YOUR MONEY: Old financial wisdom is new again in 2010New year, new decade, old advice. Oh, you may feel like nothing works after the recession ravaged your 401(k) plan, your savings, and the value of your home. Even so, there's still no way to save money other than actually saving money. Worrying does nothing. So suck it up, and make some moves.
By: Susan Tompor, Detroit Free Press
New year, new decade, old advice.
Oh, you may feel like nothing works after the recession ravaged your 401(k) plan, your savings, and the value of your home.
Even so, there's still no way to save money other than actually saving money. Worrying does nothing. So suck it up, and make some moves.
1. Every year, it makes sense to set aside money in a 401(k) plan or Individual Retirement Account or college savings plan. Just save it. Be sure to save enough to get every cent that your company may offer for matching contributions in the 401(k) plan.
2. Reconsider how much you're spending on cable, rent or other monthly services. You might cancel what you don't need — or renegotiate.
During tough economic times, landlords in some areas may agree to a lower payment to hold onto dependable renters, according to David Bach's new book, "Start Over, Finish Rich: 10 Steps to Get You Back on Track in 2010."
Some New York City landlords, he said, have offered discounts of up to 20 percent. Bach suggests using rent comparison tools like www.rentometer.com or www.zilpy.com.
3. Put more money into a rainy-day fund. No one is going to feel an urge to stuff an extra $150 or $200 a month into savings, especially when rates are low. Still, saving 5 percent to 10 percent of each paycheck to cover emergencies continues to be savvy.
4. Give U.S. savings bonds another look.
A newly issued Series I savings bond now has an earnings rate of 3.36 percent for the first six months after you buy the bond.
A Series EE savings bond has a fixed rate of 1.2 percent for at least 20 years of the 30-year life of the bond. A new rate or different structure could be announced for the final 10-year extended maturity period.
I Bond rates fluctuate every six months based on inflation. New rates for Series I and Series EE bonds are to be announced May 1.
Savers can buy up to $5,000 in paper Series EE Bonds each calendar year and up to $5,000 in paper Series I Bonds each year. An additional $5,000 for each series can be set aside each year in an online account through TreasuryDirect. See www.treasurydirect.gov.
5. Get some partners to share the costs — and discounts.
If you want season tickets for a sports team or local theater, see if you can set up a system to split the costs and the tickets with a neighbor, friend or coworker. The same could work if you want to hold onto magazine subscriptions that could be shared with someone.
6. Stay flexible about when you travel, shop, dine or go out.
Pay attention to deals, passes or youth prices. The Detroit Symphony Orchestra, for example, started a Friday Night Club pass for a onetime $99 fee for Friday night performances during the 2009-10 season. Tickets have some restrictions. Take advantage of loyalty programs on credit cards — or at specific restaurants — and plan your purchases to make sure to use those rebates or discounts.
7. Work on an exit strategy for your credit card debt.
Thinking about $20,000 in credit card debt is overwhelming. Still, you can start a new decade with a five-year plan to pay off that debt.
Make the minimum payment on time each month, stop using any credit cards for cash advances or purchases and pay an extra $100 or more a month toward your credit card debt.
The Federal Reserve has a repayment calculator that can help you run some numbers. See www.federalreserve.gov/creditcardcalculator. The Web site notes that you might get a more accurate estimate from your credit card issuer's site. So try a few calculators.
8. Don't dump that lump sum into a checking account and waste it on frills.
If you want, you could even direct your federal income tax refund into savings bonds.
When you file your tax return, include IRS Form 8888 to tell the IRS you want to use part (or all) of your refund to purchase paper I Bonds. Purchase amounts must be in $50 multiples, and any remaining funds will be delivered by direct deposit.
To request an I Bond purchase, simply place the following information in one of the available fields on Form 8888: Routing Number: 043736881 and for the account number, you'd use the word "Bonds."
9. Where is your money going?
Stop for just one month or even one week to track every dollar you spend. Write it down in a little book, save the receipts, only use a credit card or debit card.
Soon, you could be shocked to discover that you're spending $20 to $50 a week on stuff that you can't remember you bought.
In general, U.S. consumers cannot account for an average of $1,100 in spending each year, according to a new survey commissioned by Visa. Younger consumers 18 to 24 lose track of $2,500 annually.
10. Give up buying things you do not need. You can have too many shoes — and too many baseball caps.