The Benefits of Starting a Roth IRA Early

May 8, 2008

According to a Callahan and Associates Web-based survey, individuals between the ages of 18 and 39 are most likely to open an Individual Retirement Account (IRA). These individuals recognize the importance of starting early to save for retirement.

IRA rules don’t have a minimum age requirement, so any young person who has earned income is eligible to open an IRA. Because earned income is the key to qualifying for a Roth, generally, a young adult or even a child would have to be working part time for an employer who collected taxes and reported the earnings to the IRS.

How big are the benefits of starting early? If a 19-year-old began contributing $1,500 each year to a Roth IRA, by age 68 he or she would have about $608,000, assuming an average annual return of 7%.

Money is taxed going into a Roth IRA and accrues interest until it can be withdrawn, completely tax-free, beginning at age 59 ½.  While that may be a long way off for young investors, certain withdrawals can be made earlier, including a $10,000 for a down payment on a first home.

For more information on a Roth IRA, contact First New York Federal Credit Union!


10 Smart Money Moves If You Are In Your 20s

April 22, 2008

Young woman shopping

If you’re in your 20s, you have a financial asset money can’t buy–time.  And time makes your money grow.  Here’s 10 smart money moves for twenty-somethings:

1. Set financial goals, say, to take a vacation, go back to school, get married, buy a house, or start saving for an early retirement.  Put your goals in writing, then calculate how much you’ll need to save each month to reach them.

2. Make a spending plan, limit your debt, and concentrate on paying off existing bills.  Limit debt to your ability to repay.  Monthly credit payments, excluding a mortgage, shouldn’t exceed 20% of your monthly take-home (after-tax) pay.

3. Build an emergency fund equal to three to six months’ living expenses, even if it takes years to build.  Use this fund only for true emergencies, such as unexpected car repairs, illness, or unemployment.

4. Save at least 10% of gross income for your emergency fund, future goals, and retirement.  If you can’t manage 10%, start with 5% and increase it over time.

5. Take advantage of the services offered by your credit union.  You’ll earn more when you save and pay less when you borrow.

6. Make it a priority to get adequate health, disability, auto, personal liability, and tenants’ or homeowners’ insurance.  If someone else depends on your income, you also need life insurance.

7. Once you’ve implemented your spending plan, built your emergency fund, and obtained appropriate insurance, make the most of your money by starting to invest.  The key to making the most of your money is investing small amounts gradually and sensibly over time.

8. Use tax-advantaged savings plans your employer or the government offers to save money for your retirement, such as company 401(k) retirement savings plans and individual retirement accounts.

9. Keep job options open by keeping your job skills fresh.  Get necessary training and education so your knowledge and skills stay up to date.

10. Maintain orderly financial files to keep track of your money and put your hands on important records when you need them.

Try these tips, they’ll help!


First Car: Plan for the Costs of Ownership

April 14, 2008

Getting a car of your own–and it’s about time.  All you can think about is how great it’s going to be to cruise around town with your friends.  But don’t get ahead of yourself and overlook the expenses associated with car ownership.  There are a number of costly fees looking to hitch a ride with you every chance they get.

Common auto expenses shouldn’t discourage you;  they simply come with the territory of auto ownership.  When you buy your car, there will be tax, title, and license plate fees.  Then there are insurance costs and inspection fees.  And don’t forget about routine expenses like gasoline, oil changes, and tune-ups.

Research the average costs of auto insurance and other expenses ahead of time,  and save money so that you can stay ahead of the auto-expenses game.  Your preparation and resourcefulness will leave you ready for anything that tries to come between you and your new set of wheels.  Now, get out there and take a little drive–and leave auto expenses on the side of the road, looking for an unprepared driver to latch onto.


Our blog in the news!

April 4, 2008

CQ logo

A big thank you goes out to the Times Union of Albany NY.  Recently they featured our blog, along with our other podcasts, in-school branches and youth initiatives, in the Capitaland Quarterly.

Here is a link to the article:

http://www.timesunion.com/AspStories/story.asp?storyID=675726


Going Greener With Your Next Car

April 4, 2008

This post isn’t talking about what color car you want – it’s about cars and the environment!

If you’re as worried about climate change on the planet as you are about climate control inside your car, it’s now easier to pick out the greenest vehicle that meets your needs and budget.  The U.S. Environmental Protection Agency (EPA)—which regulates tailpipe pollutants as well as measures gas mileage—has combined data from both roles into a new Green Vehicle Guide.  Consulting this and other Internet green car ratings will help you make a more informed decision.

If you look at EPA ratings, you can see which of the cars, vans, pickups, or SUVs you’re considering add least to your hometown air pollution as well as have the least impact on global warming.  And there’s a bonus: Cars with lower carbon dioxide emissions generally have higher gas mileage and so will cost you less to drive.

In trying to think green for your next car, here are some issues to consider:

• Look hard at how you use your vehicle.  Consider your actual automotive needs rather than just your wants.

• Choose the greenest in your category.  Even if the vehicles you’re interested in don’t show up in the EPA or other top ratings, remember that better gas mileage translates to lower emission of the greenhouse gas carbon dioxide.

• Don’t assume a hybrid is the only answer.  Though gas-electric hybrids top the mileage and green rating lists in most categories, you can find other green choices as well.

• Be alert for quirks in the EPA Rating.  Some vehicles flagged by the EPA as green standouts run most efficiently on E85 ethanol. Check here for E85 availability where you live; you’ll have to put in your zip code.

Greener choices–from small vehicles to large–are becoming available.  For the latest on hybrids and other green cars, visit Edmunds.com and click on Tips and Advice.


Tips to Avoid Late Fees

March 27, 2008

With late payment fees of $39 or more, credit card companies make millions of dollars a year just because we are a little late in making a payment.  What can you do?

The most important thing is to make your payment before the due date.  You will save on the late fee and it will help your credit score, which in turn will save you more money in your future lending needs.  Here are a few tips to help keep you on track and avoid paying late fees:

1.  Be aware of the rules of your credit card.  For example, many credit cards offer low rates, but if you are late by one day not only will you pay a late fee, but your rate will jump up, meaning it will cost you more money!

2.  If you are paying by mail, make sure you send the payment and payment coupon, at least a week before the due date.

3.  If you are paying by online bill payment, schedule your payment 2 or 3 days before your due date, to ensure that your payment is credited on time.

4.  If you find that your credit card payment comes at an inconvenient time, ask your credit card issuer to change the due date to assist you in managing your money.  Most credit card companies would be able to do this for you.

These are just a few common sense tips to help you manage your money and avoid paying fees when you don’t have to!


Give Your Debts a Financial Health Check

March 21, 2008

Woman Workout

How healthy is your financial situation?  Here’s how you can determine your financial health!

A debt-to-income ratio is a measure of financial stability calculated by dividing monthly minimum debt payments by monthly gross income.  Many lenders use debt-to-income ratios to help determine whether a borrower is overextended or not. 

This calculation gives a straightforward depiction of your financial position.  Typically, the lower your ratio, the better handle you have on debt.  Here’s how you can calculate your debt-to-income ratio:

First, determine your debt

* Collect your most recent credit billing statements for current balances on all loans and credit cards
* Outline your total monthly bills using two columns: bill type (such as car loan, mortgage/rent payments, credit cards, and so on) and monthly payment.  Do not include bills such as taxes and utilities in this list.

* Add up the total for all of the monthly payments listed.

* Calculate your monthly before-tax income.  If you receive a paycheck every other week, as opposed to twice a month, your monthly gross income is your before-tax income from one paycheck times 2.17.

* Your monthly debt-to-income ratio is calculated by dividing your monthly debt payments by your monthly income.  For example, someone with a monthly income of $2,000 who is making monthly payments of $500 on loans and credit cards has a debt-to-income ratio of 25% ($500 / $2,000 = .25 or 25%).

What range your debt-to-income should be is subjective.  But, generally speaking if you keep it below 35%, you should be in good shape.  And, remember – the lower your debt-to-income ratio is – the better!

Take a look at your debt-to-income ratio, and look for ways to reduce that percentage!