Easy ways to hatch a terrific nest egg
Has saving for retirement got you worried? You've probably heard bleak reports that Social Security will do little to take you through your golden years, particularly if you're used to living a certain lifestyle. That's why it's important to get in the habit of saving and investing to maximize the chances that you can live the good life during retirement.
No matter what your age, there's never a bad time to get smart about money and investing.
"The key to financial security is establishing a savings plan, even if you need to start small, by saving just ten or twenty dollars a month," said Donna DeMaio, president of MetLife Bank, an affiliate of MetLife. "The good news is that it's never too late to start saving, and it's a lot easier than people think." Here are some options to consider:
SHOP SMART
It's easy to get caught up in the "must-have it" trend today. Many people accrue a great amount of debt making purchases that they want, but really don't need. The latest gadgets, a new car every three years, designer duds — these luxuries are fine if you have discretionary income. However, most people live paycheck-to-paycheck, so it's important to be smart about purchases, particularly those on high-interest credit cards.
Instead of relying on your credit cards, try budgeting luxuries and necessities each month and pay in cash whenever possible.
Also, it pays to shop around. You're not "cheap," if you look for a bargain, but frugal. Whenever possible, "shop at stores with concrete floors" — namely warehouse retailers. You can buy items at bulk, at prices typically lower than other stores. Also, walk into a store with a list in hand and only purchase from the list. Many times "impulse buys" are what put a dent in your wallet.
LOOK TO REAL ESTATE
Owning a home can be a financial burden or windfall. It depends upon how you strategize the purchase. As a result of the recent housing boom, many people got rich quickly, cashing in on homes that appreciated in value by several percent from when they were originally purchased. However, experts are seeing a leveling out of most home prices, or even a decline in some markets. Still, you can use the equity built in your home for retirement investing, home improvements which will boost its appraisal value, and to put the kids through college. However, it's unwise to use this equity to live above your means.
SIMPLE SAVING
Many people strapped for cash feel they can't spare any money to start a savings plan. However, most people can manage to find a way to set aside a few dollars a week. Set up a "don't touch" account to which you can have money from your paycheck automatically set aside. Ask your payroll office at work how to set one up. If you can manage credit card usage, there are companies that offer cash back on purchases or even savings plans that set a percentage of the dollars spent into a savings account. What's more, there are free programs where a portion of products purchased from participating vendors will be put toward a college savings plan. Start early and reap the rewards later on. Also, consider saving with a direct, or "Internet" bank, which can in many instances offer higher interest rates than more traditional financial institutions. In some cases it is possible to earn up to four times more interest.
YOU CAN INVEST
From million-dollar stock portfolios to money market accounts, there are plenty of options for investing based upon your needs and financial situation. The key is finding the right ones. Investment accounts that fit just about everyone include money market funds. They function similarly to a regular savings account, except the money you deposit is invested in a group of stable-yield companies. This helps you earn a greater interest rate than with a standard savings account.
401(K)s are also quite popular and simple to join. Most employers have some sort of employee savings plan, such as a 401(K), where funds are withdrawn from your salary pre-tax and invested in stock funds. What's more, many employers will match contributions to some extent, further building your savings potential.
Talk to a tax advisor about IRAs. The traditional IRA and Roth IRA both have their own set of advantages and are a handy way to save for retirement. A similar concept applies to the popular 529 college savings plans. You can invest money into a plan tax-free to save for a son or daughter's use when they reach college age.
For more ideas on being financially savvy, take advantage of the free resources available on the Web.
