Credit card interest rates can be manageable for some people but a real challenge for others. According to the Federal Reserve’s Consumer Credit December 2022 G.19 report, the average interest rate for all credit card accounts was 16.27 percent. However, depending on your card type, credit score, and other factors, card rates can vary anywhere from 19.41 to 26.42 percent. At the higher end of the spectrum, getting yourself out of debt may be more of a challenge. It does not necessarily have to be that way, though. You have some power to reduce your interest rates in many cases. These steps can help you reduce your credit card interest rates so you can pay back your debts before it becomes out of control.

Negotiating with Your Credit Card Issuer

One of the first things you can do is contact the credit card issuer for your card to try to negotiate a lower interest rate. It is that simple, though you will want to do a little homework first. For instance, find out what rates other competing credit card companies offer and have a list of top offers to bring to the table with your negotiations. The Simple Dollar recommends a few critical considerations for your negotiations, including these: If that does not work, there are still other options available to you, though it might be worth your while to keep trying every few months until you get a more favorable answer. Remember that a history of late payments or high amounts of debt will make your plight less desirable for the credit card company. Attempt to pay down some balance and be more consistent with monthly payments while seeking an interest rate reduction.

Consider Balance Transfer Offers

Many credit card companies allow you to transfer your balances from another card to their cards with very low, if not zero, introductory rates. That provides an excellent opportunity to reduce your overall debt by thousands of dollars if you manage to meet all the “fine print” requirements. Before you decide this is the route for you, do your homework on the cards you are considering and the relevant details about the balance transfer process. Some details you will want to have in mind include: Knowledge is power when considering a balance transfer. The more you know about the offer and its potential benefits, the better-informed decisions you can make.

Keeping Your Rate Low for the Long Haul

Asking for a lower rate is sometimes all it takes. Keep these things in mind, and you should be able to find a way to reduce your credit card debt substantially by lowering your credit card rates.

Lower Your Credit Card Rate

View Resource Lower Your Credit Card Rate
Figuring out how many credit cards belong in your purse or wallet can give you a headache. But, as new offers keep popping up, it can be tempting to take advantage of them all. Not to mention, there are cards for many different things. For example, there’s a card to target your favorite hotel chain, one to maximize airline miles, one that earns you points when spending at NFL games, and even one that offers you cashback on your grocery purchases. With this variety of credit cards, filling your wallet with plastic can become too easy. So, how many credit cards should you have? According to Experian’s “Credit Card Debt in 2021” report, as of the third quarter, the average U.S. citizen has 3.84 credit cards and an average outstanding balance of $5,221. Overall, the Federal Reserve’s October 2022 G19 report showed that total outstanding revolving credit stood at $1,171.2 billion.

Advantages of More Cards

Here are some advantages of having multiple credit cards:

Advantages of Fewer Cards

Some advantages of having fewer cards include:

Weighing It Out

So, how many cards should you own? That will depend on your specific situation. It may be best to start with one credit card with a lower credit line and work your way up to a few cards once you build up credit. Some people believe you can never have too many credit cards. Depending on the individual, this can be true somewhat. Each credit card you have in good standing will increase your credit score and positively impact your credit history. However, some people can have too many cards. For example, if you tend to overspend with multiple cards, struggle to manage your accounts, or incur much debt, numerous cards are too many.

How Many Credit Cards Should You Have?

View Resource How Many Credit Cards Should You Have?
Suppose your idea of banking is stuffing the proceeds of your paycheck under your mattress or rolling up dollar bills and placing them inside of a coffee can that you keep on the kitchen counter. In that case, the chances are that you have online or digital banking capabilities available to you from your bank or credit union. According to Statista.com, there are an estimated 203 million digital banking users in the U.S. for 2022. If you are not one of them, you might be wasting time and money. Online banking is the most convenient way to monitor your checking and savings accounts, transfer money from one account to another, and pay your bills. You can have your paycheck automatically deposited in the account of your choice if you also set up a direct deposit at work. You will rarely need to step foot in a bank again for everyday banking transactions.

Common Online Banking Features

That’s to name a few. Online banking features are ever-expanding and growing to make life even more convenient. From tracking your credit score to re-ordering checks and opening new accounts, banks and credit unions are attempting to expand the services available to their customers.

Access Anywhere

Consumers have migrated internet use more and more from their desktop computers to their smartphone or tablet devices. Digital banking has followed. Most banks and credit unions have expanded account access through direct apps that you can download to these devices, making it easier to access your account information at any time and from any place.

Safety First

Of course, you will have to practice smart Internet skills if you participate in online banking. You cannot do much to stop a widespread hack of your accounts. Unfortunately, that can happen. To start, you can protect your accounts by choosing strong passwords. You want your password to be one that you can easily remember but that no one else would guess. It is best to include letters, symbols, and numbers in your password. Be sure not to use easy-to-guess passwords such as the street on which you live or your birth date. Most banks and credit unions offer even more sophisticated ways of protecting your digital banking experience. Digital banking has transformed the consumer experience for most bank and credit union customers. It has altered the design of and use of branches and reinvented the financial world.

The Benefits of Online Banking

View Resource The Benefits of Online Banking
When tax time rolls around, you are likely waiting for that tax refund to come in, or maybe you already received it. Chances are it is a good chunk of change too. In fact, according to the 2022 IRS Filing Season Statistics, the IRS issued 108.6 million tax refunds, which totaled to more than $344.95 billion. The average refund was $3,176. The question you should ask yourself is, should you spend the money (foolishly or smartly), save it, or invest it?

So You Got a Tax Refund?

Choosing how to use your tax refund can be challenging. Many Americans have to make this decision, and you might be one of them. Chances are you will want to spend at least some of your refund. If so, do it the smart way. Sure, thoughts of taking an exotic vacation, buying that high-tech flat-screen TV and entertainment center, or purchasing those brand new designer shoes you have been eyeing are tempting. However, avoid this kind of foolish spending or at least don’t spend the entire refund check on things like this.

Smart Uses of Tax Refund

There are smarter ways of spending your tax refund that will help you get ahead in life and give you more peace-of-mind. These include: Setting up an emergency fund. An emergency fund is your safety net. You should have at least three to six months’ worth of expenses in this fund. That will help keep you out of debt and pay for unexpected expenses. You may have had to use this emergency fund money over the past couple years to get yourself out of a financial downfall. That is okay, but you should replenish it. Your tax refund is a great way to get that money back in that account. You may even earn interest on it. Paying down your credit cards. If you have credit card accounts that have large balances, you can lower your interest rates on them by paying them down. These tiny pieces of plastic you carry around in your purse or wallet are likely your most expensive debt. You can use your tax refund to get those balances down and reduce your interest. Investing for retirement. Another smart use of your tax refund is to put it towards your retirement fund. You can use it to up your 401k contribution or invest in a Roth IRA. Either way, money in these accounts can grow tax-deferred, or be withdrawn tax-free, in the case of the Roth IRA. Saving for college. It is hard to save for your child’s college and save for your retirement at the same time. Your tax refund gives you the opportunity to fund a 529 account that can pay for college bills. Plus, they are federally tax-free, and generally not subject to state tax when used for the qualified education expenses of the designated beneficiary. Moreover, it may even lead to a state income-tax deduction. Making home improvements. Even though you probably won’t be able to do a complete bathroom or kitchen remodel with your tax refund, you can use your IRS check to make smaller home improvements. Some ideas may include: These are only some ideas. There are plenty of smaller projects you can do with your tax refund to improve your home.

Avoiding Overpayment of Taxes

Make this year your last year of receiving tax refunds. Although it is exciting to receive this yearly check or deposit, it costs you. Each day you wait for that check, you could invest the funds in your retirement or other savings account and be earning interest. Although your tax refund appears to be money in your pocket, it means that you had more withdrawn from your paycheck than you needed to. When you ‘pre-pay’ the government you do not receive any interest on the amount withheld. The government has access to and can use the money you pay in as they see fit, you cannot. If you make a choice to stop overpaying on your taxes so that you can eliminate your tax refund, your first step is to contact your human resources department. They can work with you to update your tax forms. You can use your past tax years to help you estimate your deductions. While you might not be able to eliminate your tax refund altogether, you can get higher paychecks and lower tax refunds. This way you can use your money at your discretion throughout the year instead of having to wait for your tax return. It is entirely acceptable to splurge a little on yourself, of course. You should have some fun or enjoyment with your money. So go ahead and have the nice dinner or buy that new television. You may want to forget the new car or luxury cruise though.

Smart Ways to Spend Your Tax Refund

View Resource Smart Ways to Spend Your Tax Refund
Saving money. It is something that tops countless numbers of New Year’s Resolutions lists around the world. As a new year begins, many people are looking for ways to trim the fat from their budgets. We are happy to throw down the gauntlet with ten financial challenges to help you cut back on your spending or enhance your ability to save.

Save $2,023 in 2023

Having a savings goal is a good thing. With this theme, you can have a new one each year. By saving the year in dollars, you can go from one year to the next with a savings goal at hand. For 2023, that goal involves depositing a specific amount of money in your savings account each week to add up to a total of $2,023 for the year. To be successful, for each of the 52 weeks in the year, deposit $38.91 in your savings account. If you do that, you will reach your goal with a few cents to spare. In 2024, saving $38.93 will put you over the top of your annual goal.

Monthly Savings Theme

With this savings theme, you tackle a specific area of your budget each month and find savings in each. For example, in the first month, it might be your monthly grocery bill. In the second, it could be transportation costs. In the third, entertainment expenses. Each month, your budget focus will change as you focus on finding ways to cut costs in a new budget category. Of course, for this to be a genuinely productive challenge, you will need to maintain the changes you make in your spending habits and carry them forward each subsequent month.

365 “Less Things” Challenge

This challenge is about minimizing your lifestyle. It involves getting rid of 365 things in your home. One for each day of the year. Every day, look for one thing you do not need or use and get rid of it. The key is that you don’t replace these unnecessary things. You remove them freeing up space in your home and reducing clutter in your life. Now, this challenge will not impact the bottom line of your budget. However, decluttering your life may help you avoid making future purchases of unnecessary items.

Try the Store Brand

While there may be some products where the brand name is king, there are store brands out there that can take the place of others and enable you to enjoy substantial savings. With this challenge then, you will try a different store brand product each week and see how it compares to the name brand you have always purchased. From laundry detergent to packaged cheese, to canned veggies, to plastic trash bags, to snack foods, there are alternative products out there that can deliver the quality you seek at a better price point. Give them a try!

Lower (or Raise) Your Thermostat

Depending on where you live and the season of the year, the dollars you spend heating and cooling your home can have a measurable impact on your budget. With this budget challenge, when heating your home, you will lower your thermostat by one degree to help you save big on your heating bill throughout the winter. Reverse the challenge in the summer and raise your thermostat by one degree while running the air conditioner. If one degree does not make any difference to you, try two. Maybe you will save even more.

Pack Your Lunch

Switching from buying your lunch near the office to bringing a packed lunch to work each day can save you significant amounts of money. Think of it, the average lunch purchase costs somewhere in the neighborhood of $11. That’s $55 per week. At 52 weeks per year, you could save up to $2,860 per year by packing your lunch. Even if you only pack your lunch four days a week, allowing yourself a once per week splurge, you would save quite a bit of money. Plus, you would also save on gas as well since you are not leaving the office for your lunch!

Use the Library

If you have not been to the library in a while, you have been missing out. No longer is it a quiet refuge for dusty old books. At your local library, you can find a wealth of media to enjoy and countless learning opportunities for yourself and your family. Libraries today offer free access to a wide variety of media including: That makes your local library a valuable free alternative to streaming movie rentals or other media purchases. Many libraries today even offer electronic services where you can check out eBooks and audiobooks online. You don’t even have to go inside! Libraries also host educational events, meetups, and more. Most of these meetings are free or at a low cost allowing you to get even more from the use of your local library.

“No Spend” Days

Some people call them “spending fasts” and other names. The key is that you go for a designated period: a day, a weekend, a week, or even a month (for the truly brave) without spending money. This exercise is not just about not spending money. It’s also about learning to appreciate things that are free. It encourages you to take advantage of things like your public library, free entertainment events around town, or neighborhood parks instead of spending money on ‘stuff.’

The 10×10 Challenge

The 10 by 10 challenge is one that encourages thriftier habits and saving. While it doesn’t directly put cash into your pocket, it does show you how to do more with less. The challenge is for you to select 10 clothing items that you can mix and match into creating 10 different outfits. For the next 10 days, you are only allowed to wear only those 10 clothing items. The challenge teaches you that you can do more with less and don’t need as many clothing items as you might think.

$5 Savings Challenge

This one is interesting because it doesn’t rely on a weekly or monthly deposit. It does rely on the regular use of cash for transactions, however. It works like this. Whenever you find yourself with a $5 bill, you put it into your piggy bank instead of spending it. If you frequently shop with cash, the savings can quickly add up. So which one of these budgeting challenging tips are you going to implement? Perhaps all?

Challenge Your Budget Cutting Skills

View Resource Challenge Your Budget Cutting Skills
The interest rates offered on savings accounts and money market accounts today are hardly impressive. The FDIC’s weekly national rate and rate caps as of end of November 2022 found the average national rate for a non-Jumbo deposit was just 0.24%, with a cap of 3.83%. Fortunately, consumers have other options if they want to save their money in safe, risk-free investment vehicles. Certificates of deposit, better known as CDs, for instance, offer better interest rates. Credit unions might refer to them as Certificate Accounts. There’s a catch with CDs, however. You must invest the money for a set period, known as a term. If you withdraw that money before it matures at the end of the term — you’ll face a penalty. CD terms do not have to be long. Banks and credit unions offer CDs in a variety of terms. So you can select a CD that will mature in three, six or nine months if that meets your need. Alternatively, you can opt for a longer term, as long as 60 months or five years in some cases. In most cases, the longer the CD term, the higher the offered interest rate on that CD. However, what if you want the higher interest rates associated with CDs, but you also want easier access to your cash? You can achieve this with an investment strategy known as laddering.

How Laddering Works

With laddering, you take out several CDs, all with different terms. Ideally, you want your CDs to reach maturity at regular intervals. That gives you the choice at each maturation date to either withdraw funds, renew them for a new term or withdraw some and re-invest the rest. Here’s an example: You might invest some of your dollars in a CD with a longer term, maybe as long 60 months. That CD comes with the highest interest rate possible. Next, you can invest more dollars in a CD with a slightly shorter term, say 48 months. Also open CDs with terms of 36 months, 24 months and 12 months. You can see that you’ve laddered your CDs. A new CD will reach maturity every year. Moreover, here’s what you do when that happens. When your first CD matures after 12 months — the CD that will pay the lower interest because of its short lifespan — you can take out what money you need for expenses, purchases or other investments. Leave the rest of your dollars in it and then renew that amount into a 60 month CD. What just happened? You gained access to the cash you needed and transformed the CD into a longer-term CD earning more interest. One year later, your second CD — the one with an original term of 24 months — matures. Again, you can decide to withdraw all your money, renew all of it or keep some and save the rest. If you are laddering, you should only withdraw some of your money and then save the rest for 60 months. Again, you’ve gained access to your money and transformed a low-yield CD into one that pays off far higher interest rates. As you can see, this scenario will play out every year. Each year, one of your CDs will mature, allowing you easy, and penalty-free, access to your cash. At the same time, the money you do not need will be generating higher amounts of interest. You can ladder at shorter intervals and with fewer CDs, too. There’s no reason you could not ladder CDs by investing in CDs with terms of 6, 9 and 12 months, and then renew these CDs as they mature.

Risks

If done right, laddering comes with few risks. However, you could break the chain if you are not patient. It might be tempting three years into your laddering arrangement to empty one of your CDs. You will not face a financial penalty for doing so. However, you will leave a year-long gap in your cycle of maturing CDs. It is important to note that despite interest rates that are higher than those associated with savings accounts or money market accounts, CDs are still not one of the higher-yield investments out there. If you want to make more money at a faster clip, you’ll need to invest in more aggressive, but riskier, investment vehicles. Still, for those who prefer a safe and steady investment, CD laddering might be a smart move. It is a clever way to maximize both the accessibility and interest-generating powers of your CDs.

Laddering Strategies for CDs

View Resource Laddering Strategies for CDs
How much is cable TV costing you a month? Further, how much entertainment value is it bringing you? Be honest. How much time do you spend watching the Hallmark Channel, Speed, Animal Planet or others like it? If you scanned your lineup of cable channels, you might be surprised at how few of these channels you watch. That is why it is time to cut the cable to save money. Cable TV is far from inexpensive. According to BLS Beta Lab’s report on the average cost of cable and satellite TV services, the average bill has hit $547.98 a month by November 2022. With cable TV, you’re paying not only for your monthly package, but also for fees, taxes, and other charges for premium services. As prices continue to rise, many U.S. households are learning to live without cable television. Leichtman Research Group, Inc (LRG) has reported that the 15 largest pay-TV subscribers in the U.S. lost 785 thousand video subscribers in the third quarter of 2022. In addition, the companies lost 650 thousand subscribers in the third quarter of 2021. What is driving the abandonment of traditional cable and satellite television? Well, the cost of cable is indeed a key driver. However, the adoption of streaming services is an equal factor. For example, Statista reported that Netflix had 223 million paid subscribers during Q3 of 2022, and Hulu hit 47.2 million paid subscribers for Q4. Then HBO Max hit 81.2 million paid subscribers for Q2 of 2022. Consider the biggest provider of streaming video, Netflix. As of December 2022, Netflix offers their standard tier of service for $15.49 a month and premium service for $19.99, allowing Ultra HD content to be streamed simultaneously on up to four screens. Of course, Netflix might not provide all the movies or TV shows you want to watch. You can add Hulu Plus to your streaming list. Hulu (No Ads) costs $14.99 a month, too. The service specializes in TV shows, streaming most of them starting one day after they air. Also, if you are still interested in watching live television, you can subscribe to Hulu with Live TV for $69.99 per month, or $82.99 per month if you want to ditch the ads. If you want to build an impressive streaming video library, consider adding Amazon Instant Video to your subscription list. Subscribing to the service is free to Amazon Prime members. Non-members will have to pay a fee for most every video selected. These fees vary. You might be able to rent a TV episode for $1.99 for 48 hours. A newer movie might cost you $4.99 for a rental. That can add up if you are not careful, but it is far less expensive than taking the family to the movie theater. The good news about streaming services is that you can watch movies and TV shows on your TV screen through many devices. Do your children own a Xbox or PlayStation? You can stream video through these devices. You can also buy a set-top box that streams for you. Roku, Apple TV, Amazon’s Fire TV, and Google’s Chromecast are attractive options. Perhaps even of more value, most mobile phones and tablet offer apps for the most popular streaming services, allowing you to watch anywhere and at any time. These devices can range from $35 to $100 or more. However, once you set them up — provided you have wireless Internet — you can watch services such as Netflix and Hulu Plus. You also gain access to plenty of free channels that are less known, channels that specialize in everything from classic horror movies, black-and-white dramas, sci-fi shows, and westerns. There are free channels for every taste. Even if you buy a streaming set-top box, subscribe to Netflix, Hulu Plus and Amazon Instant Video, you should still save money each month compared to cable TV subscriptions. Also, when you rely on streaming video, you only pay for the channels you want and will watch. Even better? The technology behind streaming video is improving annually, making it the perfect time to cut your cable service and enjoy the lower entertainment expenses that come with such a move.

Cutting the Cable and Saving Money

View Resource Cutting the Cable and Saving Money
Does your employer offer flexible spending accounts? Do you take advantage of this benefit? If you answered “yes” to the first question but “no” to the second, you might be losing hundreds of dollars, depending on your income-tax bracket, every year.

What Are Flexible Spending Accounts?

Too many employees do not understand the benefits of flexible spending accounts, better known by the acronym FSA. Such accounts allow employees to set aside money from their regular paychecks on a pre-tax basis to pay for out-of-pocket medical or dependent care expenses. That might sound confusing, but here’s how it works: Every pay period, your employer deducts a set amount of money from your paycheck. You then use that money to pay for medical or dependent-care expenses that your regular health insurance will not cover. For instance, you might need to lose weight to stave off diabetes or hypertension. So you could use the money in your flexible spending account to pay for enrollment in a weight-loss program. The benefit of this is obvious: You will be saving up money for health expenses regularly. You then won’t face a significant financial shock if you need to pay potentially pricey out-of-pocket healthcare expenses. However, there’s an even more significant financial benefit: The dollars you stow away in your flexible spending account are considered pre-tax dollars. That means that they reduce the amount of income you will have to report to the IRS every year, thus reducing the amount of income taxes you must pay each year. For example, if you earn $40,000 a year and put $2,000 into a flexible spending account, the gross income you must report to the IRS falls to $38,000. Depending on the size of your tax rate, that could result in significant tax savings. The Internal Revenue Service limits the amount you can deposit into an FSA each year. In 2023, FSAs will be limited to $3,050 per year, a $200 increase from last year. However, contribution limits expect to be raised annually based on the inflation rate. However, even with restrictions, the savings are still meaningful to most employees.

Types

Companies that offer FSAs tend to provide two different kinds: those set aside for healthcare expenses and those created for dependent care. It is important to note that dependent-care accounts are not just for your children. Dependent-care accounts can be used for any of your dependents, including your elderly parents, if you are taking care of them. How can you use your FSA money? A recent story by CNBC does a good job listing some options. For example, if you suffer a disability, you can use FSA money to pay for renovations to make your home more accessible. If you need to lose weight to battle a doctor-diagnosed medical problem, you can use FSA money to sign up for weight-loss programs. You can also use the funds in your account to pay for gasoline or tolls when you use your car for medical reasons. If you have a dependent-care FSA, you can use the money in it to pay for a nursery school for your children, nannies, or adult daycare.

Use it or Lose it

Flexible spending accounts are not perfect, however. For example, they come with a provision that requires you to spend all of the money deposited in your FSA account before the end of the year or risk losing any unspent funds. The “use-it-or-lose-it” rule has always been one of the most significant downsides to saving in these plans. Some plans provide a grace period to let you use the money by March 15th of the following year, but the “lose it” rule kicks in after that date. In response to many consumers’ issues in losing such unspent funds, the U.S. Treasury Department amended FSA rules in 2013. The changes permitted employers to offer plans that would allow employees to roll over up to $500 from their current plan year account for the next plan year. However, such changes come at the employer’s discretion, and many haven’t implemented the new option. Many companies have decided to maintain the March 15th grace period instead of the rollover provision as IRS rules force them to choose one option or the other. Check with your plan administrator to see what your company offers. FSAs, then, are as flexible as their name suggests. Unfortunately, however, their availability from employers is not as widespread as many would like. According to the U.S. Bureau of Labor Statistics, only 43 percent of private industry workers have access to FSAs, while 71 percent of state and local government workers have access.

Flexible Spending Accounts for Medical and Dependent Care

View Resource Flexible Spending Accounts for Medical and Dependent Care
Researchers have found that many households in the United States live their lives from paycheck to paycheck. They have little or no savings and rely heavily on the influx of cash on paydays to make ends meet. The latest Paycheck-to-Paycheck report from PYMNTS.com shows that three in five Americans live that way, with inflation being the leading factor. For most of these families, a few changes and attention to detail could help them break the cycle of living paycheck to paycheck.

Problems With Living Paycheck to Paycheck

A wide range of financial and emotional consequences depend on every paycheck for essentials. These include:

Identify That You Live Paycheck to Paycheck

Four simple questions can help you determine whether you live paycheck to paycheck. If your answers are yes to at least three of these questions, then you are probably living paycheck to paycheck, and you will reap many benefits from breaking that cycle.

Look For Expenses to Trim Away

The critical thing you need to do to avoid your dependence on your next paycheck is to trim away unnecessary expenses. Most people have at least a few things they spend money on that they do not strictly need. In many cases, you can cut back on these areas of extra spending for just a few months until you build up some savings, then start adding them back in as you can afford. One ordinary expense to get rid of is eating out at restaurants and fast food places. You can also reduce the amount of money you spend on drinks, including alcohol, sodas, and specialty coffee. If shopping is your problem, withdraw a limited spending allowance in cash after each paycheck and use that for all your spending until your next paycheck.

Begin Paying Bills Right Away

One of the benefits of getting off the cycle of living paycheck to paycheck is that you can pay your bills immediately, rather than waiting for the paycheck shortly before they are due. That reduces stress in your life by reducing the chance of missing a payment and getting hit with late fees. Once you have a buffer in your checking account, try getting in the habit of paying your bills as soon as you receive them. Another option is to have a particular day of the month when you pay all your bills, so you do not have to think about them at any other time.

Develop Your Own Strategies for Breaking the Cycle

What works for other people might not suit you, so it is your responsibility to know your weaknesses. Take the time to write down everything you spend money on for a month to understand where your money is going and where you can make changes. Another way to break the cycle is to get a part-time job, just until you build up enough of a buffer in your checking account to feel free from counting down the days until your next paycheck. It is essential to keep your eyes on the prize through all of this. Once you have some money in savings and have a buffer in your bank account, you won’t stress as much regarding the state of your finances. Plus, you will be able to control your money better and work toward your bigger financial goals, like getting out of debt or saving up a down payment to buy a house.

Stop Living Paycheck to Paycheck

View Resource Stop Living Paycheck to Paycheck
The days when companies would provide pensions for their employees are rapidly dwindling. Today, workers are primarily responsible for saving enough money for their retirements. The good news? Workers can choose from many retirement plans, from 401(k) plans to IRAs to Simplified Employee Pensions. However, no matter what plan your company offers — or whatever you invest in if you are a self-employed worker — your job is to maximize your retirement savings during your working years.

Maximizing Your Retirement Savings

Richard Lichtig, a partner with accounting firm Eisner Amper, recommends that employees take advantage of two investing strategies: dollar-cost averaging and maximizing an employer’s matching contribution. In dollar-cost averaging, workers buy a fixed dollar amount of a particular investment on a set schedule, no matter what that investment’s share price happens to be. That gives employees the chance to buy more shares when the price per share of an asset is low and a smaller amount of shares when the price per share is higher. That reduces the chance that employees will make a substantial purchase when that investment is at its highest point. Another sound investment technique for employees to consider is matching their employer’s contribution to the 401(k) plan. As Lichtig writes, employers allow their workers to invest 15 percent of their salary in 401(k) plans. The employers will then match half of the first 5 percent of what their employees contribute. Employees could cost themselves money by selecting a contribution method that fully funds their 401(k) plans as early as possible. Lichtig provides a compelling example. He cites an employee with a salary of $330,000 a year who wants to contribute $16,500 to the employer’s 401(k) plan. If the employee contributes is at a 15 percent rate, the employee will have maxed out the $16,500 contribution in April. They would have invested $4,125 (or 15% of their monthly salary) from each paycheck from January through April. The employer will have made $2,750 in matching contributions. However, if the employee contributes 5 percent of their monthly salary (or $1,375) to the plan, they would have contributed the same $16,500. However, in this case, the employer would have added matching contributions totaling a much higher $8,250. Of course, this strategy works best for employees with higher salaries.

Contribution Limits

In 2023, workers can contribute $22,500 throughout the year in their 401(k) and 403(b) plans. The catch-up contribution limit remains the same at $6,500. That means workers who save about $1,875 a month — $433 a week — will max out their 401(k) and receive the best possible tax benefits. Those older than 50 will need to save $2,167 a month or about $500 a week to receive the entire tax break. It is essential, too, for workers who directly deposit funds into their 401(k) plans from their paychecks to change their direct deposits to adjust to annual changes in the contribution limit. But, again, the key is for workers to ask their employer’s payroll department to remove the maximum contribution from each paycheck. Obviously, not every worker will be able to contribute the maximum each year, so you are far from being alone if you are unable to do so. However, what is essential is for workers to contribute enough to capture any 401(k) match offered by their companies.

Reviewing Your Retirement Plan

View Resource Reviewing Your Retirement Plan