Saturday, July 19, 2008

Unleash Your Inner Frugular

There are many ways to cut corners and pinch pennies and not be destined to live a reduced-price life. Being frugal is state of mind and a great way to turn your economics around without denying yourself the simple pleasures of living. Hey, it's even cool.

A frugular has a balanced, honest and dignified approach to money management. It's someone who doesn't spend more than they earn or let money and material possessions rule their thoughts and desires.

A frugular does not buy on impulse.

Penny-pinchers use products and services resourcefully. This can range from timing a shower to having leftovers for lunch to washing and reusing disposable plastic bags.

There are many ways to release the frugular within you or to stop spending and start filling that cookie jar.

Here are just 3:
Rather than stashing idle cash in low-yielding checking or savings accounts, put your money in short-term certificates of deposit or money market accounts.

Credit cards:
To eliminate all interest charges and fees, pay off your account each month. If you do carry a balance, switch to a card with a low interest rate.

Always shop with a list. Compare price-per-ounce or other unit prices on shelf labels. Stock up on items you regularly use during sales. Use coupons, but only for products you normally buy.

Friday, January 18, 2008

#1....401(k) Fundamentals

America's most predominant retirement plan enables you to save on a tax-favorable basis. It's an opportunity that everyone should take advantage of.

A 401(k) is an employer-sponsored retirement plan that's funded by employee contributions. These contributions are deducted directly from your paycheck. Many companies match contributions up to a certain percentage of salary. Most employee contributions are pretax and grow tax-deferred until withdrawn, but some plans allow after-tax contributions. As of January 2006, employers can offer Roth 401(k) plans, which are funded with after-tax contributions. The money grows tax free and can be later withdrawn on a tax-free basis.

401(k) plans are generally offered in the private sector. Government employees usually have access to 457 plans, while teachers and workers in the nonprofit sector generally contribute to 403(b) plans. While the structure of these plans may differ slightly, they all offer employees the opportunity to plan for a secure retirement.

One of the first considerations is how much money to contribute. Generally speaking, you should contribute as much as you can. You don't want to leave yourself cash-strapped, but you also don't want to squander the opportunity to make pretax, tax-deferred contributions and get a company match. Whether your company match is dollar-for-dollar or something smaller, don't pass up free money.

Even if you don't get a company match, it's a good idea to contribute to your 401(k) plan. Experts say you should strive to defer at least 10 percent of your salary for retirement. The earlier you get started, the more the magic of compounding can work for you.

For 2007, the maximum pretax annual contribution an employee could make is $15,500 ($20,500 if you're 50 or older). The limits are the same for 2008.