February 27, 2008

America Saves Week – Just do it! Start to save or increase your savings now.

Take the steps not the elevator. Park at the far end of the parking lot and walk. Take the family for a Sunday walk rather than a Sunday drive.

It seems wherever we turn, there's someone encouraging us to increase our exercise and become healthier. And, the message is, "a few small steps can make the difference."

America Saves message is very similar: small steps towards savings can add up. America Saves is a nationwide campaign to encourage people to increase savings and build wealth.

This week is America Saves Week. All across America people are setting saving goals and beginning to take the small, but important, steps to building their wealth. You can join America Saves at www.americasaves.org. Benefits include newsletters, free financial coaching, and many, many saving tips at their website.

Even though I know changing my exercise habits would improve my health, I find it very hard to regularly and consistently take time to exercise. However, finding ways to save money isn't as much of a challenge for me. (Are there people out there who can change their exercise habits but not their saving habits?) So, what works for me?

Just do it! I find it best to make a decision to save X amount, and then put the decision on automatic. For example, using payroll deduction to deposit money into a retirement plan means that I don't even get a chance to think about spending the money. Decide once and then it happens over and over again.

Know what your goal is. Saving just for the sake of saving seems silly – why would you do this? However, saving so that I can take a vacation, send my kids to college, or even quit working someday – these are reasons that make sense to save and invest money. At least they make sense to me.

Track spending for several weeks. When I've tracked my spending (and I mean every dollar spent!) I've been amazed at where my money actually goes. Once I know where my money goes, then I can decide if I'm happy with this OR if there are changes that I want to make. Making changes can lead to finding money to save.

One last thing: watch out for small amounts of money that you pay for regularly. For example, think about your cell phone or cable TV contract. You know you want a cell phone or cable TV – decision made. But when you go to set-up the contract, there's lots of opportunities to add in small monthly charges. And you get to pay these extra options every month! You may find money to save by changing some of these contracts.

Add it up. Use a calculator like those on the Plan Well, Retire Well website to see how small changes add up to a big difference. A fun calculator, "Dollars from Dimes" is in the Start Saving section.

Celebrate America Saves Week and take that small step towards starting to save or increasing your savings. With time, your small steps will add up to real wealth. And, I'll keep working on doing a better job with exercise.

Comments? We'd love to hear from you. Send your thoughts to RetireWell@uiuc.edu. Your comments will be posted :)

Posted by Kathy Sweedler at 8:43 PM | Permalink |

February 20, 2008

Mutual fund investing may get a little easier with shorter prospectuses

You know the drill--before investing in anything you're supposed to swear that you've received and read the prospectus. That's the small book in fine print that you get about any mutual fund that you invest in.

I'd like a show of hands: How many of you read the prospectus for the mutual fund you picked in your 401(k)? How about your IRA?

You're probably like the other 98% of investors--you take one baffled look at the thing, and it either goes in the recycling bin or into a drawer, never to be seen again.

There actually is important information in those prospectuses, and it may be getting easier to find that important information. You can help make sure it happens.

The SEC (that's the Securities and Exchange Commission) has proposed a streamlined, 3-page summary prospectus that cuts to the chase. You can see a sample on the SEC's website. And you can provide comments about it until Feb. 28. Your feedback could encourage the SEC to make this idea a reality.

In my opinion, the most important pieces of information in the prospectus are:

• What types of investments can the fund hold? Is it stocks of large (or small, or middle sized) US companies only? Or US bonds?Or foreign stocks? Or something else? Or a mixture? Most importantly, is that what you need to add to your investment mix?

You'll find this in the Summary Prospectus under Principal Investment Strategies.

• How does the fund invest: does the manager actively choose the investments, or does the fund try to mirror an index--an unmanaged basket of investments, like the Standard and Poor's 500 or the EAFE international index? Index funds offer several advantages (more about that another day...).

This information would also probably appear in the summary prospectus under Principal Investment Strategies.

• What are the costs of investing in this fund? What is the annual expense ratio–the amount per $100 it costs you to own the fund each year? And is there a load–a sales charge–to either purchase or sell the investment? Research shows lower-cost investments tend to do better than high-cost ones.

You'll find the loads in the Summary Prospectus in the table labeled Shareholder Fees, and the expense ratio in the table labeled Annual Fund Operating Expenses.

You won't be getting these little 3-page prospectuses from your mutual funds right away, but here's why it's useful to look at it now: once you can recognize the important information in the streamlined prospectus, you can probably quickly scan and find it in that 28-page version you have in the drawer! Give it a try. I dare you!

For more help understanding investments, register for our free, interactive web site at www.RetireWell.uiuc.edu and go to Choose Investments.

Comments? E-mail me at RetireWell@uiuc.edu.

Posted by Karen Chan at 5:22 PM | Permalink |

February 14, 2008

Valentine's Day - Could you save the money you spend for retirement?

Happy Valentine's Day! I was reminded of how much money we spend on extra little holidays as I prepared gifts for my children last night. While the spirit of giving is wonderful and the joy on their faces will be delightful, the money spent was enough "extra" to put towards the long term goal of retirement.

One of the key reasons you often read people do not save for retirment is because they just can't find the extra dollars to save. A good way to find small amounts of money is to take a look at all small puchases you make. For example, a can of soda every day at $1.00 adds up to $365.00 a year. Just look at the $20 I spent for Valentine's Day cards and candy. That money could have been saved too!

If you are trying to save for retirement and just aren't sure where to find that extra amount of money,wrtie down all the purchases you make for a week and track where your money is going. This exercise will help you look at your budget and find little places, perhaps larger items that you might be able to cut out of your expenses and put that money towards your savings goal. For more ways to get started saving, visit the Plan Well, Retire Well website.

So, enjoy the gifts already purchased for Valentine's Day, but remember the next little holiday to think do I really need to buy these items or could that money go towards my retirement savings?

Posted by Jennifer L. Hunt at 5:42 AM | Permalink |

February 7, 2008

Tax Forms, W2s, Receipts--what do I do with all this stuff?

You probably have a stack somewhere--maybe a couple of them--where you're trying to get all the forms and documents you need to do your taxes. Isn't it fun?

Right now might be a good time to actually do something about your recordkeeping system. (A system. Right. What a thought.)

Start simple, with just a couple of files or containers: one for 2007 taxes, and one for 2008 taxes (Yep, 2008 already needs a file). You can use file folders, envelopes large enough to hold 8-1/2 by 11 papers, a 3-ring binder--whatever you have that is convenient for you.

Where will you keep these? Pick a convenient spot. Do you have a desk with a file drawer? How about a simple letter holder on your kitchen counter? Or a spot on the bookcase. Just remember where you decided to put them!

Collect all of your 2007 tax documents in the 2007 file or folder. And whenever you get a receipt or statement that you'll need for your 2008 taxes, stick it in that folder. Having a designated spot for these means no frantic searching at the last minute.

Round out your system with a few other files:

• bills to pay
• paid bills 2008
• bank records: debit card receipts, statements, etc.

All five of those files will take up a small amount of space, but will save you lots of time and frustration.

Would you like to know what papers and records you can toss and get out of your house? Check our website, Dealing with Clutter. You'll find guidelines for how long to keep all sorts of financial documents and other records, as well as information about other kinds of clutter.

Comments? Email us at RetireWell@uiuc.edu.

Posted by Karen Chan at 8:00 AM | Permalink |