If you are looking for a Mortgage Advisor to help you through the
financing process, please give us a call at (520) 744-2292 or email Sue
Licensed Mortgage Professional #206048
Fairway Independent Mortgage Corp.
5401 N. Oracle Rd., #101
Tucson, AZ 85704
Contrary to recent years, many Americans are now focusing on saving rather than spending. If you’d like to create a cushion in your wallet and maybe save up for a gorgeous house in Tucson, here are 12 ways to start!
#1 Put saving on autopilot Only 24% of Americans have a sufficient emergency savings cushion, and another 24% have no emergency savings at all -- so the majority of people need to heed this tip. The biggest barrier to saving is not being in the habit of saving, so the best way to get in the habit is to pay yourself first.Have money directly deposited from your paycheck or even your checking account into a dedicated savings account.
This can be done alongside your other goals, such as paying down debt or saving for retirement, but not instead of those goals. You won't miss what you don't see. And putting your savings on autopilot is a great way to reinforce the savings habit when unplanned expenses inevitably come along and eat up what you've saved. You're only one paycheck away from beginning to replenish your savings balance.
#2 Get a high-yield savings account When
it comes to savings accounts, "high yield" seems like a gross
exaggeration when the top-yielding accounts barely pay 1 percent
There are three requirements you should have when you
create your rainy-day fund. It must be liquid, meaning you can get to
the money whenever you need it. It must be without investment risk, and
you must earn a return that protects your buying power against the
diminishing effect of inflation.
The top-yielding savings accounts
insured by the Federal Deposit Insurance Corp. and money market accounts
meet the first two of those requirements. And while returns currently
follow the rate of inflation, they are the first to eclipse inflation
should the pace of price increases fall or interest rates eventually
Best of all, these accounts can be found with little or
nothing in the way of a minimum deposit and are available to consumers
anywhere in the United States. Call Tony Ray (520-829-1234) for some
great referrals to find the highest-yielding, FDIC-insured savings
accounts available nationwide.
#3 Find a free checking account Having
a fee-based checking account can take hundreds of hard-earned dollars
out of your pocket every year. According a survey from Bankrate.com, the
average interest-bearing checking account charges a monthly service fee
of $14.15 and requires maintaining a balance of nearly $5,600 at a
near-zero rate of interest to avoid fees. Instead, look for an account
that charges no monthly service fees or per-transaction fees and doesn't
require a minimum balance.
Free checking accounts DO exist: 45
percent of large banks and thrifts in markets around the country and 76
percent of the nation's largest credit unions still offer a noninterest,
free checking account. So keep looking!
Even if your bank has gotten
rid of free checking accounts, that doesn't necessarily mean you're
stuck paying the fee. Many banks and credit unions will waive the fee
for customers with multiple accounts or even for something as simple as
signing up for direct deposit.
#4 Keep track of your monthly spending Fewer
than 6 in 10 Americans, just 58 percent, track their spending against a
monthly budget. Whether you call it a budget or a spending plan,
gaining control of your spending accomplishes two things: it helps you
figure out where you can cut back, and it helps maximize your savings
Start by tracking your spending for a two-month period. Then
take this information and build a realistic monthly budget. Each month,
track all of your expenses -- everything from the $1 tip to the
newspaper boy to the monthly mortgage payment. At the end of the month,
tally up your spending against the budget and see where you did well and
where you fell off the wagon. If you spent less than planned, move the
remainder into your high-yield savings account or use it to pay off
#5 Pay down high-interest credit card debt For
many households, the best return on their money is to pay down credit
card debt. Whether carrying balances at 12 percent or 22 percent, credit
card debt is typically the most costly debt people have.
excess cash into repayment of credit card debt is a double-digit,
risk-free return because it reduces the remaining balance and therefore,
interest charges. This is also a sound move now while credit card rates
remain low. Consumers with high credit scores can find interest rates
in the single-digits as well as zero percent, balance-transfer offers
lasting one year or more.
When prioritizing your debt repayment,
start with the highest interest rate card first and focus on paying off
the other balances in descending order.
#6 Start saving for retirement The
pressure of supporting ourselves through retirement is increasingly
weighing us down. The first introduction to retirement savings often
comes from a workplace retirement plan such as a 401(k).
your 401(k) not only reduces your taxable income now, but your
investment goes to work immediately and grows without the deduction of
taxes until you begin withdrawals in retirement. The regular deposits
made with each paycheck represent the best example of dollar-cost
averaging, or purchasing fewer shares when values are high but more
shares when prices are low. Any employer contribution is like free
money, so make sure to put in at least enough to maximize any employer
If your place of business offers a Roth 401(k), your deposits
are made with after-tax dollars, but withdrawals during retirement will
not be penalized by taxes, therefore letting you keep your entire nest
#7 Make an IRA contribution If
you or your spouse has earned income, then you are eligible to
contribute to an individual retirement account, or IRA. In 2012, those
younger than age 50 can contribute a maximum of $5,000, assuming you
made at least that much. If you are 50 or older you can contribute up to
$6,000 thanks to the permissible catch-up contributions.
open an IRA with a bank, credit union, brokerage firm or mutual fund,
and invest the funds however you like. An IRA is a great way to add to
the asset allocation of your workplace retirement plan, where you might
be limited to an available selection of investments.
With an IRA, you
can select investments that are not available in your workplace
retirement plan, like commodities, individual stocks or certificates of
deposit, or CDs, giving you access to investment options that result in a
more diversified portfolio.
A typical IRA offers tax-deferred
savings, whereas a Roth IRA offers tax-free savings for retirement.
However, Roth IRA contributions are limited based on total income.
#8 Rebalance your investments Bonds
have had a positive year, cash yields are still close to zero, and
there has been lots of volatility in the stock market. Many
international markets are taking it on the chin while the U.S. market
has been staying afloat.
Given this diversity in returns, your
portfolio might look different than it did at the beginning of the year
and may have drifted from your intended investment mix. So rebalancing
your investments back in line with your original goals and risk
tolerance is a smart step.
Rebalancing also enforces the habit of
buying low and selling high, as you'll be reallocating some money out of
the assets that have performed well and into those that have lagged on a
relative basis. This also helps lessen the vulnerability of your
portfolio to a strong change in the markets.
Rebalancing is a good
habit to perform each year, but it is especially important in a year of
volatile movements and disparate returns between asset classes.
#9 Sign up for a flexible spending account Almost
everyone spends money on medicine, prescriptions and copayments. Maybe
you also have dependent-care expenses while you're working or pay to
commute to work. If your place of business offers a flexible spending
account as part of your benefits, think about signing up.
spending account, or FSA, lets you to pay for medical, dependent-care or
transportation costs with pretax dollars set aside with every paycheck.
By paying with pretax dollars instead of after-tax dollars, you're
effectively getting a discount on all these expenses you regularly
incur. How big of a discount? Well that depends on your marginal tax
bracket. Those in the 15 percent bracket are saving 15 percent by paying
with pretax money instead of money that already has been taxed. Contact
your employee benefits department to get specific information on
setting up an FSAs.
#10 Think about a rewards credit card Do
you always pay your credit card balance in full? If so, you're the
perfect candidate for a rewards credit card. With a rewards credit card,
you are compensated in the form of cash back, airline miles or one of
many other methods for the everyday purchases you make.
which type of reward is most appealing to you, and compare card offers
based on what percentage of your purchases are paid out in rewards. A 1%
reward ratio is the most common, but many cards have higher payouts for
certain categories of spending (like gas or groceries) or above a
certain spending threshold.
In fact, Bankrate.com's 2011 survey of
cash-back credit cards found that 22% have payouts of more than 1% on
all spending and 28% offered higher payouts in certain categories of
spending, so it's important to shop around before signing up. Finding
the card that best fits your spending pattern can put hundreds of
dollars per year back in your pocket for expenses you'd ring up anyway.
The keys to success are always paying the balance in full every month
and resisting the urge to overspend just for the sake of the reward.
#11 Adjust your tax withholding If
you either receive a large tax refund or get stuck with a big tax bill,
adjusting your paycheck withholding is a good move. While many people
look at a tax refund as "free money," the reality is that it is your
money, and a refund indicates you've made an interest-free loan to Uncle
Sam for the preceding year. Give yourself a raise by having less
withheld from each paycheck, and you can enjoy that money throughout the
year. If the shoe is on the other foot and you ended up making a big
payment at tax time, having additional money withheld from each
paycheck can keep that from happening again next year.
The IRS has a
tax withholding calculator you can use to figure the optimal paycheck
withholding. Then file a new W-4 with your employer's payroll department
to put the adjusted withholding into effect.
#12 Refinance your mortgage How
is refinancing considered a savings tip? With wages at a standstill for
many families, mortgage refinancing can create some much-needed
breathing room in the household budget. Mortgage rates are at all-time
lows, and with expanded eligibility for the Home Affordable Refinancing
Program, many gravely upside-down borrowers will now be eligible to
refinance their mortgages at better interest rates, cutting monthly
payments by hundreds of dollars per month.