This'n'That; December 29th[Investing;Budgeting;Saving;Taxes]

Time For A New Outlook? [I found this online @ investorsalley.com] It’s a New Year, and time for a new financial outlook. Although pessimism has seeped into every corner of the financial world, there are ways to regain a positive approach to managing your finances. The following strategies may offer additional benefits outside the financial realm, from helping you define the role of money in your life to possibly bringing your family closer. Buy less, be more. When feeling overwhelmed by market gyrations, it’s comforting to focus on what can be controlled-what is spent and how money is saved. Why not put that accountant’s eye and resourcefulness to work at home with some innovative approaches to budgeting? For example, try withdrawing from the checking account 2/3 of what is normally spent on groceries and entertainment in a month and making due with that. After making it on 2/3, try withdrawing even less. It’s amazing just how quickly consumers can adjust to living on less. Committing to living on less just two or three months out of the year can help individuals become more mindful consumers; making better choices that can boost overall savings. Another idea is to expand upon the innovative money-saving, gift-giving program many families instituted for the holidays. A personal letter or certificate for time together could replace store-bought birthday and anniversary gifts, too. A toned down gift giving approach appears to be in vogue. According to Spending Pulse, luxury expenditures on jewelry, art, apparel, sports cars, etc. are down 20 percent. The more creative a family gets, the more enjoyable belt tightening can become. Many families have discovered the priceless gift of quality time as their emphasis has moved away from expensive nights out and lavish gifts. Distinguish need from want. Viewing expenses such as dinners out or helpful cleaning service in relation to what it costs to achieve a short-term goal may help to and prioritize spending. For example, think of the annual amount spent on magazine subscriptions, cable, or a club membership in terms of a percentage of a short-term goal, say college tuition for one year. Tempted to buy a new outfit? Look at the cost in terms of how many hours worked to earn the money. Better still, calculate what could be earned in ten years if pizza wasn’t ordered every week and instead the money was invested in an employer sponsored retirement plan. The “big picture” can be a quick cure for frittering away money. Commit to surviving without credit. After decades of overspending, people who used their home as an ATM via home equity lines of credit should adjust to living within their means. "If you can’t pay cash for it, you can’t afford it." If an individual is in debt, traditional advice recommends making minimum payments on all cards, but to direct any extra cash – bonuses, product rebates, or yard sale proceeds – to paying off the card with the highest interest rate. However, it may be more effective to go after the card with the lowest balance first, because paying it off may provide the confidence needed to pay off other cards. Put credit cards on ice, literally. Rather than in a wallet ready for post-holiday sales, a card may be safer in the freezer -- available for defrosting in cases of emergency. Readjust the concept of time. The 401(k) account may have taken a serious hit, but remember that planning and saving is a life-long timeline, not just a retirement date. Some financial advisors plan out to age 100. With that as an investment horizon, today’s downturn can seem easier to overcome. The average U.S. economic recession has lasted about 11 months. Historically, on average, the stock market has begun to recover about halfway through a recession, with the typical rebound being about 25% in magnitude (from market low point to end of recession). Behavioral finance studies have proven that investors experience more extreme negative emotions when they suffer losses than they do positive emotions when they enjoy gains. These strategies may help avoid having short-term market volatility play on emotions and destroy the discipline necessary for successful long-term investing. In fact, belt tightening and a positive new perspective may provide greater strength by illuminating the many things that are right with life. A [Re]Balancing Act After the first of the year, one should rebalance their investments [taxable accounts], their 401[k]s and their IRAs. Different types of investments; foreign smallcaps, foreign bonds, US blue chips, US small and mid-caps, US corporate bonds, US Treasuries, etc., all have different volitilities in the market. Any one of them can and probably will lose more, much more, less or much less, than any other one in your portfolio. With this in mind, take a look at the original percentage allocations in each of your investments individually. What do they look like now? Is each asset [fund-stock] the same percentage of the whole as it was initially? I doubt it. With the change, your gains [and losses] may be greater or lesser that you originally intended. Realign the allocations toward your desires and tolerance for risk. ***DO NOT do this reallocation during the last two weeks of the current calendar year [ANY calendar year!!]; reason being-mutual fund families normally distribute capital gains and dividends during those two weeks and may subject the investor to added tax liabilities!!*** Early in the new year will do just fine; the market isn't going to change THAT MUCH! What you can do before the end of the year is to weed out and sell the losers in your portfolio for added tax benefits. These losses can be charged against any winning stocks/funds you've sold during this calendar year. If you haven't sold any gainers, DON'T PANIC!! These losses can be written off against earned income as well. Even carried forward and/or backward if necessary.

Budgeting And Savings Help

[I found this on Yahoo Financial; written by Laura Rowley, on 11/05/008, so projections are somewhat dated.....but the principles are the same!!]

There's plenty of advice out there to help slash your spending -- get rid of your car, throw out the television, grow your own vegetables, rent out the attic to a college student. But maybe you need a car to drive to work, have no time to garden, enjoy relaxing in front of the tube occasionally, and don't want to bump into an 18-year-old stranger in your bathrobe. Here are eight ways to tweak your budget and save $500 by the year's end -- with minimum hassle, and without radically changing your lifestyle. 1. Cable TV: If you pay for premium cable services -- extra channels, HBO, etc. -- call your cable company and put your service on "vacation mode" between now and the end of the year. You'll still receive basic service, but save temporarily on the extras. We did this recently because we were having work done in the basement/TV room. We eliminated the "preferred tier" for two months (we don't get the movie channels), saving $15.99/month. (Comcast charged $1.99 for the change, so the total savings was $30.) 2. Prescriptions: Only about one-third of prescription drug purchases are mostly or fully covered by insurance, according to a recent Consumer Reports survey, and prices can vary by as much as $100 for the same drug. Always ask your physician for a generic equivalent, which can cost up to 40 percent less, then shop around. About a dozen states sponsor websites that help you compare prescription prices. Discount stores such as Wal-Mart and Target offer the most popular generic drugs, including antibiotics and medications for asthma, arthritis, diabetes, and high cholesterol, for as little as $4 a month. I tested out comparison-shopping on the web and phone to save on a common antibiotic, Amoxicillin (250mg, 30 capsules), and it took about five minutes. First I searched New York State's drug comparison website [Rx.nyhealth.gov] for amoxicillin at local pharmacies in New Rochelle, which charged from $13.64 to $17.09. Then I called Wal-Mart in nearby White Plains, which charged just $4, and Costco, which offered the drug for $6.90 (no membership required). Savings from highest to lowest pharmacy: $13.09. 3. Cell phones: Take a look at your actual usage, and make sure your plan matches your behavior -- are you using all your minutes? Wasting money on extra services or old ringtones? For example, I used to pay $40 for unlimited megabytes to check email on my phone. But I realized I wasn't actually checking email that way very often. I called and asked for the cost of my actual megabyte usage the previous month: $6. By paying for the bytes used (and eliminating text messaging altogether) I save $30 to $35 a month. If you tend to go over your allotted minutes (at a cost of 40 to 45 cents a minute), register for free with a service called OverMyMinutes [.com]. It will alert you by text or email when you're at your limit. 4. Food: This one takes a little more effort, but with about an hour of planning, I typically cut my grocery bill by one-third. I start at my grocery store's online circular, creating five to seven dinner menus based on what's on sale and in season (click on the item and the site creates your shopping list for you). Then I head over to CouponMom or MyGroceryDeals (both "dot-coms," both free, registration required). Click on your state and local grocery store, and the sites tell you specific bargains available that week so you can stock up. CouponMom also tells you whether a coupon is available and exactly where to find it (i.e., "Smart Source insert 10/5"). I just pull the coupon inserts out of my Sunday paper every week, date them, and throw them in a drawer. I only cut a coupon when CouponMom tells me where to find it; but you don't have to do this at all to save money. In the store, I check the price of the sale/coupon item against the generic brand to make sure it's really a deal, and then use the store's loyalty card. Using this approach, I cut a recent grocery bill from $174 to $114 for a week's worth of groceries for a family of five. (I also do a monthly warehouse club run for low-cost staples like skim milk, which freezes pretty well.) 5. Drycleaning: "Wool, cashmere, silk, rayon, polyester, and spandex can all be laundered," says Lindsey Wieber, of The Laundress [.com], a collection of specialty fabric care products. Manufacturers actually wash the fabric before they construct it into a garment, she explains, and add the "dry clean only" label to avoid liability issues. Wieber and co-founder Glen Whiting, both Cornell University graduates, work with one of their former professors (who has a doctorate in fiber science) to create new enzyme formulas that clean without damaging clothing. Hand-wash or use a mesh bag in the washing machine (delicate cycle on cool). Lay wool and cashmere flat to dry; everything else, including cotton and linen, can be thrown in the dryer on a low-heat setting, then pressed. Hang up and air out suits immediately; use a lint-free cloth and a stain-removing product to eliminate perspiration or other stains on the inside lining, and spot clean exterior stains. Using this method, Wieber says, suits only need to be dry cleaned two to four times a season. (Savings in our household: About $30 a month.) 6. Utilities: You can get a basic programmable thermostat for as little as $23 at the hardware store, but can save as much as 25 percent on your energy bills by turning down the heat (or air conditioning) when you're away from home or asleep. For the average utility payer, that works out to about $250 a year, or $21 a month (so ideally, you roughly break even in November, and save $21 in December and thereafter). In addition, water bills can be cut back 25 percent by replacing your old showerheads and faucets with low-flow aerating models. Look for 2.5 gallons per minute (gpm) or less; Home Depot sells showerheads at 1.6 gpm for as low as $12. (Savings in our household after the initial investment: About $10/month.) 7. Taxes: The market's steep decline this year offers many investors the opportunity to save by harvesting tax losses before Dec. 31. An investor can sell downtrodden securities held in taxable accounts to offset either capital gains elsewhere or as much as $3,000 in ordinary income. (Meanwhile, additional losses can be carried forward to future years. SeeIRS publication for details at www.irs.gov/taxtopics/tc409.html ) A study of 185,000 households by Fidelity found that only 10 percent of taxpayers took advantage of the full $3,000 deduction allowed under the tax code. Most of the households surveyed would have gained $500 in additional tax savings. Consider this example from the study: An investor buys a stock for $30,000, and sells it for $27,000, taking a $3,000 loss. If the household had $100,000 in adjustable gross income, harvesting the loss would have cut their tax bill by $450 if the position was held more than a year and $750 if it was held short-term. Click here for more year-end tax tips. 8. Money rituals: In their book "The Power of Full Engagement," authors Jim Loehr and Tony Schwartz suggest that change is a matter of adopting new rituals rather than demanding we be more disciplined. "Building rituals requires defining very precise behaviors and performing them at specific times," they write. Save money by creating quirky rituals: Save all the $5 bills from your wallet at the end of the day. Bring your lunch to work every Monday, Wednesday, and Friday until the end of the year. Boost your 401(k) contribution by 1 percent every time you get a raise. Comparison shop for your auto or homeowner's insurance the day after your birthday each year. Small rituals become habits -- and take a lot less time and energy than watching every penny you spend. (For more savings tips, see www.moneyandhappiness.com/blog )

Til Nex'time.......