Women and Personal Finances

By many measures, women’s lives have changed substantially in recent decades. According to a comprehensive government report called “Women in America” (www.whitehouse.gov/data-on-women), although certain social and economic situations for women have improved, when it comes to personal finances, many women still face challenging hurdles.

Key report findings include:

  • Women live longer than men but are much more likely to experience critical health problems that hamper their ability to work – and to pass up needed care due to cost.
  • Although the earnings gap between women and men continues to narrow, it’s still significant: Among full-time workers, women’s weekly earnings as a percentage of men’s have increased from 62 percent in 1979 to 80 percent in 2009.
  • More women than men now graduate high school and college, but far fewer earn degrees in engineering, computer sciences and other higher-paying fields.
  • Women increasingly marry later, have fewer children or remain childless, yet still are more likely to live in poverty, particularly single-mother families.
  • Women are less likely than men to work outside the home (61 percent vs. 75 percent in 2009) and are much more likely to work part-time and to take time off to raise children or care for aging relatives.

In a nutshell: Women generally earn less and live longer than men, so at retirement they often have less in savings, receive smaller retirement and Social Security benefits and must spread out their money longer. Clearly, women need to take charge of their financial wellbeing. Here are a few places to start:

Develop a budget to track income and expenses. Either download a budget spreadsheet template or investigate software packages and online account management services like Quicken (www.quicken.com), Mint.com (www.mint.com), Yodlee (www.yodlee.com) and Mvlopes (www.mvlopes.com).

Plan for retirement. Time is your biggest ally when it comes to retirement savings, so get cracking. Start estimating your retirement needs:

  • Social Security’s Retirement Estimator (www.ssa.gov/estimator), which automatically enters your earnings information from its records to estimate your projected Social Security benefits under different scenarios, such as age at retirement, future earnings projections, etc.
  • Check whether your 401(k) plan administrator’s website has a calculator to estimate how much you will accumulate under various contribution and investment scenarios. If not, try the retirement calculators at Bankrate.com and AARP to determine your current financial status and what you’ll need to save to meet your retirement needs.

Do your research. Many helpful personal financial education and management tools are available online, including:

  • The National Foundation of Credit Counseling’s MyMoneyCheckUp™ program offers a step-by-step assessment of your overall financial health and behavior in four personal finance areas: budgeting and credit management, saving and investing, planning for retirement and managing home equity (www.mymoneycheckup.org).
  • Social Security’s Website for Women provides information on retirement, disability and other issues. You can also order or download their informative, free publication, “What Every Woman Should Know” (www.ssa.gov/women).
  • The Women’s Savings Initiative, a program jointly developed by Heinz Family Philanthropies, the Women’s Institute for a Secure Retirement (WISER) and Visa Inc. (www.practicalmoneyskills.com/womensave). This free program features an audio- and e-book called “What Women Need to Know About Retirement,” which you can order on CD or download as a PDF or audio file from Practical Money Skills for Life, a free personal financial management program run by Visa (www.practicalmoneyskills.com/resources).

By Jason Alderman

How to Turn Monetary Gifts into Teachable Moments

Children and teenagers who received monetary gifts for the holidays are often excited to choose what to buy. While they should be allowed to spend some of the money or gift cards, as a parent, you could also use these windfall gains as an opportunity to teach and practice important personal finance lessons.

Here are a few ideas to start with, although you can alter the message or subject matter to match your child’s experience and ability to understand the topic.

Create money goals together. Planning how your child will save or spend monetary gifts is a valuable skill and practice no matter their age. (If you don’t have a personal plan, this is a great opportunity to set an example by developing your financial path as well.)

You can start by drawing three columns – spending, saving and giving – and having them write a few goals for each. Explain the difference and importance of long- and short-term goals, and the value of having an emergency fund (for kids this could help pay for a car repair or bike tire).

Set priorities and discuss the big picture. Have them add up all they received and divide it into each column. Offer guidance to help them determine how much to put into saving and charity, taking the time to explain your reasoning.

They’ll likely find that there isn’t enough money to make a significant impact on all their goals and they’ll need to prioritize based on how important each goal is to them. Share your own experiences and how sometimes it’s better to save for a bigger and better purchase later. You could also have them calculate how expected earnings from allowance, working or upcoming holidays or birthdays could help them achieve their unrealized goals.

Decide where to store the savings. If they don’t already have one, it might be a good time to open a bank account with your children. Go over the differences between a checking and savings account and how they can store the money they received and earn. Your kids can then decide how to split their funds between checking and savings based on their goals.

Gift cards can pose a challenge, particularly if they’re store-specific cards. Children who receive them can’t deposit them at the bank, and they should take this into account as they determine which priorities they can meet and which may need to wait.

However, there are online marketplaces where they can buy and sell gift cards. How much they’ll pay and receive depends on the marketplace and the store – an example of supply and demand in action.

Comparison shop before making a purchase. No doubt children are going to want to spend some of the money right away. It offers an excellent opportunity to discuss the importance of comparison shopping.

Comparing prices at various retailers can help them find a good deal, and they should also consider several alternative but similar purchases. Being able to figure out what best fits one’s needs, wants and budget is an important skill at any age.

Discuss the time value of money and importance of saving wisely. Older children might be ready to learn about the time value of money, the idea that a dollar today is worth more than a dollar in the future.

You could discuss how inflation can decrease the purchasing power of money over time. Older children might be able to think of examples, and you can reinforce the point with images of old advertisements for 5 cent soda or gum.

The next step might be to discuss the importance of saving and investing and how compound interest could potentially offset or supersede the effects of inflation. Perhaps conclude by touching on opportunity costs, the trade-offs that come from every decision.

Bottom line: You can’t force behaviors, but you can use teaching moments to explain and practice valuable money management skills. The holidays are a great opportunity as many children receive gift cards or money, and these lessons can continue throughout the year. Try to reflect the skills and practices you’re teaching in your day to day life as well. Children can pick up on the non-verbal lessons you demonstrate as much as the explicit lessons you sit down and teach.


By Nathaniel Sillin

Resolve to Replace Your Bad Financial Habits

Most people have at least one bad financial habit. Whether it’s impulse shopping, forgetting to pay bills on time or putting off building that emergency fund, balancing what you want to do and what you “should” do is never easy. The new year is the perfect time to identify potential financial weak points and replace bad habits with productive ones.

Start by identifying your bad habits. Sometimes a bad financial habit is easy to identify. For example, there might be a growing stack of bills in the kitchen that you willfully ignore. Others may be subtler, or perhaps they’ve become so ingrained that you do them without thinking twice.

Not sure where to start? Looking through your previous months’ expenses can help you identify expensive trends or one-off purchases that are part of a larger theme. Online or paper bank statements can make this particularly simple. If you have a budget, you likely already compare projected spending with actual spending on a monthly basis, if not, this might be a good time to start.

You might recognize a few of these common bad financial habits in your life:

  • Paying bills after the due date.
  • Paying only the minimum required on bills.
  • Ignoring bills and letting them go to collections.
  • Putting off saving for retirement or for a rainy day.
  • Impulse shopping or “retail therapy.”
  • Not keeping track of how much debt you have.
  • Taking on debt to pay for something you don’t currently need.

Ultimately, all of these lead to spending more than you earn and in some cases, bad habits can have a cascading effect.

Try to figure out what’s driving your behavior. You might need to figure out what triggers your behavior and the reward you perceive afterward before you can change a habit. However, triggers and rewards aren’t always obvious.

For example, you might buy big-ticket items when they’re on sale because you want to feel like you’re accomplishing something by “saving” so much. Perhaps you could foster a similar feeling of accomplishment by investing the money in a tax-deferred retirement account and calculating how much it’ll be worth after years of compound interest.

Aim for these healthy financial habits. What habits should you try to adopt? Budgeting is certainly a worthy activity, but also consider the following mix of behaviors and specific objectives that can help keep your finances in order.

  • Pay bills on time. In addition to avoiding late-payment fees, making on-time payments is one of the most important factors in determining your credit score.
  • Make paying down debt a priority. Rather than accruing interest, make a point to pay down debts as quickly as possible.
  • Build and maintain an emergency fund. Having three to six months’ worth of living expenses in savings can help cushion the blow from a financial or personal setback. You could start with a goal to put $1,000 aside and then build towards the full emergency fund.
  • Save for retirement. You can put aside a percentage of your income for retirement and invest the money within a tax-advantage account, such as a 401(k) or IRA. Find a comfortable contribution amount to start with, and then try to increase it at least once during the year.
  • Plan your large purchases. To help prevent impulse shopping from draining your budget, resolve to wait at least one day before buying anything that costs over $100 (or whatever amount makes sense for your budget). If you know there’s a large purchase coming up, start saving early by setting a little money aside from each paycheck.

You might consider asking others for input during this process. Especially if you’re having trouble identifying a bad habit or finding the motivation to change, sometimes an outside perspective can help.

Bottom line: Make a resolution to replace your bad financial habits with healthy ones this year. Start by identifying the habits you want to change and trying to figure out the trigger and reward that surround the behavior. Then, try to replace that behavior with something positive. After identifying and trying to change your personal financial habits, you might want to consider the financial practices you share with a spouse or significant other.


By Nathaniel Sillin

Health and Wealth in One – How to Make Money While Working Out


The end of the year is a perennial period of self-reflection, and you may enjoy partaking in setting a few New Year’s resolutions. Unfortunately, you also may (more than once) enthusiastically start a year with shiny optimism only to find yourself falling short a few weeks later. You are not alone.

Resolutions related to finances and health, two important components of everyone’s life, are especially common. Here are a few ways that you could tie physical activities to achieving your financial goals. Hopefully being able to tackle both resolutions at once can help keep you motivated for the entire year.

Compete with yourself, or others. If you’re up for a little friendly competition, consider creating or joining a challenge and putting money on the line.

There’s an online app that you can use to place a wager on how often you’ll work out. At the end of the week, you have to pay your preselected amount for each workout you miss. But if you complete your workouts for the week, you collect a portion of the amount paid out by everyone else.

Some people make an arrangement with a friend where you each agree to work out X times a week and to pay the other person $5 or $10 for each workout missed. Or, you could opt to make a donation to a charity of your friend’s choice rather than pay each other. The goal is to provide accountability, and the financial aspect can add a sense of urgency and be a great motivational tool.

Connect an activity tracker to rewards programs. Several services give you points each time you work out and let you redeem the points for cash, gift cards or other prizes. The real trick is to use multiple programs and maximize your rewards from every workout. Some employers also provide bonus points to employees that use these programs or have similar rewards programs of their own.

Make working out your work. If you’re looking to make a serious lifestyle change, and potentially some serious money, consider becoming a personal trainer or fitness instructor. While the certification process can be expensive and time-consuming, afterward you’ll be able to charge clients for classes or one-on-one training.

Or, you could try to find flexible and active work that suits your interests and experience. Gardener, referee or dog walker could be good fits to supplement your income.

Keep exercise-related expenses down. It can be tempting to buy new workout equipment or sign up for a gym when you’re excited about a New Year’s resolution. However, there are many ways to get fit without expensive equipment or a large gym.

For example, you can find videos of free instructor-led workouts or yoga sequences online or try an app that creates and leads you through workouts. If you want to take up an activity that requires facilities, look for inexpensive options at local community centers.

Raise money for a charity with every step. You may not have a strong desire to earn money but are still looking for a little extra motivation to work out. Similar to the programs that reward you with points, there are apps like Charity Miles that you can use to raise money for your favorite charities while exercising.

You could also sign up for a charity walk, run or ride and know that when you cross the finish line you’ll be helping a good cause.

Bottom line: By keeping costs down and looking for ways to make money while staying active you can make your budget (and body) more flexible. This approach could help you stay motivated for longer, and you can use the extra money to pursue your other goals for the year.

Perhaps you’re trying to save for a down payment or vacation, focused on building your retirement savings or looking to make a significant impact in your community by donating to non-profit organizations. Every extra dollar can bring you one step closer to achieving that goal.

By Nathaniel Sillin

Your Quest Diagnostics Lab Results May Be in the Hands of Cyber Criminals

The transition from paper to electronic records in the healthcare industry is both good and bad. It’s easier for all of our care providers to get our information, but it’s also easier for hackers to get that information when it’s stored on databases and can be accessed online or on mobile devices. The latest healthcare related company that is victim of a breach is Quest Diagnostics. This company performs lab tests and diagnostics for one in three adults in this country and half of the physicians and hospitals, according to its website.

On November 26, the company said an unauthorized third party accessed names, dates of birth, and lab results of 34,000 patients. Neither social security numbers nor financial information was included in the accessed data, which was retrieved through what the company said was an improperly secured mobile application. It was created and provided by a company called Care 360 and is called MyQuest. It is used to store and share patient health records electronically.

Quest is sending information via US Mail to those affected by this incident. If you receive a letter, it will be more important than usual for you to review the benefit statements you receive in the mail from your insurance providers. The information on those documents is what gets submitted to them about your healthcare. If anything is incorrect or unclear, contact them to get it clarified.

Healthcare fraud can be very lucrative for cyber criminals. Medical records are more valuable than credit card numbers because they contain a lot more information and information that isn’t easily changed and that doesn’t expire. Also, it may take victims longer to figure out they have been victims because of the timing of receiving the benefit statements.

The FBI has reported that criminals often sell healthcare records for as much as $50 each. The Ponemon Institute put that number at over $363 in a recent study. Compare that to the $1-5 for a credit card number and you can quickly see why it is an attractive target. Consider the Excellus and Anthem Blue Cross breaches. The two of them resulted in theft of over 10 million and 78 million records, respectively.

Because of the big payday for cybercriminals, these types of breaches are expected to rise over the coming years as more organizations embrace electronic records and mobile apps. In the case of Quest Diagnostics, they have reported this incident to law enforcement and are determining the best ways to increase the security of their data going forward.

© Copyright 2016 Stickley on Security

What Are Your Financial Goals?

If you had to choose between sitting down at the kitchen table and setting goals or sitting on the beach in the Caribbean, you would probably choose the beach. But how would you pay for the airfare? Hotel? Food? Souvenirs?

Goal setting in and of itself may not be exciting and fun, but it helps you to save for and achieve exciting and fun things, as well as things that may not be as exhilarating but are still pretty important (such as having enough money for retirement or a child’s college education). You could just wait and see what is left over at the end of the month after you pay your bills, but since it is easy to get in the habit of spending what you make, you may wind up having no savings if you take this approach.

Even if you are putting money in savings, how do you know if it is enough to get what you want when you want it by? By taking the time to think about what your goals are, how much they cost, when you want them by, and what your regular obligations are, you will know exactly how much to save each month and if you need to make changes to your budget so that you can both reach your goals and pay your bills with ease.

The first step in achieving your financial goals is, not surprisingly, determining what your goals are. For right now, just think about the goals themselves and when you want to achieve them by – don’t worry about the cost. Do you want to buy a new computer in a year? Have a down payment for a house in four years? Be debt free in five years?

Once you figure out what your goals are, you can then calculate how much you will need altogether and what you should set aside each month. How you do this depends on whether it is a short-, mid-, or long-term goal.

Short-term Goals

Short-term goals are achieved in under a year. To determine the amount you will need to save for a good or service, look at what the cost is now – it is unlikely that the price will be that much different seven or eight months down the road. Once you know the total amount you need, determining the amount you need to save each month is easy – just subtract any amount you have already saved from the total cost and divide by the months until the desired achievement date.

Example 1
You would like to buy a new sofa nine months from now. You visit a few furniture stores and discover that the model you are interested in cost about $900. You have not saved anything yet. Therefore, you would want to save ($900 – $0)/9 = $100 a month.

Example 2
You would like to establish an emergency savings account within eight months. Unlike with the sofa, you can’t go to the store to determine how much you need. Instead, you want to look at what your expenses are – most experts recommend setting aside three to six months worth of essential livings expenses. You calculate your essential expenses at $1,000 a month. You would like to have five months worth of expenses in your emergency savings account and already have $1,000 in there. Therefore, you would want to save ($1,000 x 5 – $1,000)/8 = $500 a month.

Mid-term Goals

Mid-term goals are achieved within one to five years. To determine the total cost and amount you need to save per month, you can use the method just described for short-term goals or use the method that is described in detail in the long-term goals section. This method takes into consideration the fact that the cost of most things rises over time due to inflation and that your savings will grow beyond your contributions if you earn a return on your investments. The math for the first method is much easier, but the second gives you more accurate numbers. You don’t necessarily need to go the extra mile to consider inflation and return for goals of smaller amounts that you plan on achieving in a year or two, but you may want to do it for high-cost goals with a longer timeframe.

Example 1
You would like to take your family to Disney World in year. Currently, the cost of the vacation is $2,000. You have not saved anything for the trip yet. Using the short-term goal method, you calculate that you need to save ($2,000-$0)/12 = $167 a month. If you use the long-term goal method (assuming an inflation rate of 3% and an interest rate of 1.5% on your savings account), you would need a total of $2,060 and have to save $170 a month. As you can see, because the timeframe is short and the amount saved is small, using the first method gives you fairly accurate numbers without needing to whip out a financial calculator to do the more advanced math of the second.

Example 2
You owe $11,320 in credit card debt ($5,000 on a card with a 12% APR, $3,320 on a card with a 15% APR, and $3,000 on a card with a 19% APR). You would like to be debt free in four years. To figure out how much you should pay, you can’t just take $11,320 and divide it by 48 months – you need take into consideration the fact that you are charged interest each month on your outstanding balance. This can be done with a debt repayment calculator. One is available at www.federalreserve.gov/creditcardcalculator. To be debt free in four years, you will need to pay $132 on the first card, $93 on the second, and $90 on the third. (*Note: Make sure your monthly goal amount covers at least the minimum required payment.)

Long-term Goals

Long-term goals are achieved in more than five years. When you are figuring out the total amount you need to save for a long-term goal, it is important to consider the effect of inflation, which, as mentioned previously, is the general increase in the price of goods and services over time. Ever hear someone lament about how a loaf of bread, gallon of gas, movie theater ticket, etc., only cost a quarter back in the day? Well, inflation is one of the reasons those things cost multiple quarters now.

Start by researching what the cost of the goal is now. Next, figure out the rate of inflation you will use. (You can do research on what the inflation rate has been historically for your goal, but if you can’t find anything specific, you can use the general inflation rate (typically measured with the Consumer Price Index), which in recent years has hovered around 3%. Don’t worry too much about coming up with a precise inflation rate – even economists sometimes disagree on what to use.)

Keep in mind that the cost of your goal is the after-tax amount that you need. In many cases, the taxes that you have to pay on your savings may be minimal or nonexistent. However, if you are saving the money in a tax-deferred account, like a 401(k), or expect significant earnings from a taxable investment, then it is a good idea to figure out the pre-tax amount and use that figure when calculating how much you will need to save each month. Doing this will ensure that you have enough money for both your goal and taxes. If you do not know what your tax liability will be, you may want to seek the help of a financial planner or accountant.

Once you know the total amount you need to save, you can figure out how much you should set aside each month. As discussed previously, it is a good idea to factor in the return that you expect to earn on your investments. For example, if you put money in a certificate of deposit (CD), you will be paid interest. If you invest your savings in stocks, the value of the stocks will likely increase over time, and you may also receive dividends. (Investment options are discussed in more detail later.) Some investments may come with a fixed rate of return that you know ahead of time. If what you plan to invest in doesn’t, you will have to estimate what you expect the return to be. One way to do this is to look at what the return has been in the past – past performance is not always a very good predictor of future performance, but unless you have a crystal ball, you may have no other choice.

Example 1
You plan on buying a house in seven years. You would like to have a down payment of 10%. You look at home listings on-line and see that the homes you are interested in cost around $200,000. You have already saved $5,000. A real estate agent tells you that home values in your area typically increase about 4% a year, and you plan to put your savings in a mutual fund with a historical return of 5%. The current value of the desired down payment amount is $200,000 x .1 = $20,000. You use the “What will my investment be worth in the future?” calculator to determine the down payment amount you will need in seven years. You enter today’s date in “Present date”, today’s date plus seven years in “Future date”, $20,000 in “Present value”, 4% in “Rate of return”, and leave the “Compounding period” at annual. You get an answer of $26,318.64. You then use the “How much should I save each month?” calculator to determine how much you should save each month. You enter $5,000 in “Balance at start date”, 5% in “Rate of Return”, $26,319 in “Savings goal”, and 7 in “Number of years”. You need to save $192 monthly to reach your goal.

Example 2
Your child will be going to college in 10 years. You would like to pay for half of his tuition costs. You look up the current tuition at several schools. The average is $24,000 a year. You plan to put the money in your state’s 529 college savings plan, which in the past has earned an average return of 6%. You have not saved anything yet. Future college tuition can be easily estimated with the “College Cost Projector”. The tuition inflation rate (which is typically much higher than the general inflation rate) is already provided – you just need to fill in whether it is a two- or four-year college, current one-year tuition costs, and years until matriculation (start of college). (Leave “Adjust tuition after matriculation” at yes.) Entering your information in the calculator, you get a result of $209,616.96 for the total projected tuition costs (assuming an inflation rate of 7%). Thus, the amount you want to save is $209,617 x .5 = $104,809. Using the “How much should I save each month?” calculator, you determine that you need to save $640 a month to reach your goal.

Example 3
You are planning on retiring in 35 years. Other than that, you have no idea where to begin. Determining how much you need to save for retirement is no simple task. In addition to considering inflation and rate of return on your investments, you also need to consider what you expect your expenses to be when you retire, how long you expect to live, how much taxes you will have to pay on withdrawals, and what your Social Security benefits will be (or if you even want to count on receiving Social Security). Your best bet is to use a retirement calculator (a detailed one is available on the AARP’s website) or consult with a financial advisor.

How Realistic Is Your Goal Plan?

After you set your goals and determine what amount you need to save each month to reach them, it is a good idea to consider if you can actually save that much each month. If you goal plan tells you to save $1,500 a month but your income is $1,700 a month, you probably can’t save $1,500 a month. To determine how realistic your goal plan is, start by listing your current income and expenses. If there is not enough money in your budget right now to save what you want for your goals, consider if you can make any changes to your income and/or spending. Can you get a part-time job? Cut back on dining out? Get a cheaper cable package? Spend less on clothing?

If you still fall short after making adjustments to your budget, you may have to rethink your goals. Is there a cheaper alternative available? (For example, you can go to a local amusement park instead of Disney World.) Can you extend the timeframe? Are there any goals that are less important that can be dropped? Maybe you would really love to buy a $5,000 garden gnome to put in your front lawn, but having enough money for retirement is a bigger priority.


Once you have a realistic goal plan, you need to determine where your savings will go. There are three main types of investment classes:

  • Stocks. A share of stock represents a percentage of ownership in a corporation. In other words, if a company is divided into a million shares and you buy one share, you would own one millionth of that company. You can make money from receiving dividend payments and selling the stock for more than you bought it for. Historically, stocks have provided the greatest return long term. However, there are no guarantees – one day your stock may be worth more than what you paid for it, the next, less.
  • Bonds. A bond is a loan to a company or government, with you, the bondholder, as the lender. Organizations issue bonds when they want to raise funds. Generally, you receive the principal, called the par value, at maturity of the bond and interest periodically while you are holding the bond (although some only pay interest at maturity or not at all). Depending on the market, you may purchase a bond below, at, or above its par value. In general, bonds are between stocks and cash equivalents in regard to risk and return.
  • Cash equivalents. Cash equivalents are assets that can be readily converted into cash, such as savings and checking accounts, certificates of deposit, money market deposit accounts, and U.S. Treasury bills. They tend to be low-risk, so there is little or no danger that you will lose the money you deposit. As a result, cash equivalents provide a low return.

It is best to keep money for short-term goals in cash equivalents. Because you will be using the money soon, your primary concern is that you not lose any of your principal investment. If you put it in stocks, there is a good chance they could be worth less in six months. However, make sure to keep your savings separate from the checking account you use to pay for your regular expenses. If you are using a savings account, you should be able to have part of your paycheck directly deposited into it or set up a regular automatic transfer from your checking account to your savings account.

For long-term goals, the value of your investment in six months is less of a concern than inflation. The return on cash equivalents is often less than the rate of inflation, meaning if you keep your money there, its value will be essentially decreasing over time. That is why it is a good idea to put a large chunk of the money you are saving for long-term goals in stocks and bonds, which, on average, have a higher return than cash equivalents. There is a risk that the value of your investments will decrease, but the risk is lower the longer your investment period is. Inflation can be a concern for mid-term goals, but since the timeframe is shorter, you may want to be more conservative with your investment choices.

Diversification can help you reduce the risk of losing money when you invest. A well-balanced portfolio has a mixture of stocks, bonds, and cash equivalents. (What the exact percentages should be depends on how far away you are from your goals and your risk tolerance.) It is also a good idea to diversify within each type of investment class. For example, you can purchase stocks from manufacturing companies, technology-oriented companies, and financial services companies. A simple way to get diversity is to purchase shares in a mutual fund. In a mutual fund, money from several investors is pooled to buy different stocks, bonds, and/or cash equivalents.

Take advantage of tax-deferred accounts when they are available. For example, for retirement, use a 401(k) or 403(b) if your employer offers it, or you can set up a traditional IRA or Roth IRA on your own. If you are saving for your child’s higher education, you can use a Coverdell Education Savings Account or 529 plan. 401(k)s, 403(b)s, and traditional IRAs allow you to make tax-free contributions, while Roth IRAs, Coverdell Education Savings Accounts, and 529 plans allow you to make tax-free withdrawals. All of these accounts allow your earnings to grow tax free.

Be flexible
Your savings should be the first “bill” you pay each month. But what if you simply can’t put the $150 into your Maui extravaganza fund one month because your transmission blew? Resist the urge to panic, and consider it a temporary setback. With a little extra effort, you may be able to make it up over the next couple of months. Or you may be able to alter your plans or achievement date slightly. However, if you find yourself regularly unable to meet your savings goal, there may be deeper issues to contend with. Were you too optimistic with those overtime hours? Couldn’t give up smoking to save the extra $100 per month? Or perhaps the goal really wasn’t for you – you thought a new computer was vital to your happiness, but the prospect of owning it just isn’t giving you the thrill you anticipated. Revisit your goals and budget and make adjustments so that they are more achievable.

By taking the time to set financial goals, you can go from wishing to having.