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Millennials saving for uncertain future
How are millennials (we)Â saving for an uncertain future? According to an article by Michael Douglass from CNNMoney, millennials are saving earlier for retirement than their parents were. This is great news for us, but unfortunately the financial outlook is dimmer than in years past. In fact, recent figures from the Employee Benefit Research Institute state that millennials may need to DOUBLE how much we areÂ saving for retirement. This is due in part toÂ expert projections of howÂ the stock market will perform in years, and decades to come. Experts have stated they expect to see a steady decline in average stock gains. In addition to the declining stock market, Social Security might not be available for us when we turn 67.
What to do with such a glum outlook? Well, first things first, you need to have a plan. Do you know how much money you need to save for retirement? Does your job offer a 401k plan with a match? If not, have you considered opening an IRA and investing in mutual funds? Experts say you should beÂ saving roughly 10% to 15% of your income to live comfortably in retirement.Â Some expertsÂ suggest as much as 25% to ward off the potential financial woes of the future economic climate. Starting earlier is better, so the sooner you can start saving, the better off youâ€™ll be. Even a few years can make a substantial difference.
Here are a few quick tips to help you along your path to retirement:
- Have a plan
- Know your retirement savings goals
- Pay yourself first â€“ set aside a planned percentageÂ of money from each paycheck (preferably at least 10-15% or more, if possible)
- Talk to a financial advisor about your situation (they can be free of charge)
- Perform regular assessments of your retirement accounts and contributions to make sure that you’re on track for your goals
- Adjust your contributions as necessary to meet your goals
- Donâ€™t live beyond your means â€“ if you are living paycheck to paycheck, reassess your situation and find ways to make cuts or, better yet, increase your income earning potential
RetirementÂ savings plan
Investment expertsÂ suggest you should save double your annual income by the age of 35.Â The chart below is an â€œestimatedâ€ projection based on a starting annual income of roughly $35k at age 21, with regular 3%Â annual cost of living raises, a regular contribution of roughly 10% of your paycheck, and aÂ 3% rate of return from your retirement account.
*The retirementÂ chart isÂ forÂ illustration purposes only, and not to be used as a guidepost.Â
Note: This blog post is intended as informational only, and is not investment advice, consult a financial advisor before making any financial investment decisions.
6 tips on how to travel cheap
Memorable vacations can come with a price tag you’d rather forget. But with proper planning, smart research and a flexible attitude, you can travel cheap and still have an experience worth remembering. Here’s how.
1. Cut transportation costs
Before planning your trip, have a rough budget in mind. A vacation calculator can help. If you know how much you’re willing to spend on airfare, this map can give you ideas for destinations that are within your budget.
Traveling cheaply isn’t just about cutting costs — it’s also about getting the most out of what you spend. You may discover, for example, that the $400 you thought could pay only for a flight within the U.S. can actually take you to Paris and back.
If your travel dates are flexible, you may find an even bigger selection of places you can afford to visit. If you’ve already picked a destination, changing the departure dates could lower your airfare.
Setting up alerts for when prices drop should also be a part of your strategy. Try apps such as Yapta or Hopper, which will send you price notifications on flights you’re tracking. (Booking fees may apply.) You can also follow Twitter handles like @theflightdeal or @FareDealAlert for limited-time deals. If you find a price you like, scrutinize the airline’s baggage policy before booking. Some offer cheaper ticket prices, but have strict carry-on requirements or tack on sizable fees for overweight and oversized luggage.
If your destination is within driving distance, consider hopping in a car instead of on a plane. Use a trip calculator, like this one, to make sure it’s worth the tradeoff. Add in the cost of renting a car, if necessary.
2. Compare lodging options
Finding a cheap hotel room can be tricky and takes a bit of effort. Start by shopping around on sites like Expedia, Priceline.com and Kayak to find hotels in the area, and then search for hotel promotion codes online. Contact hotels directly to negotiate a lower price. Also consider staying in a hotel outside the center of the city and looking for last-minute deals.
If you’re open to alternatives, skip the hotel and book a room through a site like Airbnb, Homeaway and OneFineStay. Not only could those be more affordable, but often you’ll stay with a local resident who can point you to cheap restaurants and activities that aren’t in travel guides. Hostels can also be a money-saver if you’re OK with bare-bones accommodations and potentially sharing a room. Keep in mind that they may have age restrictions.
3. Eat wisely (and not just healthy)
Many travelers underestimate the costs of meals, snacks and tips, says guidebook author James Kaiser. He advises bringing your own food or buying it at a store when you arrive at your destination to save money.
That doesn’t mean you have to skip restaurants altogether and haul groceries around. Dining out is one of the most enjoyable parts of travel. The trick is knowing when to indulge and when to save.
Start by looking at your itinerary. Break down your meals each day and identify the times you want to splurge. Then look for ways to save money on the other meals. For example, you can avoid inflated prices at the airport by bringing food and an empty water bottle that you can fill once you’re past security (passengers are prohibited from bringing more than 3.4 ounces of liquids, per container, in carry-on bags at U.S. airports). For breakfast, pack energy bars so you can save time and money in the mornings.
Your spending will likely fluctuate from day to day, so remember to adjust your budget to avoid overspending.
4. Research your currency options
If you’re traveling abroad, find out if the country you’re visiting is plastic-friendly. If so, a debit or credit card that doesn’t charge foreign transaction fees could be your best bet. Otherwise, research your currency exchange options to avoid the poor rates and numerous fees common at airport kiosks. Those will shrink your vacation fund before you’ve even had the chance to unpack.
Visiting your bank or credit union to exchange money before you leave may be the best option. Assuming it has that currency, you’ll likely get better exchange rates and lower fees. And, just in case you end up needing more cash once you’re abroad, ask if your financial institution has international branches or a partnership with a bank overseas. If so, you may be able to withdraw cash from those ATMs with low or no fees.
5. Get a prepaid phone or SIM card
A cell phone can be useful for navigating new cities, as well as staying connected to travel companions and life back home. But for international travelers, it may also come with data roaming fees. You’d save the most money by ditching the phone during your trip, but that may not be realistic. Your best option will likely be buying a prepaid phone once you arrive or having your carrier unlock your phone, if possible, so you can use a foreign SIM card when you land.
6. Keep souvenir spending in check
Like everything else, set a budget for souvenirs. Also consider doing some research on the best souvenirs and shops, so you’ll have a sense of what you might buy and the prices to expect.
If you find yourself on the verge of an impulse purchase, try an abbreviated version of the 72-hour shopping rule, in which you put off buying something for three days to see if you still want it. That amount of time is probably impractical when you’re on vacation, but if your schedule allows you to return to the store the next day or even later that same day, you may find that you can easily live without that $150 wool sweater from Iceland. You were only going to wear it once, anyway.
Graduation gifts that won’t empty your savings account
With your mailbox overflowing with announcements and party invitations, there’s no denying that graduation season has arrived. Whether it’s high school or college, you’ll want to choose a gift that’s both thoughtful and appropriate for your graduate, but also doesn’t break the bank. Here are a few ideas to offer your congratulations:
A share of stock
A share of stock is a gift that can appreciate over time. To make it a little more personal, you may want to put some extra thought into the company you choose. Do you have some great memories of visiting Disney World together? Buy a share of Walt Disney Company. Mac lover? How about a share of Apple, Inc.? Car enthusiast? A combination of the Big Three, General Motors, Ford, and Chrysler would be a fun choice.
A financial planning consult
Planning, budgeting, and having to stretch your last $20 over the next week is always a challenge. Whether they’re college-bound or heading off into the working world, graduates likely have little experience effectively managing their finances. This is the time when they’re most susceptible to making some huge financial mistakes. Why not put an expert in their corner—other than Mom and Dad—who can offer some professional guidance and warn them of the consequences of poor financial management? It may not be the most exciting gift, but it will be one of the most valuable.
An annual subscription
Is your graduating senior an avid reader? An annual subscription to a specific area of study, personal finance or money magazine could be an excellent idea, especially if it’s digital! How about the WSJ or your hometown newspaper? Not only will they think of you each month when it arrives, they might learn something, find another interest, or just be able to ward off a small bout of homesickness.
A gift card
Gift cards are a great way to go if you don’t want to commit to a specific item. Does your graduate need something practical? Choose a Walmart or Target gift card. Are they headed to work? Maybe they need some new interview attire. Want to make sure they eat more than just pizza and french fries seven days a week? Their favorite restaurant gift card would be perfect. The choices are endless!
Money for groceries, books, gas, school supplies, clothes…cash will never go unused and is always appreciated regardless of the amount. It may not seem as personal, but let’s face it, these graduates are entering a new chapter of their lives, and they’re not sure what to expect or how much it will cost. On the bright side, not having to use a credit card will allow them to manage their debt more effectively and will reduce their chance of accumulating astronomical interest charges!
Whether you decide to give a practical gift, something smart, fun or completely off the wall, we’re sure your graduate will absolutely love it. They’ve worked hard to achieve their success and will appreciate just being celebrated. On to a new adventure, they’re going to need all they help and guidance they can get, and your encouragement and support will mean the world to them!
4 reasons to buy a home instead of renting
The financial benefits of buying a home compared with renting have yoyoed over the years, especially of late. If you’re sitting on the fence, here are four circumstances in which it may be a better bet to buy.
If interest rates remain low
From a financing perspective, if this isn’t the best time to buy a house, it’s pretty darn close.
The average interest rate on a 30-year fixed mortgage, the most common variety, has hovered below or near 4% for several months now. For comparison’s sake, if you bought 10 years ago, the average interest rate was 6.41%. In 1996, it was 7.81%, and in 1981 it was a whopping 16.63%.
Although the Federal Reserve has begun to inch rates upward, it is likely that it will do so slowly and that it will be a while before the cost of borrowing to buy a home stops being historically low.
If home prices level off
Home prices rose steadily in the 1970s, ’80s, ’90s and 2000s before plunging around 2007, and in the past few years they have been climbing again. Different markets have seen different trends, of course, but generally what’s at play is supply and demand: More potential buyers than houses available means sellers can dictate terms and get top dollar.
But something interesting is happening: The oft-told story that millennials are renting for longer or living with their parents nowadays is not entirely accurate. No, people in this age group (born between 1981 and 1997) want very much to own a home, but they are putting it off because of real and imagined difficulties in affording it.
That could mean fewer potential buyers and a cooling of the upward surge in home prices. While others wait, you could pounce.
If rental costs continue rising
Real estate researcher Reis Inc. reports that apartment rents rose 4.6% in 2015. In hot housing markets such as California and the Pacific Northwest, rents are going up by about 14% per year. According to Zillow, the median asking price nationwide for a rental was $1,575 per month in early 2016.
The monthly payment on a $200,000 mortgage — about the average in the U.S. — with a 4% interest rate would be just over $950. Even with taxes, insurance and maintenance, it’s tough to make a financial case in favor of renting.
If you want to save money
Home values over the past 70 years have generally tracked with inflation. Yes, you could make more money in the stock market. But we’re talking real life, not investment advice. Consider two things:
- Your rent is locked in for a year or two, then will go up. Your mortgage payment can be the same for 30 years.
- If you are raising a family, it seems all but impossible to save money. But when you sell the house after 30 years (or 20 or 10), someone will hand you hundreds of thousands of dollars, money that could put the kids through college or finance your retirement.
© Copyright 2016 NerdWallet, Inc. All Rights Reserved
Is a credit union better than a bank?
Have you ever wondered if a credit union is better than a bank? The choice between the two will ultimately boil down to the different products, services, and fees each one offers and what components are most important to you as a customer. Let’s look at some key differences between banks and credit unions, so you’re able to decide which works best for you.
The fundamental difference between the two institutions is that a credit union is a not-for-profit institution owned by its members. Their mission is to provide their members with affordable financial services. Banks are corporations controlled by board members and owned by shareholders. Credit unions traditionally use their not-for-profit status to offer higher interest rates on savings accounts and CDs and lower interest rates on loan and credit cards.
One of the most noticeable differences is the discounted or absence of fees from many of the products offered by credit unions. At a time when many banks have raised their minimum balance requirements, the large majority of credit union checking accounts still do not require a minimum balance and don’t incur any fees. In fact, credit unions make every effort to keep their fees low, including eliminating products and services instead of adding fees. If you’re familiar with the fees that banks typically charge for direct deposits, transfers, wires, and balance transfers, you’re not likely to find them at a credit union.
It’s of the utmost importance for credit union representatives to establish a relationship with each of its members. If you’re looking for personalized attention, credit unions are less formal and work hard to deliver a superior level of customer service. It’s a people-centric business whose top priority is the best interest of their members.
Online and mobile functionality
For years, credit unions were substantially lacking in online manageability. Given some recent attention, however, many have made great strides in technology and what they’re able to offer. Members should have the ability to view account balances, initiate transfers and make online loan payments, which are the most requested transactions by online users. In addition, many credit unions offer a mobile check deposit feature that allows you to safely and securely deposit your check from your mobile device anywhere, anytime –all without visiting an ATM or a branch office.
The biggest benefit of a credit union membership is likely its loan products. Because of its cooperative structure and genuine concern for the financial well-being of its members, a credit union doesn’t have to charge high-interest rates to turn a profit. Generally, loans offered by a credit union are less expensive. Some even offer the option to skip a month’s payment without incurring a penalty.
A personal choice
Doing business with a bank or a credit union is a personal choice. Is it the financial perks, the online services, the style of service, and the number of branch locations that you value the most? Does the type of ownership, the size of the company and their mission matter to you? Weigh these factors to help you decide which option will work best for you and your hard-earned money.
Tax Tips for First-Timers
Filing your taxes for the first time doesnâ€™t have to be scary â€“ and, in fact, it shouldnâ€™t be. The key to overcoming uncertainty in many situations is educating yourself and being prepared. Following these simple steps will help make filing for the first time a breeze.
Organization is key
Before you can file your taxes, youâ€™ll need to have the proper forms. At the very least, this will include a W-2 from each workplace you earned a salary. You may have more than one W-2 if you worked more than one job, or you may have a Form 1099 if you received income from another source.
You may also receive other tax forms, such as Form 1098-E if you are paying interest on any student loans. Most tax forms arrive by late January or early February, and you must wait to file until you have all of the proper documentation.
Credits and deductions are your friends
Tax credits and deductions are imperative in increasing the amount of your refund (or lowering the amount of taxes you owe). Below are a few credits and deductions you might qualify for. More information for each write-off can be found here.
- Earned-Income Credit: This credit benefits low- to moderate-income earners by reducing or eliminating the taxes paid. There are income limits depending on the number of dependents you have.
- Job Search Expenses: While you canâ€™t deduct job search expenses if youâ€™re searching for your first job, you can deduct some expenses if you are looking for a new job within the same field. RÃ©sumÃ© costs, job placement agency fees, travel expenses are some items you may be able to write off.
- Cost of Moving: If you moved due to a job change or started a new job, you may be eligible to deduct some of the expenses associated with relocating.
- Lifetime Learning Credit: If youâ€™re paying out of pocket for your college education, you may be able to deduct some of those expenses.
- Retirement Saverâ€™s Credit: This credit helps low- to moderate-income earners save for retirement.
- Home Office Deduction: If you work from home on a regular basis, you may be able to write-off some of the expenses associated with your home office based on the percentage of your home used for business activities.
- Energy-Saving Credits: Qualified energy-saving additions and improvements, such as appliances or adding energy-efficient windows and doors to your home, may earn you a credit on your taxes.
Online or in-person: how should you file?
For many Americans, filing taxes is free. Online software like TurboTax, H&R Block, and TaxAct are great choices if you feel comfortable taking things into your own hands. These services often guide you through the process step-by-step and can help catch missing information, as well as alert you to credits and deductions you may qualify for based on your individual tax situation.
If youâ€™re hesitant to file on your own, consider taking your tax documents to an accountant or other tax preparation office. However, do your research so you donâ€™t fall victim to tax scams â€“ always be wary of tax preparers who base their fees on the size of the refund they can get you.
Now that youâ€™ve gotten all your documentation organized, researched tax write-offs, and decided whether to file using online software with the help of a professional, itâ€™s time to actually file your taxes. The deadline to file your taxes, which is set by the IRS, is April 18, 2017. You donâ€™t want to wait until the last minute to file (plus, the sooner you file, the sooner youâ€™ll receive your refund!), but if there is a situation that will prevent you from meeting the April deadline, you can file for an extension.
If you do choose to file for an extension, youâ€™ll need to fill out Form 4868, which will give you an additional six months to file. The extended deadline this year is October 16, 2017.