We have a few trips planned (both business and pleasure) over the next few months so I need to be careful not to go overboard.  I’m also realizing that there a few things that will be convenient now that I’ve started running.  I want some earphones that wrap behind the ear since the earbuds I have fall out when I run.  Also, I want some type of armband or pouch to hold my iPod.  Mr. Savvy and I registered for a 5k in June so that’s a running expense as well.  We won’t even talk about the cost of Mr. Savvy’s newfound hobby, road racing (bicycling).  He plans to do the Tour de Cure later this month and has been some items to prepare for that.

All in all, we’re making progress albeit slowly.  We’ve also got some other stuff going on so things should smooth out in the next month or so.  What’s new with you guys?

photo credit: jannemei

K.I.S.S. Keep it simple, silly. I decided that our finances have gotten much too complicated as of late. Three checking accounts and five savings accounts are just too much. As as of December 1, it will be bye-bye ING. Though I love them and have been happy with them, there’s no longer the need for them. The joint checking account will be closed and those bills will be paid from one of our credit union accounts. The two savings accounts have already been closed and the money put into the credit union account. So we’ll be down to two checking accounts and three savings accounts – maybe still a bit much, but better.

Next up on the chopping block will be ShareBuilder. As of today, I’ve sold the stock from my brokerage account and the proceeds will be put into my traditional IRA. So that account should be closed by December 1 as well. I’m also strongly considering moving my ShareBuilder Roth IRA to the brokerage where I have my traditional IRA. That will mean one less account to track and easier asset allocation.

How many accounts do you have? Do you think it’s too many? What are you doing to simplify your finances this year?

I recently read the book Living Rich for Less.  It was a quick read and had many useful tips for those still trying to pare down their budgets.  Therefore, instead of letting the book collect dust on my bookshelf, I’ve decided to give it away to one of my fabulous readers.  Simply leave a comment detailing one of your own budget tips and you’ll be entered.  You can leave as many tips as you want but only one entry per person.  I will announce the winner on Saturday morning.

photo credit: feverblue

Last year, Suze Orman and TD Ameritrade sponsored a Save Yourself promotion.  You would receive a $100 bonus for opening an IRA at TD Ameritrade and automatically funding it with at least $50/month for twelve months.  I signed up and last week, I received my bonus.  It’s nice to receive a 16% return (on the $600 total that I contributed) for doing nothing.

This year, TD Ameritrade is offering a similiar promotion.  However, this time you must open a NON-retirement account and save at least $100/month.  These terms aren’t as good as the previous offer’s but an 8% return is still nothing to sneeze at.   I’m debating signing up for this promo too.  Anyone else receive a bonus?

Go to Suze’s site to learn more.

photo credit: AMagill

The American Recovery and Reinvestment Act of 2009—the new economic stimulus law signed on Feb.17—includes a key provision that impacts tax withholding amounts in employee paychecks. This provision, the “Making Work Pay” tax credit, requires employers to implement the new tax withholding changes by April 1.  So look for a few extra dollars in your next paycheck.  However, I challenge you all NOT to spend it but to SAVE it.  If your check increases by $68/month, setup an automatic withdrawal of $65/month to your e-fund or other savings account.  If your savings account is flush, consider increasing your 401k or IRA contributions.  You won’t miss what you never had.

Here are a few key points regarding this credit -

• New withholding tables may reduce the amount of income tax withheld from your wages. Many higher-income taxpayers will see little or no change in their take-home pay. That’s because the “Making Work Pay” credit is phased out for a married couple filing a joint return whose modified adjusted gross income (AGI) is between $150,000 and $190,000 and other taxpayers whose modified AGI is between $75,000 and $95,000.
• The new tables, prescribed by the Department of the Treasury, reflect the Making Work Pay credit and other changes resulting from the American Recovery and Reinvestment Act of 2009.
• You do not have to submit a Form W-4, Employee’s Withholding Allowance Certificate, to get the automatic withholding change. However, if you do not want to have your withholding reduced (because, for example, you have more than one job or you are married and your combined income places you in a higher tax bracket), you may want to file a new Form W-4. You may claim fewer withholding allowances on line 5 or request additional amounts to be withheld on line 6.
• Taxpayers will not get a separate, special check mailed to them from the IRS like last year’s economic stimulus payment.

photo credit: Richard Faulder

It’s been my experience that very few expenses are truly unexpected. Therefore it makes sense to plan ahead so that you don’t find yourself scrambling to pay bills. I like the technique a lot of people call a “freedom account” or “freedom funds”. If you look at your spending for the past year, I’m sure you can identify many irregular expenses, expenditures that don’t necessarily occur on a monthly basis. These are things like auto registration, auto insurance, HOA fees, termite/pest control, annual dues/memberships, etc.

The first step to getting a handle on ‘unexpected’ expenses is to determine the general amount. Add up all the irregular expenses you incur then add ~10% just in case. If you don’t already have a savings account you can use for your “freedom fund”, consider opening an online savings account. I prefer ING because it allows you to set up sub-accounts.

Next take the yearly total you established in the first step and divide by your number of pay periods (i.e. 52 if weekly, 26 if biweekly, 12 if monthly). Each pay period, transfer that amount into your freedom fund. Then when one of those expenses arises, you can simply transfer the money to your checking account and not have to worry about how to pay that bill.

Some of you may be thinking that you can’t ‘afford’ to make those regular transfers to your freedom fund. I say, those are expenses that you will incur, like it or not. Therefore, if you can’t afford it, you’re living above your means (spending more than you make). If that’s the case, you should take a good look at your budget and see where cuts can be made. Can you lower the costs of your cellphone bill or cable bill? Can you bring your lunch to work a few times of week instead of going out to lunch? For most people, there will be numerous ways to cut spending. By taking these steps, you’re that much closer to achieving financial freedom. Doesn’t it feel good?

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: sixty69niner

The turning of the calendar to a new year can provide motivation and a fresh start. Leave all your financial garbage behind in 2008. Instead of making resolutions, take action to improve your finances for this year and the years to come.

• Set up a Christmas account – Congratulations if you did all your Christmas spending with cash (or paid your credit card bill in full). Most people don’t. So avoid disaster by starting to plan now. Tally up how much you spent (or would like to spend) and start putting aside a little with each paycheck. Personally, I like ING (you can sign up to the right if you don’t already have an account with them) because they allow for multiple sub-accounts. Simply, create a new account entitled ‘Christmas fund’ (or similar) and set up automatic withdrawals from your checking account. When December rolls around again, you’ll feel no stress because you’ve already got it covered.  

• Set up a freedom fund – This is similar to the Christmas fund but for any irregular expenses you incur throughout the year – i.e. car insurance, homeowner’s insurance, property tax. Add up the yearly amount you’ll need to pay and divide by your amount of paychecks. This is how much you should set aside each pay period. When those expenses occur, you can merely transfer the necessary amount from your savings rather than stressing how you’ll come up with the cash to pay the bill.  

Automate your retirement savings – Don’t leave your retirement to chance. The IRA limit for 2009 has increased to $5000. This is $416/mo. Go ahead and set up an automatic withdrawal now. Technically you have until April 15, 2010 to fund your 2009 IRA. If money is tight, deposit $333/mo from February 2009 to April 2010.
 

 

• Automate your retirement savings – Don’t leave your retirement to chance. The IRA limit for 2009 has increased to $5000. This is $416/mo. Go ahead and set up an automatic withdrawal now. Technically you have until April 15, 2010 to fund your 2009 IRA. If money is tight, deposit $333/mo from February 2009 to April 2010.  

• Adjust your withholdings – If you’re getting a big tax refund every year, you’re giving the government an interest free loan. The IRS withholding calculator (you’ll need your last paystub handy) will tell you how many exemptions you should be claiming. This will increase your cash flow without much effort on your part.  

photo credit: blakeimeson

Sorry for the delay but things have been busy both at work and at home. I’ve decided to modify my goal of saving 25% of my gross income for retirement this year. In my zeal to amass lots of retirement savings, I lost sight of the fact that that money would be better used to accelerate the payoff my car loan. Duh. So I decided to lower my retirement goal to 22% and apply the rest to the car loan.

So I’ve updated the sidebar to reflect 19.19% to date through the month of July. I’ve also added a sidebar that shows my progress on the car loan. I bought my car in March 2007 so the loan is a little less than a year and a half along.

1. Your credit score is below 600 – If this is the case, the first step is to pull a copy of all three of your credit reports.  If you have accounts in collections, you need to resolve that first.  Many creditors will allow you to go on a payment plan.  However, you MUST pay them according to that plan.  Don’t make promises you can’t keep.  Next, bring any past due bills current.  Those two things will have the greatest impact on your credit score.  After that, only time will improve your score as the negative items fall off.
2. You are saving less than 5% – I recommend saving 10% for retirement as the bare minimum.  You also need to have an emergency fund of at least three months’ expenses.  If that’s not possible at this time, establish a mini-fund of $1000.  That amount will allow you to stop using credit to cover unplanned expenses.
3. Your credit card balances are rising – If this is happening, you are spending more than you make and it needs to stop NOW.  Take a long, hard look at your spending and see where you can cut expenses.  Reduce your cable package, lower your cell phone bill, stop buying clothes, stop eating out, etc. until you take control of your debt.  The first step is getting out of a hole is to stop digging.
4. More than 28% of your income goes to your house – This issue is not as easy to resolve but it still needs to be considered.  First consider increasing your income.  Then consider decreasing your housing costs.  If you’re not renting, that may be hard but you need to evaluate what steps you’re willing to take to improve your financial situation.  The economy will probably get worse before it gets better so why live on the financial edge if you don’t have to?
5. Your bills are spiraling out of control – Lay out all your bills and start cutting things.  Eliminate the fancy cable, the home phone, any non-essentials.  Get a roommate (if possible) if you have to.  Extreme times call for extreme measures.