Money Talks Blog by Oxford Planning Group

At Oxford Planning Group we hope you will be amazed by a unique experience. In our two blogs we will include periodic information and viewpoints that we hope you will find interesting. Seasoned Savers is geared towards financially experienced individuals. OPG Basics is aimed towards younger generations just starting out.

We welcome your thoughts and ideas, if you'd like to learn more about any specific area, send us an email at kirsten@oxfordplanning.com

What Scares You?

 

 

Happy Halloween everyone! Hopefully you get to enjoy some candy and fun tonight. Today's post is about financial fears, how they can affect your day to day life, and simple ways to ease your worries about some of these challenges. First, check out this infographic from a recent survey on Wallet Hub by John S Kiernan:

2019 Halloween Spending & Financial Fears Survey

https://wallethub.com/blog/halloween-spending-survey/53821/

As the survey shows, money was the top category that scares people (even over politics, yikes). With the biggest financial fear being unplanned emergencies, followed by lack of retirement funds. As a recent college graduate, there are many financial issues that can be cause for distress. Sometimes it seems like there are so many factors to think about when it comes to my money, it can be a little overwhelming. So, let's address a couple of common "fears" for young adults just starting out.

Scarcity mindset

With a small paycheck coming in, sometimes it can seem like spending money on "non essentials" is always a waste of money. This is especially true if you have a lot of bills to pay, debt, and high price items you are trying to save for. However, it's okay to treat yourself sometimes and spend money on activities that keep you happy. You risk burn out creeping in if all you do is work and stress about money. Make time to do things you enjoy and treat yourself occasionally.

FOMO

Love doing stuff with your friends but not the price you pay to do it? This is kind of the opposite of the scarcity mindset. When you are young and see your friends doing all sorts of fun things and they invite you to do them as well, it can be hard to say no and miss out on the fun. If you are worried that you spend too much money with friends when hanging out, try suggesting options that don't cost much money. Hiking is an awesome option if you enjoy the outdoors, the weather is perfect for it right now. You could also try out a girl’s night where everyone brings wine and an appetizer. Those fun wine painting classes can be done easily (and cheaper) at home if you pick up a few supplies from the craft store.

Debt

Student loans keeping you up at night? Get all your loan information together and determine how much you need to be paying off each month. Research the best options for student loan repayment and work it into your budget.

Big Expenses

When you are just starting out, the idea of having enough money to buy a car or a house can seem insane.  Start by doing some research and figuring out how much you would need for your purchase. Then, set yourself a goal of how much to save and by when. Then, looking at your budget see how much you can reasonably set aside each month towards your goal. If you aren't able to set aside as much as you would like, the next time you get a raise, put the extra money from that towards your goal.

 

With any of these issues, including the first I mentioned, it all comes down to proper planning. Having a solid emergency fund to fall back on can ease a lot of worry. Starting to save for retirement at a young age (the younger the better) will encourage you to keep it up as you and your salary grow. Even if you can only put away a small amount each month, get into the habit of doing so. Review your savings plan when you get a raise or a new job and see if you can be putting any more away.

Fears go away when you face them head-on.  The best time to start tackling them is right now.  Happy Halloween!!

 

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Choosing Health Insurance

 

Health insurance as a young adult is so important. As I mentioned in a previous post, keeping up your insurance when you are young and don't have a lot of money is one of the best things you can do for yourself. When you are on a tight budget, it can be hard to think about paying for multiple types of insurance each month. Realistically though, if you get into an accident and your car is totaled or you require a hospitalization, you will be so happy for that insurance.

Does your job provide health insurance? If so, it's typically cheaper to go with your company plan than it would be to search on the open marketplace. However, if you want to search for an alternative plan you can.

Open Enrollment Friday, November 1- Sunday December 15, 2019

Health Insurance Marketplace:

  • For those who do not have insurance through a job, Medicare, Medicaid or CHIP
  • If you have insurance through your job, plans through the marketplace will be full price unless your coverage at work does not meet certain standards

Insurance offered through an Employer:

  • Often cheaper because they are group plans
  • Choose between plans available through your employer

Individual Plans:

  • Plan is not tied to a job
  • Can choose the insurance company you want and choose a plan with the doctors and hospitals you prefer
  • Change plans during open enrollment on the open marketplace

Basic Health Insurance Terms to Know:

  • Copay: predetermined rate (flat dollar amount) you pay for health care services in addition to what is paid by the insurance company
  • Deductible: amount you must pay before an insurance company will pay a claim
  • Maximum Out of Pocket Cost:the maximum you have to pay for covered services during the year (note the word covered here)
  • Premium: Monthly amount paid for the insurance coverage
  • Coinsurance: percentage of the claim payment that the insured must pay

Health care is expensive. Many people avoid going to the doctors because of the cost of health care. However, this can lead to some conditions going undiagnosed and you risk getting really sick. Most insurance will cover preventative care at little or no cost to you. So even though you are young and healthy, take advantage! Keep up with yearly doctor's appointments and get your flu shot.

For more information regarding the Health Insurance Marketplace go to:

https://www.healthcare.gov/

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Another Subscription Service?

Have you seen an ad for some type of subscription service today? Most likely the answer is yes. From streaming services to clothing companies, it seems like everyone has made a subscription service. A study by Forbes found that among the most popular subscription services in 2018 were Ipsy, Dollar Shave Club, and Amazon Subscribe & Save. While a couple dollars a month for a service seems fine, most of them add up to at least a $100 a year and having multiple subscriptions can mean hundreds of dollars spent over the year.

Do you really need it?

  • Think about the Latte Factor here (discussed in the "Worried About Your Latte?" post previously).
    • That small number builds up over the months and if you have multiple subscriptions, think about cutting down to save money throughout the year.
  • Subscription services know how to market their products these days. Their ads make it sound like such a great deal that you can save so much money with. But realistically, take a step back, and ask yourself "Do I really need or really want it?"
  • I've found myself logging onto some sites because I've seen an Ad that looked really cool. They show the product value as double what you pay, and everything looks so neat. Then I really think about it and I realize I wouldn’t use half the stuff in the box. It's the fun of receiving the package and looking at everything that draws me in, but I realize I'd rather save the money to buy myself one thing I really want later on instead of a bunch of random things I don't really need.

Too Good to Be True?

  • I see more and more monthly clothing boxes popping up. Some of them seem like such as good deal at first. You need to look at all of the small print though. Most automatically charge you for their service at the beginning of the month and a lot do not have an opt out option.
  • Ask yourself if you would really be spending that much money on clothes from their website each month. It might be worth it if they are clothes you really enjoy, and you won't be buying other clothes. However, you need to look at the quality of the clothing as well before signing up.

Not All Bad

  • This post isn't supposed to make you cut out every single subscription, it's simply to try to get you to look and see if you really need all of the ones that you currently pay for or are considering getting.
  • Cable packages can be pricey, $12 for a Netflix subscription per month would save you money compared to an entire cable package.
    • With so many streaming services popping up now though, try not to get hooked on too many because you'll just pay more and more each month.

Every couple of months, re-evaluate if you are still enjoying the service. Before getting another subscription see if it can replace an existing one to offset the cost. Overall, if you just stick with the subscriptions you really need or really want and they fit within your budget, go for it and enjoy.

For more facts about how much the "subscription economy" has grown check out this article by Forbes:

 

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Fall Planning

It's officially fall! Doesn't quite feel like it yet, but we'll get there soon hopefully. With the holidays fast approaching, now is the perfect time for some fall cleaning and preparation.  Why should we save our big cleans for spring? Fall and winter are jam packed with holidays and events, so it's a perfect time to get organized. I recently read a book that inspired me to finally tackle cleaning out my closet. The book was about spending less and appreciating the clothes you already have by getting rid of what you don't wear. When I was done, it felt so nice to have everything organized and I could actually find the clothes I wanted to wear.

Here are a couple of suggestions for some fall cleaning for yourself:

  • Look back on your budgeting
    • How have you done with your budget and goals throughout the year?
    • Are there any goals that you haven't made a lot of progress towards?
    • Re-evaluate your goals and make adjustments.
    • Be kind to yourself and realize that life happens, so if you haven't gotten as far along with a goal as you wanted, figure out why and see if you can change anything to help yourself achieve it.
  • Clean out your closet as well!
    • As we go into a new season, take note of anything that has seen better days and may need to be replaced. This way, if you are shopping, you'll already know what you do and don’t need.
  • Looking towards the end of the year
    • Are there activities that you do every year or a certain one you just really want to try this year?
    • It's a great idea to look ahead at the next couple of months to see if there are big or small events that you should budget for.
  • Gift planning
    • Gifts can be a sore spot for budgets because unless you have an exact item in mind it's hard to know exactly what you want to spend.
    • Think about any upcoming birthdays, events, or holidays that you will need gifts for and set yourself and overall budget, then start figuring out what you want to spend on each person/gift.
  • Hosting
    • Are you planning on hosting family or friends for the holidays?
    • If you are on a tight budget, planning out your meal in advance will help you save money and stay on budget.
    • If you are hosting a night for friends, consider doing a pot luck where everyone brings a dish to save you time and money.

Have fun!

This time of year is packed full of fun activities and events so join in! Trying to stay on budget can make it stressful when you want to enjoy the season, so get all of your planning done early, leave some wiggle room for random things that come up, and enjoy time with family and friends.

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How Much Insurance Do You Need?

Happy National Life Insurance Awareness Month! Hopefully I didn’t just lose everyone reading this. I know insurance of any sort is a hard topic when you're young and don't have a ton of money. However, insurance is even more important when you don't have a lot of extra cash. Trying to learn about all the types of insurance you may need and figuring out how much to get can sometimes be overwhelming. Take it one step at a time and start learning about your personal needs to see what will work best for you.

Types of Insurance:

Compulsory insurance (has a minimum requirement)

  • Health insurance
    • Minimum requirement set by the Affordable Care Act.
    • Various levels of health insurance to pick between.
    • While you may think being young and healthy means you need very little health insurance, there are many things out of your control that could cost you a lot should they happen.
    • Figure out what you want your out of pocket maximum to be to see how much insurance you feel comfortable paying for.
      • In a future post I will get more into how to pick what type is best for you.
  • Car insurance
    • State by state minimum requirements.
    • The minimums are often not enough coverage, so do your research to see how much you need.
    • The more coverage you have, the less likely it is a plaintiff will go after your other assets.
    • Generally, the more assets you have, the more car insurance you want.
  • Home owner's insurance
    • Insurance companies will often not fully cover the cost of damage to a house unless you have at least 80% of your home's value in coverage.

Other types of insurance to consider:

  • Life insurance
    • Do you have someone else depending on your income?
    • Life insurance is less expensive when you are young and healthy. 
    • If you wait and apply for life insurance later in life, you could be denied for many reasons.
    • Partially replaces your salary if you can’t work (this insurance is important for most of your working years for everything from accidents to long term illness).
      • Could you cover your expenses if you couldn't work for a while?
  • Renter's insurance
    • Covers your personal belongings from possible events listed in the policy
    • If there was a fire at your apartment could you afford to replace what was lost by yourself?
  • Travel insurance
    • Good idea for more expensive trips.
    • Some credit cards offer forms of complimentary travel insurance.
    • If a hurricane or illness ruins your vacation plans, would you be out a couple of thousand dollars?

An inexpensive way to get started outside of the insurance you buy yourself:

  • Insurance provided through an employer, either employer paid or employer offered.
    • Fees through group plans can be cheaper, but this insurance is often not portable if you change jobs so be aware.
  • Also, small amounts of insurance can sometimes be included with credit cards at no cost such as the travel insurance mentioned above. 
  • If affordable, pays to get some insurance while younger as rates are cheaper and your health is still good.

It's impossible to insure for every event in life

Insure your biggest risks first that would be most catastrophic to you. Regardless of what type and how much insurance you get, always make sure you know what is covered and what type of restrictions there are. Lastly, each year or if any big events happen (like having a baby or one partner deciding to start their own business) re-evaluate your insurance needs. As you grow and life changes, your insurance needs will change as well.  Oxford Planning reviews insurance as part of your overall financial planning.  Call us with questions – we’re here to help.

 

 

 

 

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Worried About Your Latte?

Have you heard of the latte factor recently? The concept has been around for years and recently a book was released called The Latte Factor by David Bach, that has become pretty popular. If you google "finance latte" you'll get tons of different articles related to this idea. So, what's all this buzz about?

Why Coffee?

Latte’s have become the icon for saving money lately because it’s a common indulgence. Many of us are willing to the pay extra money to buy it in a coffee shop for either convenience or the simple pleasure of the routine. 

What's Your “Latte”?

As I said above, your daily cup of coffee isn’t under attack, a latte is simply an icon right now. The bigger message is to be mindful with your money during the week - and realize that small costs can add up to a lot of money if bought often.

Mindfulness

Are you into the minimalist or mindfulness movements? Every time I look at new books there are so many on these topics it’s overwhelming. However, mindfulness is what the base of the Latte Factor is all about!

  • Take a good hard look at your spending. Do you like online shopping for clothes? Maybe you use Uber Eats multiple times a week? Identify what you are spending your hard-earned money on and determine if it's really worth the cost.

Enjoyment versus Price

If that cup of Starbucks every morning is what makes you look forward to work and keeps you sane, then go for it! But first, try some cheaper options like making it at home with some fun ingredients. If it's not for you after a couple tries, then maybe consider only buying coffee twice a week as a special treat. Whatever works best for you and keeps you and your wallet happy.

Change Your Mindset

By being mindful about what you’re spending, you can evaluate what’s most important to you. A common phrase I hear is that people want to contribute money into the retirement plans offered by their workplace; but retirement seems so far away and they don't have extra money to put in.

  • By looking at your spending, maybe you can find an extra $50 a month that you would have spent on eating out to put into your 401(k) plan. It's great to get into the habit while you are young of putting money away every month for retirement even if it's a small amount at first.

 

So figure out what your latte is today and see what that money could add up to over a year, two years, or even more!

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Reaching High for Your Goals

 

Let's talk about goals! Everyone has them, but how measurable are yours? In financial planning, a goal should have three parts: Purpose, Time, Amount (PTA). By having these three things, your goals will be measurable and realistic. For example, everyone I know wants to travel right now while we're young, but - it's hard to find the money.

Look at these two goals:

Goal 1: “I want to travel to other countries soon!”

Goal 2: “ I want to travel to England, Scotland, and Ireland in two years and I want to save $6,000 for it.”

 Which one of these goals seems better? Goal 2! It has the PTA all written out. By setting these ideas, you give yourself the purpose to work towards instead of a general idea, you give yourself a time frame to save during, and you have a total amount of money. It can be a little daunting to try to save a lot, so having a set goal that you can see yourself chipping away at is really rewarding.

Step 1: Making your goals!

Take an hour one day and sit down with no distractions. Grab some pen and paper and start writing out some goals that you have for your future. Start with some general ideas and work your way to more specific thought out goals.

 Here are some common goals for recent post-grads like me:

  • Emergency fund (4-6 months living expenses)
  • Travel Fund
  • Down payment for a house

 Step 2: Set your Time and Amount

 Look at your salary and mandatory expenses to see how much you can save every month towards your goals.

  • Save for your most important goals first! (Emergency fund should be at the top of your list)
  • Short term vs. Long term goals: Consider which goals you have less time to save for and determine how much you want to put towards each goal

 Don’t Forget About Retirement

  • While thinking about all your goals, don’t forget about setting aside money for your retirement accounts and FSA or HSA accounts for medical bills

 Staying on Track

  • Set up automatic savings withdrawals
  • Don't skimp on everything you want to do just to save more money but - do pause and take a moment to think about what things are worth the money and what you can pass on

Re-evaluating

  • Every couple of months sit down to take a look at your goals.
    • Are all of them still valid things you want?
    • Have you been able to stay on track without depriving yourself?
  • Salary increase? Take a look at what you can be saving more for!

It’s so easy to have fun and let that paycheck slip right out of your wallet without planning.  Get started today – you’ll be so glad you did!

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Buying a New Car vs. a Used Car

Buying a car is a big decision. You want something reliable, spacious enough for your needs, and preferably in a style you will enjoy for years. A big part of this decision can be whether to buy a new car or a used car. As a young adult, there are so many things to be saving for. While a car is most likely a very necessary purchase, you don't want to spend extra money you didn't have to that could be saved for a home or travel fund. Let's look at some of the pros and cons for buying a new car or a used car.

Buying a New Car

Positives

  • No history: you don't have to worry about looking for accident histories or wear and tear
  • Latest technology: each year’s cars are coming out with new technology to make you safer and make your drive more enjoyable
  • Newer cars can be more fuel efficient
  • Can pick and choose what features or color you want 

Negatives

  • Depreciation: a car’s value depreciates the most in the first 3 years
  • Higher auto insurance cost for higher cost vehicle
  • Tech makes repairs more expensive
  • Must be bought through a dealer: if few dealers around, ability to negotiate price goes down
  • Sales tax: taxed on entire price you pay: meaning a more expensive car will cost more in taxes

 

Buying a Used Car

Positives

  • Less expensive: the upfront cost, auto insurance, taxes, and interest can all be less
  • No big depreciation hit: new cars lose value the moment you drive it off the lot
  • Easy to explore a car’s history with the use of companies that give out history reports
    • Title history, record of maintenance, number of owners, collision and repair info
  • Reliability record: used car rankings and reviews can help determine which cars will requite less maintenance, hold value best, and save you money overall

Negatives

  • History reports are thorough, but they are not perfect
  • Used cars sold as is: can't return if it has unexpected problems
  • Limited or no warranty coverage
  • Can't be as picky: may have to compromise on a few things such as color or mileage

 

Check out this video from Bank of America that breaks down the cost comparison even further:

https://bettermoneyhabits.bankofamerica.com/en/auto/buy-new-used-car

 

Certified Pre-Owned Vehicles

  • Blend some of the advantages of new and used cars
  • Gently used, usually only a few years old, low mileage, and no major accidents
  • Closely inspected
  • Typically, leased returns or vehicles driven by employees of the dealership
  • Can get special low interest financing deals on CPO cars

Reminder: Keep your credit score high!

  • Your credit score can affect
    • Your ability to get a car loan
    • The interest rate given to you

Regardless of whether you get a used or new car:

  • Make sure your credit score is high
  • Have a down payment ready to decrease the loan amount you need
  • Do your research to figure out what you really need in a car and what you can go without

 

Safe travels - whichever you choose!

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Freezing Your Credit

With the Equifax hack settlement promises coming out and the recent Capital One hack, many people are wondering how safe their credit is. Even if your credit hasn't already been leaked, it may be a good idea to freeze your credit as a preventative measure. Fortunately, after the Equifax incident, a federal law was passed to make freezing your credit free.

Why Should You Freeze Your Credit?

It seems like credit breaches are becoming more and more common and each time millions of people can be affected. Freezing your credit protects you by making sure no one can open credit in your name. It does not hurt your credit score, it simply blocks new applications.

When Should You Not Freeze Your Credit?

If you are trying to open a new credit card or thinking about applying for a loan soon.

  • Fortunately, federal law states that if a request for a temporary or permanent unfreezing of your credit is made online or by phone it must be unfrozen within one hour. So, if you freeze it and then want to apply for credit later, it should be quick to undo.

 Things to Keep in Mind

  • To freeze your credit, you need to contact each of the three credit bureaus (follow the link below to the FTC website).
  • Parents can freeze credit for kids under 16.
  • Freezing your credit only stops someone from opening a new account in your name, current account information is still susceptible to fraud so keep an eye on currently open credit accounts.

More experts are recommending freezing your credit to give yourself a better chance at protection from fraud.  Weigh the options of convenience versus security and decide for yourself.

 

Resources:

https://www.consumer.ftc.gov/articles/0497-credit-freeze-faqs

 

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Focusing on Your Tomorrows

What does financial planning mean to you?

When you hear the term "financial planning", what do you think of? I don't think most people often associate the term with young people. That's a big problem though because early financial planning can have lifelong benefits. Financial planning goals can vary depending on your age. Look below to see a list of some common goals for young adults.      

  • Paying off Debt
    • Student Loans
    • Credit Cards
    • Car Loan
  • Emergency Protection
    • Emergency Savings
    • Disability Insurance
  • Future Savings
    • Retirement
    • Big Purchases (Home)

Paying off Debt

  • Take a look at any debt you have and determine how much you can afford to pay off each month and give yourself a target date to have it paid off by.
  • Keep credit card debt as low as possible, ideally pay off your entire balance on time every month.

Emergency Protection

  • Start building up some emergency funds for when your car breaks down or you drop your phone in the toilet (it happens!).
  • Disability insurance - not a lot of young people consider this a need; however, what would happen if you injured yourself tomorrow and could no longer work?
    • Whether or not you work in a high-risk job, disability insurance is worth the cost.
    • Generally, costs about 1-3% of your salary

Future Savings

  • Large future purchases- start saving now to meet your goal quicker
    • If you know you want to buy a house at some point, start saving for a down payment of at least 20% of the home price to avoid having to pay private mortgage insurance and save yourself money.
  • Start investing for your retirement! You are never too young to start putting money into a retirement account. We can’t impress enough how compounding interest can do wonders to help grow your retirement account balance and the earlier you start, the more time you give your money to grow.

Set aside a couple of hours on the weekend and start your own financial planning as soon as you can. By understanding your personal finances and giving yourself goals, you are giving yourself the greatest shot at success in the future.

 

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Bitcoins & Cryptocurrency

A Little History

By now most people have heard of Bitcoins and how those that were fortunate enough to invest in them at the right time may have made great profits. Bitcoins were the first established cryptocurrency and today there are currently more than 1000 different types of cryptocurrency, but Bitcoins are still the most commonly known name. Bitcoins became available to the public in 2009 and rivals started coming out in 2011. Over this time the price of bitcoins had been rising; however, in 2013 the price crashed. It wasn't until 2017 that we saw the huge growth in Bitcoin price before a steady decline in 2018. New cryptocurrencies are continuing to come out and more people are getting interested in learning about what they are exactly.

How are they Purchased?

Purchase directly from an exchange

  • Expensive
  • Number of risks:
    • Viability of the exchange
    • Legitimacy of exchange
    • Cybersecurity threats

Purchase through private fund (accredited investors only)

  • Illiquid & expensive

You typically need to create a “wallet” before you can purchase any cryptocurrency. You register your identity and bank details to transfer money to buy cryptocurrency and the cryptocurrency is held in your “wallet”.

Potential Upside

  • Decentralized – no single bank or single administrator. No “middleman” and no Federal Reserve.
  • Reduced risk of manipulation from authoritarian governments
  • Blockchain shows promise to transform major elements of the financial system
  • Some experts claim that bitcoin will do to banking as email has done to the postal system
  • Crypto assets challenge the model of state‐issued money and the dominant role of central banks
  • Controlled by function of mining
    • Performed by “miners” – software solves math in exchange for currency
  • Instant settlement of payments globally

Potential Downside

  • Extremely volatile
  • Short History
  • Considered an Alternative Asset Class- allocations should be very small
  • No central bank control which means no oversight – may present an unfair competitive advantage derived from lighter regulation (regulatory arbitrage ‐ when firms capitalize on loopholes in regulatory systems in order to circumvent unfavorable regulation)
  • Touted as non‐taxed, but IRS Notice 2014‐21 provides the it be treated as property for federal tax purposes (investment income)
  • Due to the mostly anonymous nature of the peer to peer electronic cash system, potential to facilitate illicit activities
    • NY Dept of Financial Services recently sent subpoenas to Bitcoin businesses requesting their policies to prevent money laundering and ensure consumer protections

End Notes

If you're really interested in cryptocurrencies and are considering investing in them, do your research! Find a specific one you want to consider and look into how long the currency has been around, how long the company has been operating, and volatility. Consider how much you are willing to risk for the investment because there are still many questions about safety and stability for any cryptocurrency.

Will cryptocurrency be the currency of the future? We think for now it is too soon to tell, and a lot of caution should be used with them.

 

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Is Social Media Making You Overspend?

Our generation has grown up in the height of social media, with the good and the bad. Social media has made it easier than ever to stay connected with friends and family. However, studies have shown that social media could be changing our spending patterns. 

How many times do you get onto Facebook or Instagram and see pictures from trips and wish you had an upcoming getaway? How many adds do you see in a typical day of social media usage?

Sneaky Advertising

Companies realize that social media can be a huge advantage for their marketing. Not only with the direct Ads you see but also through people's actual posts. Influencers, actors, and models are all targeted by companies to try to get them to advertise their product. What some people don't always realize is that they get paid to promote these products and may not always be giving honest reviews. Social media platforms are starting to create rules for these types of posts that require disclosure if the post was sponsored.

Schwab's 2019 Modern Wealth Survey found that 49% of millennials reported spending money on certain things due to something they saw on social media.

Take a look at the accounts you follow and see if any of them do more "advertising" than others. Do they post a lot of pictures with certain products as the highlight? Do they always link the clothes they are wearing in the description? Some people just genuinely want to share a cool product that they love. However, you need to be cautious when it's coming from someone with a big social media following.

Before you buy something, take a couple of minutes and think about:

  • If you really need or want that item?
  • Can you afford it without sacrificing something else?
  • Are there cheaper alternatives of the same quality?

Do your research! If you see something advertised and really want it or do actually need it that's okay! Just make sure there aren't cheaper alternatives just as good and make sure what you're buying is good quality for the price.

Does it spark Joy?

Taking some advice from the now famous KonMari expert, think hard about your purchases. Sometimes it's useful to think about it for a week. If by the end of the week you still think it's worth it to you to spend the money, then go for it! Our brains can convince us that we really need things, when in fact the product just looks cool so you start rationalizing how much you need or want it. I know I'm not the only one to buy something just for it to be used once and then sit in a corner, never to be touched again.

 

Check out the survey listed below for some more statistics and information on how social media is impacting our generation's spending!

 

2019 Modern Wealth Survey: 

https://www.aboutschwab.com/modernwealth2019

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Ready for Vacation?

With summer right around the corner, everyone is getting excited to enjoy the warm weather and go on vacation. Here are a few tips on how to plan for your own trip.

Plan early!Set a budget and start saving for the trip or maybe you already have some savings for vacation. Determine a realistic amount you feel comfortable spending (you don't want to undo all that relaxation time by stressing about finances when you return).

Consider the cost of:

  • Lodging
  • Transportation: Gas or airplane ticket
    • Local transport: Can you drive? Do you need to take a bus, train, ect.?
  • Food (groceries and eating out)
  • Daily Activities
  • Shopping (souvenirs)

Location & Transportation

Obviously, the first decision should be where you want to go. Staying closer to home is generally a cheaper option because driving can often be a lot more affordable than flying. Consider the cost of other transport during your trip. Do you need to take a bus anywhere or a train? If you’re luckily enough to go somewhere that you can walk most places, then this cost will be minimal.

Lodging

Do you want to stay in a hotel, apartment, or house? Lodging can be the biggest expense for a vacation (unless you're camping!). If you’re looking for a really cheap option, consider camping with some friends. Some camp sites even have cabins you can rent if you’re not too keen on tent sleeping.

If you choose a hotel, look around at the best prices for places in the area you are staying and make sure to read the reviews as well. Consider going on a trip with friends and renting a place together either through a local rental service or Airbnb! This can cut down on the cost of a trip by a lot.

Food

Do you love to eat out? Plan specific nights you want to eat out and other nights make simple meals that are easy to prepare to save money. Taco night is always a great go-to for vacation, set out ingredients and let everyone make their own! Pack snacks and small sandwiches for day adventures if you don’t want to eat out for lunch.

Daily Activities

If you’re not the type to just sit on the beach all day during vacation, consider looking on sites like Groupon or even Airbnb for activity discounts during your vacation. You can find some cool options that you may have not even thought about before and save money.

Travel Points

If you happen to have a credit card that gives you travel points, look into different options and see how many of them you could use for your upcoming trip!

Weekend Getaway

If you don’t want to or can’t take a full week off of work, consider just doing a weekend trip. They can give you the break you need while also being more affordable. Take off one or two days to give yourself some extra time and find a destination not too far away to get the most out of your time. 

Going Off Season or “Shoulder” Season

Peak season for summer vacation destinations is mid-June to August. April to mid-June and September through October is known as Shoulder Season. This is when the weather is still warm but there are a lot less people vacationing, and prices are usually cheaper! Look at the prices for hotels and house rentals during these times to compare to what you would pay mid-summer.

Hopefully some of these tips can help you plan the vacation you deserve. Having fun while not breaking the bank is the best kind of relaxation there is!

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Which Credit Card Is Best For You?

There are tons of different credit cards available today, many offering some type of reward or benefit with them.  What's the best one to have, though? That really depends on your personal spending habits.

Each credit card sponsor company will have descriptions for each card that should include:

  • Annual Fee
  • Annual Percentage Rate (annual rate charged for borrowing money)
  • Rewards
  • Foreign Transaction Fees
  • Fraud Coverage
  • Other important details: account alerts, autopay features, Apps for your account

To determine which type of card is best for you, figure out what you spend most of your money on. Some cards offer more rewards for dining out or traveling, while others just give a percentage of purchases back in cash. It's a good idea to keep notes of the benefits of each card you look at to compare and decide which will be the best for you. Some companies even have calculators for how much you can earn in rewards by estimating your monthly spending on your credit card.

 

If you pay your card off fully every month:

  • Cash Back Cards
  • General Rewards Points
  • Travel or hotel Points
  • Gas Points
  • These cards offer a variety of rewards, if you really can’t choose between two, see if one gives a better sign on bonus

If you have credit card debt or usually carry a balance:

If you travel a lot:

Retail Cards:

  • Usually easier to get if you are just starting out and don't have much credit history
  • Having multiple store cards could hurt your credit though

Things to look out for:

  • Cards that have an annual fee- some waive the fee at first and then you have to start paying one after the initial year is up
  • High APR- even if you pay off your card on time every month, you could always forget at some point

It can be a little overwhelming with the amount of credit cards available today. Take your time, make comparisons, and slowly determine which is best for your personal needs.

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Budget Tip: Meal Prepping

An article from CNBC states that 49% of millennials spend more on eating out than they put into retirement accounts. How many times have you cooked something only to go out to dinner the next night and forget about the leftovers until they've gone bad? I know I have, many times. Not only is this a waste of great food, it's a big waste of money.

Meal prepping has become popular over the last couple of years and there are tons of books, blogs, and videos about it.  

Let's start by looking at three questions:

  • How much do you currently spend on food?
    • Take note on your major spending areas. Is most of your food money going to groceries, eating out, or coffee?
  • How much do you want to be spending on food?
    • Set a goal to reach for each week or month and build your meal plan around that.
    • Cut out easy things for yourself like coffee from Starbucks or fast food.
  • How much actual "prepping" do you want to do?
    • There are different levels to this. You don't have to go all out like some people do.

Make a Plan:

  • Pick out the meals you want to have for the week (how many breakfast, lunch, and dinners do you need?)
    • You can easily google "Meal Prepping for… and insert you budget and get tons of recipes, just use key words added on for your ideal meals like "vegetarian" "quick" "healthy".
    • YouTube has tons of great videos for meal prepping or just cooking in general that take you step by step through the recipes.
  • Put together a grocery list.
    • Find recipes that share ingredients to prevent waste and overspending.
    • Use your grocery store’s app (if they have one) to get an estimated total for your shopping
  • Plan your days to eat out.
    • Instead of eating out when you just didn't feel like cooking, save it for nights when you want to do something special or just have some fun and relax.

How much to Prep:

  • If you looked at the third question from earlier and sighed at the thought of meal prepping everything you are going to eat, break it down a little! Prepping can be as easy or labor intensive as you want.
    • Try simple breakfasts like oatmeal or muffins and sandwiches for lunch for a little so you mainly have to focus on prepping dinners.
    • Or instead of cooking everything one day, you could do all the chopping and marinating and save the actual cooking for the day of.
  • Pick a time and day to do your prepping & plan out what you want to get done.
    • Maybe you just want to cut up all the veggies you need for the week and cube some chicken to marinate.
    • Basically, do however much or little prepping you want that will make you more likely to stick to your plan.
  • If you find yourself getting overwhelmed, look for easy recipes.
    • YouTube, Pinterest, and apps are my go to for easy recipes.
    • The Tasty app has a search for 30 minute or less meals and 5 ingredient or less meals.
    • Use frozen vegetables for easier cooking! I hate chopping onions, so I buy them pre-chopped and frozen and I am 10 times more likely to cook with them.
    • Lastly, Crockpot recipes are a true lifesaver.

Meal Subscription Services

  • Meal services have been popping up all over the place, I’m sure you’ve seen the ads about how easy they make cooking and how much time they save.
  • While these can take save you time, they won’t save you much money.
  • I looked at three popular brands and each had servings around $9-10 (which isn't cheap compared to buying your own ingredients).
  • While I would not consider these a good option over grocery shopping and meal prepping yourself (you can make the meals much cheaper) – it could be a good option once in a while if you choose this over going out to eat at a mroe expesive resturant. 

Overall, be flexible and realistic. Meal prepping can take some time, but it can also save you a lot of time and money later!

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Financial Literacy Month

April is designated as Financial Literacy Month in the U.S., so I thought this topic would be fitting for the blog today.

Financial literacy is the ability to understand personal finance and economics and in turn be confident in making financial choices for one's self to achieve your goals.

Most people recognize that finances are important for personal well-being as well as the well-being of an entire family unit. However, it seems all you hear about the younger generations is how wasteful we are with money or how most of us are not interested in learning about finances.

A 2018 study conducted by Charles Schwab about financial literacy in young adults found that the average young adult owed around $8,000 in debt, used their parents as their primary source for financial information and were not financially independent but it was their top goal.

Another study conducted by Charles Schwab back in 2009 found that 2/3 of young adults in the study considered financial fitness more important to them at the moment than physical fitness. About the same amount of young people ranked financial priorities such as eliminating debt more important than things such as getting a car or paying for graduate school.

These studies show that young adults are interested and see the importance of financial literacy; but they don’t always know where to start when trying to learn.

 

First off test your own knowledge with this short quiz:

http://www.usfinancialcapability.org/quiz.php

Now watch this video and read a bit of this article to see how peers around your age answered the same types of questions:

https://www.cnbc.com/2017/09/19/94-percent-of-americans-failed-this-financial-literacy-quiz.html

 

Where to start? Personal Finance!

Step 1: Savings

Check out some of my previous posts on this blog to learn some basics about financial literacy such as how to budget, best types of savings accounts, and how to understand retirement plans. 

  • Create a budget if you do not already have one
  • Determine if you have the best type of savings account for yourself
  • Invest in your future self with company sponsored retirement plans!

Step 2: Debt

Look at credit card statements, student loans, car loans, ect. and determine the best way for you to pay them off.

Step 3: Goals

What are you future goals? Is it to have your own, a specific car in the future, or maybe you want to start your own business! Start saving now! Build up an emergency fund and start building up money towards your personal goals.

What’s Next? Further Your Knowledge

Next, use some of the resources listed below to begin learning about other topics to improve your financial literacy further. Find a topic that interests you, you think would be personally beneficial, or just something you have heard a lot about and have questions on. The more you know, the better off you will be.

 

 

Resources:

Beginners’ Guide by National Endowment for Financial Education:

https://www.smartaboutmoney.org/Portals/0/Resources/Your-Spending-Your-Savings-Your-Future.pdf?ver=2012-09-14-134128-837

Resources for College age and Beyond for Financial Literacy Month:

https://jumpstartclearinghouse.org/resource/search/results/?grade_levels=Adult-Consumer&grade_levels=college-young-adult&page=1&page_size=8&price_high=1000&price_low=0

  • Some of these are free and some are not, price is listed right next to the quick look link for each

2009 Study

https://www.schwabmoneywise.com/public/file/P-4065778/

2018 Study Results

https://www.schwabmoneywise.com/public/moneywise/tools_resources/literacy_survey

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“Invest in Your Future” …. But How Do I Start?

What is the stock market?

  • The stock market is made up of a network of exchanges with stocks listed on specific exchanges
  • Market indexes track performance of a group of stocks and are used as a benchmark for performance
    • Common indexes: S&P 500, Nasdaq, Dow Jones Industrial Average
  • Many factors can affect whether the stock market is up or down, so it is very hard to predict changes to stock values

What are stocks and bonds?

  • Stocks are a way for companies to raise funds and for investors to potentially grow their money
    • When you purchase stock, you purchase a small piece of that company (a share)
  • Common Stock pays dividends but are not guaranteed and the amount is not fixed
    • Dividends: regular payments to stockholders
  • Preferred Stock pay fixed dividends and holders are first to get paid and receive a liquidation of assets, over other stockholders, if company goes bankrupt
  • Within those categories stocks are further broken down into various sectors
  • Bonds are debt with an agreement to pay interest while the company uses the money
    • Have maturity dates where principal investment is paid back
    • Good for investors who want income (in the form of interest payments)   

Stock and Bonds vs. Mutual Funds

  • Individual stocksor bonds:
    • Takes significant time to do proper research on individual stocks and build a well-diversified portfolio
    • Additionally, trading costs can be higher for an individual investor
    • Learn how to research stocks efficiently if you really want to get into individual stocks
  • Mutual Fund & ETFs: Group of stocks and/or bonds professionally managed
    • Easier to build a diversified portfolio
    • Generally, have steadier investment returns as the return is not reliant on a single stock or bond
    • If you have a 401(k) you are most likely already investing in stocks and bonds through mutual funds available in the plan

What to Consider Before Investing in Stocks :

  • Put in enough money to a 401k to get the employer match and maximize the value of tax deferred assets
  • Make sure you are paying for adequate health insurance and consider other coverage such as disability and life insurance depending on your personal situation and other employer benefits you have available
  • Pay off any debt you have or have a plan to pay off that debt in coordination with other goals
  • Start an emergency fund- you don’t want to have to sell stocks at a loss to pay for an emergency
  • Learn the basics of investing instead of just picking stocks that look interesting

You’ve Decided to Invest, Sit Down and Make a Plan :

  • Determine your reason and timeline for investing
    • Are you investing to bulk up your retirement funds that you won’t need for 30 years? Or maybe trying to save for a house that you hope to purchase in ten years? Long term goals are usually the best when dealing with the stock market
    • If you have a short-term goal that you really need money for, the stock market may not be the best option
  • Assess your risk tolerance (this should correlate with your timeline)
  • Are you the DIY type or do you want someone else to manage the process?
  • Diversification is the key to success: build a broad portfolio (either on your own or with the help of an advisor) by investing in different stocks, across different sectors and investing in mutual funds and ETFs
  • Have patience!

For Short Term Goals (3-5 years) Consider:

  • Individual bonds
  • CDs with maturity dates less than 3-5 years
  • Money Market Accounts

For Long Term Goals Consider:

  • A diversified portfolio including Cash, Bonds, and Stock Funds
    • Amounts in each asset class will vary depending on your timeline and risk tolerance

Take Away Note:

  • If you have read over what to do before investing and decided that you have enough extra funds to invest in the stock market, start researching now! The stock market is complex and learning as much as you can will help you and your investments in the long run.

 

 

 

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How much do you know about your Credit Score?

 

What’s a credit score and how much does it really matter? 

A credit score is a number given to an individual that represents their ability (based on previous payment history) to repay a loan.   And yes, it REALLY matters - a lot

Do you have a credit score?

  • As stated above, a credit score is based on history. So, if you have never had a credit account, there is no history to create the score from. This does not mean you have a score of 0, it simply means you just don't have a score at all.
  • If you have a credit card, but it is a joint account with your parents, that won't provide a history for yourself.

The two major US credit scoring companies are FICO and VantageScore. Quick breakdown of rankings:

Credit Score Rankings

Excellent: 800-850            Good: 700-749         Poor: 600-649

Very Good: 750-799         Fair:     650-699        Very Poor: 300-599

What affects your credit score:

# 1: Payment history

  • AARP states that just one late payment on a credit card can drop your credit score 100 points. Yikes.This is true even if you have a long credit history and have never missed a previous payment.

# 2: Credit Utilization Rate: percent of total credit limit that you have as a balance.  Most sources recommend staying below 30% utilization of your credit limit. Meaning, you need to make sure you are paying off your credit card every month don't have an outstanding balance of more than 30% of your available credit.

So - if your credit limit is $5,000, try to stay below $1,300 each month

    Other factors: how long you have had credit and what kinds of credit have you have had?

What your credit score affects:

  • Ability to get a credit card
  • Ability and rate for a car loan or mortgage
  • If you can rent the apartment you want to rent
  • The article below describes how credit scores can be used to determine risk for car insurance,

https://wallethub.com/edu/car-insurance-by-credit-score-report/4343/

How to keep/build a good credit score:

  • Pay your bills on time- all the time!
  • Keep your credit utilization balance below 30%
  • Don't open too many credit cards. Store cards may cause your FICO credit score to drop.    Resist the temptation of store clerks offering to help you “save extra money today”. 
  • Taking a small car loan can help build up good credit as well
  • Save separately for emergencies to avoid having to put the money on credit cards
  • Check your credit at least once a year at all 3 bureaus to make sure there are no errors or fraud
  • Credit builder loan to help build credit as well as build your savings (use as a last option because it ties up your money while you pay off the loan)

UltraFICO score

  • Currently in the pilot phase for consumers, estimated full launch by mid-year
  • FICO states that the UltraFICO score gives you the ability to enhance your credit score by choosing to securely link your checking, savings, and money market accounts
  • Has potential to be a good option for those with no credit score or a low credit score

Where to find your credit score? 

This is the only actual free site to check your credit score authorized by Federal Law.  Be sure you’re on the right site – many have very similar sounding names:

http://www.annualcreditreport.com

  • Free once a year from each of the three major credit bureaus - it's a good idea to check your credit score 2-3 times per year by checking once a year each

You work hard for your money – don’t lose the benefits of keeping that good credit score!    

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Who’ll Let the Dog Out? The Price of a Puppy

Thinking about getting a pet? Let's walk through the true cost of having one. To keep things simple, in this blog I am going of focus on the cost of having a dog and use mostly average prices. Pictured above are our very much loved family dogs Finn & Haley.

One- Time Fees:

  • Initial Price: Cost depends on age and breed and whether you want to adopt a rescue or adopt from a breeder.
    • Maryland SPCA adoption fees for dogs range from $125 to $325 plus $25 for mandatory microchipping
    • According to an article by Forbes, adopting from a breeder can range anywhere from $500 to $3000
  • Neutering/spaying: Cost varies. Many vets offer puppy packages that can reduce the cost for shots, visits, and spaying or neutering. Vetstreet.com states that at private vet practices, the procedures can run from $100-$600.
    • There are plenty of low-cost spaying/neutering clinics available with a quick google search; however, don't go that route just to save money. Do your research. They must skimp on many things to be able to provide the procedure at a low cost
    • Question to ask yourself: Which price point allows me the standard of care I am looking for, for my pet?
  • Crate: $40 to $50 for a heavy-duty crate that can grow with your puppy
  • Shots: Puppy shots series can average $120, plus annual shot fees

*If you aren't adopting a puppy, the dog you adopt may already be spayed/neutered and have most of its early shots already so some of these costs may not apply.

Annual/ Monthly Fees:

  • Toys: Varies for each pet owner. If you have a toy shredder like my family, you could have to replace them every month. $10-$20 per month.
  • Dog food and treats:Anywhere between $200-$500 per year depending on the type you want to buy
  • Annual Medical Checkups: $50 to $100
  • Random: pet collars ($20), leashes ($15), beds ($30), food and water bowls ($10 to $20)
  • Medicine: Either for acute incidences or chronic conditions. Pets get sick and can also be diagnosed with lifelong problems. Be prepared for either and have enough emergency fund money for your pet to pay for them.
  • Grooming: Certain breeds require regular grooming because they don’t naturally shed or maybe you don't have enough space in an apartment to bathe your dog at home. Also, if you aren't comfortable clipping your dog’s nails that is another fee to consider.
  • Pet Sitting: Do you have friends or family that can stay with your dog if you go on vacation? If not, you will need to look into having someone dog sit or find a place to board them. Also consider vacations that you can bring dogs on. Boarding a dog averages about $35 a night for a medium size breed.

Emergency Fees:

  • If you are unfortunate enough to have a pet need urgent medical attention, the cost can hit hard. If it is outside of normal veterinary practice hours, an emergency vet is probably your only option. The fees for emergency vets can add up quickly (our puppy ate a bee and cost us $1000 one weekend). Dogs and puppies alike get into random trouble all the time so once again make sure you have an emergency fund for your pet.

Other Costs:

  • Training classes: Whether you are a first-time dog owner or have a rambunctious puppy like we did, classes are awesome for socialization and help with training. Prices vary per company and number of sessions.

Time:

  • One really big consideration before adopting a dog is time. What kind of hours do you work? Will you need a dog walker or some type of doggie day care while you’re at work?  If you like to go out multiple times a week after work or maybe you have a side hustle to help make some extra money, adding a pet will change that routine a lot.  

 

In my opinion, a dog is so worth the cost - as long as you have the extra cash and time to spend!

 

Author: Kirsten Eddy, Junior Portfolio Analyst 

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The 20 Year Old’s Guide to Investing in Yourself

  

As a young adult, it can be daunting to try to find information about the best way invest for the long term – specifically retirement accounts.  I know, it’s easy at this stage to think “I have tons of time to start thinking about getting my finances in order!” and - it's hard to sort through all the information out there to get down to the basics of what you need to know.

In this blog, I'm going to break down four retirement accounts (there are many more) and give you some facts to help you understand your options. This is by no means meant to be a comprehensive list of information. My goal for this post is to create a starting point that you can use to jumpstart further research into the type of account or accounts that will best work for you.

Types of retirement accounts:

401(k) and Traditional IRA: Contributions are made before being taxed (saving you taxes upfront) and your money grows tax deferred

  • The money is taxed when you withdraw it for retirement
  • 401(k)’s are sponsored through employers; however, not every employer offers one
  • An IRA is a good choice for people who do not have access to a 401(k) or other retirement plans at work

Roth 410 (k) and Roth IRA: Contributions are made with money from your paycheck that has already been taxed, so it’s tax free to withdraw during retirement if certain criteria are met.

  • If you believe you’re in a lower tax bracket now than you will be later, it’s smart to choose the Roth option and pay the taxes now instead of later.
  • Not everyone qualifies for a Roth account, you must meet certain salary requirements.

Where to Start: Does your employer offer a 401(k)?

  • If your employer does offer a 401(k) plan take advantage of it, especially if they offer a match. Put in enough money to get the maximum match. If you have maximized your 401(k) contribution and still have more you want to put into savings, review whether you are eligible to contribute into a personal IRA or Roth IRA. Depending on your income you may or may not be eligible to do so.

What to Know About Your 401 (k) Plan:

  • Employer's 401k plan documents: What you need to find out -
  • When you can contribute
  • Company match- is there one? And if so, what are the rules
  • How much can you contribute
  • Investment options offered
  • Maintenance costs and fees
  • Roth options- if available, do you qualify and is it a good option for you currently?
  • What happens to your money if you leave the company
  •  If your employer offers a 401(k) match, put in enough money to get the maximum match
  • Bonus note: you are lowering your taxable wage base in the process

What to Know About Your IRA Plan:

  • Opened individually at a brokerage or bank
  • Without access to an employer available 401(k), an IRA is a smart choice to start your retirement savings
  • Do you qualify for a Roth IRA?
  • Do you qualify for full, partial, or no deduction of taxes based on your salary?

Contribution limits:

                                                              Below Age 50               Above Age 50

2019 Contribution Limits 401(k):        $19,000                        $25,000

2019 Contribution Limits IRA:            $6,000                          $7,000

Don't take early withdrawals!

  • Roth 401(k)’s and Roth IRA’s are only tax and penalty free upon withdrawal if the account has been held for five years or longer and withdrawal is made in the event of disability, death, or the account holder is above 59 and a half years old.
  • If you wish to withdrawal money from your 410k before age 59 and a half, you must pay a 10% penalty fee on top of income taxes.

 

Final Thoughts:

Do: Start ASAP, Increase Contributions, Rebalance Annually and Diversify

Don't: Time the market, cash out early, or Take a 401(k) loan

If you can't max out both a 401(k) and an IRA in a year, max out the 401(k) first to get the total employer match and then put as much as you can (if eligible) into an IRA.

If your employer does not offer a match, still consider maxing out your 401(k). If your 401(k) has a Roth option, consider whether you are in a lower tax bracket today than you will be in the future. If so, consider using the Roth 401(k) option.

Start saving now!If you read through this information and thought "That was useful, but I probably won't start savings for another couple of years" rethink that logic! No matter your age, you are never too young to start saving for retirement. Compounding interest is your best friend. The earlier you start saving, the easier it will be for you to accumulate a healthy nest egg.

 

Tools and Resources:

Take a look at our calculator to see how you can grow your retirement savings with early planning.

Further Resources for Information

 

Author: Kirsten Eddy, Junior Portfolio Analyst

 

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