Money doesn’t usually come out of nowhere, but when it does, it’s nice to have some idea of how to use it. Whether your lump sum arrived as a tax return, a bonus, an inheritance or a larger-than-expected gift from a family member, Shelly-Ann Eweka, a Denver-based financial adviser with TIAA, has suggestions on what to do with it, depending on the amount and how much money you’ve already saved.
Her suggestions apply to two different scenarios: One, if you haven’t maxed out your savings potential and are carrying around some debt and two, if you’re debt-free and have managed to shore up adequate savings. Experts suggest tucking away enough to cover three to six months of expenses in case of emergency, as well as approximately 10% to 15% of your income in retirement savings. So if you’re behind, now’s the time to get started.
If You’re Trying to Save & Have Debt
Here’s how Eweka suggested investing various dollar amounts if you’re behind on your savings and carry debt:
If you have no savings at all, Eweka said to either open an account using the lump sum or split it between a savings account and your favorite charity. Even $50 in an account will start you down the road to saving — sometimes all you need is a push. Be sure the charity is a 501(c)(3) for potential tax benefits, she said.
To grow that $500, Eweka suggested opening an IRA. “Talk to a financial adviser about the benefits and whether your qualify for a Roth and traditional IRA,” she said. “An IRA can offer a great way to help build additional savings for retirement.” If you don’t have a financial adviser, you can learn more about IRAs here.
This amount can go a long way when it comes to debt, so Eweka said to focus on that. “Allocate any extra cash directly toward paying down debt, whether from credit cards or student loans,” she said. “Paying down debt as quickly as possible, while also saving for retirement, is critical to avoid high interest.” (Paying down debt can also improve your credit standing. You can see how by viewing two of your scores for free on Credit.com.)
If you have no savings, plunking the full $10,000 into an account will make a great start. “To be safe, you should have enough money in your emergency fund to cover all your necessary expenses for [at least] three months,” Eweka said. “That amount will vary from person to person, but you should have enough saved up to cover your necessities in case of a financial catastrophe.”
If You Already Have Savings
If you’ve maxed out your savings and retirement options, you have more flexibility. Eweka suggested putting the money toward things that will advance your career.
Consider having your resume professionally written and critiqued. Getting ahead in your career is a way to jump-start your personal wealth, and creating the best resume possible can help you climb the corporate ladder.
Use your $500 to have a professional photograph taken, especially if you have a professional website, use social media or need to submit your bio and photo for business purposes, .
Most people could stand to make updates to their wardrobe. If you’ve received a $1,000 lump sum, go through your closet and donate anything that no longer fits, is outdated or you haven’t worn in more than a year. Throw out things that are beyond repair or stained. Then use your lump sum to restock with clothing and accessories for a more polished and professional look.
Enroll in research classes or certificate programs to enhance your career options. These will help you keep up with your skill set and look fantastic on your resume.
If saving money was easy, everyone would be doing it. Unfortunately, the excuses for not are easy to stack — what with mortgage or rent, utilities, kids, student loans, pets, food and just the slightest social life, it can seem like there isn’t a penny to spare.
The trick to saving more is to make it simple, make it automatic and make it something you never have to think about. Still not convinced you can hack it? Check out some of these easy ways to save more every month and you might be surprised how much your bank account grows.
1. Sign Up For an Account That Automatically Saves For You
Many banks make it easy for customers to save these days by doing it for them automatically. For example, enroll in Bank of America’s Keep the Change program and for every purchase you make using a Bank of America debit card, the bank will automatically round your purchase to the nearest dollar and transfer the difference from your checking account to your savings. How easy is that? Check with your own bank to see if they offer a similar program.
2. Automate Your Savings Yourself
If you’re more of a “do-it-yourself” kind of person, automate your savings yourself by signing up for a monthly transfer directly from your checking into your savings account. You’ll know the transfer is coming every month, which will make you feel good, but you won’t have to go in and physically make the transfer yourself, which will feel even better. If you can, try setting up multiple savings accounts for your different goals (ie. house, travel, emergency, etc.). By purposefully diverting your hard-earned money into specific buckets, you’ll feel more like you’re working toward an actual goal, rather than just generally saving for a rainy day.
3. Use a Financial App to Track Your Progress
If you find that it’s hard for you to save because you aren’t seeing your progress at any given time unless you log into multiple accounts, there’s an app for that. Download a budgeting app and you can connect all of your banking in one area for ease of use. Don’t feel comfortable with an app? Your bank may offer something similar on their website. Now every time you make a purchase, put money into savings or take cash out of the ATM, you’ll be able to see exactly how your money moves have affected your current savings, goals and budget.
4. Make the Most of Your Credit Cards
If your current credit card isn’t garnering you some type of rewards, it may be time to make a switch. These days, credit cards offer such great incentives through rewards programs, so unless you’re prone to carry a balance on your card from month to month (rewards cards can come with higher annual percentage rates, which can cut into any rewards you earn), you could be missing out on some serious savings. If it’s pure cash that you’re interested in, check out our guide to finding the right cash-back rewards credit card.
5. Learn to Haggle
Remember, cars aren’t the only things you can haggle over. Check with your internet and cable provider and call your cell phone company to see if the price you currently pay is the best they can do. Ask for discounts on items in the grocery or retail stores, too. Take the difference between what you would have been paying and the final price you end up with and stock it away in savings.
6. Avoid Paying ATM Fees
You might think ATM fees aren’t worth worrying about, but those quick trips to the ATM can really add up. Fortunately, there are plenty of ways to avoid paying ATM fees.
Remember, you’ll save money on everything from your mortgage and auto loan to credit card interest if your credit scores are good. If you don’t know where yours stand, you can find out by taking a look at your free credit report summary.
Note: It’s important to remember that interest rates, fees and terms for credit cards, loans and other financial products frequently change. As a result, rates, fees and terms for credit cards, loans and other financial products cited in these articles may have changed since the date of publication. Please be sure to verify current rates, fees and terms with credit card issuers, banks or other financial institutions directly.
So you’ve decided to save for your retirement using your company’s 401K plan. Congratulations! It’s a great way to save. But now what? Which funds do you choose? How much should you contribute? Are there limits? How do your employer’s matching funds actually work? Can you access the money if you need it before retirement?
Obviously, there are a lot of questions that can arise when it comes time to set up your retirement savings, but we’re here to help. Here’s what you need to know to set up your 401K.
What Is a 401K?
The section of the U.S. tax code that describes these retirement savings plans is Section 401(k), thus the name. These plans let you invest pre-tax dollars directly from your salary, along with any additional investment made by your employer. Unlike an Investment Retirement Account (IRA), 401Ks are sponsored by employers, and, if offered at all, they must be made available to all employees of the company sponsoring the 401K.
Your employer does have the right to impose a couple of restrictions, however. 1. They can require that you work full-time for a period of time before eligibility, and 2., can also stipulate that you be at least 21 years old before enrolling. That’s why it’s always good to ask about eligibility when interviewing for a new job.
You Choose Your Investments
Most 401Ks are self-directed. That means you choose where to put your money from a list of funds made available through your 401K plan provider (Vanguard and Fidelity are two of the larger firms providing 401K funds). This can get tricky. Do you choose the safest investments that offer little risk but less reward? Do you opt for high growth? Targeted funds? Emerging market funds? What about bonds?
Obviously, you’re going to want to do some research, perhaps even talk to someone with some expertise. Most plan providers share details about the individual funds they offer on their websites, or at least have links to more details. Some even offer tools to help you choose which funds fit your needs, while others make real live people available for limited consultations. Seek out the assistance you need to fully understand what you’re doing with your savings.
You Also Choose How Much to Save …
There’s really no correct answer when it comes to how much to save, but certainly, saving as much as you can for retirement is a good idea. And if your employer offers matching funds (free money!) for your investments, you’ll at least want to invest the full amount they match. So, for example, if your employer matches up to 3% of your salary, you’ll want to invest at least 3%, though certainly you can invest more. Here are some tips on how to maximize your 401K.
… But There Are Limits
Federal law allows investors to put up to $18,000 into a 401K each year unless you’re over age 50, when you’re allowed to make an additional $6,000 in “catch-up” contributions.
If you’re in the lucky position of being able to save more than these limits, there are investing alternatives to your 401K that you may want to consider. These include IRAs, certificates of deposit (CDs) and even individual stocks if you’re familiar enough with the markets.
You Can’t Use Your Money …
Keep in mind that a 401K isn’t like a savings account. But for a few exceptions, you can’t withdraw your money before age 59½ without paying early withdrawal penalties and taxes. You can take a loan against your 401K if your employer’s plan allows for that, but only for specific purposes like education, medical reasons or first-time home purchases. Your repayments will come right out of your paycheck, making the process simple, but there are some dangers you’ll want to consider before borrowing against your 401K.
If you’re just starting out in the investing/saving world, you may want to consider putting a portion of your income toward an emergency fund that is easily accessed, carries no penalties and can get you out of a jam, like a giant car repair bill, when you need it.
… But You Can Take It With You
To another job, that is. When you leave, you won’t lose your investments, though you could lose contributions made by your employer. That’s because some employers require a “vesting period” for their contributions to your 401K. Essentially, it means you have to work for the company for a predetermined period of time before you can claim what they’ve given you.
When you leave, you simply set up a rollover IRA with your plan provider. Those funds can then either stay put in the IRA or be rolled over to your 401K with your new employer. You’ll want to compare the income history for the funds before deciding where the money will best serve you.
If you can name your top 5 favorite beauty vloggers on YouTube, you’ve probably heard of a little makeup wonderland called Sephora. Bonus points if you’ve ever walked into the makeup emporium to touch up your brows with a free sample and left half an hour later and $100 poorer.
The LVMH-owned beauty store has been fairly successful since it first opened in 1969. It currently boasts 2,000 retail stores worldwide and around 15,000 of your favorite products. All of that revenue doesn’t have to come at the expense of your wallet.
We’ve done some digging to find 12 ways you can save money the next time the smell of perfume whisks you into your local Sephora retailer’s checkout counter with your credit card in hand.
Sephora is good to those who are loyal to the brand. Save on products and services when you sign up for the retailer’s loyalty program, Sephora Beauty Insider.
When you sign up, you’ll get points for each dollar spent in-store and online. The program has three tiers: Beauty Insider, VIB, and VIB Rouge, depending on how much money you spend with the leading makeup retailer.
Beauty Insiders — aka Sephora shoppers who spend less than $350 a year — get a free birthday gift and free classes, plus the option to pay $10 a year for unlimited free shipping privileges. VIBs, or Very Important Beauty Insiders, get all of the above plus additional exclusive savings and one free custom makeover for an annual $350 spent on merchandise.
Spend $1,000 a year in merchandise purchases, and you’re rewarded with the VIB Rouge level. Rouge offers all of the aforementioned perks, but you won’t need to pay the additional $10 a year for unlimited free shipping. You’ll also get other exclusive perks like unlimited custom makeovers.
Get freebies by scanning the Beauty Deals page
Sephora has an entire page of its website dedicated to savvy shoppers like yourself. It’s appropriately titled Beauty Deals. It’s a little tricky to find the deals page as there isn’t a direct link to the page on Sephora’s home page, so make sure to bookmark www.sephora.com/beauty-deals.
It’s where you’re sure to find all of Sephora’s promotional codes for additional discounts and samples. You’re allowed a maximum of three free samples at checkout.
If you buy something regularly, purchase the value size rather than smaller sizes. You’ll almost always spend less per ounce that way. For example, the regular 4.2-oz. bottle of Clinique’s Dramatically Different Gel will run you about $6.24 per ounce, whereas the smaller, half-ounce travel size option costs about $10 per ounce.
Stock up on free samples in store
If you want to try out a product that’s way, way, out of your normal price range, get a free sample in-store to try before you buy. That way you won’t waste the full-size perfume you bought because of the brand more than the scent.
You are allowed up to three free samples per department in-store, and can get even more freebies online with beauty deals. Make sure to take home a sample of that expensive foundation to see if you can apply it as smoothly in your bathroom as the artist did in the store’s lighting.
Samples can also come handy when you’re traveling. So stop by Sephora and stock up on samples instead of travel-size bottles for short vacations.
You can and should return products you don’t like
If you didn’t follow amazing aforementioned advice to try before you buy, it’s OK, I don’t listen to my mom either. What’s great is that at Sephora, you CAN make returns, even on makeup. Learn the return policy: you can return opened goods within 60 days in gently used condition.
Shop out to in, bottom to top
Like at grocery stores, products are arranged at Sephora so that you see what costs the most, first. Check out items on the outer edges and on the bottom shelves first. They are typically cheaper than the ones you’ll see displayed at eye level according to Real Simple.
Shop semi-annual sales
Sephora holds major semi-annual sales twice a year. This is another instance where your loyalty pays. Only Beauty Insiders get access to the major sale, when products are up to 20% off. The semi-annual sales typically happen in the spring and fall, usually mid-April or mid-November, and the sales normally last a few days.
Use discounted gift cards
Purchase a gift card someone else is getting rid of at a discount before you shop. You can buy discounted gift cards for Sephora or department stores like Macy’s or JC Penney’s with in-store Sephora counters.
To find discounted gift cards, use sites like Gift Card Granny, which aggregates discounted gift card offers from around the web for you. Other great resources are Raise, WalletWhiz, and Cardpool.
Right now, we found Sephora gift cards available for up to 9% off through Gift Card Granny.
Download a rebates app
You can get even more of the money you spent at Sephora when you shop using rebate smartphone apps like Ibotta or Checkout 51. For example, when you take a picture of your receipt after spending at least $50 at Sephora, you get $5 back on Ibotta.
With Checkout 51, you’ll browse local offers at stores, then take a picture of your receipt, and your savings will be credited to your account. When your account hits $20, you can cash out.
Learn to DIY
You can save a lot of time and money on makeovers at Sephora by learning a few of the artist’s tricks yourself. Learn how to sculpt the perfect brow or apply flawless foundation at one of the retailer’s free 2-hour beauty classes.
Check online or ask the manager at your local Sephora for find out when and how to sign up for classes. If you have about 15 minutes and want a more personal experience, you can have a professional explain their process to you during a mini-makeover any day.
Like, follow, subscribe
Following Sephora on its social media channels is the most obvious and easiest way to save on goods and snag freebies. Look out for posts on Sephora’s Facebook and Pinterest accounts to hear first about current sales and free samples.
A recent report from the Economic Policy Institute revealed that women and singles of both genders face challenges when it comes to saving for retirement. They also tend to be less prepared than others.
Perhaps even more concerning, many single men and women now on the brink of retirement (age 56 to 61) have failed to save anything all, according to the report.
Entering your golden years without a dime in the bank can be frightening, and one financial expert chalks it up to a variety of issues.
For women (single or otherwise,) it’s a complicated matter tied to such things as the wage gap, and the fact that many women put their careers on hold to take care of children or other family members. Among married women, there can be a tendency to leave retirement preparations to their spouse.
For single men, their decision to forgo building a retirement nest egg may come down to their views on life.
“Some singles have the mindset that they can easily compromise on everything since they only have themselves to care for,” said Joanna Leng, a single mother and financial planner who advocates for financial empowerment among women. “Singles also have the assumption that they can always find simple work in life during their latter years.”
And then there’s single parents, who face still a different set of challenges, simply trying to make ends meet and often neglecting retirement savings in the process.
With all of these folks in mind, we talked to some financial advisers to get their top tips for getting on better financial footing.
Start Saving/Save More
Even if you don’t end up doing anything with the money, it’s much wiser to save for retirement than to forgo it altogether.
“Make it a monthly habit and change your mindset,” said Leng.
If you’re still young, you don’t have to start big if making ends meet is an issue. The point is to be consistent and over time the money will build up.
“Don’t be disheartened because it might not be a lot,” continued Leng. “It’s developing the consistent habit that matters. And 3% to 5% percent is good for a start. Then, as kids grow up, you can probably increase what you’re saving.”
There’s a variety of savings options to choose from, including simple savings accounts, employer-sponsored retirement programs such as a 401K and individual retirement accounts (IRAs).
If you’re getting close to retirement, you’ll want to max out your contributions.
If you have access to a 401K, it’s probably your best bet for making up for lost time. The upshot of using a 401K for retirement savings is that contributions come from pre-tax income and thus lower your taxable earnings and your annual tax bill. In addition, employers often contribute to your retirement savings by kicking in matching funds.
“To also help to counter the lower pay issue, women should be contributing as much as possible to their tax-advantaged, employer-sponsored retirement accounts and taking full advantage of the match,” said Sherrie E. Grabot, founder and CEO of GuidedChoice, an advisory firm focused on helping people retire. “If they’re not contributing enough to get the full match they are leaving money on the table that years later can make a big difference.”
Traditional & Roth IRAs
For those who don’t have access to a 401K, traditional and Roth IRAs are a solid alternative. Both allow you to set aside money for retirement that’s invested in stocks, bonds, mutual funds and other assets. One of the biggest differences between the two IRAs is how and when they’re taxed. With a traditional IRA your contributions are tax deductible at year’s end on both state and federal tax returns. The taxes are paid upon withdrawal in retirement. Contributions to a Roth are already taxed so are not able to be deducted each year, but the money you withdraw during retirement will not be taxed. With both a traditional and Roth IRA accounts, you can contribute up to $5,500 annually, plus an extra $1,000 for those over 50.
A simple savings account is a good place to start the habit of saving, but it typically provides the least growth for your money, as banks offer minimal interest on your deposit. Savings accounts are great for small emergency funds, however, as they’re completely liquid.
Keep in mind, your credit scores can cost more than you’re able to save if they aren’t very good. A mortgage and even an auto loan will end up costing you more if your credit scores are weak. You can keep track of your credit standing using Credit.com’s Credit Report Summary, which provides your free credit scores.
Get a Part-Time Job or Plan to Work Longer
If you’re married and relying on a partner for retirement savings, you may want to consider getting a part-time job. The money can be used both to help the family and to create a retirement nest egg.
What’s more, with the exploding gig economy, there are more options than ever to do work based on your talents and availability. Thanks to sites like TaskRabbit, Postmates, Amazon Flex and Etsy, to name a few, earning additional income without overhauling your lifestyle is possible.
“If for example, your kids are in school and you’re able to do something part-time, that’s a great way to bring in extra money,” said Leng.
If you’re older and don’t have the savings to retire, you may have to look at postponing retirement. It will not only give you the chance to save more but also reduce the retirement time you’ll need to save for.
Develop an Action Plan
One of the most critical steps to help get your retirement on track is developing an action plan and sticking to it.
Creating an action plan begins with establishing a retirement goal, which includes identifying your ideal retirement age and what sort of retirement lifestyle you’d like to have. This exercise will help you come up with a ballpark amount of money you’ll need for retirement.
After that, do the math to figure out how much you must save each week and month to reach your goals, reviewing how much you’re currently setting aside for retirement, and whether you’re on track to achieve your desired end point.
If you’re not already setting aside enough money to reach your retirement goals, part of your action plan will be establishing a new savings budget.
Some experts say it’s also a good idea to create five-year milestones, which serve as markers by which you should have accumulated a certain amount of money to reach your final goal.
And finally, an action plan can also include a debt repayment plan, so you’re not heading off into retirement with sky-high bills.
This can sound a little dizzying for some, so it’s a good idea to consider seeking out a financial professional who can help develop a realistic, manageable path to retirement.
“Having some sort of retirement income planning help and support … can help [people] understand all of the factors and decisions that go into creating a sustainable retirement income and help them make more informed decisions,” said Grabot.
Be Prepared to Make Tradeoffs
Getting serious about retirement will likely involve making some tradeoffs.
When financial experts say this they mean cutting some expenses now so you’re able to save more for retirement. The budget cuts could involve downsizing where you live, going clothes shopping less or eliminating cable television. It doesn’t really matter what you choose, the point is to take a look at your spending and decide what can be eliminated in favor of preparing for your future.
Be Honest With Yourself
Brutal honesty is your best friend when it comes to retirement.
Be truly honest about how much you’re spending to live right now. Sit down and do the math. Then, identify the age you plan to retire and add 20 years to that. Those are all years you’ll need income, so it’s a good idea to come up with a ballpark figure to get you through those years.
“Total up how much you will need to set aside from now until retirement to help you reach that goal,” said Leng. “Life is brutal. So the kindest thing you can do for yourself is be honest.”
Traditional banks are paying very low interest rates on money market accounts. For example, Bank of America pays between 0.03% and 0.06% APY. Fortunately, you do not need to settle for such ridiculously low rates. You can easily find the best money market rates at internet banks paying 1.05% or more. If you put $50,000 into Bank of America’s account at 0.03%, you will only earn $15 of interest over one year. That same money in an account paying 1.05% would earn you $525 of interest. And you can typically open and fund an online money market account in less than 10 minutes.
MagnifyMoney has searched for money market accounts paying the highest interest rates – and this list gets updated monthly. Here are the best rates for April 2017:
1. Top Choice: Sallie Mae – 1.05% APY, no minimum balance and checks available
If you have student loan debt, you probably are not very excited to see Sallie Mae at the top of this list. However, many people are unaware that Sallie Mae also operates an internet-only FDIC-insured bank with some of the best interest rates in the country. You can earn 1.05% APY, compounded daily and paid monthly. There is no minimum balance and no monthly maintenance fees. You will have check-writing capabilities (although the standard money market limit of six per month applies to this account). The easiest (and best) way to fund and access your funds is via electronic transfer from your existing checking account.
2. Highest Rate: ableBanking – 1.30% APY, no minimum balance, but no check-writing
ableBanking is a division of Northeast Bancorp, a community bank headquartered in Maine since 1872. The bank has over $1 billion in assets, and your deposit would be FDIC insured up to the legal limit. At 1.30% APY, this is the highest money market rate that we have been able to find in the country. There is no minimum deposit, no monthly fee and you do not need to be a resident of Maine (any US resident can open an account). Unfortunately, the account does not come with check-writing privileges and there is no ATM access. You can deposit and access your funds via ACH (electronic transfer), which can take a couple of days. Just remember: there is a limit of 6 withdrawals per calendar month. When we called to ask questions about the account, we could reach a customer service representative very quickly. This is a good new option (just added to the list in June) from a small bank with a great high rate.
EverBank, recently acquired by TIAA-Cref, is a rapidly growing bank that conducts most of its business online (even though it is based in Florida). In 2017, EverBank has become very aggressive on interest rates. Its products have regularly made our list of best CD rates, and – not surprisingly – it also appears on the best money market list. This is a great product, but you should be aware of a few pieces of fine print. The APY is only valid for one year. EverBank does promise that the rate, after the first year, will “never stray from the top 5% of competitive accounts.” Just be prepared for a lower rate after 12 months. You need at least $5,000 to open the account. There is no monthly account fee.
4. Good Rate for Big Deposits: Capital One 360 – 1.00% APY on balances above $10,000 (0.60% on balances below)
Capital One has become more aggressive in recent months on the rate that it pays for online CDs and money market accounts. Capital One is focused on big balances: if you don’t have a lot of money, you can get much better deals elsewhere. But if you have a lot of cash and want another FDIC-insured account, Capital One is a strong option. You earn 0.60% APY on the first $9,999.99 that you deposit. You will then earn 1.00% APY on deposits from $10,000 up to $250,000. There is no monthly fee associated with the account.
5. Favorite Online Package: Ally – 0.85% APY, no minimum deposit, and link to free checking
Ally Bank is a very popular internet-only bank. Although the interest rate on the money market account is not the highest, Ally does offer a very competitive overall package – particularly if you link the account to an Ally checking account. The checking account has no minimum balance and no monthly fee. You can link your money market account to your checking account to provide overdraft protection. Money would be transferred to your checking account with no transaction fee if you ever made a mistake. You would be able to access your money market account with your Ally ATM card, which has free AllPoint access and up to $10 of non-Ally ATM fees reimbursed every month. This money market account is a nice way to provide yourself with overdraft protection while earning interest. If you don’t need check-writing capabilities on your savings, you would still be better off with Ally’s savings account.
3 Questions To Ask Before Opening A Money Market Account
1. Should I open a savings account or a money market account?
Many years ago, money market accounts were higher risk and paid higher returns. The financial crisis of 2008 changed all of that. Money market accounts are now FDIC-insured up to the legal maximum ($250,000 per institution per individual). Interest rates are now very similar – and there is no material difference. In other words – choose whichever account you want.
In general, you tend to get slightly lower interest rates on money market accounts because you have check-writing capabilities. The best savings accounts have rates between 1.00% and up to 1.25% APY – very similar to the rates on this page. But at Ally, for example, you can get 1.00 APY on a savings account (no check-writing) and 0.85% on the money market account (with check writing).
Savings accounts and money market accounts pay much lower interest rates than CDs. Right now you can easily get a 1-year CD paying 1.35% APY (with only a $2,000 minimum). You can find the best CD rates here. If you build a CD ladder, you can take advantage of 5-year rates that are now as high as 2.30%.
Money market accounts are great places to keep money that you might need immediately. But the interest rate on a money market account can change right away, at the bank’s discretion. To lock in a higher interest rate, you should consider a CD. If you need to get access to your CD early, would forfeit interest (typically from 3-6 months). In most circumstances, putting more of your money into CDs can really help boost your returns.
3. Is a money market account the same as a money market fund?
No, money market accounts (offered by FDIC-insured banks) are not the same as money market funds (most likely sold by your broker). In fact, we really don’t know why people even buy money market funds in the current environment.
For example, Vanguard offers the Prime Money Market Fund. Like other money market funds, this one “invests in short-term, high-quality securities.” Its objective is to keep the fund trading at $1 and generate a decent return. Right now that return is 0.89% – a bit lower than the returns you see from the money market accounts listed in this article. However, money market funds do not have FDIC insurance.
Most people compare the return of a money market fund (sold by their broker) to the interest rate paid by a traditional bank (0.03%, sold by their local bank teller). As a result, they are willing to take the risk of a money market fund. However, as you can see from the best money market accounts in this article, you can get FDIC insurance and beat the return of most funds. Why earn 0.89% with no FDIC-insurance when you can easily earn 1.05% and have FDIC insurance.
If you’re a senior in college, or the parent of one, you’re probably counting down the days until graduation. But are your finances prepared for the big step? Don’t worry if they’re not — most students feel overwhelmed by the task of managing money. To give you the confidence you’ll need to succeed in the real world, we’ve compiled a list of 50 money moves to make before graduation.
1. Start Saving Those Pennies
And whatever else you can afford to squirrel away before you graduate. Retirement may feel like eons away — and in your 20s, it certainly is — but you’ll never regret having money for that freak car repair or hospital visit.
2. Find Out Whether You Have Private or Federal Loans
The first step to paying off your student loan debt is to find out what type of loans you have. Private loans are issued by financial institutions, while federal student loans are issued by the government.
3. Find Out What You Owe & to Whom …
Several loans may mean several servicers, and it’s not always easy to keep track of them all. To see what you owe for federal student loans and who services them, you can go to the National Student Loan Data System, select “Financial Aid Review” and accept the terms and conditions. Be sure to have your FSA ID handy or the information you need to create one. You can check your credit reports to see who services your private student loans.
4. … & When to Start Making Payments
Most federal students come with a six-month grace period, meaning you’ll have some time to work that monthly payment into your budget. Many private student loans offer the same option.
5. Complete Exit Counseling
Federal student loans require exit counseling when a student drops below half-time enrollment, graduates or leaves school. You can do this online in about 20 to 30 minutes. Exit counseling will inform you when your first payment is due.
6. Know the Costs of Deferring Federal Loans …
With some loans, like federal Perkins, you don’t have to worry about interest if you enter deferment. But unsubsidized federal or Plus loans will continue to gain interest, causing your balance to soar. Be sure to find out how much interest you’ll accrue if you decide to take this option and read up on how student loan deferments affect your credit.
7. … & the Dangers of Default
Failing to pay your loans as agreed can lead to default. That can take some time (270 days for federal loans, to be exact), but it’s something you don’t want to do. You’ll lose access to deferment, forbearance and a range of government benefits, as well as the ability to apply for more federal aid. You could also face collection activity, legal action and poor credit.
8. Don’t Fear Your Loan Servicer
If you’re worried about making your student loan payments after graduation, be proactive and talk with your servicer. They may outline options you wouldn’t have thought of that can help you avoid missing payments.
9. Catalog Your Basic Repayment Options
That way you’ll have a idea of what can be done if money is tight. The government offers income-driven repayment plans for various situations, although a longer term and lower payment may mean you end up paying more than you’d hoped. There are also deferment, forbearance and even student loan rehabilitation if you go into default. You can find a full list of options here.
10. Familiarize Yourself With Refinancing
You’re unable to refinance student loans within the federal student loan system, and while doing so could help you secure a lower rate, it will change the terms of your loan. Also keep in mind that refinancing federal loans with a private lender means forfeiting government benefits.
11. Avoid Student Loan Scams
There are a lot of people trying to make a buck off the confusion around student loans. Don’t get tricked into paying someone for things you can do for free, like consolidate your loans, change your repayment plan or submit student loan forgiveness paperwork. If you really need help, consider seeking advice from a reputable consumer protection or student loan attorney.
12. Learn the Basics of Credit
Consumer credit is tricky to learn, but it affects your life immensely. A landlord could pull your credit report before deciding to grant you a lease, and an employer could check a version of your credit report as part of their hiring process. To grasp how credit affects your life, do some research. (We have plenty of credit explainers to help you get started.)
13. Start Building Good Credit
Before you graduate, you’ll want to work on building your credit, especially if you have a thin file, as most students do. A good place to start is with a secured credit card, which requires a deposit that serves as your credit line. There are also credit cards geared toward students.
14. Check Your Credit Reports
If you’re an authorized user on a parent’s credit card or you’ve been using your own starter card since freshmen year, you may have established some credit. Your student loans can help you build credit, too. To see what you have, pull your free annual credit reports at AnnualCreditReport.com. You can also view two of your credit scores for free on Credit.com.
15. Dispute any Errors
Mixed files and identity theft are common occurrences. If you spot something on your credit reports — like multiple credit inquiries you didn’t make or an inaccurate address — be sure to dispute the error with the credit bureaus.
Secured credit cards and student credit cards are designed to help you build credit, so look for the right terms and conditions. Be sure to check if the card has a low annual fee and competitive interest rates, and perhaps keep an eye out for features like rental car insurance and travel assistance. The best student credit cards tout rewards for smart spending habits.
18. Use Your Card Wisely
Most credit card issuers report your activity to the three major credit bureaus (check before you apply), which can help your score improve over time. For best results, be sure to make your payments on time and keep balances low.
19. Pay Credit Card Bills on Time
Speaking of late payments, it’s a doozy of a move to pay your credit bills late. Doing this will drag down your score, result in fees and make you look irresponsible in the eyes of lenders.
20. Consider Upgrading Your Plastic
If you’ve been using a credit card responsibly since freshman year, you may be able to qualify for a better one. Next-level credit cards can include a higher credit limit, lower annual percentage rates (APRs) or rewards.
This will help you stay on top of your finances and plan for the best things (backpacking in Thailand) and the worst things (health scares). To make it feel like less of a burden, find the system that works best for you.
23. … & Your Time
It may seem like you have a lot of it now, but time will fly once you’ve graduated. If you haven’t already, learn to budget your schedule so you have enough time for work and play. A balanced life can go a long way toward financial wellness.
24. Start Tracking Discretionary Spending
Things like food and gas can quickly add up if you’re not being careful. By tracking this category, you’ll be sure not to go over budget and get a sense of how much you should put toward these items each month.
25. Watch for Irregular & Big-Ticket Items
It’s always better to be prepared for a bill than surprised by it. Be sure to keep an eye on irregular expenses as you track your spending so you have an idea of how much you’ll need to set aside to cover them when they arise.
26. Open a Savings Account
What good is a rainy day fund if you have nowhere safe to store it? A savings account can help you do that and see what you have at a glance. When shopping for accounts, be sure to ask about interest, fees and conditions.
27. Start Paying Yourself
Before you land a job, vow to pay yourself first. That means setting aside a portion of your paycheck or graduation gifts each month, and then budgeting the rest.
28. Consider a Side Gig
There are plenty of ways for full-time students to jumpstart their savings. Consider sharing your car, pet sitting, freelancing or tutoring during your downtime.
29. Sell Your Stuff
You can also make extra cash by selling used textbooks, dorm furniture and mint-condition clothing online.
30. Check Your Checking Account
If you’ve been using a student checking account, chances are that offer will expire. Check with your bank to see if you need to switch to a standard account.
31. Shop for Fee-Free Accounts
With free checking accounts on the market, there’s really no reason to pay for one. If your bank happens to charge you a fee, ask to have it reversed or take your business elsewhere.
Under the Affordable Care Act, you can stay on a parent’s insurance plan until you are 26, with their permission. If you can’t get coverage through your parents or new employer, you’ll need to go through the government exchanges or face a tax penalty. Take time to research the options.
34. Automate Bill Pay …
You know the dangers of paying bills late, so why not streamline the process? By automating bill pay, you’ll never have to worry about missing a payment or getting hit with late fees.
35. … & Check Your Statements
You never know when fraud will strike, and you want to keep an eye out for new fees or fraudulent charges.
36. Sign Up for Alerts
Many banks and card issuers offer email or text message alerts that let you know when funds are low, balances are high or you’re in danger of missing a payment. These alerts can help you spot fraud and protect your credit before it’s too late.
37. Don’t Forget Your Rent
Failing to pay your rent can torpedo your credit, and if you’re evicted, that will likely show up on a tenant-screening report. Worse still, if your landlord reports you to a debt collector, the collection account could appear on your credit report — and stick around for up to seven-plus years.
38. Sanitize Your Social Media Accounts
Your social media presence can work for or against you. So if you tend to post pics of getting sloshed every night, chances are future employers won’t like it. Think twice about what you post and do your best to keep it clean. You don’t want these things to jeopardize your financial stability.
39. Quit Smoking
And give up other vices. Not unlike drinking, smoking is a dangerous habit that can literally shave years off your life. It’s also expensive.
40. Track Down Your Documents
Make sure you have your Social Security card, passport, driver’s license and birth certificate since you’ll need to provide identification when you score your first job, apply for a loan and more.
41. Get Your Finances Under Wraps …
Keep sensitive documents under wraps, even at home, and never, ever share your credit or debit card information, especially PINs.
42. … & Stop Posting Pictures of Your Credit Card
Your credit card may not display all the information hackers need, but you’ll be bringing them one step closer if you post pictures of your credit or debit card numbers online. Also, don’t send your credit number over email or text message. Even if you trust the recipient, there’s always the chance their account could be hacked (or their phone could be stolen).
43. Beef Up Your Passwords
Aim to create passwords that no one can guess, and always combine upper- and lowercase letters with numbers, symbols and words not found in the dictionary. The more complex it is, the more secure you will be.
44. Check Your Email
You wouldn’t leave your wallet on the New York subway, so why share your personal info by email? Avoid sending your Social Security number and any account information, and do your best not to store personal information in the event you get hacked. If something sensitive is in your inbox, delete it for good.
45. Get Scam-Savvy
Never open an email that’s just a link, and if you’re in doubt, don’t click. If you know the sender, you can ask if the message is legitimate. But if something seems out of the ordinary, it probably is.
46. Get Frugal
Avoid the urge to splurge and get savvy as you gear up for graduation day. The next few tips can help you get started.
47. Learn the Art of the Promo Code
Get in the habit of digging around for promo codes whenever you shop online. Who knows? You may save on shipping.
48. Start Checking Return Policies
Shopping for your post-collegiate apartment? Read the fine print. No one wants to get stuck with a broken rice cooker.
49. Start Cooking at Home
You don’t have to do it every day, but every bit counts. The less you eat out, the more you’ll save.
50. Start Buying Generic
These products are often just as good as name-brand ones and cost a lot less.
The idea of “building wealth” isn’t just for rich people.
In fact, if the word “wealth” has you envisioning fancy people spending summers in Cinque Terre on their private yachts, it might be time to reconsider what wealth really means. Wealth, in general, can mean ensuring that you have enough to adequately cover what you need and to keep you happy while also possibly providing you with a little extra on the side for what you just plain want.
The best part is you don’t have to be a financial planner to build wealth — there are some easy things everyone can start doing.
1. Know Your Net Worth
To build wealth, you need to start at the beginning. If you haven’t already, take stock of your net worth (your assets minus your liabilities) and try tracking it for at least a couple months (the longer, the better) to see how it’s trending. (You can view two of your credit scores for free on Credit.com.) Obviously, it’s ideal for your net worth to be getting larger rather than smaller, but if it isn’t, step two will be important.
2. Keep Track of Your Spending
You can’t really build wealth if you aren’t sure where you’re spending your money. Whether you use an aggregate site to track where your money goes out, an Excel spreadsheet, an old-fashioned checkbook or regular old pen and paper, it might seem silly to pay attention to every purchase you make, but only when you start to notice patterns in your spending can you really make cuts where and when you might need to.
For example, if you determine you’re spending more than you’re making, look for adjustable costs you could potentially reduce or eliminate immediately (cable, gym memberships, extraneous spending, etc.). If the problem is your larger costs — student loans, how much you pay in rent or your car payment — it could be time to consider reconsolidating your loans or potentially moving to a more affordable apartment, getting a cheaper car or opting for public transportation, if possible.
3. Make the Most of Free Money
Very few things in life are free, so when something is, it’s foolish not to take advantage. If your company offers a 401K match that you aren’t taking advantage of, you are leaving free money on the table. Talk to your human resources representative about your company’s policy, and adjust your allocations if there is a match you aren’t currently getting.
It also might be worth making sure your savings and checking accounts are the best options for you. If you’re paying extraneous fees or think you could be earning more interest elsewhere, it’s worth researching the best place to help your assets grow.
It’s not always easy to plan for the future when you’re trying to scrape by day by day, but if you can think of any large expenses that might be happening later this year or next, you’ll be ahead of the game. When you start planning for large expenses with enough time to save up, you’ll be less likely to put them on your credit card and potentially have to pay interest on them.
You might want to consider any upcoming travel plans, plans to potentially buy a house or get married, health insurance deductibles for any planned medical procedures, potential taxes you’ll owe, etc. (See more about paying taxes here.)
6. Save, Save & Save Some More
You need to have an emergency savings account. Experts recommend keeping three to six months of expenses in an easy-to-access account, just in case something pops up.
If you have started saving and you’re serious about increasing your net worth, consider putting any tax refunds or pay raises directly into savings, or split them between savings and retirement accounts. If you already did your research from step three and found a good savings account, your pay raise will be even more meaningful when it’s compounded daily with interest.
But I like buying lunch. I’m a zombie without my morning coffee. And I really enjoy Game of Thrones (and can’t stand seeing spoilers on Facebook).
What if there was a way you could spend, get more out of life and still save in the long run?
Well, there is, and I call it my Upgrade and Save strategy. There are many areas of your life in which you can save money by spending it. If you make an upfront investment, it can mean paying less in the future.
Upgrade and Save With Coffee
A few years ago, my wife purchased a Nespresso coffeemaker for my birthday. It’s a lot like a Keurig except it makes phenomenal single- and double-shot espressos. The pods are single-use, cost around 50 cents to a dollar each and turn me from a groggy mess into someone who’s ready to take on the day.
The coffee maker wasn’t cheap. You can get one for less than $100, but some of the higher-end models, which have features like the ability to make frothy milk, can cost close to $500. It’s not as cheap as a simple drip coffee maker, but it’s far less expensive than visiting a coffeehouse every morning.
If you have one coffee each day with the low-end Nespresso machine, it’ll cost you $465 a year: $100 for the unit and $365 for the coffee pods. A $3 coffee each day will run you $1,095 a year. That’s more than twice as much.
Experts would have you believe the best solution is to buy a drip coffee maker for $20, a five-pound canister of coffee for $15, and 100 coffee filters for $2. But the reason this is more likely to fail is because it will bring far more complexity into your life. You’ll create more steps in your morning or nighttime routine, which you’ll likely forget.
What will happen when you run out of coffee filters? Or coffee grounds? You’ll stop at Starbucks and buy a cup.
We enjoy our coffee maker because we put in a pod, turn it on and can drink our coffee in about 30 seconds. No pot, no filters, no programming — it’s easy.
Other Ways to Spend and Save
You can find these scenarios everywhere in your life — opportunities to make a small upfront investment so you can cut down the costs later on. Coffee has been an easy target ever since David Bach coined the term “latte factor,” but that’s not the only area where you can save money.
If you drive a car, you know you need to change the oil every 3,000 to 5,000 miles. If you switch from conventional oil to synthetic oil, you’ll pay more for the oil but will change it less often. My car needs an oil change every 5,000 miles when it’s using conventional oil. But it can run 10,000 miles when I use synthetic oil, making synthetic oil less expensive.
Another example: CFL and LED bulbs are more expensive, but they last longer and use less electricity. That’s fewer light bulb changes, especially for those hard-to-reach places, and a slightly lower electricity bill. (You can see 11 more ways to lower your electric bill here.)
Saving money isn’t everything — improving your quality of life is important too. Invest in the things you use often, like your mattress. If you buy a quality mattress and even higher quality bedding, you’ll get a strong start every day.
Finally, put the money you save toward the future. If you buy a coffee maker and stop paying $3 per cup, you can put that savings toward another investment. You could spend it on synthetic oil or on upgrading your bed. Just don’t spend it elsewhere without careful planning.
The experts always seem to say to it’s smarter to cut things out, but that’s unreasonable. Make an investment in your life and see how it pays off in the long run.
How much will you need to retire? $500,000? $1 million? $2 million? There’s no easy answer. Some people won’t be able to enjoy their dream retirement without millions of dollars in the bank. Others will try to get by with $100,000. It depends on your lifestyle.
It also depends on where you live, according to data from the Employee Benefits Research Institute. Many retirement-savings recommendations are based on national benchmarks, noted the authors of the report on geographic variations in spending in older households. But because there can be huge differences in how much people in different parts of the country have to pay for housing, health care and other necessities, it’s probably more useful for those who are planning for retirement to consider how much people in their region spend.
Nationwide, the average household with people between the ages of 65 and 74 spent $45,633 per year, including nearly $21,000 on housing costs, $4,300 annually on health care and $4,700 on food. (Data on spending came from the University of Michigan’s long-running Health and Retirement Study.) As people age, overall expenses decline and a greater share of the typical household’s budget goes to housing and health care, while spending on travel and entertainment falls. (The survey didn’t include people who were living in nursing homes or other care facilities.)
But when the Employee Benefits Research Institute’s authors broke down the data by Census division, they found big differences, with retirees in the most expensive regions spending $15,000 per year or more than those in cheaper states.
Where is it cheapest to retire? Let’s take a quick look to find out how much the average retiree spends in your part of the country.
Average spending is for households with residents ages 65 to 74, unless otherwise noted.
9. West South Central
Average spending: $28,540
Younger retirees in Texas, Oklahoma, Arkansas and Louisiana spent less than retirees in any other part of the U.S. At $11,742 per year on average, their housing costs are lower than anywhere else in the country. (Go here to see how much house you can afford.) They also spent less on health care. But unlike most regions of the country, where retiree spending falls over time, people in the West South Central region spend more as they get older. By the time people are between the ages of 75 and 84, they’re spending $33,257 per year, in part because of a jump in health care spending to $2,600 per year.
8. East South Central
Average spending: $29,140
Retirees in the East South Central region (which includes Mississippi, Alabama, Tennessee and Kentucky) have the second-lowest spending in the country. They also have the biggest difference in spending between pre-retirees (those ages 50 to 64) and people ages 64 to 74, with annual expenditures falling from $42,261 annually to a little less than $30,000. Downsizing might be the main reason. The older survey respondents spent nearly $7,400 less per year on housing than those in the 50-to-64 age group.
A low cost of living is another reason this region is also home to four of the 10 best cities for people who hope to retire early.
7. East North Central
Average spending: $35,201
People in the Great Lakes states of Wisconsin, Michigan, Illinois, Indiana and Ohio had the lowest average spending outside of the South. That’s good news for people retiring in that region, but it comes with a caveat. Average spending in this region didn’t decrease as dramatically with age as it did in some parts of the country. By the time people reached age 85, they were still spending $31,059 per year on average, more than any other region except New England.
6. Middle Atlantic
Average spending: $38,125
Retirees in the mid-Atlantic states of New York, Pennsylvania and New Jersey spend an average of $38,125 every year, only slightly less than those in the 50-to-64 age group. Their average expenses included $13,440 on housing and $1,940 on health care. (You can determine your housing budget here.)
Average spending: $38,464
Retirees in Washington, Oregon, California, Hawaii and Alaska spent about $38,000 per year on average, including $2,360 on health care and $18,300 on housing. Their housing costs were the second-highest in the country after New England, which may not be surprising considering this region is home to eight of the 10 least affordable cities in the United States.
Average spending: $39,411
Living isn’t cheap for retirees in the vast Mountain region, which includes Montana, Idaho, Wyoming, Nevada, Utah, Colorado, Arizona and New Mexico. But things get better as you age. People in these states spend about $10,000 less per year between ages 75 and 84 than they do in the first decade of retirement.
If you end up retiring in the Mountain region, you’ll have lots of company. States such as Arizona, with its sunny skies and relatively low taxes, are perennially popular with retirees.
3. West North Central
Average spending: $42,240
Stereotypically frugal Midwesterners actually had the third-highest spending in the U.S. People in Minnesota, North Dakota, South Dakota, Iowa, Nebraska, Kansas and Missouri spent more than $42,000 per year on average from ages 65 to 74. About $20,000 went to housing and health care, with $22,000 left over for expenses, including food, transportation, travel, entertainment and dining out.
One reason retirees in this region can spend big? Some are quite wealthy. Minnesota, North Dakota, Nebraska and Iowa are all in the top 25 states in the number of millionaires per capita, according to a study by Phoenix Marketing International.
2. South Atlantic
Average spending: $44,350
Retirees in the sprawling South Atlantic region, which stretches from Delaware to Florida, have some of the highest spending in the U.S. People living in Delaware, Maryland, West Virginia, Virginia, North Carolina, South Carolina, Georgia and Florida spend $44,350 per year, on average, including $16,980 on housing and $3,000 on health care.
1. New England
Average spending: $46,019
New England retirees are the biggest spenders in the U.S., with annual expenditures of a little more than $46,000 per year. People in Maine, New Hampshire, Massachusetts, Vermont, Rhode Island and Connecticut have the highest housing costs in the country, at $19,507 annually — almost twice as much as those in the cheapest states — though costs fall significantly as people age. Health care spending among 65- to 74-year-olds is also higher than anywhere else, at nearly $6,000 per year, almost twice as much as what retirees in other parts of the country pay.