home
MONEY MATTERS
1 Build A Bigger Emergency Fund The traditional rule of thumb for emergency accounts is to have nough set aside to cover your family’s “need” expenses for at least hree months. Today, though, when unemployment can drag on, the
more savings you can put away, the better. If you don’t have anything at all
set aside and your job is at risk, forget about paying down debt right now,
says Francine Duke, a certified financial planner in Vernon Hills, Illinois. “Start
saving before you do anything else.”
Put emergency funds where
they are safe but
accessible, such as
in a savings or in
a money market
account. The Internet makes it easy to
find the best deals,
but keep checking
even after you’ve
made your deposit,
since interest rates
can go up or down
without notice. Also
look into online banks,
since their interest rates
tend to be higher.
2Don’t Stop Funding Your Retirement “All you’ll have beyond
Social Security is what you’ve saved,”
says Mary Lacey Gibson, a financial
planner in San Juan Bautista, California. Saving for retirement is critical
even in tough times. After all, there
are many options for funding a child’s
college education, but no such thing
as retirement scholarships or loans.
If your employer matches part or all of
your 401(k) contribution, you need to
take advantage of it—now.
Hesitant to save for retirement
because you worry about a possible
cash crunch beyond what your emergency savings can cover? Paul Dolce,
a Columbus, Ohio, certified financial planner, offers a compromise:
“Contribute to a Roth IRA rather than
a 401(k). What you put in won’t be
tax-deductible, but you can withdraw
contributions in an emergency.”
3Ditch Expensive Debt Running a credit-card
balance can be a huge money drain—
especially considering today’s skyrocketing interest rates. Without
touching your emergency fund, pay
off as much of your credit-card debt
as you can, as quickly as you can,
starting with the card that carries the
highest interest rate. “You’d be surprised at how many people keep
non-emergency cash in a checking
account that earns less than 1 percent interest yet owe thousands on
credit cards charging 18 percent,”
says Jeffrey J. Zures, an accountant
and financial planner in McLean, Virginia. “If they used that money to pay
off their debt, it would be like earning
an 18 percent rate of return.”
IT’S MORE IMPORTANT THAN
EVER TO KEEP AN EYE ON YOUR
MONEY AND MANAGE IT WELL.
4Find Creative Ways To Trim Chart how much you’ve been spending on nonessential expenses— restaurants, movies and gifts, for example—then compare the cost of paying for a cable movie channel, say, to joining a DVD rental
service or just buying on demand. It may be far cheaper to buy only what
you really need. Also, look at last year’s tax return. “If you got a big refund, then
you’re having too much deducted,” says Dolce. “It’s nice to get money back
after you’ve filed, but you’re better off getting it in your paycheck.” To adjust
how much tax gets withheld, increase the withholding allowance (by changing
the number of dependents) that you claim on your W- 4. Another way to save?
Raise the deductibles on your car, homeowner’s, even health-care insurance.
“Since savings vary depending on the situation and policy, talk to your broker,”
says Gibson. And reconsider your life insurance. Too many people take out an
expensive “permanent life” policy that remains in effect until they die. Term life,
which lasts for a fixed period, is far more affordable.
LADIES’ HOME JOURNAL
FEB 10
