Personal Finance and Investing

Getting a good college education is one of the most important things in a young person’s life. Making sure that college education gets paid for is one of the most important responsibilities of a parent’s life, yet most of us do an absolutely horrible job saving for our children’s college education.

Today I’d like to share a foolproof plan that every parent can follow to make sure there is money set aside when the time comes for your child to go away to college.

It’s hard to calculate an exact amount of how much money you’ll need because college education costs keep rising, seemingly higher than the rate of inflation. For instance, today Harvard cost about $60,000 a year, but how much will it cost 18 years from now? That’s anybody’s guess.

Plus, not everybody can go to Harvard or other elite private universities. State colleges cost substantially less money and community colleges don’t cost hardly anything at all. So there’s quite a range of options you need to be prepared for.

The first thing you should do is open a 529 college savings account with your state, that is, the state in which you live. These are free accounts to open that allow you to invest money that your children can use for college expenses tax-free when the time comes. They’re also very easy to open, just fill out a form that you can get online.

These plans are administered by the state and an investment adviser that the state has chosen themselves, usually a mutual fund company. You only have a few investment options but be sure to choose the one the most closely mimics a broad stock market index fund like an S&P 500 index fund because that way you will get to take advantage of the historic 7% to 8% returns that the stock market usually throw off as a whole.

Next, determine how much money you can afford to set aside each month into the 529 college savings account. Set it up to direct deposit that money directly into the account either from your paycheck at your job or through your checking account. The key is to set this up so that it does it automatically so that you can set it and forget about it.

It doesn’t matter how much money you set aside each month, five dollars, $20, $50, $100, whatever you can afford. The key is that you continue to make monthly contributions, month after month, automatically.

Finally, every year on your child’s birthday commit yourself to adding an additional $100 to the 529 college savings account. Also, especially when your child is very young and doesn’t know the difference, ask relatives to contribute money to the account on your child’s birthday as well instead of getting them a birthday present.

When your kid is two years old, they don’t know what a gift is so why give them one? Instead have people take the money they would’ve spent on a silly baby gift and put it in a college savings account. You’d be amazed how much money you can accumulate this way before your kid is even five years old!

Besides buying a house, college is the most expensive thing most of us will ever pay for in our lives. With this simple plan, now you can be sure that there will be a nice chunk of money waiting when your kid needs it.

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There are as many ways to save money as there are to spend it. Being able to live by that principle is key to saving money for the long term. Ultimately, implementing a long term saving plan is an integral part of any financial plan. Becoming a successful saver is all dependent upon the desire to reach financial goals.

Saving money sounds simple enough, but saving for adults isn’t as easy as when they were kids. Putting spare change in a piggy bank simply won’t suffice now. So, what should adults do to not only contribute more money into a savings account, but also create and implement a long term savings plan?

First, it’s important for adults to recognize that often times their mindset about money is flawed and that is the first thing that needs to be changed. A person’s view about money is as important as the actual savings aspect. Expecting to save money is a lot easier if the person is mentally committed to the long term savings plan.

Being honest about how money is spent is an important part of saving money. It may take writing down and reviewing all expenses made within a certain time frame to realize how money is being spent and perhaps wasted. This is sometimes a necessary step in changing wasteful spending habits. Actually watching the amount of money earned and then the tallying the money spent wastefully can be just the wake up call that some people need to save more.

After identifying exactly how income is spent, it’s imperative to review the numbers. Memorializing how much is earned and then determining monthly expenses is an easy way to create a financial spending plan, better known as a budget. Budgeting isn’t a very popular word, because most people interpret that to mean they will be deprived of something. Rather, budgeting should be looked at as fiscally responsible, and if done properly, there is enough money to do whatever a person may want to do. It is learning about the wasteful spending that prohibits wealth creation. To have wealth creation, however, committing to a budget within a long term savings plan is essential.

Once wasteful spending habits are eliminated and a budget is created, identifying financial goals is the next step to becoming a smart saver. Whether the goal is big, like saving for a down payment on a home, or something smaller like a new digital camera, knowing what you’re saving towards is important. After figuring out how much should be set aside, from there it’s simply a matter of implementing the long term savings plan.

Learning a few helpful savings tips could make the saving process go a lot quicker. Many people spend money without realizing how much they could save on certain items and services. The most savings can be discovered simply by refinancing or renegotiating current debt. Lowering credit card interest rates, refinancing mortgages and lowering insurance rates by increasing deductibles are a few ways people can quickly discover more funds to save.

Saving money for whatever reasons is a simple enough process to embark upon. Having the fortitude to continue is usually the most difficult part of saving. Reviewing spending habits, creating a budget and creating savings goals are all important parts on the road to reaching and attaining a long term savings plan and ultimately, wealth creation.

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When you’re in the midst of desperate circumstances and you’re stuck with debts for which there seems no way to get out of you should consider debt consolidation. It takes all of your debts and hands it over to some debt consolidation company which will then take care of your debt in exchange for a lower interest rate which will save you from going bankrupt. This way you will get some extra money each month to spend. With debt consolidation you can for example consolidate credits you got for all kind of loans, credit card debts, huge mortgages, student loans etc.

There are many reasons to go for a debt consolidation. It will enable you to regain control again over your financial situation and in time you will free up some money where otherwise you would have needed to pay of your debts.

However this is not the final solution to your problems and will only get you relative debt relief, it will not make the debts you have go away. One reason for this is that because of the lower interest rates the timeline of payments will be longer. The be able to say goodbye to you debt problems you should dig a little deeper and find out why you got yourself into these debts to begin with.

When surfing the internet there are lots of companies which offer debt consolidation, however you should be very careful not to go for one of the scam companies. What I suggest you should do is find some forums on the internet and talk to people with experience to be able to choose the best debt handling company.

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Do you know exactly what the Thrift Savings Plan actually is? Also known as the TSP, the Thrift Savings Plan is the retirement savings plan provided by the U.S. government for federal employees and federal retirees as well as current and former members of the U.S. Uniformed Services.

The Thrift Savings Plan is a tax-deferred defined plan of contribution. It is administered and controlled by the Federal Retirement Thrift Investment Board, an independent government agency established in 1986 for this purpose.

The Thrift Savings Plan is very similar to a private sector 401k plan, in that it serves as an investment vehicle for an individual’s retirement funds. These retirement funds are accumulated through participant contributions, agency contributions (if applicable), and earnings through the investment of contributed funds

If you are wondering which civilian employees would be eligible for Thrift Savings Plan participation, they would be those employees that are covered by the Federal Employees Retirement Systems (FERS) or Civil Service Retirement System (CSRS). If you are one of these employees, this would mean that you are eligible, too.

Every participant is eligible to benefit from tax deferred contributions; in-service financial hardship withdrawals from the age 59 and onwards; five available funds to invest in; the opportunity to transfer in monies from other eligible retirement savings account plans; favorable loan programs; and an option of choices in post-separation withdrawal.

Civilian employees under the FERS have the additional benefit of agency matching contributions. The FERS employee is guaranteed a 1% agency contribution even if they don’t contribute themselves. If they do contribute, the agency contribution formula is as follows: 1% for each 1% contributed by the employee (for a maximum of 3%), then 0.5% for each 1% contributed by the employee (for a maximum of an additional 1%). The maximum agency contribution therefore is 5% (1%+3%+1%). CSRS and Uniformed Service members are not eligible for matching contributions. However, Uniformed Service members (includes Military members) can contribute from additional sources of pay such as special, incentive, and bonus pays.

Prior to 2006, the amount that could be contributed was limited to a certain percentage of basic pay. In 2006, this percentage limit was removed; the only remaining restriction on contributions is that imposed by the Internal Revenue Service. However, matching contributions, as outlined above, are limited to 4% on the first 5% of pay contributed each pay date.

The Thrift Savings Plan is an excellent retirement savings benefit that federal employees and the military would be wise to take advantage of.

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A Health Savings Account is a tax-advantaged addition to your traditional health insurance plan.

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