Expert Savings Advice

The 401(k) retirement plan is funded by employee contribution and a matching employer contribution. The major feature of the plan is that the contributions are taken from pre-taxed salary. The fund accumulates tax-free until it is withdrawn. Most businesses and tax-exempt organizations can create these retirement plans.

The 401(k) takes its name from the IRC (Internal Revenue Code) of 1978. The operation of the 401(k) is administered by the EBSA (Employee Benefits Security Administration) of the Department of Labor.

The 401(k) plan has a lot of advantages. First and foremost is that the employee can contribute pre-tax money that reduces the tax paid in each paycheck. Also, the company contribution and any growth in the fund is free of tax until withdrawn.

The compounding of the fund during a 20 to 30 year period is quite amazing. The employee has a lot of control in the direction of the future contributions. When the company matches your contributions, it adds something extra on top of your own money. All money in the plan can be moved from one company to another unlike pension.

The 401(k) plan is protected by pension laws since it is a personal investment plan. It includes protection from garnishment by creditors but not from domestic cases that include child support.

There are some disadvantages in the 401(k) plan, it is hard to get your 401(k) contributions before age 60 (59 1/2 to be exact). The 401(k) is not insured by the PBGC (Pension Benefit Guaranty Corp). Also, the company contributions do not kick in until a certain number of years of service have been given. The rules state that company matching contributions must either be a 3 year ‘cliff’ plan (100 percent after 3 years) or a 6-year ‘graded’ plan.

Employees participating in a 401(k) plan have many options for investment. In most cases a listing of mutual funds. The mutual funds usually include money market fund, treasuries, stock funds and bond funds. Some plans may include investing in company stock and US Savings Bonds. The employee gets to choose how the savings is invested. The employee can also choose at any time to stop contributions.

Financial advisers usually say that the average 401(k) contributor is non-aggressive in terms of their investment options. Stocks have historically outperformed other types of investment, since the 401(k) is a long term investment it should be able to minimize the stock fluctuations.

Nothing quite matches the convenience of business credit cards. When you are looking for a good alternative to cash, checks, and personal credit cards, it is probably a business credit card you want. With credit-when-you-need-it convenience, savings and discounts on purchases, and extremely helpful reporting facilities, business credit cards can be a good tool in your financial management tool kit.

You will find it easier to get a business credit card than to open a business line of credit. For this reason, business credit cards can do a lot to help you ease your cash requirements even as you are still gearing up with office supplies and equipment. It can never be repeated too often: use business credit cards with caution and afford it the same respect you would afford any other business line of credit!

The ability to borrow money, whether from a business line of credit or from business credit cards, is something that you need for your business. Like business credit cards, the line of credit is a revolving credit, and both charge interest only on the balances that are left outstanding. The credit limit on business credit cards may be lower than on lines of credit, but both do have a predetermined ceiling. There are however a few differences between these two forms of business credit:

Cost
Business credit cards generally have higher annual percentage rates and lower credit limits, than lines of credit. When it comes to cost-effectiveness therefore, the commercial lines of credit will beat business credit cards anytime.

However, if you manage business credit cards wisely, you can maximize the 21 to 25 days grace period or float on purchases. When the statement comes and you pay off the entire balance, you will actually avoid paying any interest. The crux of the matter is that you get a 25-day interest free loan! Not badand only from business credit cards.

Convenience
Business credit cards may lose on cost, but they are miles ahead when it comes to convenience. If your checking account is running low and you need to buy some supplies, you no longer have to call the bank to transfer funds from your credit line. You could easily charge the whole transaction to your business credit card, get out of the store and back to running your business. Business credit cards also offer you the convenience of easy bookkeeping and quick cost analysis.

Whats more, business credit cards are heavily loaded with perks like frequent flyer miles, purchase protection and warranty extensions, discounts and cash backs on hotel stays, car rentals, gas purchases, and more. These business credit card incentives can be valuable to a business, not only for the sake of convenience but also for the cost savings that you get.

Business credit cards and lines of credit are two financial tools that you can use together. Business credit cards are perfect for very short-term borrowings were talking 30 days at the most. You should pay off the bulk of the balance when it falls due, to save on interest. You may want to carry 20% of the balance forward to the next month to make your business credit card issuer happy, otherwise theyre never going to earn any interest income from your business credit card account.

Lines of credit are perfect for larger purchases, particularly those that would exceed your business credit card limit, as well as for reserve funds when cash flow becomes irregular over a period. Lines of credit help you to shore up your working capital, such as payroll, paying off merchant credit and payables, or settling the quarterly taxes.

Cash advance loans online can be a huge lifesaver when you find yourself in a bit of a pinch in between your paydays. So just what is a cash advance loan and how will it be helpful to you?

A cash advance loan (or payday loan) is a very short-term loan that carries extremely high interest rates. Generally, these types of loans last from a period of one to four weeks and you either write a check out that the company will cash when the loan is due or you would have to authorize the company to be able to make withdrawals out of your savings or checking account.

If you are in a bad credit situation when it comes to obtaining a loan, getting a cash advance loan may just be the answer you are seeking. Most all payday loan companies only require that you have either an active savings or checking account and have held your current job between 3-6 months and be able to prove how much you make in a month.

You can obtain your money very quickly when you decide to into applying for cash advance loans online. After you have provided the loan company with all of the information that they require and you are approved you are likely ti have your cash within 24 hours sometimes instantly depending on the company you are getting your loan through.

Getting a cash advance loan can assist you in making your credit score better. Just make sure that when you are getting an advance you make sure that the loan company reports to one of the three major credit agencies.

Now the next time that you are in a bind and need some cash quickly, if you are you sure you can meet the terms, applying for cash advance loans online would be a smart move.

Home Business Financing 3 Reasons to use a Credit Card to Fund Your Home Business

Would you like to start your own home business but do not have the money for it? Well, you are part of a club with many members. You may think getting money for a business can be a monumental task. However, it does not have to be. If you anticipate and plan for as many expenses as possible you may want to consider using a credit card to finance your home business.

One of the easiest ways to get a loan for your home business is to apply for a credit card account. It may not be the answer you are looking for. However, credit cards are easy to receive if you have decent credit. Plus they are very flexible in using for spending purposes. Consider these three reasons for using a credit card for your home business.

The most important reason about having a credit card for your business is you get to keep your cash assets. Even though there is a risk of acquiring debt, you still get to keep your cash in the bank for a rainy day. I find this a very valuable benefit because you keep your familys money in tact and reserved for family needs. Your savings will continue for its original intentions (i.e. college money for kids, school clothes, etc.).

Another benefit is that Credit Cards have itemized statements of purchases. This is great for keeping track of money you spend on your business. The itemized statement provides proof that the Credit Card is being used for business expenses. Also, if you use the credit card for all of your purchases you can easily report expenses when tax season rolls around. Payments made that are shown on the statement is proof where your businesses money is going.

Finally, and this is my favorite reason, you have increased purchasing power with a credit card. You can use a major credit card to purchase items almost anywhere in the world. Having direct access to the funds is much more flexible than a loan. This also provides flexibility in time management because you can use the credit card to purchase items at your convenience if you have internet access.

The downside to this is that the credit card minimum payment will be an additional expense. Also, credit cards are a very easy way to acquire a lot debt for yourself if you are not careful. Always practice good and sensible spending practices. Once you start a home business it is very exciting time in your life and you may want to spend money on lots of things that you think you may need.

Always think of the basic needs of the business first. I tend to be very frugal with spending on a credit card then I do with cash. One way to curb spending by asking yourself, Does my business really need this item right now? Give yourself an honest answer and empower yourself to cut down on impulse buying.

Try to think out of the box when getting funding for your home business. A credit card to fund your business start up expenses may make things easier for you. Also, there are many offers for low interest credit cards for a specified time period. So, if you need a few thousand dollars in capital to start and sustain your business for a while then credit cards may be the answer to financing the start up costs your home business.

There is inflation every year. You cannot stop an increasing in living expenses as prices of consumer goods increasing all the time. Saving money becomes an extremely difficult task to do. Here are some solutions for saving a little so that you can still meet your needs and still find ways to trim off a little for the future.

1. Budget Get one and stick with it! And set aside at least a small portion for savings while youre at it; savings for your future, your retirement, your education, your vacation, whatever. Head to your local office supply store for planning workbooks or budget sheets to use. Or head to your favorite search engine and type in, budget planning for hundreds of sites with articles, free downloads, tips, ebooks and other resources to help with your budget setup and follow up.

2. Plan Ahead Make sure to plan for emergencies and the unexpected, like an appliance break down or garage door malfunction. Even if you can only set aside $50 or so each monthly, place it in an account and earmark it for this Miscellaneous fund. Then when things go wrong, and they will nothings perfect youll be better prepared.

3. Non Monthly Items – Work out a monthly payment for items that you dont pay monthly and set this up in your regular monthly budget. For example, for items like annual home owner or renter insurance, quarterly water bills and automobile insurance payments and annual trash bills, take the amounts and determine what they would be monthly. Then list the items on your budget log and pull these amounts aside, saving them in your account for those purposes. This way, when the bills hit, you wont be caught off guard and have to scrounge for the payments.

What works well, instead of handling multiple savings accounts for each company owed, is to use index cards and one savings account. Create one index card for each bill. Then simply log the amount youre setting aside on the card and deposit it into your savings account. Keep the index cards with your savings passbook to remind you what the balance covers. The total of all your index cards should equal the balance in your savings account. (Make sure to create an index card for your regular funds that you are saving each month in step one above and a card for your Miscellaneous fund in step two above).

So next time you get paid, take three giant steps forward. Grab your index cards, follow your budget and invest in yourself and your future. Get a grip on your money handling.

According to a survey conducted by the New York-based College Board, college tuition costs are rising faster than the pace of inflation. Between 1993 and 2003, for example, the average cost of tuition and fees for four years rose 47 percent at public colleges and 42 percent at private institutions.

Thus, parents should start saving for college as soon as possible, says Stuart Ritter, a certified financial planner at T. Rowe Price, the Baltimore-based investment management and mutual fund firm. One way to do so, he says, is by taking advantage of state-sponsored 529 college savings plans.

These plans are becoming popular as a way to save for college because they provide some of the best tax benefits available, including an exemption from federal income tax on withdrawals made for qualified education expenses, and have high contribution limits to help save for college.

As a result, a 529 plan can potentially provide more money to spend on education than other investment products such as taxable accounts and Uniform Gift to Minor Acts (UGMA) accounts, an alternative way to contribute assets to a minor for investment purposes, says Ritter. An individual or a family can usually contribute more than $200,000 total in a 529 plan.

Currently, all states offer some type of 529 plan, with about half offering incentives to in-state residents. So while it may be practical for some parents to turn to their home states first when considering a plan, families are not limited to their own states’ plans. “It could pay to comparison shop,” Ritter says, adding that in addition to looking at potential state tax benefits for their contributions, parents should also evaluate the fees, expenses and investment options.

Another tool, the College Savings Comparison Calculator, compares saving for college in a 529 plan with doing so in a UGMA account.

One caveat is that due to provisions in the tax laws, the federal tax exemption for qualified educational expenses expires in 2010 unless extended by Congress. After that time, earnings would be considered income for the beneficiary – usually still beneficial since most 18-year-olds are in a low tax bracket. Also, earnings on a distribution not used for qualified expenses may be subject to income taxes and a 10 percent federal penalty.

Sorting through the array of 529 plans can be overwhelming, but experts say it is important for parents who are hoping to get the maximum return for their savings.

Home equity loans are a great way to borrow, and although many homeowners use them for home improvement projects, they can also be used for other purchases, like car buying. Equity grows as the value of your property rises, and many consumers take advantage of the gains in the real estate market without having to actually sell their house, by using convenient home equity loans.

Whereas a home equity line of credit operates much like a credit card, an equity loan is more like a typical bank or credit union loan the kind of loan consumers prefer when looking for a longer repayment schedule and more competitive rates. If you want to borrow a set amount of money with a fixed interest rate over a period of a few years, the home equity option is an appropriate choice. For example, rather than borrow money from a car dealership at a high rate of interest and with relatively unfavorable terms you might be better off borrowing against the equity in your home. The savings over the life of the loan (thanks to a lower interest rate and some potential tax deductions) can be considerable. And as your property continues to increase in market value, the otherwise untapped equity will work for you, to help make needed purchases along the way.

Consider, for instance, a homeowner who bought a house for $200,000 a few years ago and now realizes that the same property is worth $260,000. If the home appreciates in value at a rate of just 6 percent per year for the next three years, it will be worth over $300,000. With an increase in value of more than $40,000, the built-in equity is more than enough to offset the expense of a new vehicle in three years time.

Rather than sell the house to gain access to those funds, however, the homeowner can simply use an equity loan that is paid back at a fixed interest rate over a period of years. Once the loan is repaid, the homeowners untapped credit is once again available for other purposes. And at tax time, the interest paid on a home equity loan may qualify for an itemized deduction.

Consult a tax planner and your mortgage company or bank before you begin shopping for your next automobile. With a convenient home equity loan, you may be able to drive away with a great deal without ever having to put a dent in your savings account.

Building An Emergency Fund – A Vital Part of Financial Planning

None of us have the ability to foresee the future or predict the hurdles which lie ahead of us. This makes building an emergency fund a financial priority. Building an emergency fund is healthy for your financial well being, since youre rarely given advance notice of a setback or an accident which will keep you out of work for an extended period. It is also a safety net that can save you from bankruptcy or severe financial hardships in the event of an unexpected change in your income or expenses.

Housing a small rainy day fund should be a vital part of an individuals financial goals. This is of high importance if you dont already have readily available funds in your account for covering any unanticipated expenses. They provide financial security because they give you funds to fall back on if you become ill, or if you or your spouse loses your job, you incur large medical bills, or have an unexpected large bill such as a major car or home repair. You do not want to end up in a situation where you have to buy daily necessities on credit and end up payments on groceries you bought two years back on credit, with a further 10-18% interest on it.

Saving your money in an small account for emergencies is definitely a better alternative to taking a loan or cashing in your long-term investments. If you take a loan, there is the additional burden of paying interest. Encashment of your investments before maturity means not only will you lose out the interest, but also some part of the original investment. This will also set you back significantly in your overall financial plan.

Success at building an emergency fund depends on consistency of saving money on a regular basis, and resisting the urge to dip into this rainy day fund for non-emergencies. This money should be kept separate from the general savings account. Otherwise you will be tempted to dip into these monies even if you simply run over your budget at a certain point. A substantial part of this emergency fund account should be invested in low risk funds. This ensures that your investment does not lose its value in case you need the money. Also, it should be extremely liquid, to give you access to the cash easily and quickly if you need it.

The size of the special savings account will depend on your personal situation. People often keep three to six months salary in the reserve. But you will have to decide on an appropriate amount based factors such as your dependants and fixed monthly expenses.

If you are single with no obligations, and have a reliable support system of friends or relatives during a financial crisis, you might not need a substantial amount stashed in this fund. This is opposed to someone who needs to pay nursing costs for his aging parents and supporting a young family. The more people you support, the more likely you are to have unexpected or unplanned costs.

While making a decision about an emergency fund, you should also take into account the degree of difficulty you’d have in finding a new job if you lost the present one. In case of a two-income household, the contribution of both parties should be weighed while calculating how much you should keep aside.

You may not be able to gather your emergency fund money together at once. Treat it as a financial goal and add to the kitty over time. If you get a tax refund, put it in your special rainy day account. Maybe a part of the bonus at work!

Everyone wants to save money, but no one wants to change his or her lifestyle to do so. Many people think that the only way to save is to go without; Give up eating out at restaurants, stop going to the movies, stop shopping, etc. This is not the case! It is very simple to still enjoy going out, as well as save money. You just have to find ways to spend less while going out. Here are some examples:

When going to a restaurant:

Always use coupons! I cant stress that enough. There are many ways to find them. The Sunday paper usually has coupons for a few restaurants. Many restaurants send out coupons in the mail hoping to get you to visit them. The Entertainment Book has coupons for many restaurants. The restaurants own website might have a coupon that you can print out and bring in. Sometimes you will find coupons in their take-out menu. You will be able to save a few dollars just for taking a few seconds to look for a coupon.

Share a meal. If youre going out to dinner, many times you can get away with ordering one main course and an appetizer or salad and sharing them with your partner since the portions are so large. By splitting them, you will save a lot more then if you had each gotten your own meal, plus you will get more of a selection since youll get to taste both an appetizer and an entre.

When wanting to see a movie:

If you want to go to the movies, consider going during the day, or in the early evening. These are all considered matinee showings, and you will usually pay about half of the price you would pay at night! It doesnt sound like that big of a savings, but if you go to the movies just once a month, you can save $54 a year per person. Youll save even more if you go more often!

If you want to save even more money, you can rent the movie once it goes to DVD. Many websites will allow you to buy packs of 10 DVD rentals, and you will end up saving anywhere from $0.50-$1.50 per rental! This can really add up. If you rent one movie per week, you can save up to $78 a year! Also keep an eye out for coupons that allow you to rent one and get the second free.

There are many other simple things you can do to save money when going out to enjoy different forms of entertainment. For other tips like the ones you just read, see the website below.

Americans tend to have an optimistic view of retirement-but a recent poll found many people still have a lot of work ahead of them before they can leave their jobs.

For instance, 47 percent of respondents said their retirement savings will last them 10 to 20 years. Those numbers seem promising until you consider that people should be actually planning for 30 years. Similarly, nearly half of all Generation X respondents said they expect to rely on pensions to help fund retirement. The plan may seem sound, but experts warn that many pension plans in the U.S. are at risk of going belly up. Plus, fewer than a third of all companies now offer pension plans.

The poll was sponsored by the American Institute of Certified Public Accountants (AICPA) in an effort to better understand the American public’s approach to savings and retirement. The group sponsors a Web site called 360 Degrees of Financial Literacy (www.360financialliteracy.org) to help people come to terms with financial issues at different life stages. Here’s a look at some additional polling results:

Paying For Retirement

Younger Americans do not plan to rely as heavily on Social Security for retirement as do older Americans. Close to six in 10 people age 55 and older plan to fund their retirement through Social Security. Only four in 10 (41 percent) of Americans under the age of 55 are counting on Social Security to fund their retirement. Instead of relying on Social Security, those under 55 are more likely to rely on their personal savings and investments.

College Costs

About three in 10 Americans have a child who is planning on going to college in the next five to 10 years. One quarter of these parents plan to pay for their child’s education with personal savings, another quarter intend for their child to earn scholarships to pay for tuition. Surprisingly, only 13 percent of respondents plan to use private student loans and just 12 percent plan to fund their child’s education with financial aid.

Financial Concerns

Rising energy and home-heating costs and uninsured medical expenses rank as the highest financial concerns for Americans (15 percent each). Retirement and the price of gas (13 percent each) follow closely behind. Education costs are also a concern as 9 percent of respondents worried about their child’s college education and 7 percent worried about their own college education.

Forty-one percent of Americans under age 55 say they plan to rely heavily on Social Security for retirement.