Joe's Money

Roth IRAs are great ways to save for retirement.  While your contributions are after tax money, they grow tax free, even when you withdrawal during retirement.

This the 2009 tax year, you can contribute up to $5,000 in your Roth IRA.  The greatest advantage of the Roth IRA is all gains are tax free.  You have complete tax free growth.  The only downside is, again, you contributions are your money after it has been taxed.  The contributions are not tax exempt like your 401k.

Since the Roth uses after tax dollars for contributions, this helps you diversify your portfolio since your 401k will be taxed upon withdrawal.  Since there is no way to tell what tax rates will be like when you retire, having both a 401k and a Roth IRA gives you the best of both worlds.

One of the other benefits of a Roth IRA is you do not need to distribute your account once you reach 70 1/2 years old.  The account can continue to grow if you don’t have a need to withdrawal the funds.  So in a nut shell, you can keep your money in the tax free growth account as long as you like.

With Roth IRAs, you can also withdrawal funds without penalty, but only your contributions apply.  Only gains are penalized for early withdrawal.  Also, the funds must be held for 5 years to be eligible for withdrawal.  Example:  You contribute $3,000 to your Roth IRA that grows to $3,500.  You can withdrawal up to $3,000 (You contribution) without penalty at any time, after 5 years have past.

Roth IRAs do have some eligibility requirements though.  In order to be eligible, your adjusted gross income must not exceed $105,000 and for married couples $166,000.

For 2009, the maximum IRA contribution is $5,000 unless you are over age 50.  If you are over age 50, you qualify for contributions of up to $6,000.

Buying a used car can save you loads over the price of a new comparable car.  Follow these tips to make sure you don’t get taken for a ride.

1.  Have a plan

Do some research first.  Narrow down your search by looking online at multiple dealers, private party sellers, etc.  Compare the prices and know about what the vehicle is selling for both at dealers and via private party.

2.  Know What You Want

Have all the features you need planned out ahead of time.  If you have a few kids, a third row seat may be needed, know how many miles you put on the car, etc.

3.  Do All Research and Shopping Online From Home, Not at the Dealership

There are way to many places online to research and find exactly what you need.  Don’t waste time by going into the dealership until you have narrowed down your search.  Look at the local dealers and find out which ones have cars you are looking for.

4.  Go to All of the Dealerships and Look before Making Any Offer

Check out all the vehicles on your list.  Get a asking price for all of them.  Since you know what you need, the salesman shouldn’t be able to ask you all the probing questions.  How many kids do you have, how much do you drive, etc should all be avoided.  Never let the salesman know if you are out of a car at the moment.  You want to stay clear of anything that makes you look like you can’t walk away.

5.  Don’t be Afraid to Walk Away

Even if you are in love with the car and know its the one for you, don’t be afraid to walk away.  Use your research to your advantage.  Let the salesman know that a comparable vehicle can be had elsewhere for less money.  If they don’t budge, walk away.  There are tons of cars on the market, you’re bound to find a similar one again.  Stay calm and don’t let the salesman get you.  Walk away.

6.  Leave Emotion Behind

Whenever you are shopping for a big ticket item, always leave emotion behind.  If you are sitting in front of your dream car, don’t let them know you fell in love.  If they know you want or need the car badly, they know they can probably get you for more money.  Keep a neutral face and attitude.  Let them know its the right car, but it needs to be the right price.

7.  Don’t Be Afraid to Be Rude

Salesman usually are, at least when it comes to getting the price down.  Being rude can show them you mean business and you are not going to tolerate the typical nonsense.  You are not there to make friends, you are there to get the best possible price on a very expensive purchase.  Again, don’t let emotion get in the way.  You only care about you, not how much the salesman makes in commission.  They will always say we can’t go any lower.  Its a lie.  Used cars have much more margin than new so there is much more leg room to negotiate.

Follow these steps and you will hopefully be on your way to a new set of wheels.

Well, it turns out no matter what income bracket you’re in, you probably still broke with negative net worth.

This book was a real eye opener for me.  It describes the perception and the reality of millionaires and how they got their millionaire status.  The truth is, the average millionaire is not driving a $100,000 sports car, or even a new car for that matter.  The folks driving the $100,0000 sports cars are usually just as worse off financially as the person making $8/hour if not worse.  They make more they spend more.  The doctors and lawyers may be book smart, but according to the author, they are decades behind on financial literacy.

Check it out, this is a good, inexpensive read!  Enjoy!

Link to purchase book – Used copies starting at only $.50

Certificates of deposit are sold by banks.  They are more widely known as CDs.  Typically, CDs are low risk but generally low returns.  CDs are great for keeping cash in a safe place where you won’t need it for months or years.  CDs carry a commitment.  You cannot withdraw the funs for a predetermined amount of time.  The duration varies quite a bit, anywhere from short term one month CDs up to 5 years is common.  Usually the longer the time frame required, the higher the interest is.  Unfortunately, if early withdraw is required, a penalty will likely be assessed.  All gains from CD accounts (unless in a IRA) are taxable.

CDs are very safe investments, about as safe as they get, in fact.  CDs are FDIC insured providing your bank is FDIC insured.  The predetermined rate the bank gives you is guaranteed.  If rates slide while you are in the CD, you are locked in at the original rate.  On the contrary, the same is true if rates rise.

Some common CD types are:

Traditional CD:  A predetermined interest rate is paid over the predetermined term, or length of time.  When the term is up, you can remove all funds plus interest or renew the CD at most current rate.

Bump Up CD:  Basically, these are the same as traditional CDs.  The only difference is you are allowed to contribute additional funds usually once, in addition to the opening amount.

Liquid CD:  This type of CD account allows you to withdraw funds before the maturity date.  Since you have more freedom, it comes with a cost, a lower interest rate.  The rate will still be higher than a typical money market account though.

In addition, most of the above accounts are available at your local branch or online.  I have found that online accounts usually have much better rates than local banks.

CDs are great investments.  For people nearing retirement, they are ideal due to their security.  CDs are guaranteed and will never lose money.  CDs can also be used for your emergency funds as well.  Simply pick a shorter term.  If needed, you can withdraw funds early, but the penalty will be assessed.  The penalty is usually a few months interest.  However, since this is your emergency fund and it should only be used for true emergencies, hopefully the interest has paid you far more than you will lose for early withdraw.

I hear a case of living beyond your means just about daily.  The entitlement factor in this country is unreal.  You need to get realistic and buckle down your finances.

Unfortunately, most people in our society have been brought up to live beyond their means.  We are surrounded by images and videos of people living extra large lifestyles that are simply out of reason for most.  Growing up with the constant barrage of the rich and famous, has created a society that not only thinks they need this lifestyle, but think they are entitled to it.

When growing up, most teenagers spend their parents money.  Unless they are working, they are likely spending their money on frivolous things like fancy clothes and electronics.  According to statistics, only about 42% of high schoolers find paid employment.  According to the statistics, less than 50% of teens are working, so their parents are funding their popularity contest.  They are simply keeping up with the teenage Jones’s.

Unfortunately, this upbringing sets the teenagers up for failure later in life.  They are taught that at no matter what expense, they must appear to be keeping up.  This is proven by their average credit card debt of over $5,000 for age groups 25-34 year olds.  Had they been taught the value of the dollar at a younger age, perhaps the frivolous spending would have stopped.

The worst part of this ridiculous spending spree is, that age is not a factor.  The statistics are similar for just about all ages.  Many books state the same.  The more you make, the more you simply spend.  Doctors, lawyers, and the like are all chasing their tails with the fast food burger flippers just on a different scale.  If you earn $20,000 per year, maybe you spend $10,000 on keeping up with the Jones items.  If you’re making $100,000 per year, your simply spending $50,000 on most expensive Jones items.

I don’t know the Jones’.

Many people have the ability to carry the perception of being well off for long periods of time.  However, eventually, the jokes on them.  The charade is over and all that is left is the consequences of leading this type of lifestyle.  The result is usually a lifetime of debt.  I like to refer to this as chasing your tail.  You can chase it all you want, but your never going to catch it.

What you need to realize is, you need to stop buying items you don’t need on credit.  If you don’t have the cash, DON’T BUY IT.  Its that simple.  You need to learn to sacrifice for the better long term goals.  Take a serious look at your spending. Tell yourself, you don’t know the Jones’.

Here are a couple of quick tips

1.  Learn to budget and search for bargains.  If you can’t pay cash, don’t buy it.
2.  Do not give children credit cards.  They do not have the financial foundation to handle them.
3.  If you have credit card debt, call your provider to negotiate a lower rate.
4.  Pay off small balances first, then tackle the larger ones.  Remember, always pay at least the minimum though.
5.  Once you’re out of debt, don’t go chasing your tail again, stay out of debt!

I can’t begin to tell you how much you can save by buying store brand or “value” brand groceries.  I never had really bothered to consider store or value brand items until I started to have the drive to save.  Now, I find myself constantly looking for value alternatives.  Between the grocery stores, and super stores, you can find almost any food or household item available in a value brand.  I have picked up many of these items to find virtually NO difference in taste or quality 95% of the time.  On the occasion, you will get a bad apple out of the bunch but overwhelmingly you will realize that this stuff is the same.  There have been articles online and news stories on TV about how many of the value branded items are actually manufactured by the name brand counterparts.

In most major grocery stores, the price tags on the shelves display the cost per ounce of food.  Compare the name brand to the value brand.  This is the easiest way to save and there is no confusion even if the package sizes are different since it is measured in ounces of actual product.

Expand your horizons and save!

Once you have your emergency bubble inflated and your debt paid off, you can pay cash for almost anything.  This can have its up side.

I have heard of multiple discounts given simply for paying with cash Vs. a credit card or check card.  The reasoning for this is merchants have to pay a fee plus a percentage of the sale just for taking the card.  The percentages are usually pretty low but if you run tight margins it can add up.

I have heard this specifically at gas stations.  Many times, gas is very low margin only making a few cents per gallon of gas.  Now if the credit card processor is taking only a few percent, they just ate up your profits.  By offering a cash discount in between the retail price and the loss price after the fees, they can save more profits.  Pretty simple for not having to do anything!  More times than not its the mom and pop shops doing this and it will usually be prominently advertised.

Another one that can save you tons is on labor work.  This can be anything from having your roof replaced to having someone cut the lawn.  Many times, the smaller contracting firms have to put materials on credit.  If you pay cash, they may be able to negotiate a better discount if its cash your paying with.  This never hurts to ask.  A few months back, I was able to bring a roof bid down from $9800 to $9200 and get much better materials in the process.

1.  Sell Things You Don’t Use

This is an easy one.  With tools like eBay and Craigslist, the possibilities are endless.  Take a look around your house and find some things you don’t need or use anymore.  Even if you are not sure it will sell, you have nothing to lose.  Craigslist ads are free and reach loads of potential buyers.  If you need an even larger scale, try eBay.  Both are very easy to learn.

2.  Computer Repair Services

Are you good with computers?  Well guess what, most others are not.  Throw an ad in the local paper or again, on Craigslist.  Most of the big box stores charge big bucks for the same services.  If you know how to fix em up, give it a shot.  There are even easy ways to create your own website to support your business.  You can list your qualifications and pricing info.  Be sure to offer in home service.  Most people do not like the idea of a stranger picking up their computers and being on the honor system to bringing it back.

3.  Help With Moving

Can you spare some muscle?  People are often looking for a extra set of hands or two to help out with the ever so fun task of moving.  Movers can expect to make $15 an hour or more.

4.  Lawn Care

Lawn care is yet another task that many of us don’t exactly look forward to.  Put your mower to work!  Start small with some residential customers and build your way up.  Once you save up some money you could purchase a larger, commercial grade mower and hit the commercial seen for some big bucks!

5.  Resell a Product

Many products can be found online at wholesale prices, especially if you buy in larger quantities.  Take a look around, there are tons of options.  Some wholesalers will even drop ship good for you.  This simply means you make the sale and they will ship the item directly to the customer for you.  That way you don’t have to actually order the product, store it at your home, and ultimately ship it to your buyer.

6.  Sell Crafts or Keepsake Items

Are you good with crafts or other keepsake items?  You can easily turn this hobby into cold hard cash.  Some crafty folks have been seeing selling anything from your regular craft items to custom wedding invitations.

7.  Write an eBook

Are you an expert on a subject not as well known by others?  Write an eBook.  An eBook is simply a digital book.  You can sell these on eBay or countless other websites.  I have personally seen many for sale including topics like workout routines, gambling tips, gardening, and many other how to topics.  The best part of this is, once the eBook is created, it is all profit and you don’t have to ship anything!  Delivery is usually via email.

8.  Cleaning Services

Are you neat and tidy?  Between bringing the kids to baseball practice and too many other errands to count, sometimes we all can’t keep up.  Take advantage of other people’s busy schedules (or in some cases, laziness) and offer you tidy hands up for hire.

9.  Get a Paper Route

Shockingly, some paper routes for the major newspapers can actually pay quite well.  The local paper here advertises up for $400 per month for simple delivery.  Check around and see if there is anything available in your area.

10.  Rent Out a Room

The big question…  Is an extra $500 per month worth having someone else in your space?  Depending on what you can tolerate, this could be a very easy way to generate some extra income.  Also, depending on your home design, you may already be setup for success.  You might not even notice anyone coming in or out if you have a separate entry.  Be sure to check local laws, etc before offering a room up for rent.

Everyone needs some time to get away from it all and relax sometimes.  Take a look at some of these tips and save big on your next vacation.

User Broker Travel Sites

Using vacation broker websites like Expedia, Orbitz, etc can save you tons.  I have the best luck with Expedia but I don’t travel too often.  Take a look at a few and see what you can find.  The idea for these sites is pretty simple, sell unsold seats and rooms for a discount.  Some money is better than no money.

With these broker sites, it is also easy to compare different travel times throughout the year.  If you are flexible on the days you leave and return, you can save a fortune.  I often go to Las Vegas and Sunday through Thursday seems to be the best bet most of the time.

Be sure to compare prices for extra days.  Last time we booked Vegas, we were only going to stay for 3 days.  Then we ran the price and realized it was literally the same price to stay for a fourth night.  They were running a promo for buy three nights, get the fourth free.  Even when that deal is not running, many times the extra night will only cost about $20.  Why not stay for the extra day?

Travel at Non Peak Times

Obviously, some destinations are more desirable at different times in the year.  However, if you are willing to go against the grain on this one, you can save a fortune.  I have literally seen half price vacations at non peak times.

Try to avoid Holidays and weekend, rates are almost always higher at those times.

Look for Discounts On Area Attractions

A quick google search can save you lots of money.  Before you take off for your destination, take a look at the areas attractions and activities.  Many times you can get discounts or deals when booking in advance.  Many attractions also post coupons on their websites or elsewhere online.  Again, a simple google search will help you find whats available.

Don’t Waste Money on Poor Attractions

The internet is your friend.  Looks for reviews of attractions you are thinking about.  Once you arrive at your destination, it can be much more difficult to find reviews on the attraction of choice.  Use this tip and stay away from the things that are not worth the price.

I am confident that we can agree that simply put, you must spend less than you make to build wealth.  Whether rich, poor, or somewhere in between, if you often spend more than you make, you will never accumulate wealth.  Although this concept may be equally as important as some of the things listed below, it is not the number one reason people fail to build wealth over their lifetimes.

Reason No. 9:  Procrastination

Many people fail to invest in their own financial future until it’s too late.  While you are young, you have a excellent opportunity and a definite advantage over the older folks because you have time.  The reasons behind not starting young vary quite a bit and are wide ranging.  Also, age seems to have an effect on why you fail to save.  While young, people in their twenties are just entering the workforce and tend to indulge themselves with the hottest trends, electronics, cars, etc.  Once you hit your thirties, maybe a young family is preventing you from putting away as much money as you would like.  At this point you may be living check to check and this is where debt problems stem.  Forties hit and you may have children in college or unforeseen medical expenses.  By the time you hit your late fifties, it is already probably too late.  Compound interest no longer has time to grow as much as it would have had you saved earlier.

Reason No. 8: Lack of Discipline

Most people find it difficult to save because they constantly buy, and very seldom, save.  It is much easier to say yes to your impulses.  Those who are able to say no, are going to have a much easier time building wealth.  Most are lead by advertising and the ease of being able to swipe a credit card.  The “I don’t need to pay for it now” ideas kick in.  Worry about it now, not later.  Until you find the power to say no, you will never get ahead.  Stop trying to keep up with the Jones’.

Reason No. 7:  Inadequate Protection Against Unexpected Expenses

Life unfortunately throws a lot of curve balls at us throughout the years.  May it be a water heater, car repair, or medical expense, these can all put a damper on your financial well being, and quickly.  Implement an emergency fund to cover these unexpected expenses so you don’t fall back on using credit.

Reason No. 6:  Poor Debt Management – Borrowing too Much

Lack of patience can cause you to turn to credit to get what you want NOW.  Again, learning to say no now, will save you tons of money in interest payments as well as buying items you may not have really wanted to begin with.  When using credit, unless you can afford to pay the item off in full at the end of the month, the item can end up costing much more than the original sticker price.

Reason No. 5:  Failing to Adjust How You Live

When people are used to a certain lifestyle or are used to spending, it is very hard to break the trend.  Try to find a way to break the routine. Otherwise, you will never change, and never seek the financial freedom you were looking for.  Don’t be afraid to try something new.

Reason No. 4:  Lack of Foresight

Winners have the ability to look beyond the immediate and into the future.  Although some may see your visions as dreams, don’t forget you need to have a vision to make your dreams come true.  You are not going to win the lottery.  Set a goal and create a path to help you get there.  Look into the future, find what you want, and plan how you will get there.

Reason No. 3:  Using Time Poorly

You’ve heard it a million times, time is money.  You have a choice to spend your time on watching TV all day or taking a look at how you will finance your future.  No one is going to knock on your door and give you the magic formula needed to plan for yourself.  Once time has been wasted, it’s gone.  Use it to your advantage.  Plan what you desire.

Reason No. 2:  Failure to Plan

My old man said it best, if you fail to plan, you plan to fail.  It couldn’t hold more true.  If you don’t plan what you want, you have essentially removed all hope of ever getting where you want to be.  According to polls, only 5% of people plan and only 2$ have their plans written down. Planning and writing your goals down can be a great motivator.  Everyday when you get up and look at your goals, you are setting the mindset that the reward is later and you can and will stick to the plan.  If you don’t have a plan or goals, how can you succeed?

Reason No. 1:  Lack of Knowledge

This should actually read lack of willingness to gain knowledge.  Most people give up after reading one thing they don’t quite understand.  Make an effort to read more about financial literacy.  This subject can be found in countless books and online websites.  The knowledge is there for the taking.  It is up to YOU to take in and process it.  This will help you find what is best for you.  No one, including financial advisors, have a better picture of your financial future than you.  Turn off the tube and read a book.

Stop living paycheck to paycheck.
Stop blaming your financial problems on anyone and everything besides you.
You are the only one that can control your future.
Find motivation to plan the rest of your life and stop living like a sucker!