Follow these four steps to financially prepare for your maternity leave.
The post What You Need to Know About Budgeting for Maternity Leave appeared first on Discover Bank – Banking Topics Blog.
Follow these four steps to financially prepare for your maternity leave.
The post What You Need to Know About Budgeting for Maternity Leave appeared first on Discover Bank – Banking Topics Blog.
Renting your textbooks is a great way to cut the cost of your college experience. Here are some of the best cheap college textbook rental websites to try.
The post 15 Best Cheap College Textbook Rental Sites appeared first on Bible Money Matters and was written by Lorraine Smithills. Copyright © Bible Money Matters – please visit biblemoneymatters.com for more great content.
We are in the midst of a major economic shift. While workers in the past could expect to keep a stable job with a traditional employer for decades, workers of today have found they must either cobble together a career from a variety of gigs, or supplement a lackluster salary from a traditional job by doing freelance work in their spare time.
Though you can make a living (and possibly even a good one) in the gig economy, this kind of work does leave gig workers vulnerable in one very important way: retirement planning.
Without the backing of an employer-sponsored retirement account, many gig workers are not saving enough for their golden years. According to a recent report by Betterment, seven out of 10 full-time gig workers say they are unprepared to maintain their current lifestyle during retirement, while three out of 10 say they don’t regularly set aside any money for retirement.
So what’s a gig worker to do if they don’t want to be driving for Uber and taking TaskRabbit jobs into their 70s and 80s? Here are five things you can do to save for retirement as a member of the gig economy. (See also: 15 Lucrative Side Hustles for City Dwellers)
Many people don’t have a clear idea of how much money they have. And it’s impossible to plan your retirement if you don’t know where you are today. So any retirement savings should start with a look at what you already have in the accounts in your name.
Add up how much is in your checking and savings accounts, any neglected retirement accounts you may have picked up from previous traditional jobs, cash on hand if your gig work relies on cash tips, or any other financial accounts. The sum total could add up to more than you realize if you haven’t recently taken stock of where you are.
Even if you truly have nothing more than pocket lint and a couple quarters to your name, it’s better to know where you are than proceed without a clear picture of your financial reality. (See also: These 13 Numbers Are Crucial to Understanding Your Finances)
If you don’t already have a retirement account that you can contribute to, then you need to set one up ASAP. You can’t save for retirement if you don’t have an account to put money in.
IRAs are specifically created for individual investors and you can easily get started with one online. If you have money from a 401(k) to roll over, you have more options available to you, as some IRAs have a minimum investment amount (typically $1,000). If you have less than that to open your account, you may want to choose a Roth IRA, since those often have no minimums.
The difference between the traditional IRA and the Roth IRA is how taxes are levied. With a traditional IRA, you can fund the account with pre-tax income. In other words, every dollar you put in an IRA is a dollar you do not have to claim as income. However, you will have to pay ordinary income tax on your IRA distributions once you reach retirement. Roth IRAs are funded with money that has already been taxed, so you can take distributions tax-free in retirement.
Many gig workers choose a Roth IRA because their current tax burden is low. If you anticipate earning more over the course of your career, using a Roth IRA for retirement investments can protect you from the taxman in retirement.
Whether you choose a Roth or a traditional IRA, the contribution limit per year, as of 2018, is $5,500 for workers under 50, and $6,500 for anyone who is 50+.
While no investor wants to lose portfolio growth to fees, it’s especially important for gig workers to choose asset allocations that will minimize investment fees. That’s because gig workers are likely to have less money to invest, so every dollar needs to be working hard for them.
Investing in index funds is one good way to make sure investment fees don’t suck the life out of your retirement account. Index funds are mutual funds that are constructed to mimic a specific market index, like the S&P 500. Since there is no portfolio manager who is choosing investments, there is no management fee for index funds. (See also: How to Start Investing With Just $100)
One of the toughest challenges of being a gig worker is the fact that your income is variable — which makes it very difficult to plan on contributing the same amount each month. This is where technology comes in.
To start, set up an automatic transfer of an amount of money you will not miss. Whether you can spare $50 per week or $5 per month, having a small amount of money quietly moving into your IRA gives you a little cushion that you don’t have to think about.
From there, consider using a savings app to handle retirement savings for you. For instance, Digit will analyze your checking account’s inflow and outflow, and will determine an amount that is safe to save without triggering an overdraft, and automatically move that amount into a savings account. You can then transfer your Digit savings into your retirement account.
An excellent way to make sure you’re maxing out your contributions each year is to change your view of "found money." For instance, if you receive a birthday check from your grandmother, only spend half of it and put the rest in your retirement account. Similarly, if you receive a tax refund (which is a little less likely if you’re a gig worker paying quarterly estimated taxes), send at least half of the refund toward your retirement.
Any gig workers who often receive cash can also make their own rules about the cash they receive. For instance, you could decide that every $5 bill you get has to go into retirement savings. That will help you change your view of the money and give you a way to boost your retirement savings.
Planning budget-friendly date nights can keep your relationship and your finances healthy.
The post 8 Ways to Save Money on Date Night appeared first on Discover Bank – Banking Topics Blog.
Celebrating your birthday is fun, but it’s even better when you get free stuff. Here’s a list of 150+ birthday freebies that you can get this year.
The post 150+ Birthday Freebies: Where To Get Free Stuff On Your Birthday This Year! appeared first on Bible Money Matters and was written by Peter Anderson. Copyright © Bible Money Matters – please visit biblemoneymatters.com for more great content.
A key financial decision people struggle to make is how to allocate savings for multiple financial goals. Do you save for several goals at the same time or fund them one-by-one in a series of steps? Basically, there are two ways to approach financial goal-setting:
Concurrently: Saving for two or more financial goals at the same time.
Sequentially: Saving for one financial goal at a time in a series of steps.
Each method has its pros and cons. Here’s how to decide which method is best for you.
You can focus intensely on one goal at a time and feel a sense of completion when each goal is achieved. It’s also simpler to set up and manage single-goal savings than plans for multiple goals. You only need to set up and manage one account.
Compound interest is not retroactive. If it takes up to a decade to get around to long-term savings goals (e.g., funding a retirement savings plan), that’s time that interest is not earned.
Compound interest is not delayed on savings for goals that come later in life. The earlier money is set aside, the longer it can grow. Based on the Rule of 72, you can double a sum of money in nine years with an 8 percent average return. The earliest years of savings toward long-term goals are the most powerful ones.
Funding multiple financial goals is more complex than single-tasking. Income needs to be earmarked separately for each goal and often placed in different accounts. In addition, it will probably take longer to complete any one goal because savings is being placed in multiple locations.
Working with Wise Bread to recruit respondents, I conducted a study of financial goal-setting decisions with four colleagues that was recently published in the Journal of Personal Finance. The target audience was young adults with 69 percent of the sample under age 45. Four key financial decisions were explored: financial goals, homeownership, retirement planning, and student loans.
Results indicated that many respondents were sequencing financial priorities, instead of funding them simultaneously, and delaying homeownership and retirement savings. Three-word phrases like “once I have…,", “after I [action],” and “as soon as…,” were noted frequently, indicating a hesitancy to fund certain financial goals until achieving others.
The top three financial goals reported by 1,538 respondents were saving for something, buying something, and reducing debt. About a third (32 percent) of the sample had outstanding student loan balances at the time of data collection and student loan debt had a major impact on respondents’ financial decisions. About three-quarters of the sample said loan debt affected both housing choices and retirement savings.
Based on the findings from the study mentioned above, here are five ways to make better financial decisions.
Rethink the practice of completing financial goals one at a time. Concurrent goal-setting will maximize the awesome power of compound interest and prevent the frequently-reported survey result of having the completion date for one goal determine the start date to save for others.
Do more of anything positive that you’re already doing to better your personal finances. For example, if you’re saving 3 percent of your income in a SEP-IRA (if self-employed) or 401(k) or 403(b) employer retirement savings plan, decide to increase savings to 4 percent or 5 percent.
Decide to stop (or at least reduce) costly actions that are counterproductive to building financial security. Everyone has their own culprits. Key criteria for consideration are potential cost savings, health impacts, and personal enjoyment.
Almost 40 percent of the respondents were saving nothing for retirement, which is sobering. The actions that people take (or do not take) today affect their future selves. Any savings is better than no savings and even modest amounts like $100 a month add up over time.
Use an online calculator to set financial goals and make plans to achieve them. Planning increases people’s sense of control over their finances and motivation to save. Useful tools are available from FINRA and Practical Money Skills.
What’s the best way to save money for financial goals? It depends. In the end, the most important thing is that you’re taking positive action. Weigh the pros and cons of concurrent and sequential goal-setting strategies and personal preferences, and follow a regular savings strategy that works for you. Every small step matters!
Take the proper steps to thrive while you’re self-employed.
The post Everything You Need to Know About Budgeting As a Freelancer appeared first on Discover Bank – Banking Topics Blog.
Are you stressed by an income reduction? Try these budgeting tips to survive a pay cut and thrive during this challenging time.
The post How to Handle a Pay Cut: Budgeting in Uncertain Times appeared first on Discover Bank – Banking Topics Blog.