In the mail yesterday, I received a notice regarding a Comcast class action lawsuit. Apparently Comcast had settled in the case of Hart vs. Comcast of Alameda. The lawsuit claims that Comcast had promised and advertised specific speeds and unlimited Internet access, but had slowed down data transfer speeds for some users of ‘Peer-to-Peer‘, or P2P users.

Comcast agreed to credit some current and former High-Speed Internet service customers, up to a total of $16 million, minus settlement costs. Interesting (and somewhat landmark) case in the net neutrality debate. But this is a personal finance blog, so money is involved somewhere in this.

Who is Eligible to Get a Credit or Refund from Comcast?

You may be eligible if you live in the U.S. or it’s territories and either:

• Used or attempted to use Comcast to access a P2P service such as Ares, BitTorrent, eDonkey, FastTrack, or Gnutella between April 1, 2006 and December 31, 2008 and were unable to share files or believe your internet speed was slowed down.

and/or

• Attempted to but were unable to use Comcast to use Lotus Notes to send email between March 26, 2007 and October 3, 2007.

If you did not receive notice in the mail, you are probably not eligible for this.

What are the Terms of the Settlement?

If you submit a valid Comcast settlement claim form, you may receive a share of the $16 million, up to a maximum of $16.

Where do I fill out the Settlement Form?

www.P2PCongestionSettlement.com

Am I Signing Up?

I don’t know about this one. I’ve had an opportunity to sign up for 3 or 4 class actions over the last few years and the only one that seemed like it was worthwhile was the Transunion class action, where I received 6 months of free credit monitoring, including credit scores and credit reports, in addition to a possible cash payout. That was definitely worth signing up! For $16, and I don’t think I used any of those services, I would actually feel kind of weird about signing up for this one (despite not being a huge Comcast fan). But I want to hear your take.

Class Action Lawsuits Discussion

• Are you signing up for the class action lawsuit?
• If you are eligible, but choosing not to sign up, why?
• What other class action suits have you participated it, and what was the result?

Related Posts:

• How to Buy Glasses Online
• How to Get Comcast Discounts
• How to Negotiate with Comcast
• How to Get Rid of Cable
• Comcast Customer Service Sucks

Comcast Class Action Lawsuit: is it Worth $16? is copyrighted by 20somethingfinance.com without consent to republish.

So what are some realistic and strategic goals once you reach 30? I’ve been thinking about this a lot lately. The thirties are an interesting time period. Ideally, you start to advance in your career and begin hitting your peak earning years, you may have a house, start a family, and you generally have a completely different set of financial goals than when you do in your twenties.

Much like I did on my twenties post, I’ll cover some basic goals along with goals that would win you extra points. Remember, these are goals to strive for, they won’t be hit by everyone.

1. Retirement: Max Out your 401K

I’ve max out my 401K for the last few years and plan on doing it every year in my thirties. Why max it out? Well, for starters, if you’ve been doing it already, you know what it takes and should have no problem doing it as your income continues to grow. If you haven’t been, your thirties might begin to provide enough of an income for you to consider it. Don’t wait until your 40′s to start savings significantly for retirement. By then, it might be too late to use the power of compounding capital gains to have a huge impact by retirement.

Not sure what the IRS maximum 401K contribution is? Click that link to find out.

• Bonus Points: Starting to contribute to your IRA in your twenties should be a goal. In your thirties, there’s more at stake. In addition to maxing out your 401K, also try to hit your IRA maximum contributions by maxing out your traditional or Roth IRA.

2. Debt: Pay Off All Non-Mortgage Debt

This would include credit cards, auto, and other high-interest unsecured loans as well as student debt. High-interest loans are the equivalent of a dam that’s about to break. It’s starts off as a little drip and as time goes by it turns into a steady stream and finally, it breaks down the wall altogether.

• Bonus Points: Pay off your mortgage. Carrying significant mortgage debt into your forties and fifties leads to you being very dependent on your primary source of income to keep the house, most notably, your day-job. As we all know, hardship can happen anytime. Having to foreclose on a house at that stage of life makes recovery for a comfortable retirement very difficult.

3. Emergency Savings: Maintain an Emergency Fund Equal to One Year’s Worth of Living Expenses

In a span of ten years, the country will probably going to go through an economic recession or two. In such times (and even outside of them), you or your significant other may be at risk of losing your job. You also may become more prone to disease or other medical hardship as you age. When my wife was laid off last year, our emergency savings fund helped save the day. Protecting your future goes a long ways towards peace of mind.

A lot of financial gurus recommend six months worth of emergency savings, but after this recession, I’d feel a lot more comfortable with a year.

• Bonus Points: Earn interest on your emergency fund through a high-yield savings account through an online bank, such as Discover Bank, Everbank, Ing Direct, or Ally Bank.

4. Protect: Protect your Loved Ones with Term-Life Insurance

A lot of us will continue or begin long-term relationships and possibly start families in our thirties. If someone you know is even partially dependent upon your income to live comfortably, then you should be taking a look at covering yourself with a term life insurance policy. Term life insurance is the ‘discount broker’ of life insurance – you cut down on fees and pay for only what you need.

• Bonus Points: Acquire long-term disability insurance as well.

5. Protect your Legacy: Fulfill your Legal Obligations to Others

Create and maintain a living will, living trust, durable power of attorney, and a will. If you are to become medically incapacitated or pass away, these legal documents can protect your loved ones on a financial and emotional level. You owe it to them.

You can go through an attorney to complete these legal documents, but that can be costly, particularly if you frequently update them. I’d recommend checking out Quicken WillMaker Plus 2012, which has fill-in-the blank templates for all four documents and many other legal documents that you might find useful.

• Bonus Points: Don’t die in your thirties. Oh, that’s just wrong, isn’t it? Have a little sense of humor!

Personal Finance Goals for your Thirties Discussion:

• What goals did you create/complete while in your thirties?
• If you’re in your twenties are you a step ahead on completing some of these goals?
• What financial goals do you have for your thirties?

Related Posts:

• 8 Personal Finance Spring Cleaning Ninja Moves!
• How to Improve your Credit Score

5 Personal Finance Goals for your Thirties is copyrighted by 20somethingfinance.com without consent to republish.

The 5 Personal Finance Mistakes you should Avoid

1. Build any sort of non-mortgage or tuition debt (consumer debt)

This one is absolutely killer. I’d estimate that at least half of the personal finance blogs out there these days are focused around the ‘get out of debt’ mantra. Why? Because a whole bunch of people dig themselves deep into debt. Until the recession, the U.S. personal savings rate had dipped into the negatives – meaning that the average person was spending more than they were earning.

Student tuition (within reason) often has a good return on investment. Owning a home can also be advantageous for your personal finances. These are permissible debts, if used wisely. Just about every other type of debt is consumer based. You spent the money because you wanted something. That ‘something’ didn’t bring happiness, so you bought other ‘somethings’. It’s a vicious cycle that never works to your advantage.

2. Wait on saving for retirement

I don’t know how many times I have heard peers say ‘I’m not worried, I have decades to save for retirement’. I personally max out my 401k each year, get a 50% match on it, and I’m still worried. We live in an age without pensions, and the cushy retirements that our grandparents and some of our parents have to look forward to will be extinct when we retire. Start building your own pension RIGHT NOW. You need the compound earnings for decades to outpace inflation and afford yourself a comfortable retirement.

3. Buy vehicles that you can’t truly afford or need

I spent too much on a vehicle. Instead of finding a serviceable $4 or $5k used car, I bought one that was $11k. Even worse, I financed it. A little over a year ago, we sold the car. I felt a little redeemed that I sold it for the same price that I bought it for after two years of use – but still, lesson learned.

In selling the vehicle and taking the bus to work, I have been able to save over $300 per month. I have a friend who now owns two vehicles that were purchased for over $20k – the most recent one because it’s a fast vehicle with a ton of horsepower. He and his wife have a higher income than my wife and I do. They also could bus to work if they chose to. He was absolutely amazed that I was able to max out my 401k. In paying nothing other than maintenance costs for our 2000 Pontiac Grand Am, we are saving roughly $800/month on vehicles – all of which can go towards my 401k.

The bottom line is (and this may hurt) – THAT EXPENSIVE VEHICLE YOU CRAVE FOR IS NOT A RIGHT. If you absolutely need a vehicle, get a serviceable used one that is at least 3-5 years old that you can pay for outright. Anything more is most often a personal finance blunder.

4. Buy more house than you need

The biggest danger in buying more house than you need is that your housing expenses will become disproportionately high in comparison to your other expenses. Experts recommend keeping your housing expenses to less than one-third of your take home income. I’d recommend pushing it lower than that. If you have huge mortgage debt and you or your partner lose their job, you may be in big trouble. Your home is not an investment.

This was a reality for my wife and I earlier in the year when she lost her job. Our expenses were suddenly outpacing our income to the point that I had to cut my 401k contributions to zero. Make your house work for you, not against you.

5. Rush to get an MBA or other graduate degree

I have seen a number of colleagues who are less than two years removed from their undergraduate degree clamor to get their MBA as if it was their pre-scripted destiny. In order for a graduate degree or MBA to make sense, I truly believe a few things need to happen first:

• You have at least 5 years of experience related to the field that you want to advance your career in. Don’t add insane tuition debt if you don’t even know that you’ll like the job that your degree may bring. If you don’t know, don’t do it.
• Do a cost/benefit analysis. Ask yourself how many years and at what salary it would take to pay this degree off. Factor in the income that you’ll be losing for the years that you’ll be back in school. I’ve done this calculation and estimate that it would take me at least 10 years with an additional $20k in salary JUST TO BREAK EVEN. If it doesn’t pay off, don’t do it.
• Ask yourself, better yet – ask potential employers if they would be willing to hire someone with your experience level and an expensive piece of paper at anywhere near the income level you are looking to reach with that expensive piece of paper. If you aren’t getting the answers that you have dreamed about, don’t do it.

Personal Finance Blunder Honorable Mentions:

• Try to keep up with the Joneses with emerging technologies.
• Eat out excessively.
• Wander around for years without finishing your degree or trying to grow your career.
• Save money instead of first paying off consumer debt.
• Neglect paying for the right insurance.
• Choose high fee investments.

Personal Finance Mistakes:

• What personal finance blunders are you guilty of?
• How have you fixed a personal finance mistake?

Related Posts:

• Roth IRA Guide
• 5 Benefits of Using a Traditional IRA

The 5 Worst Twenty Something Personal Finance Blunders is copyrighted by 20somethingfinance.com without consent to republish.

If that’s your outlook, it’s time to change our mindset and look to why everyone should be focusing on building up savings. After all, our entire financial futures are at stake. An automatic savings plan is the way to do it.

Why an Automatic Savings Plan is Essential

1. Saving for Emergencies

A savings account can act like a sort of fire extinguisher when an unexpected catastrophe puts fire to your wallet. It’s a good idea to have three to six months of living expenses socked away in case of a job loss. That might take some time to build, so in the meantime, put aside $1,000 to help pay for sudden expenses. Then, build your ideal emergency fund.

2. Saving for retirement

You’d like to stop working at some point, right? Of course, you do. Well, without money in retirement, how do you expect to pay your bills after you’re no longer working? Saving money for retirement helps ensure you’ll have money to cover necessary expenses (and some luxuries) during your golden years.

3. Saving for a vacation

A lot of people don’t think twice about putting a vacation on a credit card. When you do it that way, you end up paying more for your vacation that it actually cost. That’s because the credit card balance accrues interest until you pay it off completely. But, when you save up for a vacation, everything’s paid for in advance. You can also relax without worrying about the credit card debt you face when your vacation’s over.

4. Saving for financial goals

The most coveted things in life are also the most expensive. A house, a car, and an education are all things you have to work toward. Putting money away makes each of those easier for you to reach.

Why You Should Save Automatically

No matter how much you realize that saving is important, it’s still not as easy as it seems. There’s just something about parting with money without an immediate benefit that makes saving boring. Before you give up on saving all together, consider making your savings automatic.

When you save automatically, the money automatically deposited into your savings account on some periodic basis. For example, you might have $100 automatically deposited into your savings account each month. After a year, you’d have at least $1,200 saved up, more if your account has a good interest rate.

As a result, your financial future is no longer based on your will-power – it’s just going to happen.

How to Plan Your Savings

Trying to understand personal finance without a heavy dose of financial planning will get you no where fast. You have to know what your goals are before you can determine if you’re doing the right thing. You always need to plan your finances.

Saving money is no different. Before you set up your automatic savings, you have to figure out three things.

How much will you save? Coming up with the answer to this question can be easy or hard. If you have a written budget that you use to manage your money, it will be easier to refer to your budget to see how much you have left over for saving. On the other hand, if you don’t have a budget, you’ll have to do some calculating to see what’s left over after you pay bills.

How often will you save? Base the frequency of your automatic savings on your pay periods. If you get paid once a month, then save once a month. If you get paid every other week, then save every other week.

What are you saving for? You should have a savings goal. Without one, it will be easy to stop saving and start spending the money on something else.

Once you’ve made those critical decisions, you’re ready to move on and make your savings automatic.

How to Set up an Automatic Savings Plan

There are two basic ways to save automatically, and either one works perfectly fine depending on your situation.

1. Automatic Savings through your Bank:

Save automatically, just divide your bank accounts into two: the account where you spend money, and the account where you save money. Every month, have X% automatically taken from your checking account and placed in your savings account. Check out EverBank, Ally Bank, or Ing Direct if you’re looking for a bank to do this with.

You just made your savings automatic.

If you’re comfortable with computers at all, then a high-yield online savings account is probably your best shot. One of the benefits of having an online account is that it keeps your money far enough away that you can avoid spending impulses, but close enough to reach in an emergency.

Make sure set your automatic transfer to occur close to the payday, but not before. That way you can be sure the money is available and you won’t have to deal with a potentially expensive overdraft.

If you choose not to open an online account, check with your bank to see if you can connect a savings account to your existing checking account and set up a recurring transfer from one to the other.

2. Automatic Savings from Direct Deposit

Finally, if your employer uses direct deposit, you might ask your human resources or payroll department if you can set up a direct deposit for two accounts. You would have your savings deposited into your savings account and the remainder into your checking account.

The best thing about automatic savings it that once you set it up, you don’t have to worry about saving again. You can monitor progress toward your financial goes without feeling the sting of losing money. In some ways, it’s like getting paid twice.

Automatic Savings Discussion:

• Do you have an online bank account? Where?
• Do you have your savings set automatically?
• Do you have any tips for making the process smoother or more effective?

Related Posts:

• 5 Banks with Free Checking & Debit Cards
• PerkStreet Financial Review
• Ally Bank Raise-your-Rate CD

How to Set up an Automatic Savings Plan is copyrighted by 20somethingfinance.com without consent to republish.

In her field, when companies can’t get sufficient credit to finance new projects, workload decreases. This all thanks to corporate greed and financial deregulation. Some of her colleagues lost their jobs as well. Unfortunately, working in a very niche profession in an economy like we’re facing today presents an even tougher challenge. I’m also concerned that things won’t turn around until 2010 or beyond.

Although this is a huge hit to our livlihood and financial situation, I am confident that we will get through things and come out better off in the long run. We’ve already developed a plan of ways to attack this.

How We are Fighting Unemployment

1. File for unemployment

We need to do further research on what % of her salary unemployment will cover and how long benefits are good for, but at least the paperwork process has begun.

2. What are Our Priorities

Our first choice is to stay local. We have a home and trying to sell it in this economy is not ideal. I like my job and don’t plan on finding a new one unless I have to. Secondly, we both have family about an hour away and would like to stay within the state, at least. Third, if we have to move, my employer does offer some relocation possibilities. This really is going to effect where she focuses her efforts in finding a new job, and we’ll probably work in this order:

• look locally
• expand out in a 30 mile radius
• if we are forced to expand beyond that, I will need to start looking for opportunities within my company

3. Keeping Dignity

Even though there’s a sense of urgency for her to find a new job, we have to keep reminding ourselves that it has to be the RIGHT situation. She shouldn’t rush to take just any job.

4. Update Resume and Portfolio

What better time, right?

5. Network

She’s reaching out to everyone she knows to touch base with and throw her resume out there.

6. Create Lists

On this one, we will be creating a list of every possible employer out there within the area. This includes name of employer, contact name, number, website, etc. We’ll also be collecting a list of every possible job board, and check them weekly.

7. Extreme Frugality

I have been living the lessons I teach on this blog, but now I am forced to take them to the next level. I’m actually looking forward to this opportunity to see how much I can really cut back on in the next few months.

Next Steps in Unemployment

We’re tired, and it’s time to get some rest. The challenge is going to be to remind ourselves to be patient, take our time, and truly believe that things happen for a reason and we’ll come out better in the long run for going through this.

Related Posts:

• Unemployment Rate by Job
• 7 Lessons Learned After One Week of Unemployment
• I Hate my Job!
• Stop Dreaming & Start Retiring – Now!
• 3 Steps to Avoiding the Rat Race

Day One of Unemployment is copyrighted by 20somethingfinance.com without consent to republish.

There’s nothing better than self reliance and personal empowerment when it comes to financial planning. However, if you don’t yet have the confidence in yourself to manage your financial situation, you’re not alone. You also really only have two options:

A. wander aimlessly and hope you come out ahead and are able to meet your life’s goals
B. hire a financial planner

Unfortunately, finding a good financial planner with limited or no conflicts of interest is incredibly difficult to do, and this person may be one of the most important you’ll ever meet. Time and effort is necessary to seek out the right planner. This list of 10 characteristics can serve as a checklist when you’re looking to hire a financial planner.

1. They Charge an Hourly or a Flat Fee

Planners have four pay structures: hourly, flat fee, commission from products sold, or by % of assets managed. Don’t get into a situation where you are paying a percentage of your managed assets or a commission on products bought to a financial adviser. If they manage your assets, you are prisoner to their long-term strategy, and poor results.

2. They Educate you

A financial planner that withholds information or doesn’t take the time to teach you the basics is not a good one. Your financial planner should want you to know as much as they know so that eventually you can manage your own finances and refer all of your friends to him/her.

3. They are not a Friend, Co-Worker, or Family

Any time you bring emotional bonds into financial decisions it is usually at the sacrifice of results. Avoid the drama, highs, lows, and the potential to damage relationships if your investments go south.

4. They are Patient with their Advice

A financial planner that calls you with urgent hot stock picks does not have your best interests in mind. There should be no sense of urgency when it comes to sound investing that leads to long-term growth.

5. They are a Certified Financial Professional

All legit financial planners should have some sort of highly valued certification. Perhaps they are a Certified Public Account (CPA), Certified Financial Planner (CFP), or a Chartered Financial Consultant (ChFC). Make sure that they show you their credentials and then verify the credentials with the respective organization.

6. They are Up Front About their Strategy

Before you invest any money through a financial professional, they should have no qualms towards telling you exactly how they plan to invest it. Why? Any good financial planner is going to have a relatively passive investment strategy that they believe in and stick to.

7. They Care About more than just your Investments

Sound financial strategy involves a whole lot more than just the types of asset classes you are investing in. A good financial planner is going to invest the time to take a holistic look at your spending habits, debt obligations, life goals, and more.

8. They have a Good Reputation

You’re not always going to be able to find a good referral, but they certainly don’t hurt. Just be wary of a hot shot planner that has had a little short-term success in managing your buddy’s investments, and now they are the greatest investor to come along this side of Omaha.

9. They have Never Been Disciplined by the Authorities

Check with regulating authorities like your state’s insurance and securities dept., FINRA, and the CFP Board to make sure that your financial adviser does not have any black marks against them.

10. They Invoke Genuine Trust

If you are feeling nervous, fearful, or stressed energy when around an adviser, trust your instincts and get the heck out of there. If you don’t trust your financial planner, it’s not going to be a good business relationship, and there are plenty of other advisers out there.

Final Thoughts on Certified Financial Planners:

By finding your way to this site, hopefully you’re well on the way to being your own financial planner. If you do decide to go with a professional, take the time and effort to do it right. After all, your entire financial well-being is all that’s at stake, right?

Financial Planner Discussion:

• Do you work with a financial planner? Why? Why not?
• How did you get referred to your financial planner?
• What’s the best/worst financial planner story you have?

Related Posts:

• How to Make a Stock Trade
  
• 5 Ways to Limit Financial Planner Conflict of Interest

10 Characteristics your Financial Planner Must have is copyrighted by 20somethingfinance.com without consent to republish.

This is a guest post from Shaun Connell, author of Learn Financial Planning, a series of free, comprehensive financial planning tutorials.

It’s hard to watch the news or keep up with anything financial without hearing about inflation, deflation and our current money supply. Understanding inflation is essential to the basics of personal finance. It’s not just an economic concept it impacts you every day, and is only of the biggest obstacles your investments will face.

Inflation is when your dollar loses it’s buying power. Inflation is when is takes more currency to buy the same amount of stuff.

Take penny candy, for example. I still remember when I could buy a small piece of candy for a penny. Now, I haven’t seen penny candy in years. This doesn’t mean the candy disappeared. No, you can still buy the candy I used to buy… now it just costs ten cents or more. This means one of two things:

1. Candy is becoming more valuable, OR
2. Our currency is becoming less valuable

The second is, by far, the most important concept to understand. That’s because the price of almost everything has gone up over the past few decades. Overall, our money is becoming worth less and less. The penny isn’t what it used to be.

But why? What does this mean for us?

What Causes Inflation?

One of the most basic principles of economics is how the law of supply and demand affects prices. If there’s a bunch of something, it’s usually not valuable. If there’s not much of something, it’s usually pretty valuable. To simplify the concept: the more that’s available, the less it’s worth.

For example, a truckload of gold is worth more than a truckload of sand. It’s all about what economists call “scarcity.”

Remember, our money isn’t inherently worth anything. It only has worth because people think it does, and because it’s relatively scarce. There aren’t millions of dollars under every bed. Money simply represents the real material wealth that others own. If there’s more paper and less wealth, then the ratio of dollars to value goes down, the dollars are worthless.

So what causes inflation? Though there are an incredible number of complicated smaller causes, the biggest cause is simple: the government decides to print more money. The actual material wealth in the economy isn’t changing. The government doesn’t make money; the government just prints money.

Inflation is what happens when there’s more “money” being created than there is worth being added. In other words, if the government prints 100 trillion new dollars, and our real GDP only grows about 10 trillion dollars, we’ll be seeing roughly 90 trillion dollars diluting the value of other dollars. That’s inflation.

But why should we care about inflation?

How Inflation Hurts You

Inflation slowly erodes the value of your wealth. The average yearly inflation is about 3.43%. This means that every single year, the cash you have is worth 3.43% less. That might not sound like much, but it’s simply mindboggling:

• Fact: Investments really make less than you think. If you make an average of 6% return in your investments every year, you’re actually only making about 2.6% per year after factoring into account inflation.

• Fact: Investment fees are eating into your returns. If you are paying anything more than $5 for your trades, you’re getting hammered. Zecco has free trades and investment accounts with zero fees. They have great service as well.

• Fact: For most people, a “raise” breaks even, maybe. If you get a 10% raise every three years, you aren’t actually getting a raise at all. You’re actually living on 3% and 6% less for two years preceding your raise after factoring into account inflation.

Inflation especially affects the people in the lower income rungs. Right now you can’t get away from hearing about inflation and deflation — it’s all over the news. Why? And what should you do?

What is Deflation?

Right now, we’re actually seeing a major amount of deflation, caused by the recession and low oil prices. This means that your money actually has a bit more buying power than usual.

But don’t get comfortable. We’re about to see record levels of inflation in the next few months and/or years. Just consider the following facts:

• Fact: More Fed loans are given, increasing inflation. All over the news, you can see reports that the Federal Reserve is lowering interest rates down to nearly 0%. This means the Federal Reserve (the people who print money) will be giving out more “loans.” A “loan” is when we give money that doesn’t yet exist for banks to loan out. The lower the interest rate, the more loans are given out, the more money is printed.

• Fact: We’re already printing a lot, increasing inflation. In the past few months, the Federal Reserve has already printed more money than the last 19 years combined.

• Fact: Spending increases printing, increasing inflation. Over the past few months, Bush has spent over a trillion dollars to help the economy. Obama has already pledged at least another trillion towards his economic stimulus alone. Spending several trillion dollars is a surefire way of increasing inflation.

I’m not saying the world is going to end — just that inflation is going to start again, and soon. We’re seeing deflation right now, which means one thing: This is the perfect time to get prepared.

How to Beat the Future Inflation

Understanding inflation isn’t enough; you have to be willing to take actions to “beat” inflation. Though there are many tactics, the four tips below are simply a must for a rational financial plan:

• Stock Up. Remember, as we’ve talked about before, we’re currently in the middle of deflation. That means that items that will be increasing in costs in just a few months to a year are actually much, much cheaper. So stock up. Buy bigger boxes and value packs. This is usually still a good idea, but right now it makes even more sense.

• Precious Metals. Usually, I’m not a big fan of precious metals like gold and silver, and encourage their purchase only for the sake of diversity and financial security. But due to the recession, the price of gold looks good. Precious metals are also a great “crisis hedge” in the sense that during times of crisis, investors often flee back to precious metals.

• Save, Save, Save. As mentioned before, a high-interest savings account will allow you to just break even. But right now, with deflation, you’ll actually be making even more. Remember, deflation is the opposite of inflation, which means for every 1% of deflation, your money’s value increases about 1%. This means that you should be storing your money away while in deflation periods for two reasons:

1. To have extra money on hand when prices increase, and
2. To make an extra couple of percentage points due to the deflation.

• Get That Raise. Though this might be considered a “duh” point, it’s important to understand. Inflation means you’re getting a built in pay cut of at least 3% every year. In the next few years, that’s going to get worse… a lot worse. This means that now, more than ever before, is the time to focus on working harder and doing things that will get you noticed. At this point, getting a raise is often still just a defensive measure.

Inflation Conclusion

Remember, the laws of economics don’t change just because we’re having a financially rough time. If anything, this is the time we should focus on the economic and financial principles that get us to prosperity.

This means you don’t have to do anything “special” to combat inflation: just do what you already know you should do. Extraordinary financial times call for extra ordinary financial measures.

Inflation Discussion:

How is inflation impacting your long-term savings plans?

Related Posts:

• Review of Zecco’s Online Discount Brokerage
• Index Funds Vs. Mutual Funds
• Emergency Funds Guide

Inflation: How to Beat it with Smart Financial Planning is copyrighted by 20somethingfinance.com without consent to republish.

Among the melting pot of New Years resolutions posts over the next week you’ll see a lot of the familiar staples: save X amount per month, pay off X in debt, eat out less, exercise 3 times a week, give more to charity, etc. All good stuff, but I thought I’d go with a little something more concrete this year that can be carried over from year to year.

Here are six steps that you can set goals towards over the next year (and every year). Each step will ideally lead you one step closer to financial freedom over the long haul. I realize that this list will not be applicable to everyone and few will have the financial resources to do everything on this list every year, but that shouldn’t prevent us from setting stretch goals.

1. Set a Budget

Before you can attack debt and figure out savings, you have to know how much is coming in and how much is going out every month. I’ve created a free budget planner to help you do so. You can also utilize budgeting sites like Mint, Yodlee, and others.

A budget will help you square away all the necessities in your life (water, energy, food, shelter, insurance, etc.). Beyond necessities, have the attitude that you are going to attack your ‘wants’ to get them down to a minimal level that results in the optimal return on your happiness (i.e. scale back your cable, phone, and transportation expenses). After that’s been accomplished, move to step 2.

Whether you’re in good or bad standing financially, without a concrete budget you’re in no place to strategically plan how to move yourself forward towards other financial goals. You should re-budget at the outset of every year or more frequently if circumstances demand it.

2. Attack High Interest Debt to Stop the Bleeding

If you have any credit card debt that carries over from month to month, attack it, so that you can stop the bleeding. You should not have any savings in the bank or elsewhere if you have this kind of debt. The odds of your savings outperforming the 10+% you’re probably paying on credit card fees consistently over time are not very good. Any positive cash flow after creating a budget should go towards this goal before savings.

Part of this process is going to be knowing the difference between good debt and bad debt and negotiating lower rates on your bad debt. The following debt spreadsheet should help you classify your debt as a good starting point.

3. Get your Employers Full 401K Match

The one exception to the previous rule would be if the rate of return on your 401k match is better than your credit card fees. In this case, I would personally go for the 401k match first. For instance, if you get matched 50 cents for every dollar that you contribute to your 401k up to a given amount, your return on that match is 50%. This is probably a much higher return than what you are paying on most, if not all, of your debt. More simply:

• If 401k match return rate > debt effective annual rate (EAR) then max out the match.
• If 401k match return rate < debt EAR, then pay off debt (each debt should be judged separately).

4. Max Out your IRA’s

The max IRA contribution for 2009 is $5,000. After getting your employers full match and paying down high interest debt, this is ideally the next place to put your money. I suggest going this route vs. non-matched 401K because you will have wider flexibility in the investment options in your personal retirement accounts than you have in employer sponsored plans, such as 401k’s. Need to start an IRA? I personally have my IRA with because of their $4.95 trades and zero IRA fees.

5. Max Out your 401k

Next, continue capitalizing on the tax benefits of retirement accounts by fully maxing out your 401k. This means contributing the amount from where you left off with getting your employer’s match all the way up to the maximum amount allowed by the IRS. The max 401k contribution in 2009 goes up to $16,500, for an increase of $1,000 over 2008.

6. Save for Life Goals

You can’t save for everything at once, so you’ll have to start with budgets for each. Life goals could include things like going to school, early retirement, saving for your children’s college expenses, down payment for a house, etc. I can’t tell you where or how much to allocate towards these goals because it all depends on your personal priorities.

The immediacy of some life goals may force you to take funds away from previous steps, such as maxing out your 401k. That is OK, and you shouldn’t feel guilty about it.

The one thing that is very important to keep in mind is that many ‘life goals’ can be financed very cheaply. For instance, why save for own school expenses when you may very likely be able to get very low interest loans to pay for school?

Your savings should, at the very least, be earning 3% or so from a high interest savings account, money market account, certificate of deposit, or savings bond. Those with a longer time line to their life goal (i.e. early retirement) may want to seek higher risk, higher reward potential from stocks or mutual funds.

Concluding Thoughts on Financial Freedom

Perhaps you won’t get all the way to step 6 with this plan, but use this list to push yourself to the next level. For instance, for those who’ve never gone beyond step 2, perhaps you push yourself to get to step 3 this year. Best wishes for financial and personal success in the new year!

Financial Freedom Discussion:

• What are your financial goals for 2009?
• If you’ve followed a similar path, how far did you get this year and where do you plan on getting to next year?

Related Posts:

• Roth IRA Guide
• IRS 401K Maximum Contribution Limits
• 5 Benefits of Using a Traditional IRA

6 Steps Towards Financial Freedom in 2009 and Every Year is copyrighted by 20somethingfinance.com without consent to republish.

In the midst of recent market turmoil, it is more important than ever to focus on your long term goals and develop patience in order to achieve financial peace of mind.

We know where the market has been, but nobody truly knows where it is going in the future. Historically, in fear driven markets such as the one we are experiencing right now, there usually is a bounce back, or rally, in stock prices when normalcy begins to set in again. Historically is the key word though, and this country has never quite seen a financial crisis like it is currently experiencing. There is no true precedent, as times have changed significantly since the Great Depression.

To survive uncertain economic times while keeping your sanity, it is essential to get down the basics. Here are 10 things that you can do to find peace of mind when times are tough:

1. Aggressively Pay Down Debt

If you have income that can go into the market or towards paying down your debt, now is a great time to tackle your debt. I personally will be applying income towards paying down my mortgage, which will give me a 5.83% guaranteed return on investment. If you have credit card debt, or other high interest, unsecured forms of debt, they should be your first priority. Here are some tips on how to attack your debt.

2. Analyze your Monthly Recurring Expenses & Trim the Fat

Most recurring monthly expenses come in the form of entertainment that you don’t necessarily need. These non-essentials really add up over time. For instance, do you need to spend $90 per month on cable or satellite TV, especially when digital TV will soon be accessible to all for free? Look at your monthly expenses and look internally to see if you really NEED them. Movie rental subscriptions, magazine subscriptions, newspaper, cable or satellite TV, land line phone, cell phone data plan, etc. In order to keep track of these expenses, check out this free budget spreadsheet.

3. Reduce your Energy Expenses

There are a number of ways to reduce your energy expenses, including:

• Cutting your water bill
• Reducing your heating and cooling expenses
• Cutting back on the cost of commuting

4. Don’t Pay Attention to the Markets

When you are continuously watching your stock and mutual fund prices drop, it is hard not to become obsessed with the market. Seeing paper losses can push you to panic and make irrational decisions such as selling a stock when the market is at its low point. You’re not really making rational decisions at this point, you are following your emotions. In order to avoid this trap completely, just stop logging in to your investment accounts or checking stock quotes. Keep your money in for the long haul. If you’re in good financial standing, this tip alone may completely wipe out your day-to-day market-driven anxiety. You’ll thank yourself later.

5. Keep More of your Paycheck

If you are getting a large tax refund every year, but struggling on a month-to-month basis, you may want to consider raising your tax allowances. The more allowances you claim, the less the government holds onto over the year and the lower your refund will be. This allows you to use more of your earned income over the year instead of giving an interest-free loan to the government. Here is more info on tax allowances.

6. Increase your Emergency Savings

Perhaps it is time to increase your emergency savings account as a safety net in the event of a family member losing income due to economic slowdown. Experts typically recommend that you save six months worth of living expenses, however, in times like this it may be wise to push it to a year or more if you have the means to do so.

7. Recognizing Wants vs. Needs

With all one-time purchases it is more important than ever to really ask yourself if you truly need the item you are about to buy. Focus on recognizing when emotion is driving your purchasing behavior. In order to delay emotional purchase gratification, resist buying things immediately. Sit on your decision to purchase for a few days. Check out this post for ways to delay instant purchase gratification.

8. Smile More at Work

In the unfortunate event that your employer should make cutbacks in an economic slowdown, make it hard for them to cut YOU. I’m not suggesting to be inauthentic at work, rather, being friendly and helpful when appropriate, having a positive attitude, and being efficient in what you do.

9. Don’t Stop Putting Money into the Market

It may seem crazy, but now is not the time to stop making contributions to your personal investing or retirement savings accounts. Let’s imagine we are at the bottom of a market decline. In that case, if you stopped investing now, you’d miss out on purchasing shares that are at their cheapest price (and would start buying again as prices rebounded). This is a strategy that compounds your losses and limits your gains. Contributing a steady amount over equal periods of time is the way to go.

10. Keep Some Cash on Hand

With banks failing left and right, your mattress never looked as safe as it does now. Sure, the FDIC insures your deposits up to $100,000, but if your bank fails it could take weeks, if not months to get your money back. If you need this money in a pinch, you would be out of luck. Keeping a little cash on hand is an extra safeguard in the event of a bank run.

Reader Feedback:

What kind of things are you doing to protect yourself in these tough economic times?

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10 Basics for Financial Peace of Mind in Tough Times is copyrighted by 20somethingfinance.com without consent to republish.

It’s great to be ‘in the black’ with your net income, simply meaning that more money is coming in than being spent. This is different that being 100% debt free. All it means is that you are not accruing more debt due to a negative cash flow.

When you’re relatively young one of the most daunting questions can be ‘what do I do with all this cash?’. It’s a nice problem to have, but without a strong financial background, the default solution often tends to be to stick it away in a savings account or certificate of deposit. Next to spending it or placing it under your mattress, this is about the worst thing you can do with your extra income, but more on that later. In general, one of the toughest decisions to make in personal finance is to figure out where the heck to put your money because it involves answering a lot of tough questions. Let’s get the easy parts out of the way first.

A Guide to Asset Allocation

Step 1: Starting an Emergency Fund

Many experts recommend that you save 2 to 3 months worth of your current salary to put into highly liquid (quickly and easily usable) assets. For your emergency savings, I would recommend opening a high interest money market account. You can do this through a discount broker or through your local bank. You may want to compare rates before selecting one. A money market is essentially a high interest savings account that gives you a high interest rate because you are required to deposit and maintain a higher balance than a regular savings account.

Step 2: Look at your Debt Situation

Once you have an emergency fund established, you’ll need to ask yourself the following questions to figure out where to next allocate your extra cash flow:

• Do I have any debt?
• If so, at what interest rates?

If the answer to the first question is yes, read this post on debt payoff. As a general rule, if you have high interest bad debt you want to pay it off before investing in anything else. The one exception to this rule would be if you have an employer match on contributions to your 401K, with the match rate being higher than your bad debt rate. If this is the case, you may be better off getting your match and then fighting your debt, but not everyone agrees on this point.

There is more of a consensus that if you have good debt at a low interest rate, then you’re probably better off paying your minimum monthly payments and investing your leftover money.

Step 3: Figure out what type of Investment Makes the Most Sense

• Why Putting your Money into Savings Accounts or CD’s for Long-Term Investing is a Bad Idea. According to the Bureau of Labor Statistics, the average inflation rate over the past 20 years has been 3.24% and in the past year it has been at 4%. With rapidly increasing fuel and food prices, you have to wonder if inflation rates are currently on the rise. At the same time, certificates of deposit are paying around 4.5 to 5% interest. Most savings accounts pay less than 1%. Subtract the minimum 15% you’d be paying in taxes on earnings and it’s easy to see why you would have to consider yourself lucky to see the value of your money stay flat when left in certificates of deposit. In a low interest savings account, you’d actually be losing value in your money over time.
• So Where do I put My Retirement Money? Many experts disagree on exact asset allocation percentages once you near retirement, but if you’re under the age of 40, it’s hard to make a strong argument against not having 100% of your investments in stocks via individual stocks or mutual funds.
• Making a Case for Stocks: The average annualized rate of return for U.S. stocks was 13.4% from 1926 to 2000. The worst average annual rate of return for U.S. stocks in any 65 consecutive year period has been 8.5%. If you would like a conservative estimate, go with 8.5% in your calculations. How does this stack up against other investments? Large U.S. stocks have dominated all other investment types over long periods of time in terms of real returns (factoring in inflation). Every $1 invested in stocks since 1926 is now worth $271.72. $1 invested in long-term U.S. treasury bonds over the same time would be worth $5.77. Corporate bonds? $8.89. Treasury bills? $1.72.

Step 4: Figuring out how Much to Save for Retirement

In order to figure out how much you need to save for retirement and for early retirement, you need to work backwards and make a lot of educated guesses on the following questions:

• What age will I live to?
• What will my annual expenses be in retirement?
• What percentage increase in salary can I expect to get on average per year?
• How much in retirement savings will I need to meet my expenses until the age that I die? For this one, consider the fact that in order to receive full Social Security benefits you can’t begin getting payouts until age 67 and you can’t pull distributions from your retirement accounts (IRA’s or 401K’s) until age 59 and 1/2 without penalties.
• What age would I like to retire at?
• How much money will I need to get from my early retirement age to the point that I can begin withdrawing distributions from my retirement accounts without penalty at age 59 and 1/2?

Each of these questions are a post’s worth of material within themselves and will take a little bit of time to figure out. Since they do involve a little bit of guesswork you’re probably going to want to be as conservative as possible with your estimations. Here are some retirement calculators to help you figure it out:

Retirement Calculators

• CNN Money Retirement Calculator
• Bloomberg Retirement Calculator
• Choosetosave.org ‘Ballpark’ Estimate Calculator

Step 5: What Investment Vehicle do I Allocate my Money into?

Once you know how much you need to save and in what amount of time for both early and official retirement (withdrawing distributions without penalty), you can figure out how much to allocate to each. My first recommendation would be to get the maximum match possible from your employer within your 401K. Once you get this, your asset allocation breakdown should be to distribute between taxable personal accounts and retirement accounts (IRA’s and 401K’s) at the level that will allow you to reach both your early and official retirement goals.

What is Asset Allocation? Here’s a Summary

Asset allocation is rarely an exact science and it involves a lot of subjective guesswork on your part. It also depends on how comfortable you are with certain strategies. The steps provided in this post are simply guidelines to give you a better idea of where you should be putting your money. Ultimately, your final asset allocation will be dependent on your lifelong values and goals.

Asset Allocation Questions

Where are you putting your money and why?

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• How to Make a Stock Trade
  
• Pay off Debt or Invest?
• IRS 401K Maximum Contribution Limits

Where do I Put all of My Money? A Guide to Asset Allocation is copyrighted by 20somethingfinance.com without consent to republish.