Archives for October 2012

3 Helpful Tips For Choosing A 529 College Savings Plan

One of the best ways to build wealth over time is to invest. Investing can help you amass wealth at a faster rate than you would likely be able to otherwise. This holds true whether you are saving for retirement, or whether you are saving up for college.

If you are looking for a way to increase your chances of helping your child pay for college, you can use a 529 college savings plan to set money aside. While there is the risk of loss, there is also the potential to build up some wealth — especially if you start relatively early.

Five years ago, I opened a 529 account for my 10-year-old son. I contribute monthly, and it has been gratifying to watch the account grow over time. By the time he uses the account, when he is 20, there will be 15 years worth of savings and growing with the power of compound interest.

As you consider your 529 plan options, here are three things to keep in mind:

tips 529 college savings

1. Choose a Plan that is Versatile

Look for a plan that is fairly versatile in terms of where you can use the money. Most 529 plans are set up by states. However, just because a 529 college savings plan is set up by a particular state, it doesn't meant that you have to attend school in that state. Many plans allow you to contribute if you live out of state, and you can also use the money to pay expenses at thousands of educational institutions across the country.

Make sure that the plan you choose is versatile, so that your child has more options when it comes to deciding which school to attend. Look for a versatile plan, with fewer restrictions.

2. Look for a Variety of Investment Options

One of the reasons I like the 529 plan I use for my son is that there were a number of investment options to choose from. The plan offered a number of index funds and ETFs. Some plans only offer a few investment options, so you are limited. This can be very disappointing, especially if there is a particular fund that you are interested in. Choose a 529 plan with a variety of investment options that fit your needs. Simple investments, like index funds and ETFs, can give you a big advantage, while offering a degree of diversity, and a lower risk. Don't choose a plan that limits you to investments that you aren't thrilled about.

3. Avoid Plans with High Fees

Just as costs are coming down for various funds, it's also possible to find 529 plans with low fees. Compare the fees charged by different plans. The higher the fees, the lower your real returns. While you can't completely avoid fees, you can reduce what you pay in fees. You can save on fees when you choose low-cost ETFs and index funds for your 529 plan. Before you commit, look at the fee schedule so that you understand what you will pay for the privilege of investing.

Chances are that you can find a 529 plan that offers you versatility, various investment options, and low fees. Many states are trying to make their plans attractive to investors, and that is to your advantage. Do your homework, and you will be more likely to find a solid 529 for your child's college education money.

4 Savvy Tips For Better Organizing Your Financial Life

By Miranda Marquit 1 Comment

Things seem to run smoother when you are better organized. This is true whether you are planning a birthday party for a friend, a wedding, or your finances. When your financial life is organized, you are more likely to stay on track — and less likely to be wasting money.

If you are ready to take charge of your financial life, streamlining it for better effect, here are 4 actions you can take:

1. Consolidate Your Accounts

It can be difficult to keep track of several accounts in various places. Recently, I decided to finally consolidate my Roth IRA accounts. I transferred the amount I kept in one Roth IRA (with high mutual fund fees) to another. It makes sense to consolidate accounts when possible in many cases. Having your investments spread out can dilute their effectiveness.

Consolidation can also make sense for your other accounts. I find it easier to manage my finances when I have my checking, business checking, and personal line of credit with one bank. (I did go elsewhere for savings, though, because I wanted a higher yield.) Think about how much work it is to manage your accounts across several institutions, and then change things up to better reflect your needs.

Don't stop with bank accounts, though. You can also consolidate your insurance. Many insurance companies will offer you a discount if you purchase auto insurance, homeowners (or renters) insurance, and life insurance from the same company. Bundle your insurance, consolidating to one company, can save you money, and make it easier for you to manage your insurance.

2. Automate Your Finances

Another great way to organize your financial life and streamline your money is to automate your finances. Match up your income with your bills, and arrange to have what bills you can automatically deducted. You can even automate your investments, retirement account contributions, and emergency fund savings.

You do need to be careful when you automate your finances, though. Double-check that your money comes out after your paycheck is firmly deposited. That way, you will be able to ensure that you have the funds to take care of everything. One of the worst things is to miscalculate when automating your finances and find that you are racking up huge fees.

3. Ditch Your Smaller Holdings

Instead of holding on to small stock, sell and reinvest elsewhere. Over time, thanks to losses, company splits, and other reasons, you might find that you have several small holdings just sitting there. Re-evaluate your need for them. Then, consider reinvesting the proceeds in a low-cost fund or ETF. Your money will work more efficiently for you.

You will have to determine whether or not you owe capital gains, though. If you sell at a loss, you can deduct your investment losses against your income. Get a tax deduction, and beef up your more effective investments at the same time.

4. Reduce Your Credit Cards

While it's possible to manage several credit cards without getting into debt, you could probably be more efficient. Evaluate your credit situation, and your rewards cards. Choose cards that offer rewards programs that are generous, and that you can use. Consider asking for credit limit increases on credit cards you plan to keep if you are worried about the reduction in credit availability. That way, you can cancel without as big an impact. Focus on one to three cards that will really give you a solid benefit.

Take a personal day to fix your finances, streamlining and organizing. Then, it will be easier to maintain your finances going forward.

Make Saving Easier With Targeted Goals

By Miranda Marquit 2 Comments

One of the ways that you can make saving easier for yourself is to set goals. When you have a target, it can be easier to stay motivated. Besides, it's almost always easier to see how far you've come if you actually know where you are going. Plus, knowing what you are working for can help you stay motivated.

How Targeted Savings Goals Work

Setting targeted savings goals is fairly straightforward. You decide what you want to save for, and then make a plan to achieve your version of success. This helps you break down your goals, and helps you create plans to help ensure that the most important items in your life are taken care of.

savings goals

Think about a goal that you want to reach. Do you want six months of expenses in your emergency fund? Do you want to reach the point where you are maxing out your retirement account contributions? Are you planning a family vacation? Do you want to re-do the flooring in your home? All of these represent savings targets that you can use. Think about how much money you need to reach your goal, and then determine your time frame. Do the math to see how much money needs to go in the pot to reach your goals.

If you want to save $2,000 in six months for a family vacation, you need to save $333.33 a month. This approach really helps you break down your needs. You can look for ways to cut out unnecessary expenses to help you reach your goal, or you can earn more money to help you achieve your ends.

The idea is to break down all of your savings goals down into manageable chunks. In some cases, you can even be contributing to different goals at once. As long as you stay organized, and you are sure about what you want to accomplish, you should be able to use various targeted accounts to help you save for specific goals.

Setting Up Different Targeted Funds

If you really want to take things to the next level, you can also use different funds to help you reach various goals. This works especially well for those who don't have specific goals in mind all the time, but still have a general idea of how they would like to use their money. If you want to be able to eat out regularly, or participate in other entertainment activities, it's possible to start up a fund for that purpose. This concept also works in terms of cars. You know you might need to pay for repairs, or for a new car, so adding to the car fund provides a target for your money, even though it isn't exactly specific. Add money to the fund regularly, and see that it is invested in assets that offer some sort of return that beats a savings account yield. Then, your money grows, while at the same time providing you with something that you can draw on when you want.

Think about how you can improve your lifestyle by planning ahead for splurges. In many cases, even if you don't have a specific goal to save for, saving can still be of benefit. You never know when you will need the money, and it can be available for you in the event that you decide that splurging might be in order.

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