Authors

Karen Chan
Extension Educator, Consumer Economics

Paul McNamara
Extension Specialist, Consumer Economics

Kathy Sweedler
Extension Educator, Consumer Economics

Blog Archives

Plan Well, Retire Well

Saving and investing your money

February 21, 2012

Saving Money is a Challenge

Saving money is a challenge. Sometimes it's helpful to have encouraging nudges and saving tips to keep us on track with our saving goals. That's why I'm happy to tell people about America Saves.

Most Americans today are not saving adequately for retirement, and most lower-income households do not have adequate emergency savings for unexpected expenditures. To help encourage people to save, America Saves, along with the America Savings Education Council, created America Saves Week. Started in 2007, around 2,000 organizations participate (including University of Illinois Extension) and millions of people are encouraged to better their finances.

This year, America Saves Week is encouraging everyone to 'Set a Goal, Make a Plan, Save Automatically.' America Saves provides helpful tips for successful saving, because not everything is always easy done alone.

This year, America Saves Week is February 19-26 and when you join America Saves you will receive:

Free subscription to our quarterly American Saver Newsletter
Free monthly email newsletters with savings advice
100 bonus credits with SaveUp
Free access to our members-only Savers Tracking Tool to help you reach your goals

You can also get tips by receiving updates from Facebook and Twitter

Set a Goal. Make a Plan. Save Automatically.

The theme for America Saves Week 2012 is more than just a theme; it's a simple set of instructions to help you save successfully. Set a Goal. Make a Plan. Save Automatically. Knowing what you want to save for, how to achieve it, and then making the savings process automatic will allow you to reach your savings goal.

Set a Goal
You can save more by having a goal in mind. Visualizing what you want to save for gives your savings a purpose. You may be tempted to withdraw from your savings if it has no purpose. But once you have a goal in place, you know that taking money out of your savings is taking away from that ultimate goal. So what are you saving for? An emergency fund, a home, retirement, a car?

Make a Plan
Once you have your goal in place, make a plan of how you are going to save. To start, cut down on your spending and reduce high-cost debt. Next, keep track of what you spend and make a budget. Once you know where your money is going each month, you can cut down on unneeded spending and save the difference.
Don't forget to keep your savings safe, secure, and growing. Banks, credit unions, and even the government offer a variety of financial products that can help you save.

Save Automatically
It can be hard to put aside money for savings. But there is an easy way to save money without ever missing it. Once you know how much you can save, make saving automatic. Many employers allow you to divide your paycheck into different accounts through direct deposit. Take advantage by putting part of your pay into a savings account. If you get paid in cash, take a small amount to the bank to deposit into a savings account each week.

Join America Saves to get tips and advice year round and follow them on Facebook and Twitter.

Source: America Saves

Posted by Kathy Sweedler at 2:42 PM | Permalink |
Categories: Kathy Sweedler, Saving Money
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February 20, 2012

Get a 50 to 100% return on investment. Guaranteed!

The stock market has been going gang-busters so far this year. But many people are still shell-shocked from the investment roller coaster of the last decade. Wouldn't it be a relief to have something guaranteed for a change?

Here's one of the few sure things around: if your employer matches your contributions to a 401(k) or 403(b) plan, that's a guaranteed return. Maybe your employer matches 50 cents for every dollar you contribute to your retirement plan, up to some limit such as 3% of your salary. That's no-risk 50% return on those contributions. If the employer matches dollar-for-dollar, that's a 100% return.

That leads us to the first rule to getting the most out of an employer retirement plan: Contribute enough to get all the matching dollars available to you.

If you aren't contributing to your employer plan or you're not contributing enough to get all the matching dollars available, go right now to your employer's benefits website or call your HR department and get that taken care of. If you don't know what investment to choose, you don't have to make that decision. There will be a default option. By law, that default investment must be "appropriate as a single investment capable of meeting a worker's long-term retirement savings needs" (Department of Labor).

Posted by Karen Chan at 4:00 PM | Permalink |
Categories: Investing, Karen Chan, Retirement Planning, Saving Money
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February 13, 2012

Swipe, Swipe ... Spending Money is Easy!

Stop by my favorite coffee shop on the way to work: swipe, debit card pays for the purchase painlessly and quickly. Quick run through the store on the way home for one item, end up with seven things in my cart: swipe, debit card pays for the purchase – no signature or counting out cash required. Where does my money go?

Debit cards are wonderful for their convenience, and typically safer than carrying a lot of cash. But, research suggests that we may spend money more easily when we swipe that electronic card!

If you feel like money is slipping through your fingers, perhaps you'd like to try one of these strategies to change how you think (and act) when spending money.

First, consider using cash for expenses you'd like to regain control of. For example, perhaps you'd like to take control of your spending for food eaten away from your home.

Estimate how much you want to spend for a week.
Put this much cash into an envelope at the beginning of the week.
Every time you buy food to eat outside of your home, pay with the cash from the envelope.
When you run out of money in the envelope, you're done spending – at least, until the beginning of the next week when you can reload your envelope.

Don't want to carry cash? You can modify this envelope budgeting strategy.

Write the amount you want to spend on the envelope.
After each purchase, put the receipt in the envelope and subtract from the total allowed.
When you reach $0.00, you're done spending for the week.

There are free phone apps, such as "Easy Envelope Budget Aid (EEBA)" where money is taken away from virtual envelopes. This might fit your style if you're more likely to carry a smart phone than an envelope.

Whichever technique works for you, the important feature is to slow down your purchasing and to feel the "loss" when you spend money – right then, not at the end of the month.

What strategies have you used to slow down your spending in one expense category or another? I'd love to hear what's worked for you!

Posted by Kathy Sweedler at 11:14 PM | Permalink |
Categories: Budgeting, Kathy Sweedler, Reduce Spending
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February 8, 2012

Which Bills Should I Pay First?

You probably heard it on the news: the Federal Reserve Bank says that credit card debt increased in both November and December, which is a good thing for the economy. But what does it mean for you?

January and February can be financially difficult months. If you charged gifts and other holiday purchases, the bills showed up in January. With cold weather, the gas and electric bills are higher. What do you do if you can't pay all your bills?

The long term solution is to reduce your spending. But in the short term, you may have to prioritize who to pay or contact creditors to negotiate different payment arrangements.

Think about these questions to help you decide which bills are most important.

What are my family's basic needs?

You and your family need food, water, heat, and housing. You may be able to get some assistance with these necessities. For example, you might visit a food bank. But these items will probably be your first financial priority, before other kinds of bills and debts.

What will I lose if I don't pay this bill?

If you don't pay a bill, can the lender take something from you? They can if the debt is secured. Car loans, mortgages, and other types of home loans are secured loans.

Other kinds of debt may be secured. Check your loan or credit card agreement to be sure. Rent-to-own isn't really debt, but those items can also be taken if you don't pay.

You might be thinking, "My car's a piece of junk anyway. Let them have it!" But be careful. If your car is repossessed or your home is foreclosed, you could still owe money on that debt if the car or the house is sold for less than what you owe.

How much do you still owe on the loan?

If you only owe a couple of payments on a debt, making the remaining payments may be a priority. Once that debt is paid off, you can use that monthly amount to pay toward other debts.

Do you owe child support, back taxes, or student loans?

These are debts that are not going to go away in most cases, even if you file bankruptcy. There can be serious consequences if you don't pay these debts: property could be seized or have liens placed against them, money could be taken from your paycheck, and income tax refunds could be intercepted. Consider those consequences when you're trying to decide which bills have priority.

This blog post is based on the fact sheet, Managing Your Debt, on University of Illinois Extension's Getting Through Tough Financial Times website. You may want to read the entire fact sheet for more information. You'll find a variety of fact sheets there that may help you assess your financial situation, contact creditors, and talk with other family members about your finances.

Posted by Karen Chan at 2:30 PM | Permalink |
Categories: Budgeting, Credit and Debt, Karen Chan
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February 2, 2012

Can making a payment on an old debt be a mistake?

To follow up on my previous post, Does Old Debt Go Away?, I wanted to let you know about a very informative article on the Federal Trade Commission's website. If you're trying to decide whether you should pay off older debt, I strongly encourage you to read this item, titled Time-Barred Debts: Understanding Your Rights When It Comes to Old Debts.

It outlines what you should do if a debt collector contacts you about a debt you believe is older than your state's statute of limitations. And it addresses the things to consider when deciding whether to leave an old debt unpaid, make a payment, or pay it in full.

This is a question that often comes up in my workshops, and I'm glad to have found a reliable source that does a good job discussing the issue.

Posted by Karen Chan at 2:25 PM | Permalink |
Categories: Credit and Debt, Karen Chan
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