How to use your CD’s for Savings
The advantages and drawbacks of putting your money in a certificate of deposit
From savings accounts and money market accounts to stuffing cash into a jar in the cabinet or beneath the mattress, there are a wide variety of ways to save your money. These options offer varying advantages and drawbacks, but what they all have in common is the idea that you can withdraw your money as soon as you wish. If you have funds that you want to squirrel away without the temptation to dip into them, consider putting the money into a certificate of deposit.
What is a certificate of deposit?
According to NerdWallet’s Tony Armstrong, a CD is a kind of savings account that typically offers a fixed interest rate and fixed maturity date. Insured by the Federal Deposit Insurance Corp. for up to $250,000, CDs are considered extremely low-risk savings alternatives. The advantage to leaving the money in your CD for a full term, which Armstrong says typically ranges from three months to five years, is that it will accrue interest over that period, offering a significant return on your investment.
Saundra Latham, contributor at The Simple Dollar, writes various different types of CDs are worth considering. A traditional CD is the most common variety and offers fixed interest rates, but if you prefer a bit more risk you can also opt for a variable-rate CD which will adjust to the market rate. There is also a bump-up CD, which allows you to opt into a higher interest rate if one becomes available during your term. If you have a larger amount of money to put away — think six figures or more — a jumbo CD pays out a higher interest rate than the traditional option.
When a CD won’t work
A CD requires the full term to pass before you can withdraw funds (without paying an exorbitant fee), so it might not be a sound option if it is your only means of savings. CDs are attractive because they tend to offer higher interest rates than savings and money market accounts, but they don’t offer the same flexibility when it comes to making sporadic withdraws for emergency situations. Margarette Burnette of NerdWallet suggests a high-yield savings account might be a preferable alternative if you aren’t positive you could go for a fixed term without the money.
A CD also might not be your investment of choice if you want a higher risk-reward proposition. CDs are generally safe additions to your portfolio if you want something reliable to fall back on, but if you prefer more aggressive investments with potentially bigger payouts, CDs likely aren’t going to be the focal point of your financial strategy.
How to maximize your CDs
The “laddering” technique is a common approach to getting the most out of a CD. The Wall Street Journal’s how-to guide on CDs puts it as such: “Let’s say you want to invest $15,000. By laddering, you would invest $5,000 in a one-year CD, $5,000 in a two-year CD and $5,000 in a three-year CD. Then, each time one of the three CDs matures, you would either take the cash or re-invest it in another three-year CD to keep your ladder in place.”
This strategy enables you to continually collect interest and opt into higher interest rates if they are available at the close of a term. If you keep this method going continuously, you will allow yourself the option of having a chunk of your CD savings at your disposal every year. This way, you can decide whether you need the money for an emergency or investment opportunity while the other CDs in your portfolio continue to accrue interest.
Investing in CDs is a safe, solid financial decision if you have the patience to bear it out. To determine whether a CD is right for you, talk to your financial advisor to learn more about the risks and rewards.
How to Adjust Your Savings When Your Income Changes
Have you ever heard the phrase “The more you make, the more you spend” If you have and live by this mantra then you are doing it wrong!
An increase in your income does not mean you need to up your shopping list, it means you need to increase your savings.
Basically, if you have been making living on $45,000-a-year and you have been paying rent/or mortgage and paying your bills on time, there is no need to increase your spending. We are not saying you cannot treat yourself once in a while. However, you do have to make smart decisions and be conscious of the fact that a big emergency fund matters and can help you when you need it most.
Keep the following tips in mind if you are getting a raise soon:
- Do not spend more
If you earn a raise or bonus, congratulations you deserve it!
Just be careful, most people become trapped in a spending circle with no money saved up for the future. Take a look at the goals you are trying to reach, be ready for unexpected expenses that may come up and be comfortable without exceeding your means.
- Grow or Create an emergency fund.
Your emergency fund should cover a minimum of 3-months expenses. A good emergency fund covers 6 months of expenses easily. Make this one of your goals! Do not use these funds for a vacation, a wedding or leisure time. An emergency fund, as the name suggests, it’s only for emergencies. For example, an emergency fund can be used for an unexpected hospital bill, car issues or job loss.
- Create a separate savings account and make the funds transfer automatically
If you don’t see it, then you don’t need to spend it. Additionally, if your income shirks, the savings you have should help you carry you thru. A BrightStar Savings Account is completely FREE and it does not require a minimum when it’s coupled with a FREE Checking Account. What better way than to save money in a reliable credit union?
Do not forget the essentials of saving, living in moderate means, and to plan accordingly.
How to save money on your 4th of July BBQ
If you are lucky enough to be off today, you are probably enjoying the day with your friends and family. After all, there is nothing better than a good food, music and fireworks. However, sometimes the joy becomes worry by the realization you spent over $500 on a day of burgers.
To try to avoid this issue, help you save and help you keep a good memory without thinking of money, we have a few tips for you.
Tip 1: Strategize the Way You Buy Food
Let’s face it, if you are having a backyard BBQ for multiple people your bill will be sky high. Buying cheaper meats can help keep your guest and wallet full. We are not suggesting you buy expired items, but replacing foods like fresh ground beef with hotdogs can be reasonably cheaper and just as good.
Another way to save money is to buy meats in bulk. Costco and Sam’s Club are big money savers and can give you extra coupons during this time. Additionally, do not be afraid and ask your friends to help you with the extra items like chips, salads and beverages. Most of them, will just be happy to have a good day.
Tip 2: Dollar Store Decor
American-themed table decorations can often be bought from dollar stores and your guests probably won’t even notice the difference. Balloons can also be bought inexpensively so you can buy some packs in red, white, and blue and use them to decorate the party area in patriotic colors. You don’t necessarily need to go overboard with the decorations and they can sometimes have greater impact if you use them more sparingly.
Tip 3: Enjoy local fireworks.
If you live near a park, this one should be a no-brainer. After you eat and have fun with friends, take a walk to the local park. Most of the time, these parks will have FREE entertainment such as live bands, pretty fireworks, and good dancing. Not only will you have fun, you will also get to meet some great people around the area.
Happy 4th of July!
3 Ways to Help Your Teens Build Good Credit
When your teen finally takes the big leap and moves out of the house, they’re going to need a solid credit score for a lot of life steps: renting an apartment, getting a loan or finding a good deal on insurance.
For that reason, it’s important that teens build up their credit scores before they move out. There are a few ways you can prepare them for this in the years leading up to graduation.
- Make sure they have a checking account and debit card to go along with it
Getting your teen started with their own bank account is a significant step in building their credit score without ditching their safety net. A teenager under 18 years old can still sign up for a debit card; they just need a co-signer. Since you are co-signing on the card, your personal account will be linked to your teen’s in case of an overdraft. With this checking account and debit card, you should also teach your teens the importance of managing money well.
- Teach them the credit card basics
Credit cards are a bit more complex than debit cards, so it’s important to sit down your teen and help them understand the basics. Signing them up for their own credit card is a bigger step than signing up for a debit card, but it’s an additional step that will help boost their credit score — assuming they pay the bills on time and in full. U.S. News & World Report contributor Amelia Granger says that the most critical skill a teen can learn is to pay their bills in full, even if that means starting with a smaller credit limit. Make sure you are monitoring your teen’s bills to confirm they’re not damaging their credit score rather than building a good foundation for the years ahead.
- Help them open a Secured Credit Card
A Secured Credit Card is the perfect card to teach your teen how to properly manage money. It does this by not allowing them to use the money they don’t have, instead locking in a minimum amount of $500 they must use as if it were borrowed money from the bank. This card will help them improve their credit score and after a year they will be able to apply to a regular credit card.
Responsible money management is tough to practice if you learn it late in life. Your kids will be much better off by teaching them good financial practices.
How Can You Help Your Parents Manage Their Finances?
As the years pass responsibilities shift. One day you may wake up and realize you have become the caretaker of the family. Your parents may no longer have the ability to make reasonable financial decisions and you have to step up to the plate.
Research shows that your ability to make financial decisions peaks at the age of 50 and can rapidly decline after the age of 70. However, it can be rather difficult to convince your parents you (the person they raised) can teach them a thing or two.
Instead of changing their mind, try to encourage them to consolidate and simplify their finances. How?
Lower the amount of opened accounts
Help them bring their money to one financial institution and one brokerage firm. Then help them reduce the number of credit cards they hold. Ideally, you want them to keep 2 credit cards; one for groceries and one for automatic payments.
Pick a Power of Attorney
Having power of attorney allows you to have decision over your parents’ financial matters. It is normal for an elderly parent to neglect your recommendations. They see you as the small person they raised and forget you are a grown adult. A power of attorney will make your life a little easier in case something happens to them. You need to have the time to go over all of their accounts, insurance policies and balance sheets if necessary. It takes great responsibility to have power of attorney. All decisions must benefit your parents and you must be involved in their lives entirely. It is also important to be transparent about the decisions you make with your siblings, parents, and all parties concerned.
Analyze their Investment Accounts
You have to make sure only 30 percent of your parents’ money is in stock. The rest of their money should be in corporate and government bonds. The reason behind this statement is that your parents need to have immediate access to their money and do not have the time to make up for any losses.
Lastly, if your parents have plenty of money to care for their needs and want to leave some assets behind to benefit grandkids, consult a money manager. It is better to get seek professional help in order to avoid any future issues.
How Can You Save on Your Electrical Bill?
Living in Florida has its benefits. You never have to shovel mountains of snow; you never pay an individual state income tax and can enjoy the beach all year-round. However, the never-ending summer leads to the excessive use of air conditioning. Therefore, your electric bill keeps climbing.
If you are looking to reduce your electric bill and save money, our tips will certainly help you.
- Never leave your electronics turned on.
Most of you know this, but do you actually turn off your devices before leaving the house?
Computers, TV’s, coffee makers, and gaming devices should be turned off when they aren’t being used. That means you don’t have to keep them on when you are in the house showering, cleaning or sleeping either.
- Spend time outside.
The more you are outside, the less you will need to use your AC. We are not saying to spend money going out (that will defeat the purpose). You can go to a park with your pets, walk around the beach, or visit a friend. If you aren’t home you don’t need to have the AC on. If you have pets you have an excuse to take them out, and leave it on for them while you are at work.
- Invest in a smart thermostat
A sophisticated thermostat can help you adjust the temperature of your home according to your individual routines. You can divide your day into blocks and set desire temperatures for each. For example you can adjust your settings to a higher temperature while you’re at work and lower them when you return from work automatically. A smart thermostat can trim cooling cost by 15%.
- Insulate hot water pipes
According to the Department of Energy, insulating your hot water pipes can reduce your electricity or gas bill $12 annually. Insulating your hot water pipes is inexpensive– especially if you have duct tape at home.
Stop overspending in your electrical bill change your habits and start saving money.
4 Ways to Avoid Over Spending During the Weekend
If you are smart with your money, chances are you don’t spend much during the week. However, it all gets turned upside down when the weekend comes. You may feel the urgent need to go out, buy new outfits, and have a few drinks with friends, which leads you to spend all you saved up during the week. This is not terrible unless it becomes a habit. Lucky for you, we have some tips that will allow you to have fun during the weekends without overspending.
- Make good use of free recreation.
Living in Florida gives you the advantage of having beautiful outside areas where you can have fun, build memories, and relax. Take the beach for example- if you’re smart all you have to pay for is parking. Bring a cooler with some waters from home, food, and a beach ball and enjoy. If you want some drinks, buy them ahead and add them to the cooler. You will be saving a lot more money buying drinks ahead, than buying them at local hangout spots.
If you aren’t a beach person, you can try the same concept at a pool, or even a park. The outdoors can be really fun and not terribly expensive. Take advantage!
- Don’t go shopping out of emotion
We know you probably own a million outfits, so that millionth and one is probably not necessary. Get creative! Change accessories, do something different to your hair, make it work. Unless you absolutely need it, try to avoid it. If you do give in, look for sales and make sure it is something you will wear more than once.
- Take your credit cards out of your wallet.
Yes, budget yourself ahead of time by planning out your weekend. The rule of thumb is to spend the money you have in the bank only. Not the imaginary money you can have by buying extra with your cards. That is a big NO.
- Have a get together at home
If going out to watch the game is where your money goes, try to invite your friends over and watch the game at home. Everyone can contribute food and drinks and you can have just as much fun.
Remember, you can have fun without breaking the bank. Use your member discount if you can. Have fun, just do it in a smart way.
6 Ways to Maintain and Save
When we’re looking to save money, the first thing most of us do is scrutinize our every purchase to see where we can squeeze out unnecessary spending. After all, a nip and a tuck here and there can add up to a bundle of savings over time! What many forget, though, is the cost savings that can result from proper maintenance of the things we already own – especially the really high-ticket items, like a home and car, which can be costly to repair and even more expensive to replace.
R. L. Polk reports the average person holds on to a new vehicle for just under six years. That’s longer than it was before the Great Recession, but with the average new car price topping $33,000, it makes good budget sense to find ways to extend the ownership period as long as possible. Just think of the boost it would be to your retirement savings if you bought just one fewer car in your lifetime, and instead directed that cash to an IRA or 401k account!
Here are some simple things you can do to keep your car and other stuff in good shape for the long haul.
- Get Regular Oil Changes
Be sure to read your vehicle’s owner’s manual to find out how often oil changes and other preventive maintenance is recommended. Nobody knows more than the manufacturer about what your car needs to continue running properly. Plus, not following the manufacturer’s recommended maintenance schedule could affect your warranty. - Check Tires Regularly
A flat tire’s not just inconvenient and expensive to replace. If not fixed promptly, a flat tire can lead to costly wheel damage. In addition to checking tire pressure monthly, have tires rotated, balanced and alignment checked regularly. Oftentimes, this regular maintenance is included in the warranty for new sets of tires. - Following Cleaning Instructions
If the tag says “dry clean only” believe it! Professional cleaning can add up, so you may be tempted to try laundering at home, but it’s a false economy if it means you ruin an expensive item of clothing. Instead, look at care instructions before you buy and decide then whether or not it’s a smart purchase. - Rotate Your Mattress
Some super-premium beds have different maintenance instructions, but if you have a standard mattress and box springs set-up, you’ll get longer life out of it by rotating it at least twice a year. If you notice sagging sooner, go with a three-month rotation schedule. - Replace AC Filters Regularly
A home’s air conditioning system is one of the most expensive items to replace if it goes bad. Twice-yearly maintenance is a prudent investment, and replacing filters regularly is really important since clogged filters can cause the system to burn-out prematurely. - Maintain Exterior Paint
Shabby and peeling paint doesn’t just make the outside of a home look unkempt. A proper paint job protects surfaces from the sun and weather, and helps ensure that cracks are repaired, preventing leaks and helping to keep destructive pests like termites at bay.
8 Amazing Ways to Avoid Binge-Shopping
It would great if we all made only rational, well-analyzed spending decisions. But none of us are robots. We’ve all made emotional buys at one point or another. Think back on things you bought because you had a rough day at work. Or maybe it was an argument that got you agitated. No matter the cause, purchases made on feelings instead of frugality can be rough on your bottom line. Here are a few ways to soothe yourself without draining your funds
1. Create “me” time
A In a lot of cases overspending happens because it gives you a sense of control over your surroundings. Instead of trying to grab control with money, take control of your time and your surroundings. Whether that means gifting yourself with a nice hot bath or time to work on that tinkering project in the garage, commit to unwinding on your own terms.
2. Connect with a loved one
Loneliness is another emotion that can turn you into a frenzied consumer. A call to a relative you haven’t spoken to in a while or even a spontaneous get-together with a friend can remind you of the wonderful bonds in your life.
3. Volunteer
It may sound strange, but in many cases the best way to help yourself is to work at making someone else’s life better.
4. Exercise
Scientists believe that for certain people splurge shopping releases the same amount of endorphins in the brain as skydiving. So if you are one of those people who gets a real charge out of filling a shopping cart, consider alternatives like going to the gym, walking or riding a bike to get your endorphin rush (if the plane and parachute are not available).
5. Enjoy nature
One of the best ways to get away from your problems is to, well…get away from them! Leave your connectivity behind and get back in touch with a favorite out-of-the-way spot.
6. Read
A little healthy escapism is always good for taking your mind off your day-to-day worries. Whereas passive media like television usually serves more as just a casual distraction, diving into a good book forces you to actively engage in the story.
7. Play
Be it with children or a pet, having some silly fun can shed a lot of stored up tension you might otherwise look to purge with shopping.
8. De-clutter
Because coming home to a place full of stuff can add to your stress level, give yourself a present and a future of increased serenity by hunting for items that can be donated or sold online or at a garage sale.
What is the 50/30/20 Rule?
The 50/30/20 Rule is the simplest way to create a budget. It helps you keep your spending aligned with your savings goals. This very convenient, especially if this is the first time you try to organize your finances. Once you know how to achieve a balanced budget, you can further customize this rule around your unique expenses and goals.
50% of Your Income Goes to Essentials
Start by setting 50% of your income to pay essential items such as rent, utilities, car transportation and housing. This might be a little high in the beginning but once you get the hang of it you will be able to customize your budget to your needs. For instance, some people live in high-rent areas, yet can walk to work, while others enjoy much lower housing costs, but transportation is far more expensive.
30% of Your Income Goes to Your Lifestyle
Your lifestyle is important and although you may need to sacrifice some luxuries, you need to splurge once in a while. Therefore, 30% of your income goes to personal expenses like travel, dining out, cable, and even expensive coffee. If you travel extensively or work on-the-go, your cell phone plan is probably more of a necessity more than a luxury. It is up to you to decide which items are consider personal and which you should cut-off.
20% of Your Income Goes to Savings
The last step is to designate 20% of your income to savings. This is for your future, for everything unexpected that may come your way. This is the category you should think about after your essentials and before feeding your lifestyle expenses. It is your “get ahead” section and you must give it importance.
You don’t need to make a lot of money to budget properly. The 50/30/20 rule is only the beginning, you will customized this rule when you become an expert at budgeting.