• Pay the mortgage bi-weekly.  If you pay a monthly mortgage, you may be able to reduce the number of payments by checking with your lender to find out if they have a bi-weekly payment plan (you pay the same amount, only half of the mortgage is submitted mid month).  Still, in order for this type of arrangement to fully work in your favor, the lender must immediately credit the mid month payment (so be sure to carefully explore the lender’s guidelines).  The result if done properly?  Impressively fewer mortgage payments!  For example, a 30-year loan may take only 24 years to pay off!

• Visit the library. So, you enjoy reading, watching movies, and even downloading books onto your e-reader?  Then dust off your library card (assuming it’s dusty) and borrow the items for free.  Taking advantage of town benefits always makes sense, but it especially prudent when money is tight. A bonus?  No one will rush you out the door if you want to stay for a while.  You can peruse the book shelves, sit and read for hours, or grab a novel and run; it’s completely up to you.  An added perk?  You can extend the length of time you have access to the books you checked out simply by calling the library.  And movies?  There’s typically an impressive collection, although the borrowing window is generally much shorter.

• Entertain at home. Years ago, friends loved to congregate at each other’s homes and enjoy an evening of fun.  They shared a cocktail or two, played bridge and other interesting games, or just chatted about worldly events while savoring wine and munchies.  In recent years, meeting up outside the home for dinner and entertainment has become more fashionable, but this can be pricey, especially if it happens regularly.  In fact, many restaurants charge in the vicinity of $10 for one glass of wine.  Multiply that by a table of 4, and there goes $40 just for drinks (and that’s not including the tip!).  Then, if bowling, dancing, or movie tickets are thrown into the mix, the evening becomes even more expensive.  Because of this, consider bringing back the entertainment patterns of the past, at least some of the time.  You will not only save some money, you’ll also have a lot of fun!

• Leave credit cards in the drawer.  At one time, people relied on cash.  If they didn’t have the money to buy something, they didn’t buy it.  Today, that mentality is passé.  What changed?  Well, credit cards are relatively easy to get and even easier to pull out.  And, where individuals used to have one card they carried with them on special occasions, countless people today carry multiple cards and use them freely.  As we know, the funds do not have to be sitting in the bank to cover the purchase because the bill doesn’t arrive until the following month.  Nevertheless, once it does come, some cardholders pay only the minimum due, and interest rates inflate the balance.  Yes, plastic is convenient, but it’s not always wise.  An exception?  When you use credit cards primarily for essentials and pay the complete balance at the end of the month (so interest does not accrue); credit cards can then work for you instead of against you.

Thriftiness makes sense, especially during uncertain times.  Carefully monitoring your cash flow can leave you feeling a little more secure.

What can we do?  Here are some money-saving tips.

• Downsize.  You have a three-bedroom home with a sizable yard and multiple bathrooms, but the kids are gone and it’s only the two of you?  Then consider downsizing.  True, it’s not a seller’s market right now, but if you’re using the proceeds from the sale to purchase a smaller property, then you will likely make out on the buying end.  An added bonus?  Fewer square feet means lower property taxes, lower heating costs, and a lower electric bill.

• Dine out less often. Eating out is kind of fun because you are waited on, you have so many food items to choose from, and you don’t have to cook.  Still, frequent restaurant stops can add up.  If this is an area you feel you can compromise, make an effort to dine out less often.  Case in point?  If you eat out four times per week, try to cut it down to two or three.  If you eat out twice a week, attempt to go out only once.  It’s amazing the amount of money you can save when you dine in.

• Redevelop your wardrobe. Some people love buying new clothes, but this can get expensive, even when the items are on sale.  A thought?  Stay away from stores as much as possible and keep your good-condition clothing clean and ready to wear.  For example, a dark-colored suit, little black dress, brown pants, and gray skirt are all pretty universal.  Instead of buying replacements, spruce up what you already own with alternating accessories.  Rotate the shirt, belt, jewelry, tie, etc., so every time you wear the outfit, it looks fresh and exciting.  Even coats we’ve had for years seem more thrilling when paired with changing scarves.

• Go economical. If your car is paid off and running well, you probably don’t want to invest in another, even if the gas mileage isn’t so great.  However, when it does come time to trade in your vehicle, search for a car that is good on gas.  Filling a tank these days can cost in excess of $70.  If you drive 300 to 350 miles per week (and that’s how far your tank will get you), then you’re spending $70 a week on gas.  Yet, if you choose a car that goes 650 miles on a tank of gas, you’re spending $70 every other week; and that’s a savings of $140 a month!  Even some luxury automobiles now offer impressive gas mileage.

• Resist impulse purchases.  We live in a consumerism environment, and little is going to change that fact.  Still, we control of our finances, so there are certain things we can manage.  If you find yourself regularly drawn to gadgets, golf balls, software games, clothing, books, and other types of goods you may not need (or already have), wait a day or two before making the purchase.  Sometimes when we pause, the merchandise no longer looks as desirable.  Even if we rationalize the item is only $10, $10 multiplied by twenty items we could have done without equals $200!

There are many ways to cut back in harder times.  And, once we get used to the newer behavior, many of us adjust quite nicely.

Next time we will continue with some additional money saving tips.   But until then, enjoy the foliage!

riders.

Annuity income is determined by different factors.  Some contracts are set up to provide retirement income for a specified period, some are constructed to supply retirement income for life, and certain plans even afford income to beneficiaries when the investor passes away.  The specifics vary from one contract to the next.

Case in point?  The fixed annuity.  Investors have a good idea as to the minimum income they will collect, but they may only receive payments for ten years because of the way the contract is written.  However, another fixed contract could provide an income for life.  Even so, a variable annuity contract may go kaput (meaning the income is gone) after a short time because of poor investment choices and/or a market plunge.  Bottom line?  Annuity income is determined by the particulars in the agreement.

Riders typically provide security and peace of mind, mainly for variable annuities.  There are different varieties, but the objective is mostly to protect the investor against outliving his or her assets.  Let’s look at two common types.

• Guaranteed Minimum Withdrawal Benefits.  This rider guarantees that the original payment for the variable annuity (hypothetically, $70,000) will be paid in a series of withdrawals independent of how well the investments are performing (as long as withdrawals do not exceed the guaranteed yearly amount).  So, if you are receiving $6,000 per year, you still receive $6,000 per year.  Sound fair?  Perhaps.  Still, if the investor passes away shortly following the beginning of the withdrawals, then the rider cost may not be realized (and riders can be expensive!).

• Guaranteed Minimum Income Benefits.  In simplistic terms, this rider allows the contract to pay a guaranteed minimum income regardless of how well the variable annuity is doing.  For example, if an individual is receiving roughly $6,000 per year in income because of favorable returns and problems then occur within the investment, the individual still gets a minimum income (theoretically, $5,000 yearly) for the remainder of the contract.

There are additional dynamics to riders besides the ones listed above; subsequently, it is best to do your homework.  Annuities can be complicated to understand, and riders may compound the confusion.  This type of investment can be very beneficial for certain investors and all wrong for others.  Therefore, it is always wise to seek the counsel of a trusted financial advisor.  Protecting your retirement income is extremely important, especially in these uncertain times.

So what are annuities?  They are products that take the form of insurance contracts.  How do they work?  Essentially, the investor gives an up front amount or periodic payments to the insurance company.  In return for the payment/s, the insurance company allocates the investor an income.  The income can be deferred, start immediately, be paid out in intervals (e.g., monthly) or even be assigned in one lump sum; there’s a lot of flexibility regarding distribution.

Annuities fall in to two categories: fixed and variable.  Let’s briefly look at both.

• Fixed Annuity.  Fixed annuities have a type of certainty attached to them in the respect the investor has a firm grasp on both the minimum interest rate and the dollar amount he or she will receive.  In this situation, the insurance company makes the investment decisions.  Fixed annuities are often referred to as guaranteed because the insurance company assures the investor he or she will be paid a fixed income independent of asset performance.

• Variable Annuity.  Variable annuities differ from their fixed brethren in that the investor makes the decision where to put the money: mutual funds are a common choice.  Because the investor is in control, the insurance company does not guarantee the income amount.  Because of this, income varies, often dictated by how well the investment is performing.

Okay, what’s appealing about annuities?  Well, they’re certainly not for everyone.  However, for the right individuals (e.g., those who has the cash to invest), they have benefits; in particular, they allow for money to be tax deferred.  Therefore, the payment the investors put in, and the interest that accumulates, need not be declared to the IRS until an income is drawn.  By that time (typically retirement age), people are usually in a lower tax bracket.

And negatives?  There are a few.

1. Annual fees.  Fees can be high, mainly in variable annuities.
2. Commissions.  Brokers authorized to sell these products generally make a healthy commission.
3. Surrender penalties.  An investor who wishes to cash out of the investment, especially if the decision takes place shortly following the product purchase, will face substantial charges to do so.

This all sounds confusing?  It can be.  A trusted financial advisor or investment expert should be consulted before an investment of this nature is made.  Next week we will look a little more closely at annuity income and an optional attachment available on some annuity products called Guaranteed Lifetime Income Rider (what?).  Until then, though, think spring!

Groupon is an Internet-accessible site.  Interestingly, it got its name from a Switzerland city; a major tire brand is sold there at deeply discounted prices.  The company began in Chicago in 2008 and has over 300 employees at its headquarters.  In addition to the Chicago location, an on the rise office is also located in Palo Alto, CA.

Groupon asserts that it really wants its customers to love the discount coupon experience; subsequently, all features of the deal are explained up-front.  How would someone get a coupon?  By accessing the Groupon site, signing in, and checking out the “deal of the day.” The featured promotion might be something like $50 worth of merchandise at a recognizable sports store for a cost of $25.  A certain number of people must buy in to the deal for the transaction to be consummated.  If the minimum number has not been reached, then the deal is canceled.

What else is there to know?  Here are some details.
•    The collective power of group buying allows companies like Groupon to sell services and products at a discounted price.
•    If you like the deal on the Groupon site for that day, then click buy.  If enough people buy in, your credit card is charged.  If not, it will not be charged.
•    Groupons can be given away as gifts (unless otherwise stated).
•    You should use the entire Groupon amount when you utilize the service (e.g., $50 worth of sports merchandise).  Vendors typically will not issue a store credit if there is a leftover balance.
•    If a business shuts its doors and you are holding on to an active Groupon, the money you paid will be refunded.
•    Groupons usually expire at some point, so be sure to check the expiration date.
•    If you send a Groupon referral to a friend and he or she makes a purchase within three days of clicking on the referral link, you will get a $10 credit in your account (you can refer more than one person).
•    Certain deals may have stipulations or blackout dates, so be sure to read the respective conditions.
There are other social buying Web-sites in addition to Groupon with their own nuances and rules.  Companies like BuyWithMe (founded in Boston), SocialBuy, and LivingSocial also offer discounts on assorted services and goods.  Naturally, businesses such as these may take a while to become accepted by some people, but overall they have amassed an impressive following in a relatively short period of time.

Group coupons?  Perhaps they warrant a look or two.

So which updates generally pay off?  Here are a few.

• Outside Grooming.  This undertaking is sometimes simple and often produces a noticeable improvement in appearance.  Why?  Because the yard is the first place people see when they visit.  To economically beautify the outdoors, tidy or remove any clutter hanging around the lawn or porch.   If you do not have a shed to store items like gardening tools, rakes, and shovels, there are outside storage bins that can be purchased and inconspicuously placed.  Another suggestion?  Stain or paint a tired fence, the visual change is immediate.  A final low-cost thought?  Groom the bushes, it’s kind of like getting a new haircut: everyone notices.  Naturally, if the house is in need of painting or the vinyl siding could use repair, the outlay will be more substantial.  Nonetheless, if it is within your budget and feels right, then get at least three estimates (and references) and choose the one that seems best.
• Indoor Painting.  Occasionally we become immune to faded walls if we look at them long enough, but others tend to notice as soon as they walk in.  Consequently, a fresh coat of paint can make a huge difference in exhibiting a clean feel.  What color is best?  Neutral tones are wise if you plan to sell your home in the not-too-distant future.  However, if you are only out to please yourself, then go with bright red if you wish.  Keep in mind that an undercoat is often needed, but today there are paints that do not require this preparatory step.  They are somewhat more expensive, but they could save time.

• Renovate the Bathroom and/or Kitchen.  This kind of improvement can be easy or complicated, depending upon the condition of the room/s.  In some situations, particularly ones where the surroundings are completely outdated, a thorough overhaul will not only be amazing but may influence the sale of your home when the time comes.  Nonetheless, some people are simply not in the position to make a considerable investment.  In this type of situation, perhaps consider cabinet refacing, new wallpaper or paint, and an upgrade of fixtures (e.g., sink, knobs, toilet paper holder, towel rack, faucet/s).  The project will not be nearly as costly but still will produce positive results.

Renovations can enhance the way you feel about your home, and certain updates return the investment when you sell the property.  Naturally, if you feel compelled to choose designer tile imported from exotic locations, this may be an exception.  For example, installing $60,000 worth of pricey marble in an 8 by 12 bathroom may satiate your aesthetic taste buds but probably will not pay you back dollar for dollar.  Still, if the project makes you happy and you have the resources to indulge, reward yourself.  In short, keep within budget (and have fun!).

So what are some mutual fund positives?

1. A specialized individual follows the investments (so you don’t have to).
2. Not a lot of money is needed to get into some funds.
3. Funds are usually diversified (meaning investments are spread across different companies or areas).
4. Funds are generally easy to get out of should the investment be needed.

With positives, though, usually come some negatives.  Here are a few.

1. Money managers have control, so once an individual chooses a fund, he or she has little say as to where the money is going.
2. Fees and/or sales charges sometimes accompany this type of investment.
3. Not all fund managers have the same skill level, so some are better than others.

Are all mutual funds the same?  No, there are different kinds.  A few fund types are listed below:

Growth Funds. These funds focus primarily on companies with the highest promise of upward mobility.

International Funds. This type invests in companies abroad in the hopes of producing growth.

Bond Funds. Often a safer type of fund (at least in the short term), bond funds invest in government, corporate, or municipal bonds.

Index Funds. This type focuses on specific stock indexes, such as the Dow Jones.

Money Market Funds. Although sometimes not producing the highest return rates, Money Market Funds tend to present the safest environment.

So you think you might be interested in a mutual fund?  Well, it is important to do your homework.  Research the fund’s history to better understand its record.  However, just because a fund has made impressive returns in the past year or two, it does not necessarily indicate it will repeat the stellar performance in the next two.

Another thought?  Access data from third-party companies, such as Morningstar, which analyze a medley of investments, mutual funds included.  Such businesses provide comprehensive information concerning market trends and how well specific investments have performed over time.

So, are mutual funds completely safe?  No, similar to other types of investments, they involve some degree of risk.  Nevertheless, they can also produce impressive gains.

Mutual funds are certainly not for everyone, but then again, what is?

While few people can say they are guaranteed a favorable monetary future, there are some steps individuals can take, similar to the ones below, that might bolster their positioning.

IRA.  An Individual Retirement Account is a relatively easy way to accrue money for the future.  The plan is tax-deferred, and many individuals can contribute up to $5,000 per year (those over 50 may be eligible to put in an additional $1,000).  There are different types of IRAs: let’s briefly touch upon two.

• The Traditional IRA defers taxes until funds are withdrawn (at which time taxes are applied to the amount taken).  Age 59 ½ is the earliest that someone can begin withdrawing without a penalty.  A 10% fine may apply if funds are taken out before the minimum age requirement.
• A Roth IRA is different than the Traditional IRA in that withdrawals are typically tax-free (to be eligible for a Roth IRA, 2009 guidelines indicate that joint filers must not make over $176,000, and single must not exceed $120,000).  A Roth IRA is especially beneficial to people who might expect a higher tax bracket in retirement.

Pensions.  Pensions can come from different sources and indicate payments a person receives upon retirement.  Still, a number of people tend to associate pensions with Defined Benefit Plans.

Defined Benefit Plans are chosen by the employer.  They are noncontributory (meaning the company sets aside a certain amount of money on behalf of the employee).  A fixed income, based on a formula of earned wages, coupled with other variables such as number of years employed, determines the retirement dollar amount.  DB Plans are less popular now than in prior years because they are expensive for companies to manage.

Defined Contributory Plans appear more popular today.  The employee contributes a portion of his or her income (typically tax-deferred), and the payout is based upon the amount put in and success of the respective investment.  Unlike Defined Benefit Plans, the income from Defined Contributory Plans is not set (meaning that if your investments go down, your pension might, also).  A perk?  Should individuals leave the company, they can usually roll their money into an IRA (or transfer it to the new employer plan).

There are other income types in retirement such as Social Security.  The Social Security Administration informs people over 25 (via mail) as to current and projected estimates of their benefits.

Savings and stock investments are also crucial in senior years.  Instead of spending $100 now on an item you really don’t need (assuming that sort of thing happens), maybe consider adding the money to your bank account for later.

Everyone hopes to be financially secure in retirement.  Some thoughtful planning (and a good financial advisor) can help make that hope real.