Liz's Blog

Tuesday’s need-to-know money news

April 22, 2014 By Liz Weston

Today’s top story: How to stress test your retirement portfolio. Also in the news: Organizing your personal finances with online calculators, avoiding costly college financing mistakes, and five of the dumbest credit moves you shouldn’t make.

Stress-test your retirement portfolio
Can it withstand the pressure?

5 Online Calculators to Help Organize Your Personal Finances
No pocket protector necessary!

The Most Costly College Financing Mistakes: How To Avoid Them
Don’t pay more than you already have to.

The 5 Dumbest Credit Moves
See above.

5 Ways to Be Green With Your Money
Taking care of Mother Nature does’t have to cost a fortune.

Does your kid need expensive SAT prep?

April 21, 2014 By Liz Weston

Back when dinosaurs roamed the earth, I bought a fat paperback test prep book to help me study for the SAT (which, back then, was still known as the Scholarship Aptitude Test). I didn’t buy the book until after I’d already taking the SAT the first time. After studying, I took the test again–and did worse.

Not that I suffered for this experiment. I scored high enough to become a National Merit Scholar, which meant big bucks for college.

I recently asked a friend my age who was also a National Merit Scholar how he prepared for the test. He vaguely remembered being taught a few test-taking strategies in school. But that’s it.

The world’s changed in the past few decades. College is a lot more expensive and elite schools are a lot more competitive. High scores give kids an edge not just for admission but for all-important merit scholarships. Which is why SAT test prep is pretty much a given among upper-income parents. Even less affluent parents are spending hundreds or even thousands of dollars trying to boost their kids’ scores, as I write in my Reuters column this week, “Resist the urge to go overboard with test prep.” Not investing in test prep feels like a gamble that could leave your kid trampled in the dust.

These parents aren’t foolish or deluded. Scores matter, and most teenagers could use some help. My column mentions some free resources, and I highly recommend reading Debbie Stier’s book, “The Perfect Score Project: Uncovering the Secrets of the SAT.” Even if you can’t afford private tutors, you can do a lot to help your get your child ready for the test.

Monday’s need-to-know money news

April 21, 2014 By Liz Weston

Today’s top story: How to pay off your student loan in four years or less. Also in the news: Affordable ways to help someone having a bad time, how healthy living could save you money, and an easy way to tell if you have good credit.

5 Tips For Paying Off Your Student Loans in 4 Years or Less
Shortening the lifespan of the student loan albatross.

6 Affordable Ways to Help Someone Who’s Hurting
It truly is the thought that counts.

How good health will pay off during retirement

Healthy living right now could pay off in the future.

A Super Simple Way to Figure Out If You Have Good Credit
It’s all about the credit report.

Are Reverse Mortgages a Good Idea for Retirees?
A look at the controversial mortgage program.

Money rules of thumb: Retirement edition

April 18, 2014 By Liz Weston

For every rule of thumb, there are hundreds of people who would quibble with it.

We saw that just recently with a USA Today columnist who quantified exactly how much you need to save for retirement (his answer, via an analysis by T. Rowe Price: $82.28 a day). Lots of people didn’t like that the number was an estimate, an average, and that their own mileage may vary.

But many more people don’t have the patience, knowledge or energy to sort through all the potential factors for every financial decision. Sometimes, they just want an answer.

Over the next few days, I’m going to share the most helpful rules of thumb I know. They aren’t going to apply to everyone in all situations. But if you’re looking for guidelines (or guardrails), there are a starting point.

Let’s start with retirement:

Retirement comes first. You can’t get back lost company matches or lost tax breaks, and every $1 you fail to save now can cost you $10 to $20 in lost future retirement income. You may have other important goals, such as paying down debt or building an emergency fund, but you first need to get started with retirement savings.

Save 10% for basics, 15% for comfort, 20% to escape. If you start saving for retirement by your early 30s, 10% is a decent start and 15% should put you in good shape for a comfortable retirement (these numbers can include company matches). If you’re hoping for early retirement, though, you’ll want to boost that to at least 20%. Add 5-10% to each category for each decade you’ve delayed getting started.

Don’t touch your retirement funds until you’re retired. That pile of money can be tempting, and you can come up with all kinds of reasons why it makes sense to borrow against it or withdraw it. You’re just robbing your future self.

Keep it simple–and cheap. Don’t waste money trying to beat the market. Choosing index mutual funds or exchange-traded funds, which seek to match market benchmarks rather than exceed them, will give you the returns you need at low cost. And cost makes a huge difference. If you put aside $5,000 a year for 40 years, 1 percentage point difference in the fees you pay can result in $225,000 less for retirement.

Thursday’s need-to-know money news

April 17, 2014 By Liz Weston

Today’s top story: What you need to save every day for a comfortable retirement. Also in the news: The three tax buckets, the 10 commandments of savings, and four boring but essential money conversations.