Donna Dratch reminds us to pay more attention to the way we spend and save. More importantly, the author reminds me to start getting back on track. It’s been a crazy summer of dating, going to shows, and just spending more money than I should have. I even “upped” the available minutes on my cell phone plan since I was on the phone quite a bit. Now it’s time once again to focus on earning and saving.
It’s inevitable that every summer I trade some of my savings for enjoyment, but the trick is to realize when it’s time to get back on track. Donna Dratch’s article has thirteen decent tips that I will try to keep in mind as summer winds down.
As this article from CNN/Money points out, you can’t plan your trip without knowing where you are at the moment. That relates to your financial plan, as well. Every once in a while, take a look and estimate your net worth. That will help you figure out what you need to do to get to whatever your goals happen to be.
According to the first chart supplied by the article, I am doing well for my age group. My net worth is significantly higher than the average for my range.
However, the next table (not pictured here) paints a different picture by going by salary range. Theoretically, individuals in my salary range have been there for a while and have had time to build up their net worth to try to beat that average. Maybe a year or two would be all I need, but I hope to break into the next salary range soon.
The Federal Reserve (“the Fed”) raised interest rates yesterday. That usually means that banks follow suit, raising interest rates in the loans they offer and some investment products, like CDs. I’m going to use this opportunity to change some of my cash investments into CDs at ING Direct. This bank already raised its interest rates on CDs, but it might do so again after September begins, or possibly after Labor Day.
I plan on waiting until after the holiday to lock in any new, higher rates, if ING decides to raise them again. I will take a portion of my emergency fund, currently in an ING Savings Account earning 2.2% interest, and use that money to build a CD ladder. It’s a little less liquid but I could be earning twice as much interest on a portion of that money.
Of course, if I have to pull money out of a CD, there is a penalty of half of the accrued interest. I should be okay if I leave some of the money in the cash savings account. Hopefully, I won’t have to draw from the CDs, but if I do, even with the penalty, I’m earning a good amount of interest— more than I would be if I left the money in a savings account from another bank, such as Wachovia, where my checking account is located.
I added a link in my sidebar to an Exceptional Blog called The Kirk Report. The author, Charles Kirk, appears to be an accomplished investor. For the last few years, the amount of time I’ve spent thinking about wealth expansion and making a comfortable living, I’ve been following the theory of passive investing, that is putting in money to invest in the stock market as a whole, with long-term goals. My IRA is in an index fund and my 401(k) mainly invests in funds that are close to indices of various sectors.
I’ve been thinking, with predictions of a much slower general market upturn abounding, that it may be time to put some research into more active investing. If I put enough time into it, there’s no reason I can’t do as well as others have in the stock market.
That is the temptation that draws many people to the stock market. The trick is to remain cool and intelligent. The key is doing research and not investing in a company solely because it feels good or I have a hunch about its future success. Anyway, it’s something to think about.