Mt. Pleasant (989) 772-1209 | Midland (989) 631-9500
RFM Financial Solutions, LLC

All posts tagged saving

Retirement usually doesn’t start until you’re in your 60s but there is a good reason to start saving much sooner. The earlier you contribute to your nest egg, the moprocrastinationre time your portfolio will have to grow in value.

The image illustrates the ending wealth values and effects of compounding of two investment portfolios. Consider two hypothetical investors who begin investing $3,000 at an average annual rate of return of 5%. Investor A invests $3,000 for a 30-year period, which results in an ending wealth value of $199,317. On the other hand, investor B invests $3,000 for a 20-year period, which results in an ending wealth value of $99,198. Investor A invested an additional $30,000 compared to Investor B. However, a large difference in the ending wealth value can be attributed to the compounding effect of the $30,000 for the additional 10 years. In other words, your dollars saved now will be worth a lot more than your dollars saved in retirement.

If you are one of the millions that receive a sizable tax refund every year, why not use the extra money to help out your personal balance sheet.  Here are some ideas for your refund that will be more beneficial than just spending it on whatever…

  1. Use the cash to pay down your debt.  Reduce any high-interest credit card debt you may have, or pay down the principal on your mortgage.
  2. Contribute to an IRA or a 529 plan for your children.
  3. Want to have a vacation, set aside some of your refund for just that.  Setting up a separate account helps for just that.  You could even do this for your holiday shopping!
  4. Have some smaller home improvements you want to make, use some of this money to do just that.
  5. Have a stock you want to invest a little in, open up a brokerage account and do just that!
  6. Do a check on your emergency fund to make sure there is enough in there in case you get laid off or hurt.
  7. Maybe it’s time for some additional life insurance?

These and may more tips are available at

Even before the onset of the worst financial crisis since the Great Depression, many people wondered whether they were saving enough for retirement. Frankly, many weren’t. Now, post-meltdown, the question remains: Am I saving enough? Take the Kiplinger quiz to see if you are on track for a comfortable retirement and if not, how you can improve your chances.

Click here for the quiz!

If the recession has taught us anything, it’s that we can make it on less. We may not want to, but we can.

Even if your job is secure and your investments have rebounded, the economy remains shaky, and there are lots of reasons to stick with your new frugal money habits — just as those who lived through the Great Depression never forgot the lessons they learned.

Here are six lessons from the recession worth incorporating into your financial life to get you through both good and bad times.

1. Use cash and borrow less
Americans have racked up $2.43 trillion in consumer debt as of March 2011. As the recession deepened, credit cards supplemented unemployment benefits for many people out of work. Many consumers maxed out their cards and scraped to make minimum payments, and the result has been catastrophic to credit scores.

Even if you’re working now, don’t return to the credit crutch. Instead, pay cash whenever you can so you don’t accumulate any new debt. Then, make a concerted effort to pay off what you owe.

“You almost never ‘have to’ use a credit card to get by,” says Sally Herigstad, a certified public accountant and columnist for “To test yourself about whether you absolutely must use a credit card for something you can’t afford to pay cash for, ask ‘What would I do if I didn’t have this card?’ You would survive, wouldn’t you?”

Herigstad says that should stand for most purchases, except for maybe a car breakdown far from home. “You can’t go wrong by using only the green stuff you already have,” she says.

If you like the convenience of plastic, trade in your high-interest credit card for a debit card that works like a credit card but is linked to your checking account. (Make sure it has a Visa or MasterCard logo for greater protection.) This puts you on a money diet: You’ll only be able to spend if you have the money in your account.

As financial guru and author Dave Ramsey says, “A sure way not to fall victim to unexpected credit card fees is to stop using them! If you are serious about getting out of debt, cut up the card, pay off the card as quickly as possible, and close the account!”

2. Make sure you build an emergency fund
Unexpected expenses come up even during good economic times, but if you’re struggling to pay the bills each month, a sudden large expense can upset the most well-planned budget. That’s where an emergency fund comes in.

Financial advisors recommend you keep between three and six months’ worth of expenses set aside in a cash account.

These funds should be used for emergencies only, such as if you lose a job, your car breaks down or you must repair something essential in your home. Having money set aside from your checking account will help you stay solvent without building new debt or digging into retirement accounts prematurely.

If you don’t have an emergency fund, start small. Instruct your bank to automatically transfer a set dollar amount each week or month to a savings account. In a year, you’ll accumulate $1,300 if you save just $25 per week.

3. Setting priorities is critical
Before the recession, many Americans blurred the line between their needs and wants.

Families splurged on 400 cable television channels, dinners at pricey restaurants and brand new cars every few years. But as budgets got tight, more people cooked at home, clipped coupons, shut off electronics that weren’t in use and pared back on cable and other extras.

People also are holding on to their cars longer, according to surveys by Kelley Blue Book, a new and used car information service. That’s a smart choice. Once you’ve paid off a $400 per month car loan, there’s no need to race out and buy a new vehicle. If you wait and set aside the $400 a month you had been paying, you’ll have saved $4,800 in a year. In two years, you’ll have $9,600.

Maybe there’s something you need more than a new car, such as a second home for retirement, a bigger retirement fund or seed money for a business.

Make a priority list of what’s most important to your family’s future, and if your funding isn’t up to par in some areas, consider where you can cut back or what purchases you can delay. Try some of these money-saving strategies to help save $5,000 a year.

4. Budget is not a dirty word
A lack of job security, pay cuts, furloughs and investment losses pushed many families to take hard looks at their budgets. A recent poll by USAA Bank found nearly half of consumers said keeping a budget is a bigger priority than it was before the recession.

Even if your personal finances are rebounding, you need to stick to your budget and should add any extra income to your emergency fund or retirement accounts. Living on less means you can save more for the future.

5. Being a penny-pincher makes you smart, not cheap
Deals abound as retailers and venues continue to compete for precious consumer dollars. Be aggressive about searching for discounts, and don’t pay full price if you can help it.

Coupon redemption spiked by 30 percent last year, and you can find coupons for just about any products you need. Check sites such as and

When shopping, ask for a price break even if none is posted. Department store cashiers, physicians and mechanics may be able to offer a discount — if you ask. Also check with your human resources department to see if your company has discount deals with any merchants. My husband’s company, for example, made deals so employees get discounts with a popular computer company, a car insurance company and other businesses. Call your college alumni association or any trade groups to which you belong to see what offers they may have. Groups I belong to offer discounted insurance, tax preparation services and other goodies.

6. Stay in charge of your investments
Portfolios tanked during the recession, and many investors were surprised to see how far their account balances fell.

Don’t allow yourself to be surprised again. Monitor your investments, check your accounts twice a year and make sure you understand where you money is. If something doesn’t seem right, ask your investment company or a trusted advisor for help.

Keep tabs on the changing economy, but also be sure to keep your eye on your long-term financial goals.

“I wouldn’t let every market gyration change your goals,” says Andrew Samalin, a Chappaqua, N.Y.-based certified financial planner. “Don’t let short-term factors derail your long-term vision.”

Karin Price Mueller – Second Act