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The Best Investment Advice You Will Ever Get

 

I’m going to simplify what I consider to be the best investment advice I have ever been given and share it with you.  Here you go:

1. If you have any credit card or other type of consumer debt on which you pay 5pct or more interest, pay it off.  Compound interest is your enemy.  The chances of you earning more on your money than you are paying in consumer interest rates are slim. Pay it off.

2.  Cash is King. Now that Madoff is in jail, no investment can offer returns with zero risk. If you don’t fully understand the risks of an investment you are contemplating, it’s ok to do nothing. In times of massive uncertainty like we are facing today, doing nothing is a valid and IMHO preferable investment strategy. Just put your money in the bank.

3. Cash Creates Transactional Returns.   What does this mean ? It means that you should analyze what you spend money on over the course of a year. You will get a better return on your money by being a smart shopper and taking advantage of  cash, quantity or other types of discounts than you will in the stock market.  Saving 15pct on the $1k dollars worth of items you know you will absolutely spend money on is a better return on your money than making 15pct in a year on a $1k investment  because you don’t pay taxes on it.

If you have under 100k dollars in liquid assets,  your net worth will be higher in one year if you follow this advice  than if you follow ANY other investment advice any broker or banker will give you this year.

Should You Increase Savings First Or Pay Down Debt?

 

Erik Carter, Contributor

One of the most common questions we get is about how to prioritize your savings. If you’re like most Americans, you may have some credit card debt to pay off, an emergency fund to build up, and a retirement to invest for but your savings to fund these goals are shall we say…limited. So what should you do? While financial planning should always be customized according to your individual situation, here are some general guidelines to consider in setting your priorities:

1. Make sure you have adequate emergency savings. Start with at least $1k in cash. Dave Ramsey calls this a “starter emergency fund” and is the first in his recommended series of “ baby steps.” You can keep it in a savings account or even in your checking account as a protection against overdraft fees. (With a rewards checking account, you can actually earn more interest than in a savings account.) Either way, be sure to only use it for genuine emergencies (no, the new Samsung Galaxy doesn’t count).

Next , you’ll want to have access to enough assets to cover at least 3-6 months of expenses as Dave Ramsey suggests or even as much as 8 months of expenses, which is what Suze Orman recommends. Your number may depend on how risky you feel your income is. Do not count credit card limits or home equity lines of credit as these can be cancelled, especially if you lose your job, which is when you’ll need it the most.  If you’re depending on selling investments or borrowing from your retirement plan, make sure you’ll still have enough even if the market takes a significant downturn.

It may feel like a lot of savings before investing for retirement but keep in mind that this amount is unlikely to make or break your retirement plans. On the other hand, not having it can really get you in trouble. One option is to save for both emergencies and retirement at the same time by contributing to a Roth IRA since anything you don’t withdraw for emergencies (you can access Roth IRA contributions any time and for any reason without tax or penalty) can grow to be tax-free for retirement. Just be sure to keep the Roth IRA in cash until you have enough emergency savings elsewhere. At that point, you can invest it more aggressively for retirement.

2. Max the match in your employer’s retirement plan. It’s hard to beat a guaranteed 50% or 100% return on your money. Plus, you’ll at least be putting something away for retirement.

3. Pay off any debt with interest rates over 5-7%. If the interest rate is over 7%, you’re likely to save more in interest by paying down the debt than you would earn by investing the money. If the interest rate is 5-7%, you can go either way depending on how comfortable you are with debt and how aggressive an investor you are. If the rate is below 5%, you’re probably better off investing any extra savings.

4. If you don’t own a home, save for a down payment. That’s because having a paid-off home is a huge asset to have in retirement. Just be sure you buy one you can actually afford.

5. Max out a health savings account. If you have a qualified high-deductible insurance plan, an HSA is a great deal. Why? Like an FSA,  you can contribute to it pre-tax and use the money tax-free for health care expenses. But unlike an FSA, you can carry it over and invest it for the long term. Anything you don’t use grows tax-deferred and can be withdrawn penalty-free after age 65 (and still tax-free for health care expenses). For that reason, you may not want to touch it even if you do have qualified medical expenses.

6. Get on track for retirement. You can use one of these calculators to see if you’re on track for retirement. If not, try to save more, starting with tax-advantaged accounts like a 401(k) and IRAs. If you can’t save enough now, try slowly increasing your savings rate over time. By increasing your contribution rate by 1% a year, most people don’t even notice the difference in their paychecks. Some retirement plans offer this as a feature called an automatic contribution rate escalator.

7. Save for college. This should be last not because a college education isn’t important, but because there are other ways of funding it. They don’t give financial aid for retirement though. If you are on track for retirement and have extra savings, look for a low cost 529 plan or Coverdell account so your investments can grow tax-free for education expenses.

These guidelines can provide some much needed guidance for an otherwise complex decision. However, keep in mind that financial priorities are ultimately always a matter of individual circumstances and preferences. In the end, what matters is what works for you.

Erik Carter, JD, CFP® is a senior resident financial planner at Financial Finesse, the leading provider of unbiased financial education for employers nationwide, delivered by on-staff CERTIFIED FINANCIAL PLANNER™ professionals. For additional financial tips and insights, follow Financial Finesse on Twitter and become a fan on Facebook.

Top 10 Hack to Organize Your Kitchen

 

Had you ever feel like you need some extra space in your kitchen. Are you sick of extra bottles or dishes laying down around your kitchen area? Life hacks kick hard to help you with your organizing and will present you 10 great tips on how to manage extra space and how to pack the kitchen items properly. Let’s start

 

Use Rail to Store Cleaning Products

Use the Magnetic Rack to Organize Knives

Tension Curtain Rods Will Organize Cupboards

Organize Pot Lids with Magazine Rack

Hang Pots and Pans on the Ceiling

Utilize Wall Space to Hang Utensils

Deep Kitchen Drawer Will organize your Utensils Vertically

Supplement Your Fridge Storage

Keep Magnetic Spice Racks on your fridge

Attach Undershelves in a Cabinet to Take Advantage of Vertical Space