Opening your own IRA is a great idea, but do your research first.
Make a few appointments to interview banks and investment companies. What are their fees? What types of investments do they offer? There are many options to choose from.
If Your Company Doesn’t Offer a 401K, Get an IRA
If your company doesn’t have a retirement plan, then you should start an IRA or a ROTH IRA.
- An IRA account is for saving pre-tax money to be able to withdraw later in life when your tax rate should be lower.
- A ROTH IRA is the opposite. You contribute after tax money now and withdraw tax free at retirement.
Talk with your investment person or tax preparer to determine what is best for you. Discuss the income limits and the maximum contribution amounts you can contribute based on your age. Have this discussion today.
If Work Offers Retirement Savings, Do it
I can hear you saying… “I don’t have enough money to live today, so how can I think about saving for retirement?” Yes, that might be true, but look at it another way… you will get older and you will want to retire some day. If you don’t start now you’ll have to work the rest of your life.
If you work for a company that offers a 401K or 403B, take advantage of it. If your company offers you matching funds and you haven’t taken advantage of it, then you are turning down FREE money. As an added benefit, the money you contribute is tax free today, and any growth in your account is not taxed until you withdraw it.
Talk to your company benefits person and start an account as soon as possible. If you need to wait for open enrollment, mark that date in your calendar.
If you already have a retirement savings with your company, increase the amount you contribute so you’ll have more later when you really need it.
Saving for Emergencies
Emergency savings are for when your car breaks down. It’s for an unexpected medical expenses. It’s for covering your bills if you’re between jobs. It’s for unexpected home repairs. An emergency is something that must be taken care of right now or you won’t be able to get to work, have a place to live, or when you might have to choose between medical bills and utilities.
What it’s not: a savings account for things you think you need. No matter how much you think need to book a cruise, a nice vacation is a want. You will survive if you vacation at home with trips to the local beach. You will also survive without a smart phone, or cable TV, or a Kindle. You get the idea.
Once you have an emergency savings equal to one year of your expenses (yes, I said one year), then you can start saving for the fun things you want in life. Today, plan on how you are going to start saving for emergencies. Set up a regular savings amount from your pay that automatically goes to this account.
Living Within Your Means
Whatever your goals are, you have to learn to live within your means. That means that you cannot spend more than you earn. For every dollar you bring in, you need to spend less than a dollar so that the remaining amount can be saved.
Go back to the numbers you did earlier this month. Are you including money for savings? If not, you need to figure a way to do that. In a perfect world, you need to have savings for emergencies, savings for retirement and savings for wants. Today, think about how you will get that money to save.
What do you want financially from your life?
It’s Day 20 of Financial Literacy Month – time to make a list of things you really want. Maybe it’s money to pay for your children’s college? Maybe it’s more money to save for retirement? Maybe it’s enough money to be able to live monthly and not worry about how to pay your bills? Whatever you want, today is the day to make a list and meditate on your goals.
Greeting Cards
Do you spend lots of money on greeting cards and postage? Do you forget to send cards? Try an online greeting card service. I use one that’s less than $10 per year (with no postage). I get reminders for special dates, and can schedule ahead of time, or send right away. No special day slips by me. …Of course, nothing beats markers, paper, and hand-delivery. 🙂
Games Night
Board games aren’t just for kids. Lately, teens, college students and adults have rediscovered game night parties thanks to new games like Apples to Apples, Ticket to Ride, Last Night on Earth (a zombie game), Pandemic (a plague game), Settlers of Catan, and the crazy fun Quelf. Personally, I love a fast-paced game of Mexican Train (dominoes).
Movie Night At Home
How about a movie marathon at home? Go to your local library, borrow several movies, and watch them on your own TV with homemade popped corn. If the library doesn’t have what you want, rent them from your local grocery store movie kiosk for minimal cost. Netflix members can use a Roku or compatible game console.
Dinner with a Twist
If you want something more than pot luck but don’t want to pay a fortune for dinner out, try a BYOB restaurant. Check around, some restaurants will let you bring your own bottle of wine. Ask first, because there could be a “corkage fee” for bringing your own bottle. When you buy wine from a restaurant, your favorite bottle can be double the price of what you would pay retail. Check with your state, because some states will let you bring the partial bottle home, and others won’t. This is one way wine lovers can enjoy dinner out and still save some money.
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