Stop Thinking About Retirement

Last month a study by published by the Investment Company Institute revealed that IRA participation has steadily grown. The study found that IRAs now account for 25.4 percent of U.S. retirement wealth and at year-end 2008 IRA made up 8.5 percent of total U.S. household financial assets. This news illustrates a steady incline in IRA participation, but before we proponents of savings get all excited let me throw a negative at the statistics. Twenty-four percent means that just a quarter of our savings goes into a tax-advantage account. Only 8.5% of household wealth? We can do better and here’s how.

Stop thinking about retirement! The attitude that IRAs are for our golden years is the biggest deterrent to IRA participation. For most people in their 20’s paying this month’s rent and having some money for fun is a greater priority than saving for retirement. And for people in their 30’s supporting their family now is at the forefront of their financial plan. That’s why we don’t really start thinking about IRAs until we get older.

By age these are the stats:1
Ages 61-69—16% contribute to an IRA
Ages 51-60—10% contribute
Ages 31-40—participation is just 7%
Ages 21-30—a mere 3% contribute to an IRA

Saving for retirement is like preparing for death. No one wants to think about and we’ll do nearly anything to avoid it. So that’s what we do—avoid.

I propose that if you aren’t participating in a tax-advantage savings program (like an IRA) that you get a new attitude. Start thinking about wealth building. The maximum IRA contribution in 2009 is 5,000 dollars. That’s $5,000 tax-advantage dollars. The type of advantage depends on which IRA you choose. BTW you can still open and contribute to a 2009 IRA. The contribution amount can be limited by your Modified Adjusted Gross Income (affectionately known as MAGI). If you are over 50 years old, you get to add up to $6,000 to your IRA wealth building account.

I’m not going to bore you with the details on contributions and differences in the IRA plans during this posting. To find out more do the following, and start building your wealth and stop thinking about retirement…

• Call the Coors Credit Union and ask to talk with the Investment and Retirement Team. They’ll take a look at your situation and help you decide which wealth building tools will work best for you.
• Go to IRS.gov this site will give you the most accurate information and help you understand your choices. I know, I know it’s a government site, but there is a lot to be said for going to the source.
  
  1 Data released by Federal Retirement Thrift Investment Board, Analysis of 1997 Thrift Savings Plan Participant Demographics, December 1998; and Employee Benefit Research Institute, EBRI Databook on Employee Benefits, 4th ed., 1997.
  

How Much Do You Have in Net Investible Assets?

You’ve probably heard of Net Worth as a term used to measure your wealth. It’s a simple calculation of Assets – Liabilities. But many financial advisors do not consider Net Worth to be an accurate assessment of your wealth. Oh, and first a reminder, “wealth” is not equal to “rich”, it is just a word to describe the value of your money. Okay, now back to our topic.

Net Worth assumes that if you needed to sell your assets—like cars, a house, jewelry—that you would receive current value. That’s rarely the case. Net Investible Assets, however, determines the amount of money that you have to invest. Financial advisors like to look at this value because it tells them how much of their client’s money is available to work with.

To calculate your Net Investible Assets add all your savings and investments and subtract your consumer debt (credit cards and loans). Don’t look at how much equity you have in your home or the appraised value of your wedding ring and grandmother’s jewelry or your family mountain home. This leaves you with investable assets. This tells you how much money you have available without selling all your personal properties.

If you begin to look at your financial position using Net Investible Assets you might start looking at your financial picture a bit differently. Although investment advisors may include emergency and regular savings accounts in your Net Investible Assets calculation, I would suggest that you take these out of the equation. Look at your Net Investible Assets as money that you can invest and leave the other savings for their intended purposes. And like your other savings, assign a goal to any funds that are included in your Net Investible Assets. If you are just starting to build these funds establish a savings vehicle that you can regularly and automatically fund. If you are working with an advisor, tell them upfront that this is the money you’ve allocated toward investing. Protect your emergency and regular savings to use when needed.

Looking only at your Net Worth can be a way to deceive yourself into thinking that you’re in good financial health. The Net Investible Assets calculation can be sadly eye-opening.

New Rules: Saving vs. Debt

The new rule on whether you should pay off debt vs. building savings is that there are no rules. I know I've been following the rule of pay down debt before adding to savings and I've touted the benefits of this strategy: debt costs more long term, savings accumulate slower. But all bets are off in this economy.

Suzy Orman just released an update to her 2009 Action Plan, and I've got to agree with her on this. Suzy says, "If you do not have a stash of cash and you have been using all your extra money to pay down your credit card debt and they keep closing your cards down- what are you going to live on if you lose your job? Chances are you may not have any available credit limit to use to rely on since the cards are reducing those limits, you will not be able to get a new card since you are now not employed. So to help you in the event you lose your job my advice is to pay just the minimum required on your credit cards every month, and then use every extra penny you have to build your emergency savings fund."

Make your goal to have 8 months of living expenses in an emergency fund. As long as you continue to make minimum payments on your credit cards your credit score should be fine. That is unless the card company doesn't reduce your limit or close down your card, which they are less likely to do as long as you pay the minimum. But don't be tempted to use the cards for charges that are not emergencies. And only then if you don't have other funds to cover the event.

If you already have a substantial emergency fund in place, keep paying down that debt. These are unusual times and it's important to be prepared for the worst while remaining flexible to changing your strategies.

I dare you to buy nothing!

Have you scoured the paper this weekend? Did you visit the Black Friday websites? Have you made your list, checked it twice and planned your route for the biggest shopping day?

Or are you celebrating Buy Nothing Day?

Buy Nothing Day is an informal day of protest against consumerism. It's typically promoted for the Friday (a.k.a Black Friday) after Thanksgiving in North America and the next day internationally. The day was founded by Vancouver artist, Ted Dave and has been subsequently promoted by the Canadian Adbusters magazine.

In this year of financial crisis when many high profile retail corporations are counting on Black Friday to start and carry them through the season critics say that all that buying won't help one bit. Instead they claim that consumption is what got us into this mess in the first place. They may be right--too much credit, too much "I want it now" and must haves make us crazy consumer world.

Could you really buy nothing on any day? Set aside mall and big box Black Friday shopping--it's not that hard to refrain from crowded overly glittery stores. But, what about today? Or tomorrow? Could you buy absolutely nothing? That means no coffee, no picking up something for dinner, no Itunes. It means nothing. I dare you to try.

How to Get Things Done

So this week I am taking a vacation with my family to Portland, OR. We’re meeting up with another family from the old country—Pennsylvania. We’re flying out later today so of I have bazillions of things to do still. Like my own laundry and packing (everyone else in the fam is ready), I need to buy more dog and cat food, run to the Credit Union to make a deposit, work stuff, and more. Why is it that it always seems like a last minute rush no matter how far ahead you plan?

I think it’s fortunate that I’m a list maker. My husband would disagree, he thinks I’m obsessive. But if I’m going to get anything done I need the List. Like any tool a List can be ineffective if used incorrectly. Some people just like to see things checked off and make “to-do” lists of things they’ve already done. I’ve been guilty of that, but I think it helps give you a sense of accomplishment that can then catapult you in to actually doing something.

Lists that don’t work are full of tasks that are to general, vague or overwhelming like “Get in Shape”, “Clean the Garage”, or “Free Tibet”. These are projects, not tasks. To make a successful “to-do” list you first need to look at your projects or goals and break them down into tasks. Then each day add a task from each of your goals to your List.

So it might look like…

• Go for a run


• Clean up paint shelf


• Meet with President HU Jintao

The same thing goes for financial goals (ah, you’ve been wondering how I was going to turn this around to the subject of money—weren’t you?) If you’re goal is to “save money” think about how you’re going to do that. Simply writing “spend less” or “add money to savings” isn’t specific enough. You must get very specific. Try something more like this:

• Open an IRA


• Set up automatic transfers of $50/month to IRA account


• Transfer $21 into primary savings account through online banking, then pack lunch for work 3 times this week. (I know it's long, but notice the deposit before the action, that’s a more motivating.)

Where should you keep your list? My favorite place is on my forehead. That way whenever you see someone they will say, "Deposit $21 into your savings account." Then you'll say "hey, thanks" like they're some kind of mind reading genius. Just be sure you also write "wash your forehead" on there too. Or if that doesn't work for you, you could try a list on your desktop, or online lists or a PDA or even some good old fashioned paper on the fridge.

Okay, first thing on my list today...make the List.

The Saving Savings Challenge

I was reading Ginny Brady's Broadcast for UFirst Federal Credit Union and was inspired by her Saving Savings Challenge.

Here's the basic concept as explained by Ginny:
Each time I find a "bargain" or consciously make a lifestyle change that saves money, I'll deposit the difference between what I paid (or saved) and what I would have paid without the discount into a savings account. For example, since I bought 2 gallons of milk (I have a big freezer), I saved $1.74. I'll round that up to $2...
photo by • Eliane •
You get the rest, Ginny will deposit $2 into her savings account.


I'm going to take up the challenge as well. Of course there's the whole argument of whether a "sale" is really a "savings", but don't you feel like you hit the jackpot whenever you find a bargain?

So here's my first deposit. We're going to Portland for vaca early August. We nearly booked a hotel chain that we're familiar with and love. See we're 5 people so we always need either a suite or two rooms. Anyway this particular chain has always been good for us. But I felt the the $209/night was a bit higher than it should be. After a little online searching I found the same suite chain just 8 miles away at $165/night. Bingo I just won $44/night. Or $308 total for our stay. Time will only tell how good my bargain was, but they do have a basketball court something the other location didn't have.

Today's deposit $308.

Okay so with that one I saved money, but what do I do with stuff I don't expect to buy? Like the glasses I unexpectedly broke--and since we no longer have vision insurance--let's just say that cancels my hotel savings.

This Challenge could drive me crazy!!! But I'm not giving up! From now on I'm going to deposit the difference into an untouchable alternate savings. It's not really untouchable. It's my secondary savings account that I usually forget about. We've used it as an emergency fund in the past and it's dwindled slowly away, so it's time to build it back up.

Forget about the broken glasses and the hotel. I'm starting fresh and I'll keep you posted occasionally. As for you, it's the weekspend get out there and save!

Let's Go Shopping: Got Coupons?

I think we can all agree that grocery shopping is a drag. And with prices gone wild it can get downright depressing. But we've all got to eat. So this week we'll examine some ways to save money at the grocery store.

It used to be that newspapers could sell subscriptions by just asking, "Would you like to receive Sunday coupons?" But printed papers are struggling and not even the Sunday coupons are saving them. Why is that? A gallon of milk costs more than a gallon of gas. Cheese costs more than it weighs. Rice is rationed. And flour outprices the cookies we bake it with. Well, the answer is simple--coupons rarely cover the stuff we really buy.

Still we've all heard stories about coupon clipping queens who claim to rack up savings at the price of a few hours of cutting up paper. One clipper, Teri Gault, has turned the hobby into the savvy Internet business, GroceryGame.com. The Grocery Game gives you a list of items that are on sale at the stores you shop. You then buy the newspapers, clip and take them to the store. The premise is that you might not have been able to locate all of the coupons without the Grocery Game list. Well, maybe you could but it might be harder. The Grocery Game list will alert you to what the best deals are and when to use those coupons to get the best savings. Users have said that they can sometimes even get items for free. The cost for this service is $10/month for the first store you signup for and $5/month for additional stores.

Have I tried it? No. You can try out the service for 4 weeks for just $1. But I don't like any service that asks for credit card information upfront and then automatically bills if I forget to cancel--The Grocery Game does just that. It's just a principal that I have. Instead I hunt around for reviews on the Internet. I found a lot of users who suspiciously love the Grocery Game. They were mostly bloggers who ask that you mention them as a referral when you signup with The Grocery Game--read kick back.

I also found one honest blogger who said that the time and money spent clipping, buying papers, and driving to different stores was more of an investment then she was willing to give. That would be my thought as well. But I won't knock The Grocery Game since it may be just what you need to make grocery shopping more fun as many users claim.

Here's a thing to remember and it's what the whole Grocery Game concept is built on. It's also the secret that all successful clippers know. Manufacturer coupons are enticements to try products. You knew that right? They are often for items that you wouldn't normally buy. Store coupons might be for items that the store is trying to move. Either way the coupon is the first indicator that a price cut is coming. The secret strategy is to clip coupons and then save them--for about 4 weeks. The items will then typically go on sale. That's when to use the coupon and that's how Grocery Gamers get free and nearly free stuff.
Serious clippers organize their coupons in categories like "produce" or "meats" and then save them for weeks until the items are on sale. photo by ninjapoodles

Do any stores double coupons any more? I've been hearing this, but haven't seen it locally. Have you?

Green Clean

Something few people know about me is that I make my own cleaning products. It’s an environmental-organic-frugal-give my family something to complain about thing. It’s easy to make your own cleaning products. I think they work better than many commercial items. Yes, I use a lot of vinegar and that’s where the complaining comes in. But the odor fades quickly and complaining is just what families do.

But I have been curiously awaiting the release of Clorox’s new Green Works line. I know it seemed strange to me at first too. This brand name alone connotes toxic chemicals. And yes I have tried Seventh Generation. They’re a bit expensive but I do sometimes indulge in the fabric softener. Anyway, I did some research and am pleased that Green Works, which was released in January, is getting some rave reviews.

Most surprising is the Sierra Club endorsement. They asked several of their volunteer committees to review the cleaners before allowing Clorox to use their logo. It’s the first time they’ve ever endorsed a cleaning product. Treehugger ran this quote from Sierra Club executive director Carl Pope,"We hope we are transforming the marketplace by doing this. These products are clean, they're green, they're not going to hurt you, and they're not going to hurt the environment."

Another surprise: Clorox actually publishes the ingredients for Green Works—typically unheard of in this industry. Treehugger confirms that the ingredients are mostly natural just as the company claims.

And about the cost. Clorox can’t beat my homemade products but for the convenience their prices aren’t bad ranging from $2.99 to $3.39.

The two things about this line that really make me smile are:

1. The Company’s openness. The website is informative and factual (and blogger friendly since they happily include downloadable images for sharing.)




2. It makes green products readily accessible. Major brands have the money muscle for advertising, product placement and mass production. That means more people will be able to choose environmentally friendly products.

But if you’re still curious about making your own, check out Care2.com's Green Living pages.