Tuesday, May 26, 2009

Start Early for a Comfortable Retirement

Many people don't start thinking about their retirement planning until they are well into their career – then they realize how much valuable time they lost. If you start saving for retirement now, you have the best shot at attaining long-term control over your finances and ending up your life in comfort.

A common way people take advantage of time and compound interest is through an Individual Retirement Account. If you open an IRA in 2007 you can invest $4,000, which is the maximum annual contribution. That $4,000 will be invested in mutual funds, stocks or bonds that will provide a return within the IRA account. By the end of the first year you'll have the original $4,000 investment, plus any income it has earned. Now you've got $4,000 earning interest plus interest earning interest. And on top of that, you can make a contribution in 2008. The entire sum will earn interest and so on.

If you start making annual $4,000 contributions to a Roth IRA at age 37, you'll have contributed $112,000 by the time you retire at age 65. At a 7 percent rate of return, you should have $345,386 in your account at retirement age.

Keys to Retirement Success
  • Start early: the younger you are when you begin contributing to your IRA, the longer your money will have to compound, making it worth even more when you retire.
  • Contribute every year: Even if you're tempted, don't skip your IRA contribution. Give your money the best possible chance to grow by socking away a little bit every year.
  • Resist the temptation to withdraw the money early: You'll have to pay a penalty of about 10 percent and your retirement nest egg will be that much smaller.
  • Aim for a high rate of return: The more your money earns annually, the more you'll have at retirement.
  • Leave the money in longer: Money gets the greatest effect from compounding in the later years, so the longer you can leave it in your account, the more you'll have when you withdraw it.

10 Barriers to Success (from John Bishop of Teaching Moments)

  1. No clear vision – the clearer your vision is of your goal, the faster you will achieve it.
  2. Fear of failure – don’t let worry, fear and uncertainty hold you back from reaching your goal. Eliminate bummer words like never, can’t, maybe or if.
  3. Lack of determination – turn challenges into opportunities. Come at them from the other side.
  4. No action plan – write a detailed, step-by-step plan including a timetable and written strategy that you review every day or week.
  5. Change –make adjustments as needed but don’t lose focus on the goal.
  6. Negative thinking – everyone has some self-doubt. Ask yourself everyday: 1. Did I give my best effort and 2. Did I move closer to my goals?
  7. Lack of enthusiasm – you are your own best cheerleader. Look at all days as good days, some are just better than others. You’ll find your enthusiasm is contagious.
  8. Procrastination – You can have a great written plan, but you must take action. Be self-motivated, determine what motivates you and take action.
  9. Making excuses – take responsibility for your success.
  10. Learn from your mistakes – Everyone makes them. Successful people turn mistakes into learning opportunities.

Roadblocks can actually be stepping stones to success. Identify what holds you back and turn it into an opportunity!

Wednesday, May 20, 2009


What are your attitudes/values about money? Do you tend to do things the way your parents did (or do you find yourself rebelling against their example?) A lot of people would argue that “understanding yourself” (i.e., what drives your spending and saving decisions) is critical to achieving financial success. It is very common for money personalities to get in the way of making good choices.

A study published by the American Psychological Association found that the #1 source of stress for 73% of Americans was money. This emphasizes the importance of exploring our feelings and attitudes about money. The ultimate goal is not necessarily to change your current personality/values to different ones, it is to learn to prosper with the one you have.

Different experts have different names for these money personalities. Jordan Goodman, author of “Master Your Money Type: Using Your Financial Personality to Create a Life of Wealth and Freedom” summarizes money types as:

STRIVERS You are all about achieving success and letting others know just how successful you are by buying lots of stuff. Money equals success. Ambition is the upside; overspending is the downside.

OSTRICHES You are uncomfortable with money, even confused, intimidated or embarrassed by it. So you bury your (financial) head in the sand. The upside is you’re not consumed by money and you focus on more important things in life; the downside is eventually you’ll wind up regretting your avoidance of money problems and not setting financial goals.

DEBT DESPERADOS You get a thrill from buying, which leads to overspending. You quickly accumulate debt and may find yourself on the run from creditors. If there is an upside, it is that you likely understand the anguish debt can cause and that can be used to motivate and provide the resolve to get out of it. The downside is overspending is a weakness that is often bailed out through credit cards.

COASTERS You may be coping or even thriving financially, but a lack of a money crisis has made you comfortable with the status quo. The upside is that you’re organized and responsible. But complacency means you’re missing out on opportunities and greater prosperity.

HIGH ROLLERS You’re a thrill-seeker and gambler with money, thinking you’re smarter than others and are certain you’ll get a ‘big score.’ The upside is that you’re comfortable with risk, which can pay off with big rewards. The downside is that unbridled risk-taking can be dangerous and can land you in financial ruin.

SQUIRRELS You hoard your money like a squirrel gathering nuts for the winter. You’re intensely afraid of losing money and exert a great deal of effort to spend less. The upside is you’re an excellent saver, but often at the expense of other things money is good for – spending, giving, etc.

A recent study by Putnam Investments outlined six financial beliefs and habits that they found to be most important in achieving financial security:

  1. Realistic Expectations
  2. Resisting temptation for quick rewards and fads
  3. Patience in the face of adversity
  4. Greater satisfaction from saving than spending
  5. Ability to tolerate above-average risk
  6. Receptivity to advice on how to save and invest

Source: Dr. Mark Oleson, University of Missouri – Columbia.

Friday, May 1, 2009

Controlling Credit Card Debt

Credit card debt can become overwhelming for some families. Here are some ideas to help you get your credit card debt under control. Feel free to pass this along to others not enrolled in Wyoming Saves.

Never ever pay the minimum. If you can afford to pay more than the monthly minimum on your credit card, do it! With $3,000 on a credit card, a 2% minimum payment and 18% annual interest, it takes over 30 years to repay provided you don’t add any new charges. In the end, you pay a total of $10,013 including interest of $7,013. For this reason, federal regulators have encouraged credit card companies to increase the percentage owed for their minimum payments.

Some experts recommend paying off cards with the smallest debt owed first and ignoring interest rates on the other cards. This costs a tremendous amount in unnecessary interest payments. Debts with higher interest rates grow more quickly. By tackling them first, you will pay off debt faster!