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A few months ago, the buzz word was recession. All of a sudden, that word has been replaced by “saving”. With a new awakening consumers have realized that living beyond their means and putting expenses on credit cards could lead to dire consequences. Consumers are now looking for new ways to save money as the US economy slowly emerges from what has been the worst recession since “The Great Depression”. Listed below are a few ways in which consumers could save during these uncertain economic times.

Recession Money Saving Tips

Saving money during tough times seems impossible but it is doable if an individual is willing to follow some basic money savings tips.

1. Budgeting: This is one word that cannot be emphasized enough. More now that ever before it is necessary to budget if one wants to save money. Make sure that you have a complete understanding of your all your cash inflows and outflows. Once you have met all your compulsory obligations, make sure that you put away between 10-15% of the residual amount towards a money savings plan. If after having met all your expenses and putting money away for your savings, you still have residual funds; use these to pay down any debt you may have accumulated.
2. Beware Of Luxuries: It is not unheard of that consumers make luxuries a part of their budget. It is not that essential to buy that new television, car or boat especially if you are trying to save money. During an uncertain economic climate, it is always beneficial to put off expenses that you could do without in order to stick to your plan of saving money. If any of your goods are still working and have not given you a reason to change them, then it might be prudent to extract as much out f its useful life as possible.
3. Education: Not only did a lot of investors lose money during the market down turn, individuals lost money which they had stashed away for their children’s education. It might be a good time to start thinking about investing in your state’s 529 education plan. Not only is it a good place to put away money savings for education, but it also fits in quite well if you are looking to start a pattern for saving money.
4. Expensive Projects: In line with your money savings regimen, expensive projects like renovations and modifications should be put off. When you feel that you have saved a sufficient amount of money to create a financial buffer for yourself and have been able to meet other immediate liabilities it may be a good time then to re-embark on these endeavors.
5. Eating Out And Vacations: A lot of families are in the mode where they must have a family vacation each year. If you are not in the pink of financial health, it might be time to break that tradition and save money first. Family vacations are usually never a part of a family’s budget. Unknowingly this hidden expense throws a lot of calculations out as most people do not consider the annual family vacation as a part of their estimates. Another expense you might be able to curtail is eating out expenses. If you are struggling financially then it may be time to stop spending on eating out and start eating in. You will be surprised with the amount you save.

Consumers, by making small changes to their everyday expenditures can save a lot of money. These money savings can be used to meet more immediate expenses and even reduce debt or start a savings plan. Hence it is always beneficial for consumers to be financially savvy when it comes down to meeting their expenses and creating savings.

Reference:

1. Seven Ways to Save Money During A Recession – Learn Financial Planning

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In the not so distant past it was possible to get a no down payment mortgage loan or a 100 percent lend as the market place calls it. However with the recent economic meltdown and tightened lending policies, no deposit loans are fast becoming the “Dodos” of the banking world. In other words they are extinct. This leaves clients with the obligation of coming up with sufficient funds to be able to secure a mortgage nowadays.

Come to think of it, one of the chief advantages of putting down a down payment for mortgage is that it creates instant owners equity in the market. In addition to this, the larger the down payment, the smaller your monthly interest payments on your mortgage.  In addition to this several industry experts have found that several first homebuyers who are not accustomed to owing a property find it hard to cope with owning an maintaining their homes. Hence as a precaution it is advisable that individuals should not allocate all their money towards their down payments and should store a bit in reserve. As a result of this a lot of mortgage programs nowadays have cash reserve requirements for individuals.

Getting A Down Payment For House

Some quick fixes to getting a house down payment are as follows:

• Ask your parents for the deposit amount as a non-repayable gift. This will ensure that the banks do not treat the mortgage down payment amount from your parents as another debt.
• You can also create your house down payment by selling assets such as cars, boats, bikes collectibles etc.
• In addition to this you could also liquidate your investments such as stocks and managed funds.
• Another alternative for a down payment mortgage could easily be recycling your tax refund and using that as a deposit.
• You could borrow the mortgage down payment from your IRA account.
• If you have received a bonus at work and are planning to buy a property, set this amount aside to use it as your down payment.
• In addition to the above-mentioned methods you could also look into private mortgage down payment assistance programs or if you are an employee of the government you could look into home buyer programs for public servants.

Alternative Methods To Getting a Down Payment

• Government Backed Programs: Apart from the above-mentioned methods there are other alternatives to securing a house down payment for your mortgage loan as well. For instance, The FHA backed mortgage Insurance program allows borrower to secure a loan with as little as a 3% deposit, the entire of  which could be a gift. However, you must be a approved applicant first. In addition the loan programs run by the Department of Veteran Affairs allows retired servicemen to get a home loan without any deposit at all.
• Private Assistance Programs: Private Assistance programs such as Nehimiah and AmeriDream are extremely popular and controversial at the same time. While these programs convert sellers equity into the buyers house down payment, they are not without flaw. One may ask him or herself the question that if an individual did not have the discipline to save up for a deposit,  will they have the discipline to make their repayments.

Hence, as stated there are several ways an individual can come up with a mortgage down payment for their home, but it is always advisable to ensure that you have saved up for it and have made adequate contributions.

Reference:

1. How to come up with a down payment – House Hunt
2. How to come up with a down payment – MSN Money

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If you have been harbouring dreams of college, or have been wondering if you will be able sufficiently to send your kids to a university of their choice, this is post on education savings may be suited to your needs. Irrespective of market conditions education costs do not seem to have dropped as much. Even today affording good higher education requires planning and meticulous savings for college.

The 529 College Savings Plan & Other Options

The new 529-college savings plan, has meant that it might be beneficial to stay near home as States offer deductions to residents contributing to their state’s plan. This however does not mean that you should not venture out of your home state for college. It might just so be that the other educations and non-educational benefits of moving to a university in another state, far surpass the tax incentives offered by your state. In addition to this the next question that needs to be answered is that should you invest your funds in your states 529 plan or are there better options out there These are some of the things, which a college saver should look out for:

1. Cheap Funds: This might sound a tad bit absurd, but historically it has been proven that education funds, which do not cost an arm and a leg, to get into have a better chance of outperforming the index. Having said this does not necessarily mean that the fund will out perform. That could depend on a number on factors such as investment decisions, calls made by the fund manager and other external market factors.  However what does remain a certainty is of course the amount of money you pay. If however you take an expensive fund, apart from the entry cost, there will be administration expenses attached by the 529 plan plus brokerage, if you are investing through a broker etc. This can greatly hamper your overall return.
2. Diversification: Here is another important consideration. Diversification basically means spreading your eggs across several baskets. You could, by diversifying, expose your self to international college saving funds and small caps, which in turn usually offer greater returns in the long run. This will also reduce your overall exposure and thereby dependence to Domestic Blue Chips and large caps.
3. Time Frame & Risk Tolerance: It is important to remember the time frame you have in mind for your college savings plan. If you are working a fairly large time from, it might be prudent to initially invest in small caps and international funds as these yield a higher return in the short term. If you only have a few years to go prior to the date the individual or yourself having to join college, then it may be a safer bet to invest your education savings in large caps and blue chips.

Having mentioned the foundation guidelines for a good education savings plan, it is also worth mentioning that unless you have used the right mix of funds and have properly diversified you could end up losing money. It is essential that you have strong base of college funds around which you can place several satellite funds to help obtain your overall objective. However, it is essential that you or your broker chooses these funds with ample care and after having done ample research.

Once again prior to making any investment decision remember to consult an expert in the field and ensure that you have weighed all your options accordingly.

Reference:

1. College Savings 101 – Saving for College

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One might consider an article talking about choosing the best bank account in this modern day and age rather absurd. But knowing your individual spending habits and money needs might help you choose the correct bank account. In today’s fast evolving economic world no two products are the same and neither are bank accounts. Bank accounts offer different features. Some pay higher interest than others, while some don’t. Some are catered for the needs of senior citizens while some are tailored exclusively for students. Despite their various options, one thing in common to all bank accounts is the fact that they all charge fees. However, this fee can be waived if certain privileges are given up. Listed below are certain considerations which consumers should keep in mind while choosing the best bank account:

Bank Account Information For Choosing The Right One

1. The Amount Of Money You Are Planning To Deposit can be a big determinant in choosing the best bank account. While the default way to go would be to determine which account pays the highest interest or APY (annual percentage yield), bank fees can also be a major determinant. An annual study by bankrate.com shows that for an account to get interest while not having to pay any monthly fees with a check facility, the minimum balance required is $3,460. On the other hand for an account to have a check facility but not earn any interest the minimum balance to not incur any additional fees is a little below $110.
2. Using Your Check-Book: Certain consumers are not going to write too many checks and are not going to exceed the maximum number of allowed free check transactions by their bank accounts. In this case it may be beneficial for consumers to opt for a flat fee checking account. However, if you are in the habit of writing several checks it may be beneficial to talk to a banking representative and work out the best bank account option for yourself so that you do not get charged a high penalty fee for exceeding the number of allowed free banking transactions.
3. Economies Of Scale are what consumers get when they have several bank accounts with the same bank.  If you have been using several products offered by the same bank, make sure you get your fees aggregated or ask for discounts on your current facilities. Most banks nowadays have consumer loyalty programs.

Basic Bank Accounts To Choose From

In addition to the above mentioned considerations, consumers may also want to consider some of the accounts mentioned below to ensure that their funds are in the right place:

• Savings Account: When placing your funds consumers are often concerned with security. In this case bank offered savings accounts are the safest option, although they may not pay as high interest as some of the other available option they make up for the same by offering great security. In addition these bank accounts are backed by what is known as FDIC (Federal Deposit Insurance Corporation) insurance.
• Certificates of Deposit And Money Market Accounts: CDs require consumers to lock in their money for a period of 3 months up to five years. Another option may be investing your money in the money market during a bull market as the returns which the money market would generate would far surpass your interest rates offered by your banks.

These are some of the considerations consumers should keep in mind while choosing the best bank account.

References:

1. Pick the right account – CNN Money
2. Savings Account Overview – Money Instructor

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We have all used bank accounts and are to a very large extent self confessed savers. However, the questions as to whether we know certain trivial facts about banking and savings still remains unanswered. During this time of recession it is important to create a good savings plan. We have put together a list of certain important banking tips that we feel might interest consumers and help them understand their everyday bank and savings a little better.

Banking & Savings: Tips To Keep In Mind

1. Safety: One of the primary reasons why consumers use bank accounts is owing to fact that money in a bank account is safe. Let’s face it, no matter what, one cannot deny the security offered by a bank is far greater than any floor-secured safe, hidden closet or underground treasure trove. One might remember the federal government’s pledge to insure bank accounts for up to $250,000 per depositor during the credit crunch. However, come January 1st 2010 the normal insurance of $100,000 per depositor is said to return.
2. Convenience: Bank and savings fees are justified by the convenience factor. Apart from allowing you to safely store your money, banks allow you with a lot of other privileges like writing cheques or using ATMs etc. Bank saving accounts tend to pay lower rates on accounts which bear interest, in comparison to similar accounts which can be held with broking houses or mutual fund companies.
3. Beware Of Inflation: Unknown to consumers, inflation slowly erodes any interest that the banks pay you for your saving accounts. What you may not know about your bank and savings is that with the rising prices of goods and services some times it is possible for your money to lose out in a bank account.
4. Interest Rate Inequality: This is a commonly known fact about bank and savings that different bank saving accounts earn different interest rates. Interest rates are calculated differently at different banks. If you really want to compare your bank accounts, the best banking tip is that it might make sense to compare the Annual Percentage Yield. The APYs are always calculated using the same formula everywhere.
5. Getting Better Rates: A lot of consumers often use certificates of deposit (CDs) to earn better interest rates. However, it may be of interest to know that CDs require consumers to lock in their money for a period of 3 months up to five years. Another banking tip is the option of investing your money in the money market during a bull market as the returns which the money market would generate would far surpass the interest rates on saving accounts offered by your banks.
6. ATM Charges: This issue has become an increasingly popular one. Using an ATM of another financial institution can prove to be costly thus affecting your saving accounts. Not only do you get charged $1.46 by your bank for using another ATM, the other bank chares you a further $1.97 to use its facility.
7. Banking Without Banks: While this banking tip may sound absurd it is also true. You do not have to store your cash/money in a bank account. There are a lot of companies out there which are offering similar services to banks and with pretty much the same flexibility as a saving account. Examples of these institutions are credit unions, building societies, mutual fund companies, broking houses etc.

The above mentioned facts are a guide to help consumers understand their personal bank and saving options  better. It is always advisable for consumers to shop around prior to settling on a particular saving account or bank. It is also recommended that consumers should consider their own banking and budgeting needs as well prior to making up their minds.

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All of us try and save at least 10% of our income, but are we actually saving it. Most consumers suffer from what we like to refer to as “illusional savings”. This, as the name suggests is an illusion where clients think they are saving but spend on various items, especially when luxuries are disguised as necessities.  We have put together a simple set of tips to help you create a savings plan.

Saving Plans – Tips To Get Started

While most of us are fairly certain that we have a savings plan in place, here are few easy tips to ensure that you are getting the most out of your savings plan:

1. Create A Budget: We have harped on this issue before, but no amount of emphasis is enough to describe the importance of creating a budget. List all your incomings and outgoings in priority. Make sure to leave luxuries and shopping binge expenditures to the very end. Once you have done this you will be amazed to see how much of money you have been spending on unnecessary items.
2. Set Yourself A Goal: Taking baby steps is often the way to go. If you have been overspending, setting yourself a goal of saving$1,000 by the end of the month may be a bit of a stretch. Set yourself small achievable goals like managing to save 10% of your weekly net pay every week. Once you start hitting your targets, keeping raising the bar and before you know it you will be well on the way to creating substantial savings.
3. Cash Is King: The biggest mistake people make is by over using their credit cards and under using their cash. When you spend out of your credit card, you feel that you haven’t touched your hard cash and hence feel that y0ou might be in a better situation. This is a classic example of”illusional savings”. By not using your cash and over using your card, you are actually spending money you don’t have and hence are stretching your finances. At the end of the month when you receive your credit card bill or store card bill you are shocked by the amount you spent and the interest for which you are now liable. This however would not have been the case had you used cash, because not only would you have felt it every time you spent, but also you would not have to pay any interest on it.
4. Prioritise Your Liabilities:  If you have a personal loan, mortgage loan or a high interest credit card, make sure that you are meeting these payments and other necessities around the house prior to making any other expenditures. In a lot of cases once you have made the immediate payments first, you might no longer feel that certain expenses are necessary and hence enable yourself to fast track your savings plan.

Invest Saved Money in Saving Accounts

The next issue that arises is what do you do with all the money you have saved? After all, your money is only good when you make it work hard for you.  Here are few suggestions to help you create an effective savings plan:

1. Savings Account: These savings accounts can be opened with banks, credit unions, Building societies and savings and loan thrifts. These accounts usually pay a competitive interest rate and offer easy access to your money. However, if you feel that you might be tempted to withdraw your funds then you might want to get yourself a account, that only allows a set number of transactions every month or quarter and beyond that charges you a certain fee per transactions. This may be a good way to keep your spendthrift habits in check.
2. Money Market Deposit Accounts: These are also known as money market account and are federally insured. They work the same way as money market funds do. The catch with opening one of these accounts is that the minimum deposit amount is higher and the numbers of transactions are limited in line with federal regulations. However, these accounts pay higher interest or dividends in comparison to savings accounts.
3. Deposit Certificates: These are meant to invest a fixed sum for a fixed period for a fixed interest rate. These are quite simple in operation. The depositor decides to deposit funds for a fixed period of 3,6,12 or more months and in turn the institution pays the depositor a fixed interest rate. If the depositor withdraws the funds prior to the maturity of the term he/she either has to pay a penalty for early withdrawal or must forgo a part of the interest earned.

These are just a few ways to help you create a savings plan and work your way to a more cash positive situation.

References:

1. How to Make a Savings and Investing Plan – Young Money
2. How to create a savings plan that works – Epinions

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We of ten hear the phrase “save for a rainy day”. While most of us think this is just a phrase and do not pay it much attention, for those who understand the value of sound retirement advice know how important it is to save for retirement. While most consumers are of the opinion that saving for retirement is something they would be interested in when they are past their mid 40s, it might be advisable to rethink that thought process.  Most financial planners and advisers who have seen their clients weather this terrible financial storm will strongly advice you to save for retirement and put in a place a sound retirement savings program.

Retirement And Savings

It may be interesting to look at some figures with regard to retirement savings to decipher whether we are in a bit of a

Put a Retirement Savings Plan in Place

spot. Experts are of the opinion that Gen Xers are probably going to be the worst affected as nearly 49% of Gen Xers will have to reduce their current lifestyles in retirement. On the other hand, baby boomers are in a better spot with studies showing that only 35% have had to downgrade their lifestyles for retirement and savings. It is more important for Gen X and Gen Y to consider their retirement savings options owing to the simple fact that the ’saving for retirement’ options such as company pensions, full social security benefits from early sixties  and 401(k) savings accounts are not available to Gen X and Gen Y. Hence it is very essential for the current generation to save for retirement and use unconventional channels apart from their mainstream options as mentioned.

Retirement Savings Account

The Bush government, in an attempt to enable consumers to be able to make after-tax contributions towards their retirement introduced a retirement savings account (3). This retirement savings account was meant to replace the traditional IRA, Roth IRA and Simple IRA accounts. Although this could be a tax haven and could help you save for retirement with tax free dollars, it is essential to keep the following points in mind to avoid any tax liabilities or implications:

• If your employer offers you a 401(K) retirement savings plan with a matching plan, make sure that you contribute enough to get the maximum amount as offered by your employer.

• In case you are switching jobs rollover your funds in the 401(k) account into an IRA account as this gives you more flexibility.

• Ensure that you nominate your children as beneficiaries for your IRA account. This will give your children tax- deferred and tax-free growth by allowing them to stretch the IRA payouts over their lives.

Retirement Savings Plan

The IRS (Internal Revenue Service) (1) has developed several programs to help individuals save for retirement. Some of the initiatives from the IRS are as follows:

• The IRS have expanded ways in which individuals and sponsors can automatically enrol into in retirement plans.
• By making the process of saving tax refunds easier and
• By helping individuals roll-over their lump-sum payments like payments for unused leave and other similar payments into various retirement plans.

In addition to this, with the help of the IRS, consumers can also receive their tax refunds in the form of government bonds, should they elect to do so. Moreover the IRS also provides information and advice on rolling over distributions received from unused vacation or employee termination and retirement lump-sum distributions.

Apart from these, there are several other savings plans available. It might be beneficial to consult your financial planner to get more personalised advice that is best suited to your retirement savings needs and objectives.

It is obvious from the abundance of options out there that it is possible to have a comfortable retirement. The only requirement is to have the drive and commitment to out the wheels in motions. Let us not forget that retirement savings are the need of every individual and it is never too late to start saving for retirement or to put a retirement savings plan in place.

References:

1. Retirement and Savings Initiative – Internal Revenue Service
2. Is there really a retirement savings crisis? – MSNBC
3. The President’s Savings Proposals – U.S. Department of the Treasury

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