Understanding Your 401K and 403b Plans

Every working American should put away some money for retirement. A couple of the more common vehicles for retirement savings are the 401k and 403b plans. Both of these plans are tax-deferred and serve to reduce current income tax obligations. They can also grow over time to make up a good nest egg provided that people continue to contribute.

The main difference between the 401k and the 403b is related to the types of business that set them up. For-profit companies will offer the 401k while those businesses and charities that work in the nonprofit sector offer the 403b. Both have a 17,500 limit on annual contributions, but those who are older than 50 can contribute additional make up contributions to help their nest egg grow.

Many employers will match employee contributions to these retirement plans. Therefore, it is a good idea to contribute at least as much as the employer will match. If it is a dollar for dollar match, those who save are able to get a 100 percent return on investment the minute it is contributed. The major complication some people might have with these plans is the requirement that the money must be kept in the plan without withdrawal until age 59 1/2. Those who take out the money before this point are likely to get at 10 percent penalty in addition to any applicable taxes.

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What are the Best Investment Strategies for 2012

This year, as always, investors have many options when it comes to deciding where to put their money. Stocks, bonds, certificates of deposit and annuities are just a handful of the many different investment options that are available. Here are some suggestions.

Those who have serious credit card debt should look at paying off their credit cards as an investment. Credit cards can have interest rates that run anywhere from 10, 15 or even 20 percent. Paying off these debts will effectively have a return that is equal to the interest rate.

Another investment that many people might not think of as an investment is making contributions into a company’s 401(k) plan. Employers will frequently provide a match up to a certain percentage. For example, an employer that matches 50 percent up to the first 3 percent of an employee’s salary would basically be giving that employee a 50 percent return up to the maximum. This would be hard to beat with any other investment.

Finally, there are mutual funds. Mutual funds minimize the risk that stocks and bonds carry because the funds are spread over a large number of sectors. If one stock tanks, it is not likely that all will. Therefore, spreading the risk is a less risky investment than just picking any old stock.

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Steps to Take to Improve Your Credit Rating

Improving your credit score is important for anyone who has ever needed to get a loan or apply for a job. Fortunately, there are many things a consumer can do to improve his or her credit score.

The best way to improve a credit score is to make full and on-time payments on all of your current bills. This includes utilities and loans. A late payment can reduce a credit score by as much as ten percent, and making less than the minimum required payment typically has the same affect on a credit score that not making a payment at all has.

In addition to this, it is a god idea to ask for an increase in the credit limit that is extended to you on your credit cards. By doing this, you’ll be able to increase your ratio of credit extended to credit used. The more credit that has been extended to you that you have not used, the higher your credit score.

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Tips and Tricks to Save Money Around the House

Jobs are scarce and prices are going up, so people are trying to save money every way they can. Saving just 10 or 15 a week might not sound like much, but it can add up after a while. It is not that difficult at all to save money if you think outside the box. There are even quite a few ways you can save money around the house.

Don’t Spend a lot of Money on Decorating

Decorating your home can be a lot of fun, especially if you just moved in. However, decorations can be very expensive and put a dent in your wallet before you know it. Instead of spending a lot of money on home dcor, check out garage sales and thrift stores. If you take the time to look around, you might be able to find affordable pieces that can make your home look more festive and inviting.

Be Energy Efficient

If you want to save money around the house, you have to be more energy efficient. One of the most important energy saving tips you should consider is replacing your old appliances with new ones. Newer appliances use less energy, which will save you money in the long run. Another thing you can do is unplug your electronics after you get done using them. Electronics that are plugged in use energy, even if you are not using them. Also, turn off the lights when you leave the room. Leaving all the lights on can use more energy than you think.

Get Rid of Your Land Line

If your cell phone gets good coverage, you might want to think about getting rid of your land line. It is really not necessary to pay extra money for a land line if you use your cell phone all the time.

Take a Faster Shower

Although a long and hot shower might feel comforting, it will make your water bill more expensive. Instead of taking a shower for 15 or 20 minutes, only take a five-minute shower.

As you can see, saving money around the house is quite simple. Following these tips will help you save hundreds of dollars in the long run.

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What is Your Debt to Income Ratio?

Consumers who are interested in purchasing a home should understand their debt to income ratio. For many, this is a new term and one that they may not fully understand. The term is used primarily when purchasing a home for lenders to determine the maximum payment you may afford.

Calculating income

Your income is calculated on a gross basis, the amount you earn prior to taxes. Income from all sources should be considered if they are stable. In addition to your weekly paycheck, maintenance payments for child support or alimony may be included if they are expected to endure for more than five years. Income from royalties, annuities and other investment income may also be included if it is stable.

Calculating debt

To accurately determine the amount of debt you have on a monthly basis, you will need your credit card bills, car payment bills and maintenance payments for child support or alimony. In addition, you should include your potential mortgage payments including taxes and insurance for the most accurate calculation.

The final calculation

The final calculation is reached by multiplying total debt against total income. The lower your debt to income ratio, the easier it will be to
qualify for a loan. Some programs allow for debt as high as 41 percent though most lenders will prefer this amount be lower.

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