2 Quick Ways To Save Money For Saving And Investing

We all know we should be saving more for retirement or investment purposes, but how to save money in this economic climate?  We all know the basic ways to save money: List all money coming in, and all expenses going out.  Then you trim expenses where you can.  Take your monthly savings from cutting expenses and use that to pay off your credit card debt if needed.  Start investing that savings towards investing or retirement once your debts are paid off.

Sound simple? Saving money for me was harder than it sounded.  I’m far from a money saving expert but I have a few money saving tips that may help you out.

Remove Fees For Instant Savings

We live in a service fee culture anymore.  There are usually fees for paying a bill over the phone or even keeping your money in the bank.  And we all know about late fees.  As I discussed in my post about saving money with credit unions, banks charge a lot of fees just to park your money there and those fees are generally thought of the cost of doing business.  Chase currently charges $12 monthly for a no interest checking account.  That’s $144 a year to write checks to pay your bills.  Credit unions are member owned and generally pass savings onto their members.  I have a no fee savings and checking account with my credit union and couldn’t be happier.  A real quick way to save a few bucks if your aren’t already is to pay your bills in person or mail if possible.  Or purchase event tickets at the venue instead of a ticket distributor.  The difference between the venue and say, Ticketmaster can be eye-popping.

What about monthly living expenses?  Got an old fashioned LAN line?  Consider getting rid of it.  Especially if you have a cell phone.  As LAN customers drop, the aging infrastructure is not maintained as much.  Consequently, service goes down as prices go up.  For something you probably already have.  Consider getting rid of your cable for saving money.  Everybody hates the cable companies anymore.  In many areas of the country Comcast is the only option available.  Essentially a monopoly charging what they want for what they want to give you.  Everyone knows about the unique hell that is getting a cable repairman to come to your house.  Why put up with such pain?  Perhaps DSL is available for your internet needs.  A lot of entertainment content is available online from free shows on Hulu to Netflix streaming.  I know Netflix costs money, but I guarantee that your Netflix bill is  lower than your cable bill.  When we got a new tv about 4 years ago, it had inputs for HDMI, USB, and VGA.  VGA is your old school A/V cable that you connect your computer monitor to your tower with.  We ended up connecting a laptop to the tv through VGA and watch our entertainment online over the internet.  Perhaps there’s a cable show like The Walking Dead or Game of Thrones that you can’t live without.  Consider buying each episode on Itunes or Amazon.  Maybe go in on a season with a friend.  Place them on a USB drive and play them through your computer or the USB input of your tv.  I’m pretty sure that LAN line telephones seem ancient to most of us nowadays.  I bet that cable tv will feel the same in a few years.  Cable tv is an old model that controls all aspects of that model.  Step outside the box and leave the model behind.  Save some money in the process as well.  Maybe think about putting those savings towards retirement….

Saving For Retirement With A Roth IRA?

There are a ton of retirement savings options out there.  One overlooked option is the Roth IRA.  The Roth IRA is a little different than the traditional IRA.  Basically, there is an income limit to a Roth IRA.  Single tax filers in 2015 must have an adjusted gross income of $131,000 or less to participate.  A lot of people can use this option.  Most importantly, the Roth IRA charges tax on your contributions the year you contribute in exchange for tax free withdrawal generally any time you wish.  This is important for several reasons:

  • Traditional IRAs tax you when you withdraw funds.  The tax rate will be at the current tax rate in the future.
  • Traditional IRAs require you to start withdrawing at age 70 1/2.

What’s that cheesy saying?  “Nothing is for certain except death and taxes”.  Let’s modify that to say nothing is for certain except tax rates going up.   They have to if you think about inflation.  As the value of the dollar goes down, goods and services cost more of these “lower valued” dollars.  Tax rate have to go up to raise the funds to maintain current services.  With a Roth IRA, you pay the taxes on contributions as you go, leaving more money to withdraw in the future.  Also, there’s no penalty for not withdrawing your money at 70 1/2 if you want to hold on to your money a little bit longer.  And generally there is no penalty for early withdrawal as well.

There’s one more Roth IRA tip that will help you out in this no interest rate climate.  The power of these retirement vehicles resides in the tax savings they offer and the magic of compounding interest.  But interest rates have been incredibly low for years.  Your IRA isn’t going to accumulate much value just adding funds to it year after year without a decent interest rate.  This is where our no fee model can help us out.   There are several no fee IRAs available.  I have a no minimum balance, no fee Roth IRA with E*Trade.  They have a list of commission free ETFs that one can purchase for their Roth IRA.  So if your like me and buying small amounts of stocks, mutual funds or ETF’s, no commission fees on a transaction is huge.  I am continuing to put the power of inflation to work for me by adding shares of EPS to my Roth.  EPS is the Wisdomtree Earnings 500 Fund, a commission free fund that tracks the stock market.  It has low maintenance fees, and pays a small dividend.  The stock market will go up and down and occasionally has a major reset.  But as inflation decreases the value of the dollar, one needs more dollars to maintain current levels.  Over the long haul, the stock market should go up just because costs go up, or the value of the dollar goes down.  If one buys shares now and holds on to them for a long time they should go up in value.  The dividend will increase and you will be getting the most value for your investment.  Especially if you can get as many no fee options available.

Hopefully this information inspires you to find a few extra dollars to invest in your future retirement.  Even if its a small start, starts are starts nonetheless and you will be on your way to saving money.

Save Money With Credit Unions

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A long time ago I had a free checking account with the regional based bank Washington Mutual.  Overall, it was a great experience:  Small branches throughout town, open later than most other banks, and free checking.  During the financial meltdown of 2008,  Washington Mutual was absorbed by Chase Manhattan.  I was assured that my free checking would be grandfathered in and not to worry.  I didn’t think twice about it until a few years later I was getting charged a monthly service fee to maintain my free checking.  I was outraged.  I was being charged to “maintain” a checking account that paid me no interest.  I always assumed that most banks were offering a trade off here: “Keep a checking account with us and we’ll use that money for investments towards bank profits in trade for parking your money with us for no charge”.  I decided to take my checking and saving elsewhere.  I was shocked to find out that every bank in my town charged some kind of fee for personal banking.  Either an outright fee or a minimum account balance.  I guess the landscape had changed in the time I had been with Washington Mutual.

After checking around, I decided to investigate local credit unions.  In the past they had seemed to me to be weird membershipy types of “banks” that one needed to be part of a club to join.  Well, I found several in my area that were easy to join (membership requirements were occupancy of the credit union’s area of business) and years later, I still couldn’t be happier I got rid of my bank.

Should You Join A Credit Union?

Credit Unions and banks have a few major differences.  Credit unions are supervised by the National Credit Union Association (NCUA)  instead of the FDIC.  The NCUA administers the  National Credit Union Share Insurance Fund (NCUSIF).  This fund is a federal government backed insurance fund that like the FDIC, insures deposits.  In the case of credit unions, deposits are insured up to at least $250,000 per individual depositor.  So, different government agency but your money is still safe.  The major difference between banks and credit unions is that banks operate to make a profit, whereas credit unions are not-for-profit entities owned by their members. They usually have a mandate to pass profits on to the members and the communities where they live.  This comes in the form of added member benefits such as low fees and low rates as well as keeping more money in the local economy through small business loans and philanthropic activity.  Credit unions loans are generally lower in interest rates whether it’s a loan for an automobile, a house or a credit card.  Credit unions take care of their members.  There are even military credit unions for members of the armed services that provide nationwide banking and loan services.

Here’s a list of the top credit unions in the US.  These are some of the largest credit unions including military credit unions and state credit unions.

I managed to join a local credit union with free checking and savings.  I also got a credit card with an unbelievable 7.25% interest rate and eventually refinanced my house for a lower interest rate and got lower house and auto insurance as well.  I seriously love my credit union.  In this day and age, most companies make money through service fees, whether fees for account maintenance on your checking account, your mutual fund, a brokerage account, hell we even get charged monthly  fees for cable boxes that customers never own.  These small fees are slowly killing our finances.  It’s a slow death from a thousand cuts.  Joining a credit union helped me stop a few of these fees and save some money in the process.  I have great atm access, a large amount of local branches, online banking and even an app for my local credit union which allows me to do wireless deposits with my phone.  I’m seriously not missing out on anything a bank has to offer me.