Year end closeout...

So, another year has gone by... did you keep your New Years resolution? Mine was to post more. I came close. Missed a few since August due to work.

With the holiday's and New Year coming up. We all do things for other people, but forget to do the important things. Things that will benefit you and your future loved ones even more than the latest/hottest gift.

Here are a few things you've probably missed:

1. Examining your 401k - Is it giving you the best return, does it need to be reallocated? Are you getting at least 12%?? No? Time to take a look. While you're there, be sure to increase your contribution by 1%. You'll never miss it and you'll thank me later!

2. Your emergency fund - Is your money sitting in a checking account earning something for you? Most banks are paying 0.01 - 0.05% on your checking account vs a national money market account which is about 1%. Know what that means for every $1,000? $10 vs $0.10 in interest. What would you like to be earning?

3. Insurance - For everything. Are you covered? Life, Auto, Home, etc? Talk to an insurance agent or 2. You can save money and cover yourself. If hurricane Sandy taught us anything, is that anything can happen, make sure you're covered.

Life insurance can help your family through a rough time, especially if you had a new addition this year. Update your beneficiaries too!

Not to mention that you could also save a ton of money by getting additional insurance. I saved an additional $200 on car insurance for buying a $100 renters policy which covered me for property loss, even if something is stolen from my car.

4. Company benefits - This has multiple parts.

FSA/HSA/Dependent Care - ALL pre-tax benefits. Your child care, your glasses, dental work, doctors visits, etc. Plan ahead. You save 25% in taxes by just planning ahead. 25%!! Think about it. Could you use $250 for every $1,000 you spend. I sure could. (If you don't know what these are, I would find someone who does and ask. Talk to your tax adviser/accountant this coming April.)

Company Stock - Does your company offer it? My company offers a 15% discount on the purchase price at the end of every quarter. 15% You don't get a rate of return on your money that easy, ANYWHERE! Think about it, every $1,000 you earn $150 in 3 months. That's an extra $600 a year. Not to mention that some companies also pay dividends. Do you hear the dollar signs?

Pre-tax transit & Parking - Want to save 25% off your transit costs? It's easy! Take advantage of your pre-tax commuter benefit. Most companies offer this. On average, we spend about $1,000 a year on trains and buses. Park at a Park & Ride? You can put away for parking also. Add that $1,000 to it and you save $500 a year.

5. Your living will - Very important. If you don't have one. Get one. It's cheap and easy. It will save your family a ton of problems in case you ever pass away. No matter how old you are, you have assets and it can be passed on. Work has life insurance, your car, your retirement account. It will help in settling your affairs. Make a list and check it twice. You may have more than you know!

At this rate, I think I've saved and earned you at least $3,000+ a year.

And that's all I have for now! Happy Holiday's and Happy New Year!! See you in 2013!

Cash is king. Make money work for you.

I hear this all the time. People making large cash deposits on low interest loans. Regardless of it being a home, car, credit card, etc. In the long run you lose money even more money.

Due to a lack of a proper financial education, most of us actually get financial advice from the people closest to us. Our parents. Now like most people, your parents aren't wealthy millionaires. Chances are they've worked most of their lives, lived frugally and have scrapped by to have the little that they have.

Do you ever wonder if there is a better way? I have. So I did some research and learned some things on my own, rather than take advice blindly. Would you take restaurant advice from someone who's never opened or ran one? Do you take advice on how to beat a ticket from someone who's never beat one? You get the idea.

It's always a debate, so I've put it down in a spreadsheet below. Click on the link to see the full view. It should be self explanatory, but inc ase you do have questions I'll sum it up after the link.

Last 10 years Saving vs Debt

In the spreadsheet there are 2 separate sections. The top is someone who invested their money and below is someone who paid off debt first before saving.

As you can see I've use a real mutual fund in the example with 10 years worth of returns.

In the mad dash to save $3,700 in interest they sacrificed $16,000 in gains.

So, the big questions is do you want to save $3,700 or make $16,000? I'd rather have the $16,000 in cash. Wouldn't you?

Not all debt is created equal...

What does this mean? Not all debt is the same. Some debt is good. Believe it or not, paying off debt can cost you more money than you imagine.

What do I mean? Here's an example:

Low interest debt, which is anything in single digits, can actually work to your benefit. The best example is my previous post: The Power of Saving Early You can apply that to this. So you have low interest debt (Student loans, car loans, mortgage) and want to pay it off first before saving. BAD! Why you ask? If you look at the break down in the spreadsheet. You avoid saving and paying off debt of $30,000. You lose $48,000 in trying to catch up for retirement vs saving early and it costing you $12,000. Not only that, you also lose in the financial gains you may missed out on, which is highlighted in the spreadsheet below:

https://docs.google.com/spreadsheets/d/e/2PACX-1vSQTiorIeNCt4YQTXZ6RYHPfy2GB68xpCYJZYD4BmzQ7nSRuVyjbADg0RmVDdfAm7PbMT_T_GBVkviK/pubhtml

Now, in the example above.

Person B paid of debt early and was debt phobic. They started saving later and managed to save a nice $1.5 million.

Person A started saving early and paid off their debt slowly. They have $3 million dollars saved for retirement.

Who would you rather be? Person A I hope.

The Power of Saving Early

So, here's a graph I saw in my previous life as Financial Advisor and recreated. (The link is below.) We demonstrated the power of saving early, to convince people to start saving early. Initially I always thought of it as marketing, until I actually put it together in a spreadsheet.
Here's the SHOCKING part. If you look...

Person A saved $2000 a year starting at 21 and saved until 26 ($12,000). To get $1,510,252.43 for retirement.

Person B started late at 27 and had to save until 65 ($78,000). To get $1,532,182.84 for retirement.
It costs $66,000 more, because they started late, to get ONLY $21,930.41 more in savings for retirement.

If you truly think about it, it's only $77 per check every 2 weeks or $167 month or $5.48 a day to save the $2000 a year.

It's AMAZING how college graduates or even high school students aren't taught this in school.

Check out the link: https://goo.gl/3DpvFH

* Based on a rate of return of 12% per year. I'll show you how in another post! Stay tuned!