21 Apr Top 10 Money Tips You Won’t Find on CNN Money
Up until the 1980s, most companies offered pension plans to their employees to protect them in their retirement years. When 401(k)s and IRAs were born though, they shifted the responsibility and costs of retirement planning onto the employees. But are 401(k)s and IRAs as good as pensions? You may think so, but the real answer is no. Sadly, having a 401(k) plan doesn’t guarantee you’ll have enough money to retire … a fact that even its creators admit is now true (see interview at npr.org).
Below are 10 simple proven saving tips you won’t find in CNN Money that will ensure you’ll sail off into the sunset in your retirement years.
- Save 10-20% of every dollar you make: One of the greatest assets of any retirement plan is time. Start saving early and often, and don’t touch the money. Saving 10-20% of your income is what we recommend. This might sound challenging at first, but look for ways you can trim your expenses. That will be easier to do now than when you are retired.
- Contribute to your retirement savings plan: If your company offers a retirement plan, contribute monthly. If you are fortunate to have an employer who matches your contributions (free money!), contribute up to the amount your employer matches. For instance, if your employer offers a 5% match on whatever you contribute, make sure you contribute 5% of your salary. That will help you achieve that 10% minimum savings goal mentioned above.
- Live below your means: In a nutshell, this means live on less than you make. For instance, if you make $50,000 per year, live like you make $40,000 per year. This might sound challenging at first, but the Internet has made it easier than ever before to scout of the best deals on everything from cell phone providers to car insurance. This will also help you achieve that 10% minimum savings goal.
- Learn how to invest: In investing, there are four possible outcomes – a big gain, a small gain, a small loss or a big loss. While making big gains is what everyone desires, learning to avoid big losses is equally important. For sports fans, think of it this way … a good defense allows you to stay in the game.
- Don’t lose money: Wherever you are in your financial picture, you need to protect your investments. How? By keeping a portion of your retirement savings in holdings that are protected from the volatility of the stock market. Our members are taught these time-tested strategies. Strategies you won’t learn on CNN Money. Want to learn how? Contact us.
- Keep fees low: Whether you are investing through a company 401K or on your own, find funds with the lowest expense ratio. To check expense ratios, go to morningstar.com type in the mutual fund symbol and click on the tab “Fees & Expenses”. Look for the lowest expense ratio funds, and reallocate your positions to those funds. Choose funds with no front-end load fees and expense ratios below 0.50%.
- Reduce your tax bill: One of your single biggest expense eating into most people’s income is taxes. CNN Money will not teach you about finding hidden loopholes in IRS tax codes to take advantage of. Reducing your taxable income can be as easy as itemizing deductions or creating your own company to take advantage of available tax deductions. Find a good CPA who can help you.
- Gain financial knowledge: When you purchase life insurance, a home or a car, where do you get information and advice? Most people rely on those trying to sell them these things. Unfortunately, when you do that, you are relying on someone else’s knowledge and honesty. Have you ever heard the old adage that knowledge is power? It’s true. He/she who has the most knowledge has the most power. Even a basic working knowledge of finances and investing will help you tremendously in creating a successful financial path.
- Track your results: Keeping track of all of your investments on an annual or quarterly basis will give you a great snapshot of their performance, enabling you to make appropriate adjustments as needed.
- Protect your retirement savings as you approach retirement: One of the most critical times in retirement income planning is ten to five years prior to retirement because losses at this point cannot be made up easily. In fact, the size of a loss at this critical time could mean the difference between retiring or not retiring. We’ve helped our member create income plans that help maximize the amount of income they receive with safety and peace of mind. Contact us to learn how.
The great thing about these tips is that they can be taken together or individually. Either way, they will help ensure that you’re being smart about your money which will help you ultimately live the life you dream about.