The next targets in my sights are my student loans.  I’m ashamed to saying that I’m still paying them (1.5 years of undergrad and 1.5 yrs of grad school at expensive private universities) 11 years later!  The initial loan amount as well as a deferment early on definitely weren’t in my best interest but I am where I am.  For 2011, I’m increasing my monthly payment to the old payment plus my car payment plus a little more (four figures a month!). 

I’m doing okay since all those things will be automated but there’s always room for improvement.  So for next year, another goal is to pack my lunch more so that I’m not eating out EVERY SINGLE DAY.  I know, shame on me but I’d rather leave leftovers for the next night’s dinner (so I only cook half as much) rather than taking them for lunch.  That’s going to change those.  What are your financial goals for the upcoming year?

The end of the year is fast-approaching. That means I spent a few hours yesterday looking at our finances. Due to an extra paycheck that I wasn’t expecting (it was scheduled for Friday 1/1 but that’s a holiday so it was moved to Thursday 12/31), I was able to max out my 401k. I originally expected to be a few hundred dollars short so that was a pleasant surprise. However, Mr. Savvy is on the same pay schedule as me. That meant he exceeded the max by several hundred dollars. That money went into after-tax contributions. I guess it’s done now but I would have much rather that money go into his SEP-IRA instead.

Next, I tallied up my total income for the year, including the extra paycheck. I sent an extra payment to our church online to ‘true up’ my tithe for the year. I also need to remember to take the bag of stuff in my closet to Goodwill before the year is over.

Next, I sent another $200 to my IRA. I’m nowhere near maxing that out but will before the April 15 deadline. Once I’m done contributing, I will do a Roth conversion. I also took a look at our asset allocation. There are a few tweaks to be made but there’s no rush for that. What year-end money moves are you making?

photo credit: Mark Sardella

It seems that we need new toilets.  I know it’s a necessity but I’ve been putting it off because I don’t like spending money on things that aren’t ‘fun’.  What’s more, we really need to replace all four toilets.  I’m thinking of  replacing two now (the most used) and the other two later.

In other financial news, I received an e-mail from my company last week stating that they’re discontinuing one of the fund options in our 401k plan.  Of course, I have holdings in the fund and of course, the fund is down about 20%.  I have until May 29th to make a decision but I don’t know what I want to do.  If I sell, I will have locked in those losses.  If I do nothing, it will automatically roll to the replacement fund (still locking in the losses but taking a gamble with the new fund).  Guess I need to start doing some research.  Bleh.

photo credit: mujitra (´???)

This is a guest post from A, a pf blogger at I Pick Up Pennies. Thanks to A for guest blogging while I’m on vacation!

My husband and I turned 30 in 2008, and I decided it was time to start planning for retirement.

Neither of us have worked for companies with 401(k) matching programs, so no one was going to hold our hands (or match our funds). We were on our own.

Do it yourself (whether you want to or not)

Plenty of jobs out there offer 401(k) matching programs, although these may be in jeopardy as the economy dwindles. Even these people probably shouldn’t rest on their laurels when it comes to IRAs, but at least they have an excuse.

There are, however, plenty of people who don’t have access to a matching-funds program, or even a company-chosen bank to invest with. Whether they’re stay-at-home parents, self-employed or simply with a company that doesn’t provide retirement help, these folks are the ones who need to get going on an IRA.

Maybe they put it off because they think they don’t have enough money to bother. The fact is, there is no magic number when it comes to retirement contributions. Each day you procrastinate, however, can have long-term effects on your future.

In “Deal With Your Debt,” Liz Pulliam Westin gives the perfect example:

There is a pair of twins. One contributes $3,000 every year, from age 22-32. Then she stops and never puts in another nickel. The second contributes $3,000 from 32-62. The early saver will save nearly $100,000 more than her sister: $437,320 vs $339,860. (This assumes an average return of 8%, since this example was written in far more optimistic times.)

Take the first step – however small

The moral of the above story is that the sooner you act, the more benefits you reap. Still, some people think that they couldn’t put enough in the plan to make it worthwhile. And this is where they’re wrong.

Of course, each of you must decide for yourselves what you are comfortable contributing. It will depend greatly on your income, your assets, your debt and basic costs of living. For the two of us, that amount was $20 a week. (Which you probably knew from the title.)

My husband and I have an income of just under $3,150 a month. From that we pay: $700 for rent, $502 for my husband’s health insurance, and about $100 for a medication not covered by Medicare. Beyond food and utilities, most of the rest gets thrown at our debt: $8,600 to the credit card companies and $5,000 to relatives.

Despite this tight budget, we both agreed that we could budget around $20. That amount probably wouldn’t be missed. Anything more than that, though, might hinder our ability to pay down debt as quickly as possible.

Some of you may wonder why we even bother contributing such a small amount. The thing to remember is that those little amounts add up. At $20 per week, we accrue $1040 in a year (minus a $20 bank fee). Maybe that’s still not very impressive for most people. But it’s a step in the right direction – and the first step is usually the hardest.

I look at the IRA as a symbol of our commitment to creating a secure future for ourselves. And it reminds us that, even in this low-income situation, we can start our plans for a better future – just in a slightly smaller way than we might like.

Still not convinced? Okay, then let’s look at the math:

Let’s say our contributions never get beyond $1020 a year (52 weeks x $20/week and minus $20 bank fees). But we contribute for 30 years and get a 3 percent return. (Given the current markets, I think it’s best to be conservative.)  At the end of that 30 years, we would have $49,934, completely tax free (which we’ll address later).  And if in 5 years, my husband is able to start his own IRA, he’d have $42,769 at the end of 25 years. That would make for a total of $92,703.

From $20 a week, we can grow over $90,000. Imagine what we can do when we get out debts paid off.

photo credit: habi

Once again, Kiplinger’s Magazine is offering FREE retirement advice.  Today, you can call or go online (9 am – 6 pm EST) to talk with NAPFA financial planners.  Just call 1-888-919-2345 or go to www.kiplinger.com/yourretirement/jumpstart/.

photo credit: habi

Once again, Kiplinger’s Magazine is offering FREE retirement advice.  Today, you can call or go online (9 am – 6 pm EST) to talk with NAPFA financial planners.  Just call 1-888-919-2345 or go to www.kiplinger.com/yourretirement/jumpstart/.

photo credit: habi

Once again, Kiplinger’s Magazine is offering FREE retirement advice.  On January 13th and January 30th, you can call or go online (9 am – 6 pm EST) to talk with NAPFA financial planners.  Just call 1-888-919-2345 or go to www.kiplinger.com/yourretirement/jumpstart/.

photo credit: Latente § piove merda e dicono che è ciocolata

Like most of you, my 401(k) has steadily been declining despite the money I contribute with each paycheck.  When I checked my balance last night, it looked a lot like my 2005 balance!  So what am I going to do?  Nothing, or rather stay the course.  No one can predict the future so there’s no point shuffling money around and making matters worse.  So I will leave my contributions as is and evaluate my asset allocation at year end, as usual.  Then I will make any necessary adjustments.  Retirement is more than ten years away for Mr. Savvy and I so there’s no need to panic.

But enough about what we can’t do anything about, here’s what we CAN do something about.  As of yesterday, Mr. Savvy’s ‘hobby’ is now a business.  Therefore expenses he has occurred in the pursuit of such can now be written off against the income he’s bringing in.  Also, since he now has a business (a sole proprietorship, by the way), we’ll be opening a SEP-IRA in order to shelter some of that income.   So in addition to working to maximize our income, we utilize all possible (legal and moral) ways to keep as much of that income as we can.

We will also probably delay an upcoming major purchase.  We will still make the purchase but I’m comparision shopping in order to get the best price and I suspect there will be more deals to be had as the year ends.  What, if anything, are you doing differently during these financially trying times?

I currently save ~20% of my gross income for retirement.  My challenge will be to increase that amount to 25% for this year.  I think it may prove difficult (I’ll be honest, I like my standard of living and don’t want to cut back) but I’m going to try it anyway.

For the purpose of this challenge, gross income will be my gross salary and any bank account interest received as well as any miscellaneous or side income.  I will not be including interest or dividends paid to retirement accounts as I have no access to those.  Retirement savings will be defined as my 401(k), IRAs and taxable brokerage account NOT any general savings accounts.

I usually do a month-end financial statement so sometime this week I will add a status bar as of April 30th and then update monthly after that.  What are YOU going to challenge yourself to do?

Stage 0 – Have an e-fund (at least 3 months’ expenses) in place – This should be your first priority so that when (not if) the unexpected happens, you don’t have to accrue debt.

Stage 1 – 401(k) up to the company match – This is typically the most beneficial because you get ‘free money’ (the company match) as well as tax savings.  Each dollar you put into your 401(k) reduces your taxable income, saving you between 10 and 35 cents (depending on your tax bracket) for each dollar.

Stage 2 – Traditional IRA, if you’re eligible – Depending on your AGI, you may get a full or partial tax deduction for your contributions.  There is also a saver’s credit for those deemed low-income (under $26K for singles, $39K for head of household and $52K for married filing jointly).

Stage 3 – 401(k) to the maximum ($15,500 for 2008 unless over age 50, then $20,500) – Once again, you are able to reduce your taxable income (and therefore your taxes) by contributing to your 401(k).

Stage 4 – Roth IRA if ineligible for a traditional IRA – While you won’t receive any tax deductions for your contributions, you are using after-tax dollars.  Therefore once you retire, qualified distributions are not taxed.

Stage 5 – Taxable Accounts – I only recommend utilizing taxable accounts for retirement once you have exhausted your other options.  It makes fiscal sense to take full advantage of all the tax-deferred and tax-advantaged accounts that are available to you.

Of course, one size does NOT fit all when it comes to retirement planning.  If you’re self-employed or employed by a company that does not offer a 401(k), then you will need to seek out other options but there are several to choose from.