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.