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text 2017-04-30 15:10
How to save for retirement on a tight budget

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To the average American, saving money is a mythical topic. In a recent CareerBuilder report, 78% percent of full-time workers said they live paycheck to paycheck, up from 75% in 2016.

 

Retirement savings can seem unnecessary when you're barely getting by. That said, you and your spouse will need about $1 million to live comfortably during your golden years, and waiting for a financial windfall isn't the best use of your time.

 

Take these steps to prioritize savings with the resources you have.

 

Trim your spending

 

It's not easy or fun, but cutting unnecessary spending is the most effective way to take control of your finances. The good news: According to a study by Hloom, 8 out of 10 Americans admit to wasting money, so there's a decent chance that you're not as broke as you feel. Start small by eliminating things that aren't overly painful, and work your way up to making significant cuts across the board. An efficient budget will help you form better savings habits.

 

Change your spending perspective

 

The opportunity to save money is vast if you know where to look. For example, suppose you have a $5,000 credit card balance with a 22% interest rate. If your credit score is decent, your bank may be willing to lower the rate, which will help you repay the debt more quickly. This is just one example of how a frugal mindset can change your lifestyle, and you'll be surprised by how easy it is to negotiate savings. For instance, while you probably wouldn't think to haggle at big box stores like Home Depot, most are willing to price match their competitors. The same goes for internet and phone providers, office supply stores, baby stores, and even online retailers like Amazon. Prioritize savings by finding discounts in every corner of your budget.

 

Find a side gig

 

The idea of working after work probably sounds awful, but there are plenty of ways to earn extra income without feeling burnt out. If you're a homeowner, consider renting out a room on the weekends via Airbnb or another rental site. If you're artistic, use your talents to sell goods through Etsy. Or, if your day job skills are in high demand, consider selling yourself as a part-time consultant who commands a high fee. There are 44 million people working side gigs in the U.S. alone, and even modest savings can add up. For example, at a 7% return, investing $500 a month will yield nearly $592,000 in 30 years. Take stock of your passions and financial goals to find the perfect fit.

 

Control your debt

 

One of the biggest roadblocks to retirement savings is lingering debt. Whether you're paying off student loans, credit cards, an auto loan, or a mortgage, controlling your cash means making deliberate choices. For example, paying off credit balances with variable, high interest is usually the best choice. That said, it might not make sense to make accelerated payments on fixed loans with low interest, especially if it prevents you from investing in retirement. Review your finances and strike a balance between long-term savings and immediate expenses.

 

Use your employee benefits

 

Saving for retirement is easier with the support of your employer, but the sad truth is that only about one-third of Americans are taking advantage of their 401(k)s or other tax-deferred retirement plans. If you haven't already, redirect your savings as soon as possible, and be sure to ask whether your company matches a portion of your contributions. There's nothing quite as satisfying as free money, and your employer's 401(k) matching offer is exactly what you need to supercharge your efforts.

 

While you're at it, don't forget to learn about the other ways your employer can help you save money. If your company offers a health savings account (HSA), your out-of-pocket medical expenses are tax-free, which frees up a portion of your income to save for retirement. The same goes for flexible spending, which can include expenses like child care, home improvement supplies, and more.

 

Open your own savings vehicle

 

There are ways to save for retirement even if you don't have access to an employer-sponsored plan. The value of compound interest means that your money has the power to grow until the day you retire, and it's important to take advantage of the time you have between now and then. Consider opening an individual retirement account (IRA), which allows you to contribute up to $5,500 a year or $6,500 a year if you're over age 50.

Source: bellmoregroup.weebly.com/blog/how-to-save-for-retirement-on-a-tight-budget
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text 2017-04-18 14:49
There are 3 things to understand about investing if you want to make money in the stock market

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Investing is anyone's game. And putting money in the stock market while you're young is one of the best — and easiest — ways you can set yourself up for a comfortable retirement.

 

But the reality is many people don't invest — especially younger Americans, who keep as much as 70% of their portfolio in cash, according to a recent BlackRock survey.

 

In a recent blog post, ESI Money, a blogger who retired at 52 with a $3 million net worth, said "waiting to invest" is one of the "worst money moves anyone can make."

 

After all, investing your savings in the stock market, rather than stashing it in a traditional savings account, could amount to a difference of up to $3.3 million over 4o years.

 

Luckily, investing isn't as complicated as it seems. According to ESI Money, there are three factors that determine how well your investments will perform:

 

  1. Your timeline

 

ESI Money crunched the numbers and found that time is the most important factor in how well your investments perform. "[T]he longer you wait to save and invest, the more you're costing yourself," he said.

 

In other words, it's all about maximizing the benefit of compound interest.

 

Take a look at the chart below, which illustrates the difference in savings for a 15-year-old who puts $1,000 of their summer job earnings into a Roth IRA — a retirement account where your savings grow tax-free — for four years and then stops, and a 25-year-old who puts away $1,000 until age 28 and stops.

 

Assuming a 7% annual rate of return, the early saver will have nearly twice as much money saved by age 65 as the late saver, with no extra effort whatsoever. Even if the late saver continued putting away that same amount until age 30, they'd still come up short.

 

The best way to maximize earnings is to keep saving and investing consistently, but the idea remains: The more time your money has to grow, the more you'll end up with.

 

  1. How much you invest

 

How much money you earn will be based partially on how much you invest. The good news is that you don't have to invest a ton of money to earn a lot over time. You can easily start by contributing 15%, 10%, or even 5% of your pre-tax income to a retirement account, like a 401(k) or IRA.

 

If you're worried about investing too much money for fear of losing it, don't be. Stock market investors had over a 99% chance of maintaining at least their initial investment — the same as a traditional savings account, according to a recent NerdWallet analysis of 40-years of historical returns.

 

  1. The return rate

 

The NerdWallet analysis also found that investors had a 95% chance of earning nearly three times their initial investment, while traditional savers had less than a 3% chance of tripling their investment.

 

Still, the rate at which your money grows is completely out of your control. That's the nature of the stock market — not even legendary investor Warren Buffett can guarantee big returns.

 

Ultimately, you're doing well if your investment outpaces inflation, which won't happen if your money is shored up in a bank account with super low interest rates. To minimize risk, diversifying your investments across different types of companies, industries and countries is key.

 

You can start by investing in a low-cost index fund that does the diversification for you — like the Vanguard Total Stock Market Index Fund. Another increasingly popular tool for novice investors are robo-advisors, which use an algorithm to build and manage your portfolio for a small annual fee. Or, you can follow Buffett's advice to stick with a simple S&P 500 index fund, which invests in the 500 largest US companies.

 

These are commonly called "set it and forget it" investments that grow over time, regardless of short-term performance. Just make sure you're not paying annual fees higher than 0.5% or it'll eat into your returns.

 

ESI Money sums up the winning formula best: "Save early, save often, and save more as time goes by."

Source: bellmoregroup.strikingly.com/blog/there-are-3-things-to-understand-about-investing-if-you-want-to-make-money-in
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text 2017-04-07 22:06
Should I invest my emergency savings in the stock market?

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How much of your emergency savings should be held in a savings account instead of the stock market or other account that has higher returns with various risks?—Mary

 

There's no question you should always have some money tucked away for emergencies.

 

Most financial advisers recommend keeping three to six months' worth of expenses for emergencies, but where's the best place to keep the money? Experts usually recommend a plain-vanilla savings account. But in a low interest environment, it can be frustrating to watch your money earning nothing. Here are some ways you can get a better return on your money without taking on too much risk.

 

Online savings accounts

 

If you're a super saver, you may not be satisfied with the .01% interest your local bank offers you. Instead, consider an FDIC-insured online bank, says Tammy Wener, a financial adviser from Illinois.

 

"They generally pay higher interest rates than local banks and can be easily linked to a checking account," Wener says.

 

For example, Ally Bank and Discover have online consumer accounts that have no transaction fees and no minimum balance, and offer approximately 1.2% in annual interest. This still may not seem like a large return, but having access to the money when you need it allows it to serve its purpose, according to Wener.

 

"While holding the funds in a savings account provides very limited growth potential, the peace of mind is more than worth it," Wener says.

 

Money Market Accounts

 

If you're open to performing savings transactions with a bank that may be a great distance away, a money market account may be another safe bet for your emergency fund. Money market accounts typically offer similar interest rates to online savings accounts, but some also come with additional liquidity by allowing you write checks from the account -- like Sallie Mae, which offers 1.30% APY, with no minimum balance or maintenance fees.

 

Because access to your funds in times of emergency is the primary function of emergency savings, Oklahoma-based certified financial adviser David Bize suggests keeping all of your money in a secure and liquid account.

 

"100% of emergency savings should be in checking, savings, money market account," Bize says. "These are 100% liquid and never decrease in value."

 

Mutual funds

 

If you're still worried about having such a large chunk of your money sitting in an account, there are times when it may be appropriate to consider a balanced mutual fund that could provide better opportunities for savings, says New York-based financial adviser Byrke Sestok.

 

In order to determine which fund to use, he recommends looking at how a fund performed during the Great Recession, one of the greatest stock market declines.

 

"If you could tolerate a loss of a similar percentage to your emergency fund that occurred in that period then you may have a good fund to use," he says.

 

Stock market dangers

 

In theory, you could keep part of your emergency savings in the stock market. However, Arizona-based financial adviser Dana Anspach notes that market declines often go hand-in-hand with layoffs and recessions.

 

"That means at exactly the time a big stock market decline occurs, you could be out of a job," she says. "If your money is invested in the market, which could mean it is worth 40-50% less at the time you need it most."

 

Investing your emergency savings in the stock market exposes it to risk, and makes it less accessible to you. For that reason, most advisers recommend keeping your emergency fund out of the market.

 

"Doesn’t put money in riskier investments until you have an adequate emergency fund tucked away somewhere safe and sound," Anspach says. "You want to know what your emergency fund will be worth should an emergency occur."

Source: bellmoregroup.wordpress.com/2017/04/07/should-i-invest-my-emergency-savings-in-the-stock-market
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text 2017-03-29 17:30
Knowing When To Invest -- It's Not When You Think

Startup investing is a funny thing. Sometimes it feels like you are on fire. You see exciting companies and founders coming one right after another. Other times, nothing coming through the pipeline feels quite right, no matter how many you are seeing. After experiencing several of these hot and cold cycles, I was curious how normal this is. I decided to take a look.

 

Let’s begin with an idea that many investors strive for: investing at a steady pace. Simple, right? Investing at a steady pace sounds intuitive enough. The only problem is that it's a bad idea.

 

The reality is that the best opportunities are not evenly distributed over time. Randomness is clumpy. If you invest in only the best opportunities, whenever they arise, you will have busy and slow periods. Smart investing plans for the clustering.

 

 

Consider the math. I randomized 10,000 scenarios to understand how the ten best investments I see every year will be distributed over that time. The results are interesting for any investor. If you want to run your own scenarios, feel free to use the basic model I built here.

 

I target ten investments a year. You might think that I would aim for 2-3 investments per quarter. But actually, the randomized scenarios make it clear that a “normal” quarter only happens half of the time. I am just as likely to have a sleeper quarter (0-1 deals) or a slammed quarter (4-6 deals).

 

 

A few other highlights from my analysis:

 

  • In 3 out of 4 years, there will be one sleeper and one slammed quarter—big ebbs and flows are the norms. You should plan on this, not on steady investing over a year or a fund's life
  • In 1 out of 3 years, half or more of the best opportunities will come in a single quarter
  • In 1 out of 4 years, you will have a quarter with zero opportunities

 

The lesson is clear: investors who try to invest at a steady pace will not be investing in the best opportunities. To only invest in the best companies, you need a flexible investing calendar.

 

This math assumes that the best deals are randomly distributed throughout the year. If you believe that there is seasonality driven by accelerators, school graduations, or founders quitting jobs at the end-of-year, then the opportunities will be even more clustered.

 

I struggle with this myself sometimes. Recently, I had made two back-to-back investments when a third exciting startup also caught my attention. At the time, I questioned whether I was being too eager, perhaps having too optimistic an outlook that month. The reality, though, is that opportunities very often cluster, and I did make that third bet—a clear win in hindsight.

 

There are of course some advantages to investing at a steady pace. Remaining active in the market keeps your networks active, your brand fresh, and your knowledge relevant. It simplifies planning for a fund's manager and limited partners. And it prevents you from letting good opportunities pass you by, waiting for a perfect deal that doesn't exist. Venture will always be about taking risks and putting your neck out there.

 

So, how do you know when to bet? The key is to find balance.

 

The wrong approach is to hold yourself and your team to strict investment quotas per quarter or year. A better approach is to set a range that incorporates the natural ebbs and flows of randomness, and to discuss expectations with your team and limited partners. Running scenarios against your portfolio size and investment period will help you understand the clumpiness expected in your own model.

 

Understanding the randomness of opportunities will help you plan smarter. Steady investing, rather than pursuing the best companies when they actually are ready for investments, will ensure sub-par investing and returns. It will cause you to miss out on excellent deals—don't make that mistake.

Source: blogs.rediff.com/bellmoregroup/2017/03/29/knowing-when-to-invest-its-not-when-you-think
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text 2017-03-03 15:13
How to Come Back from Bankruptcy

After spending several years fighting with creditors, you decided to file for bankruptcy. You never thought to find out how long bankruptcy can affect your credit score. And now that your credit score and confidence have taken a hit, you feel hopeless. But don’t fret because there’s a light at the end of the funnel. Keep reading to discover how to start rebuilding your financial life.

 

Ways to Recover From Bankruptcy

 

  1. Shift your mindset

 

If you’re going to pick up the pieces and rebuild, a mindset shift is paramount. It’s normal to feel like a failure. But the goal is to focus on getting to the root of the problem so you can move forward.

 

  1. Create a spending plan

 

Once you’re committed to improving your financial situation, create a budget. A few factors to keep in mind:

 

Expenses should always be lower than income. If not, trim unnecessary expenses.

 

Filing for bankruptcy should have alleviated some of those debt payments.  So, use the extra money to pay off other debts and start saving.

 

Always be realistic with your expenses and income or you’re setting yourself up for failure.

 

  1. Build a cushion

 

Each time you get paid, it’s important to set aside a part of your income into a savings account. As the balance builds, you’ll have an even greater cushion to fall back on if a financial emergency arises. Even better, you won’t have to rely on debt to get by or put yourself at risk of falling back into the same trap that led to the initial bankruptcy.

 

  1. Start rebuilding credit

 

Are you thinking that filing for bankruptcy bans you from the credit world for several years? Think again. The easiest way to start rebuilding credit is by using credit responsibly. There are lenders that will give you a second chance without charging a fortune in interest. But it’s usually in the form of a secured credit card or loan product.

 

Both need a deposit for collateral in the event you default. Start with your financial institution when researching options. They may be more willing to approve you on the strength of your positive account history. But be sure to keep your balances low to derive the greatest benefit.

 

You could also become an authorized user on some else’s credit card to start rebuilding credit. You’ll benefit from positive account activity without being liable for the debt.

 

Lastly, don’t forget to see investigate chexsystems to see if have an account listed. It may have been removed but if it hasn’t, now is the time to take care of it.

 

  1. Avoid late payments at all costs

 

Payment history accounts for a whopping 35 percent of your credit score. In fact, one late payment on a credit card or installment account can tank your credit score by up to 100 points. Even worse, the negative mark will remain on your credit report for seven years. So, if you’re serious about rebuilding your credit score post-bankruptcy, you can’t afford to let accounts slip through the cracks.

 

Instead, use your budget to stay on top of your expenses and due dates. You may also want to take it a step further by automating payments to avoid missing any due dates. And if you know you’re going to be short on funds, call the creditor in advance to set up a payment arrangement.

 

  1. Keep an eye on your credit report

 

When was the last time you checked your credit report? The thought of taking a peek may be frightening. But your report could contain material errors that are dragging down your credit score. In fact, one in five credit reports contain errors. So, visit AnnualCreditReport.com to retrieve your free copy and dispute any mistakes.

Source: bellmoregroup.livejournal.com/7893.html
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