having an emergency fund.  The emergency fund protects you from events that can set you back financially.  Regularly funding your emergency is the equivalent of flossing to ward off those unexpected cavities that can develop over time. 

Protection.  Protecting your teeth is an investment.  You need those teeth to carry you through a lifetime of eating.  Making sure you have adequate insurance protects you and your family from risks.  Having adequate insurance on your health, cars, life, and home is a must in order to protect yourself from large liabilities. 

Periodic Exams.  Your teeth need a regular check up.  Regular check ups help you know the condition of your teeth and any problem areas that may arise.  A good financial plan must be reviewed regularly.  Some financial choices need monthly reviews.  Balancing your checkbook and writing out your monthly budget are 2 examples.  Reviewing your savings and investment accounts may need review every 6 months. 

In summary, your finances and your teeth need regular attention.  Neglect in either of these areas can result in decay and have consequences for you. I challenge you to be the model patient and implement the practices of prevention, protection, and periodic exams.  When was the last time you had a financial check up?

Wants vs. Needs

February 9, 2009

We  have a lot of choices about what we do with our money.  How much of what you buy every week is a need?  How much is a want?  What about your credit card purchases? What return value are you getting on these items?  In looking back over the choices that you made with money this past month did those choices benefit you long term?  We all have 3 basic needs: Food, Clothing, Shelter.  Transportation is probably a close 4th.  Let’s look at the number of choices you have in these 3 areas.

Food – What do you spend on groceries every month? Do you shop for bargains? Do you keep a sharp eye for items on sale?  Do you use coupons? While food is a basic need, there are many ways to shop wisely and keep costs down.  What do you spend a month on Eating Out?  Is this a need or a want? I say want.  How much money could you save if you only ate out 1/2 as much as you do now?

Clothing – There are lots of choices in regards to clothing.  Does what you buy have to be new? Consignment sales and yard sales can offer slightly used, good clothing at much lower prices.  My two brothers and I spent most of our early years in garage sale clothes and we don’t have any negative repercussions.  You can also get good sales as clothes are going out of season if you keep your eyes open.

Shelter – We all need a place to protect us from the elements.  As I write this my wife and I are building our first home.  The costs of this are coming apparent as we approach the last 6 weeks of this process.  We do want to stay ‘in budget.’  There are lots of choices inthe amount you can spend on your home.  Look at appliances.  TV, Refrigerator, Dishwasher, Oven, Computers, Sound systems. The list could go on.  Before you replace that next appliance, ask yourself, “Is there anything wrong with the one I have?”  “Can I repair it cheaper than buying a new one?” “Can I pay cash for the new one?”  “Can I find a good one that is slightly used?” Can you say, Craigslist? 

We all have lots of choices in how we buy the things we need and want.  If you find yourself cash strapped and stretched with your money, it could be time for you to address needs vs. wants.  Distinguishing a need from a want is a valuable skill if you want to move ahead financially.