Save With a Plan

Today, I participated in a Cooperative Extension Twitter chat for America Saves Week (ASW). The theme of the Twitter chat and its accompanying video chat was planned saving. “Save with a Plan” was the theme for Day 2 of ASW 2020. Below are some ideas that I shared and heard from others about the benefits of planned saving and how to do it:

¨      Develop a savings plan for emergencies and short-term, medium-term, and long-term goals. Identify an amount and a time deadline with this worksheet : https://njaes.rutgers.edu/money/pdfs/goal-setting-worksheet.pdf.

¨      Do research on the total cost of your savings goal (e.g., a vacation trip or a new car). Then do some math. Divide the cost of the savings goal by the number of months to save to get the monthly savings amount.

¨      Look for online resources to help you save with a plan such as these financial calculators from Bankrate: https://www.bankrate.com/calculators.aspx.

¨      A savings plan makes you more future-minded; it forces you to think about what you want and when. A plan also helps you see your progress. If you save $2,500 toward a $5,000 goal, you are halfway there.

¨      Re-evaluate your savings plan at periodic intervals like every 6-12 months. You need some time to see progress. Also re-evaluate your plan when life circumstances change (e.g., a big raise or marriage).

¨      Automate your savings if you have a regular paycheck. Otherwise, save when you can (e.g., when you get a bonus or income tax refund) if your income is volatile.

¨      Start small with the 30-Day $100 Savings Challenge starting on March 1, 2020. It is a strategy for planned savings. On March 30, you could have $100 saved by saving daily amounts ranging from $1 to $5.

Four Strategies to Increase Your Tax-Deferred Retirement Savings

In addition to earning a higher Social Security benefit (e.g., by working longer and delaying benefits), one of the most powerful ways that people can increase their income in retirement is to increase their savings in tax-deferred employer retirement savings plans (e.g., 401(k), 403(b), and TSP). 

Below are four strategies to boost your savings: 

Save Until It Hurts- Save as much as you can until savings starts to pinch your cash flow. In 2020, workers under age 50 can defer federal income tax on up to $19,500 in a 401(k) or similar employer tax-deferred retirement savings plan. Workers age 50 and over can contribute up to $26,000 with catch-up contributions.

Save Automatically- Sign up to have automatic retirement savings contributions deducted from your pay if you receive a steady paycheck. If your income fluctuates, save as much as you can whenever you can (e.g., when you receive a higher than average monthly income, a bonus, or an income tax refund).

Earn the Maximum Employer Match- Save at least the maximum amount that your employer will match (e.g. 6% of pay). This is “free money” that should not be left on the table. A fifty cent match for every dollar saved is an automatic 50% return that is risk- free and tax-deferred.

Make Wise Investment Choices- Select investments with low expense ratios and good long-term performance for employer plans (and IRAs). Many investors value simplicity and select index funds or exchange-traded funds that track market indices and target-date funds that gradually become more conservative over time and hold less stock.

America Saves Week 2020 is February 24-29. Consider it a challenge to increase your retirement nest egg. Every small step matters.

Tips to Save Money on Valentine’s Day and Year-Round

I recently participated on a panel for a Twitter chat titled How to Spend Valentine’s Day on a Budget, sponsored by Experian. Below are some tips that I shared in response to the questions:

¨      Dine Out for Less- Eat at a national chain restaurant that does not raise its prices just because it is a holiday. Dust off unused restaurant gift cards that are still lying around since the holidays or time-shift and eat out on February 13 or February 15 or 16. Avoid local restaurants that jack up prices on holidays “because they can” and use restaurant coupons, if allowed. Some may have “fine print” that excludes holidays. Also, consider going out to lunch or breakfast, instead of dinner, if you both work at home or at nearby jobs. It is cheaper.

¨      Give Frugal Gifts- Examples include a bottle of wine (can be as little as $3 a bottle at some supermarkets), a handmade card with an original poem, graphics, and/or photos, and a playlist of someone’s favorite music for a CD or MP3 file. Other ideas are to make a flower arrangement with cut flowers from a supermarket and a vase from a thrift shop and make your sweetheart’s favorite meal and/or a special dessert at home.

¨      Don’t Pay Full Price- Take advantage of flash sales, newspaper ads, online promo codes, coupons, retailer and restaurant rewards programs, and other money-saving tools. Also, if you have accumulated credit card cash-back rewards money, you can cash out to buy gifts and restaurant meals that are essentially “free.”

¨      Do Low-Cost Activities- Consider hiking on a nature trail or visiting a local park or beach (weather permitting). Both are free or low-cost. Also look around for local events in public places. Check out Eventbrite for a list of events in your area. If cold weather or snow has you stuck indoors, stream a movie or rent a DVD from Redbox or a public library and curl up on the couch together.

Bottom Line: It is possible to celebrate holidays on a budget. Do something that you both like to do and remember the “small stuff”: smiles, laughter, handholding, etc., all of which are free.

Four Common Scams and How to Avoid Them

I recently attended a seminar called Identifying and Avoiding Scams. The speaker, a bank fraud specialist, described three key steps: know the types of scams that are out there, learn the identifying characteristics of scams, and avoid scams. People over age 55 are especially scam targets because they have the most wealth. Crooks go “where the money is.” 

Below is a description of four common scams that are frequently reported to the Federal Trade Commission (FTC):

¨       Tech Support Scams- Victims are scammed by a pop-up message purporting to come from Apple or Microsoft saying that their computer is infected or has other “issues.” It says that they must immediately call a phone number or click on a link in an effort to steal personal information or install malware to access sensitive data on your computer.

¨       Imposter Scams- Victims can be scammed under a number of false pretenses including imposters purporting to be government officials (e.g., IRS and Social Security) or relatives (e.g., a grandchild) in trouble. Fraudsters request that they wire money immediately to pay taxes or fees or to help someone out.

¨       Lottery Scams- Victims receive a letter with a fake check for a lottery, prize or sweepstakes and are told that they must respond immediately to pay “taxes” or a fee. Fraudsters ask for bank account information or a credit card number or ask victims to wire money. The fake check bounces, of course, and victims often get requests for even more money.

¨       Romance Scams- Victims are scammed by fraudsters who troll online dating sites. The scammers, who say they live far away, build a relationship with victims online and then say they need money for something. Fraudsters request a wire transfer of funds and coach victims what to say to not arouse the suspicion of bank officials.

In addition to the above scams, there are charity scams, investment scams, contractor scams, gift card scams, and more. Regardless of the type of scam, red flags of fraud include requests to wire money immediately, requests for payment in advance of services, and secrecy (“Don’t tell anyone”). Be careful out there. Anyone can become a fraud victim.