Investing

Debunking 401k Theory

Step Brothers

If you have a 401(k) retirement savings plan and you’re like the rest of working Americans, it’s highly likely that you don’t plan on touching that money until well, retirement. With social security increasingly becoming an unreliable source of income for many people, the younger generation is putting a lot of stock in their 401(k) savings.

Television gurus like Suze Orman and Jean Chatzky all preach the message that it’s a heinous crime to withdraw money early from your 401(k). But what if Suze Orman is wrong? Can it actually be smarter to cash in some of your retirement well before you will ever retire? If you have consumer debt, the answer is….yes!

How 401(k) plans work

Let’s quickly review how employer-sponsored 401(k) plans work. Employees are given the opportunity to elect to have a portion (usually no more than fifteen percent) of their pre-tax wages set aside in an investment account. In short, you get the benefit of saving money while deferring taxes.

Generally, the company will match part or all of the employee’s contribution to their 401(k), or offer a profit-sharing contribution to the plan. Because the nature of a 401(k) is that it’s an investment account, it can and usually will grow significantly over time. All 401(k) earnings (interest, capital gains, or dividends) are tax deferred, culminating in the blessed occasion when you turn 59 ½ and can withdraw funds without any penalties beyond regular income tax.

The good and the bad news

So why do all the gurus tell you not to withdraw early? It’s not because you can’t; it’s because the government imposes severe penalties to the tune of extremely high taxation whenever you withdraw early. Many 401(k) plans also allow withdrawals in the form of loans you eventually have to pay back with interest. Oftentimes, you can end up paying taxes twice over when you withdraw from your 401(k) early.

Is there really any good reason to withdraw early from your 401(k)? Absolutely, definitely, and yes. You will never hear the famous financial gurus tell you this, but sometimes waiting until you retire is quite simply too long. The number one reason to withdraw early from your 401(k) is to pay off debt.

Early withdrawal can save you money

For a person with thousands of dollars worth of personal loans that are growing at a very high interest rate, cashing out part of a 401(k) might be just the solution.

With interest rates on the rise, consumer loans and bad debt can quickly drain a person’s cash flow. Sure, early withdrawal from your 401(k) will get you tax penalties. But if the trade off is that you can move toward being debt-free and freeing up cash flow, tax penalties are a small price to pay for financial freedom

Consider the long term impact

It’s important to do long term cost analysis before choosing to withdraw early from your 401(k). If you’re in a situation where you’re only able to pay the minimum due on a high interest, high balance credit card, the long term consequences of not paying off that credit card can have a far greater impact on your finances than losing a few thousand dollars in taxes from your 401(k). For people who aren’t facing any type of hardship or significant debt burden, early withdrawal most likely isn’t the best solution.

Only you truly know your own financial circumstances. Do your own research and absorb as much knowledge as you can. Besides, it’s always possible that by the time you’re 59 ½ years old, you’ll be dead. I like to leave on a positive note so here’s a smiley face :)

Money Management

Saving Money for a Deposit

For many, owning their own home is the ultimate financial goal. Unfortunately, many are giving up on this goal due to the rising house prices and indeed the rising cost of living.  

The problem is, the rise in house prices has had a knock on effect on the size of the deposit required. For example a 15% deposit on a £238,000 (The average UK house price) house is £35,000, however with many experts predicting dramatic rises in house prices, this deposit is set to rise to over £40,000 over the next 5 years.

Naturally, the idea of saving nearly £40,000 seems pretty unrealistic especially in these tough economic times. Despite this, financial goals should never be given up on, regardless of how far away they may seem. We’ve come up with some top tips that should help you when saving for a deposit:

Identify areas where you can cutback

If, over the past few years you’ve had very little reason to save money, then the chances are you’ll have simply let your finances drift along and won’t have worried too much about your spending. Now that you have got an incentive to save, you’re going to have to assess your finances and look for areas to save money each month.

The best way of doing this is to create a budget. Nowadays, you can either choose to create it manually or use an online software service such as the budget planner on the Money Advice Service website.

Initially, it is likely that one or two areas will immediately stand out, however if they don’t you’re going to have to scratch beneath the surface. While you’ll be unable to do anything about your rental costs or your utilities, it is your variable outgoings such as your weekly shop, transport costs and entertainment costs that are likely to be costing more than they could be.

Make money outside of work

With many people working long hours already, taking on a second job or asking for overtime is out of the question. Fortunately, there are now things you can do that take very little time out of your busy daily schedule and could prove to be a nice little earner.

Firstly, you could sell some old stuff. There are a number of routes you could go down here; eBay can prove successful, however beware of the seller fess involved which are often quite high. Another option is Gumtree; this is a free online ad trader and while the prices your goods fetch may not be as high as those you’d get through eBay, there will be no listing or seller fees involved. Alternatively, you could take your old goods to an old fashioned car boot sale; however these are decreasing in popularity due to the presence of sites like eBay and Gumtree.

Another way to boost your income is to compare costs of current credit commitments in a hope to find a cheaper deal. For example you could save in excess of £200 just by switching energy providers; you may also be able to save £20 here and there on broadband, mobile phone and TV subscriptions.

Ensure you’re getting the most out of your savings

Having worked so hard to get the most out of your wages and cut back on outgoings, the last thing you want to do is put your hard earned savings into an account that is going to offer very little in terms of interest. While savings rates are very low currently, it doesn’t mean you have to settle for second best. Look out for Cash ISAs, Fixed Rate Bonds and Easy Access Savings; these are likely to offer the best rates for your money.

When looking to save for a deposit, the trick is to act quickly. As we outlined above, house prices are expected to rise over the coming year, so the quicker you can save, the lower the amount you’ll require. Consequently the longer you leave it, the more you’re going to need to save.

This article has been written by Jason Scott on behalf of UK Credit Guarantor Loans. For more top money saving tips visit https://www.guarantorloansonline.co.uk/Blog.  

Bankruptcy

3 Reasons To Choose Chapter 13 Bankruptcy

Some economists say the recession is over, but many Americans are still struggling to feed their families while paying creditors. For some of these consumers, bankruptcy may be the only viable option. But before declaring Chapter 7 or liquidation bankruptcy, consider these three reasons to choose partial debt repayment under Chapter 13.

1. You’re much more likely to resolve mortgage-related problems under Chapter 13. Even the official United States Bankruptcy Court website recommends Chapter 13 above Chapter 7 if you hope to resolve past-due mortgage problems and keep your home. If you go for the Chapter 7 option, you’re much more likely to outright lose your home. In Chapter 13, court officials and your mortgage lender are much more likely to work with you to resolve a past-due mortgage problem and come up with an amenable solution for both you and the lender that doesn’t involve home foreclosure. Remember, most lenders would rather not deal with foreclosure due to the expense, red tape and potential for serious profit loss.

2. Your credit suffers less long-term damage when you choose Chapter 13. Chapter 13 is noted on your consumer credit reports for seven years from the date of filing, while Chapter 7 cases reflect for 10 years from the date of filing. Since you’re partially repaying your debts for three to five years under Chapter 13 and can’t legally get new credit without court permission, the wait to become credit-worthy again is significantly shortened with the Chapter 13 option.

3. Your ego may be less bruised in Chapter 13. No bankruptcy is easy and Chapter 13 is no exception. No matter what option you choose, you must open up your personal and financial affairs for court officials and in some cases, your creditors. Filing bankruptcy is nothing to be ashamed of, though internal feelings of shame and guilt are all-too-common among some people who have had to file bankruptcy. With Chapter 13, you can reassure that inner critic by reminding it that you did not take an easy way out and are repaying your creditors to the best of your ability.

    If most of your debt problems are related to federally-issued student loans, tax bills less than three years old, court fines, child support or alimony, then Chapter 13 won’t help you. No type of bankruptcy reduces or cures these types of “priority” financial obligations. The same rule of thumb applies to debts incurred due to illegal activities like drunk driving. If you’re embroiled in a struggle against one or more of these debts, contact someone involved in the situation such as an Internal Revenue Service or family court clerk.

    Stephanie Mojica is a writer for Quizzle.com, where she specializes in helping consumers with debt management and financial planning. She’s also a business success and prosperity coach and author of the free report “5 Business Prosperity Secrets.”

    Business

    eCommerce is the New Mall

    These days, most businesses have an online presence, and a large portion of those businesses are utilizing eCommerce. This is the trend, just as it is the trend for consumers to shop online versus buying something at the mall. Therefore, small businesses are adjusting by launching their stores online. They use tools that will make the process easier for them. Some of the tools help them to build websites; do marketing via email, track ads, and set up online shopping carts.

    Website Builder

    Small business owners have noticed the success of Amazon, Ebay, and other online stores. They also want to have the same results, so they use tools that will help them get there. One of these eCommerce tools is website builder. You will get a professional looking standard store template. You do not need to have any technical skills. Just drag and drop the store designs where you want them.

    You can use the simple WYSIWYG customization, or the most advanced customization using HTML/CSS/Javascript. There is also an SEO product category and page URLs. You will also get to create keyword search using defined SEO meta-tag descriptions. This site builder includes storage, and it also has a mobile store.

    Marketing via Email

    You can use email for your direct marketing to communicate with your prospective customers or long time customers. You use this form of communication to build loyalty and to have repeat business. With email marketing, part of the tool includes unlimited autoresponders, unlimited follow-ups per autoresponder, and you can broadcast email messages. There is a monthly email limit. You can use autoresponders geared to a particular product.

    Additionally, you can set up the emails to have your recipients automatically subscribe or unsubscribe. You will get a delivery and open rates for your HTML messages. When subscribers opt-in and remove, you will get it tracked in real time. Each autoresponder is set up to have its subscribe-by-email. You can also send personalized messages to your clients.

    Tracking Ads

    With ad tracking, you can use online advertising platforms. The tool helps you to set up a URL that will track the ads that you place. When someone reads the ad and clicks it, they will get taken to whatever site that you have designated for the URL.

    You will know when a visitor has clicked on your URL. You will also know from where the visitors came. The tracker will tell you from what country, the search engine used, and also if the user clicked on a computer or a mobile phone. You will know the exact time that it occurred and also the total amount of hits that your URL has gotten.

    Shopping Cart

    The eCommerce tool also provides you with a website shopping cart. You do not have to be an expert techie to use the online shopping cart. You also do not have to install software. The shopping cart is secured and Certified HTTPS/SSL. You will have admin access that is safe and secure. You also get to accept payments in any currency. You can also upload bulk products. You can track inventory. You get to export orders to QuickBooks and several other options.

    In conclusion, to run a successful online store, you will need an eCommerce tool that will help you to build a website; do email marketing, track your ads, and also help you to set up an online shopping cart.

    Outsource

    Outsourcing Just Got A Lot Better

     

    safe

    A safe really doesn’t have anything to do with this post but it was either this or a picture of a condom…I probably should have picked the condom.

    This is a little long, so if you only want the point, scroll down to where it says “The Point”

    Sometimes there are things in life that we have to do but don’t want to do them. But since you didn’t come her to have me tell you to do stuff you don’t like, outsource those tasks. It’s easy and very cost efficient.

    I’ll go into the intricacies of outsourcing another day.

    Let me start off with an experience I had with outsourcing with 2 different companies.

    The first company I started with was Elance.

    I decided to hire someone to write content for one of my niche sites. Side note, in my experience, don’t outsource content to a country where English isn’t the first language unless you want to edit a lot. It is cheaper but it’s for a reason.

    Anyways, so I had them write the articles and I had to have them rewrite several of them because they sounded horrible.

    Long story short, I just accepted the rewrites even though they weren’t great because I knew it wasn’t going to get better, I gave them a low review, and then they gave me a low review. Awesome!

    With that, for my next project I decided to switch to another company that I love and use now, oDesk.

    Even though I use them I now, I still had a bad experience (which is what this article is about).

    I wanted to get some SEO work done for this site (This experience is what made me decide to learn as much as I could about SEO).

    One of the applicants didn’t have much experience on oDesk, but he was from Orlando, where I live, and he had a website for his SEO firm. So I decided to hire him and when he started working on it, I noticed on my site statistics that someone from Cape Town, South Africa visited several of my old posts.

    A little bit later the guy contacted me saying he was done and sent a file over but it wasn’t the SEO, he accidentally sent me HMA which is an IP changer so it looks like you’re in a different country. He then proceeded to say he sent the wrong file and then he sent my the actual file and asked if I could pay him through PayPal instead of through oDesk.

    Needless to say I put all the pieces together and I had an OMG moment when I realized I was lied to. Even at that point I knew a little SEO and knew that this was awful work. I did pay partially upfront, but because it was awful work and he asked for outside payment (which is against their terms), I reported him and ended up not paying the rest of the money.

    Lesson learned, don’t hire people that don’t have any oDesk experience, interview them, and/or don’t pay upfront.

    Fast forward to today and I’ve had several great experiences with them and love their customer service. Plus they have a program that takes pictures randomly of the screen of people working for you hourly, pretty cool.

    The Point

    Anyways the point I’m getting to is that recently they rolled out a new program called oDesk ID Verified.

    It is currently only optional but contractors can submit a photo, photo ID, and utility/bank statement to become verified. That increases the amount of applications they can have active. It’s a great safety feature that would have helped out my situation with the guy from Africa.

    I think this is a great program and will really help get better quality workers and less scammy folks.

    So once again, oDesk pulls through. This is just another reason for me to use them, and I highly recommend them to you.

    Who do you use when you outsource? Do you have a horror story? What are your tips for getting quality contractors?

    Let other people know about how much safer outsourcing is by Tweeting and Facebook sharing this post.