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You and Your 401(k)

June 15th, 2007 at 11:53 pm


I had to fill in at my hometown library today so while I was there I scouted out their books on personal finance, naturally. I spotted one, You and Your 401(k), by Julie Jason that looked interesting.

I've commented to my husband that we needed to look into his 401(k) and figure out why it doesn't seem to be gaining much ground. He's had it since the mid 90s and has been contributing up to what the company will match most of that time, but it just doesn't seem to be doing much. Neither of us know anything about how to pick what funds to invest in, so we just took a friend's advice years ago and really haven't done anything else to it.

On the other hand, I've only had my IRA for not even 2 years and it's already worth 1/4 of what his 401(k) is worth.

So I thought this book might be a big help to us so that we are more informed. I will report back in on what I've learned from it.

Women & Money: Month 4

May 8th, 2007 at 12:54 am


In Suze Orman's Women & Money book she lists 3 documents that every woman needs to have. They are:

- a will
- a revocable living trust with incapacity clause
- an advance directive and durable power of attorney for health care

A will alone is not enough if something were to happen to you. A will tells how you want your assets and material possessions to be distributed to your loved ones upon your death. It can also include who you want to have custody of your minor children. Almost every will goes through probate to establish that if is valid and a court order to distribute the contents of the will as stated. This process can take months or even years and cost a lot of money.

A revocable living trust is the most powerful of the must-have documents. Because it is revocable you can change it at any time. It is a living document in that it is in effect while you are living. Upon death, there is no probate period. The successor trustee (the one in charge after death of the trustee) signs an affidavit of the death of the trustee and then can sign papers to follow the trustees wishes as expressed in the living trust and will.

When setting up a trust make sure you fund it. To do this you must change the title of all property to be held in the trust from your own individual name to that of the trust.

What a trust contains:
- real estate
- nonretirement investments
- savings
- outstanding loans that have not been repaid

The trust should have an incapicity clause. This is in case you become incapable of managing matters while still alive. This clause will give someone of your choosing the legal authority to handle your affairs for you.

The trust will take care of your larger assets while the will is the place to state whom you would like to receive smaller assets that you have (family heirlooms, pictures, etc.)

An advance directive and durable power of attorney for health care is important in case we are ever physically incapable of speaking for ourselves. The advance directive will state the level of medical intervention you want if you are ever unable to speak for yourself. This is also known as a living will.

A durable power of attorney is someone you appoint that you trust to carry out your wishes if you are unable to speak. They will be your 'voice'. Put a lot of thought into your choice. It needs to be someone that is strong enough to stand against opposition by family that may not want to see your wishes carried out. Make sure that your entire family knows who you have chosen. This will avoid some hurt and angry feelings in the case of a tragedy when the news is sprung upon them.

Don't Touch that Money!

April 4th, 2007 at 10:43 am


More from Suze Orman's Women and Money Month Three:

Do not touch your retirement money before you reach retirement age.

Two common mistakes that people make that put their retirement years in financial danger:

1. taking out a loan:
- If you are ever laid off or change jobs, you normally have to repay the amount left on the loan within a few months of leaving. If you don't have the money to pay the loan off, you owe a 10% penalty as well as income tax on the withdrawn money
- You end up paying taxes twice on the money you withdraw. The money you use to pay back the loan is after-tax money, and when you do withdraw the money at retirement, it is taxed once again.

2. cash-outs:
- There are 4 options for your 401(K) when you leave a company:
- if you have at least $5,000 you can keep the money in the plan
- move it to your new employer's plan
- move it into an IRA rollover account
- take the money in cash
Never take the money in cash. You will owe a 10% penalty and income tax on any money you withdraw before age 59 and a half. You may think you need the money now, but think ahead to how much more you will need it in the future.

Investing Your 401(K) Money

April 3rd, 2007 at 09:26 am


Notes from Suze Orman's Women & Money book:

- if you have at least 10 years until you retire, your money belongs in individual stocks or stock mutual funds. These give you the best chance to earn more than the rate of inflation. The historical average annual rate for stocks is more than 10%. Bonds average less than half of that and savings accounts even less.

- if you want a maintenance-free plan choose a lifecycle fund. Choose a fund that has a retirement year in the name that is close to when you plan to retire. The fund will automatically hold and adjust to the right types of investments based on the number of years until retirement.

- if you want a more "hands-on" involvement go for index funds. These types of funds strive to follow the performance of popular market benchmarks such as Standard & Poor's 500.

Women & Money: Month 3

March 31st, 2007 at 07:38 pm


Month 3 of Suze Orman's book Women & Money focuses on retirement investing. She starts by telling us to focus only on what is in our power to do today. Don't worry about setting aside a larger amount of money than you can right now.

If you have to decide between setting aside money for your children's college education vs your retirement, you should save for retirement. If you don't retire with enough money to fund your retirement, you're going to be a financial burden on your children. It's best for them if you put yourself first in this area.

The earlier you start to save, the more time your money has to grow. You have to start saving and you need to do it now.

If your employer has a retirement plan (401(k)for corporations or 403(b) for nonprofits), you can designate how much of your paycheck goes into your retirement account. It will be automatically deducted from your paycheck and deposited into the retirement account. This money is taken out of your paycheck before taxes. It will not be taxed until you withdraw it.

Employer's generally match the amount you contribute up to a certain percentage. This is free money and should not be passed up. Make sure you contribute the maximum that your employee will match.

Women & Money: Month Two

March 23rd, 2007 at 07:11 pm


The second month of Women & Money focuses on credit cards and your FICO credit score.

Suze's aims in this chapter are for women to:

- have 1 credit card in your name only
- check your credit card statement every month
- avoid extra fees and high interest rates
- make it a goal to pay your credit card bill in full each month
- know the difference between good and bed debt
- have a plan to pay off old credit card balances you've been carrying
- understand how important a good FICO credit score makes in your financial life
- learn how your credit reports work
- check your credit report annually

My Chase Freedom card that I use for gas, groceries, and utilities is in my name only. I also pay the balance off every month. I check it on-line several times a month to make sure that charges are mine and nothing else has been charged. It has no fees and no interest for a year.

I have a set amount of money that I pay on the Discover card each month to get that paid off ASAP.

I learned the difference between good and bad debt in my Personal Finance class last year and I know the importance of a FICO score. Last year I ordered a credit report and got my FICO score. Wish I still remembered what it was, but at that time it meant little to me so I didn't pay much attention.

I need to work on learning more about how my credit reports work and need to remember to check them at the end of the year.

Women & Money: Month One

March 23rd, 2007 at 05:19 pm


Suze Orman walks women through a 5-month process for gaining control of their financial lives in her book Women & Money.

I want to make myself walk through this plan one step at a time. I quite often tend to dwell on those steps that are easy for me and skip altogether those that I struggle with or that take too much energy.

The first month's focus is checking and savings accounts. The assignment is to:

- learn how to read the statement and balance your checkbook
- stop paying for checking services
- know the difference between checking and savings accounts
- appreciate the importance of savings accounts to financial security
- earn the highest savings account interest as possible
- use an automatic investment plan to build a savings account to cover 8 months of living expenses
- open a savings account just for yourself in addition to a family account

I already have conquered all of these requirements so no need to spend time on these.

Start Late, Finish Rich

March 14th, 2007 at 06:49 pm


I found Start Late, Finish Rich when I was changing the books at a deposit station today. I immediately slipped it into my work box so I could take it home to read.

The claim is that this book has the plan that will help you to build a secure financial future.

Ameritrade Account

March 2nd, 2007 at 05:38 pm

I have been reading Suze Orman's new book Women & Money: Owning the Power to Control Your Destiny and took her advice and opened an Ameritrade money market account. She has partnered with Ameritrade to try to get women to take control of their finances.


The challenge is to direct deposit at least $50 a month for a year. At the end of that year Ameritrade will give you a $100 bonus! Not bad earnings.

So I checked on-line today and my account is open and active!

Suze Orman's New Book

February 24th, 2007 at 01:16 am

Suze Orman's newest book, Women & Money: Owning the Power to Control Your Destiny came into the office a couple of days ago. Knowing that I'm the only one of the library personnel that is interested in it, I didn't bring it home until today. It has a release date of February 27th, so it will be available to the public on Tuesday.

I've only had a chance to glance through it but it looks interesting and has a great incentive for saving money. Perfect weekend reading!

Financial Tips

October 27th, 2006 at 09:33 am



Just wanted to sum up Jane Bryant Quinn's money tips. This is the order she says to do things in:

1. Retirement: must put away 10 or 15% of your income

2. Reduce, then eliminate CC debt

3. Create a Cushion Fund (Emergency Fund). If still in CC debt start with a cushion to cover expenses for 1 month.

4. College savings for kids. This is optional and should not come before saving for your own retirement. She says the kids can always get student loans but you can't get retirement loans.

5. Prepay your mortgage. This should come last on your priority list.

She says that you should count any contribution that your employer makes toward your retirement fund in the 10-15% that you should be saving off the top.

I guess we're doing well with that because both of us have 5% withheld from our paychecks and both of our employers match that.

We're working on #2, but at the same time that we're also working on #3. I'll be happy just to get to $1,000 let alone one month's worth of expenses.