Money Don’ts

Sometimes the difference between being eternally broke and financially comfortable is just a few simple things you shouldn’t do. Avoid these basic money mistakes:

• Not tracking your spending – Pay attention to where your money goes. Your credit card statement will help you do this, but don’t forget all the incidentals you pay cash for. With this data, you’ll find it easier to stick to your budget. And speaking of budgets …
• Not setting up a budget (and sticking to it) – This advice may seem really basic, but many smart people don’t take it seriously. Figure out how much money you realistically need to pay bills and buy needed supplies for a week or month, and don’t go over it.
• No emergency fund – Set aside some money for emergencies, and don’t touch it for any other reason. Ten or 20 dollars a month can add up, especially if it’s growing interest.
• Not shopping around – Take the time to look for the best prices and avoid those impulse buys. Stock up on essentials on sale, and always look for opportunities to negotiate a better deal.
• Borrowing too much money – Don’t put more on your credit card than you can pay off at the end of the month. Resist the urge to buy more house than you can afford, and don’t be seduced by reward programs that entice you to buy extravagances in order to get bonus points.
• Not watching your credit rating – Know your credit score so you can avoid problems when you really need to borrow money. Make sure all the information is correct, and watch out for signs that your identity has been stolen.

Can You Afford to Retire?

Have you ever sat down and figured out how much you’d need for a comfortable retirement? If not, don’t worry – you’re not alone! According to the U.S. Department of Labor (USDOL), fewer than half of all Americans have calculated how much they will need to save for retirement.

While it’s important to plan, it’s also important to set realistic, achievable goals. Know your options and ask questions. Set aside time to talk with your employer about retirement plans. Your employer may offer benefits like 401(k) plans which allow for an immediate tax deduction growth on your savings.

“While earlier generations of retirees relied on employer provided pensions, today’s workers will need to rely on their own work-related and personal savings for retirement,” said Stephen A. Cox, president and CEO of the Council of Better Business Bureaus. “That’s why it’s extremely important to have an alternate plan and save as much as possible.”

BBB and USDOL recommend that consumers consider the following to ensure a more financially comfortable retirement:

• Get started. Start saving now and continue to stick to your savings goal — it’s never too late to start saving. Make a budget and use it! Saving can be fun if you think big and realize how much it will pay off when the times comes to retire.
• Get realistic. According to the USDOL, you’ll need about 70% of your preretirement income. If you’re a lower earners, you’ll need 90% or more to maintain your standard of living when you stop working. The average retiree is in retirement for 20 years of their life. Plan ahead and learn how much you will need after factoring in Social Security and other sources of retirement income.
• Take advantage. Of your employer’s retirement savings plans, that is. If your company offers a 401(k) plan, participate in it. There may even matche a percentage of your contribution. If your employer doesn’t offer a plan, think about opening an IRA or Roth IRA. You can put up to $5,000 a year into an Individual Retirement Account (IRA) and contribute even more if you are 50 or older.
• Leave it alone. Avoid touching your retirement savings if at all possible. If you withdraw your retirement savings now, you’ll lose principal and interest and you may lose tax benefits or have to pay withdrawal penalties. If you change jobs, leave your savings in your current retirement plan, or roll them over to an IRA or your new employer’s plan.

About Credit Scores

You know a credit score is important when you apply for a loan or credit card – but do you know exactly what it is and how it can affect your chances in getting the financing you want?

Creditors use a credit scoring system to help determine whether to give you credit, and how much to charge you for it. Your credit information like your bill-paying history, the number and type of accounts you have, late payments, collection actions, outstanding debt and the age of your accounts is collected from your credit application and your credit report.

Using a statistical formula, creditors compare this information to the credit performance of consumers with similar profiles. A credit scoring system awards points for each factor. A total number of points — a credit score — helps predict how creditworthy you are; that is, how likely it is that you will repay a loan and make the payments on time. Generally, consumers who are good credit risks have higher credit scores.

You can get your credit score from the three nationwide credit reporting companies — Equifax, Experian and TransUnion — but you’ll have to pay a fee for it. Many other companies also offer credit scores for sale alone or as part of a package of products. You are allowed to get one free credit report per year. Get it for free here: AnnualCreditReport.com.