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[BUSINESS] 7 Shortcuts for Major Money Hassles

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  • madchinaman
    1. Ace Your Retirement http://money.cnn.com/popups/2006/moneymag/shortcuts/index.html By the time you re 65, you ll need to have socked away about $25 for
    Message 1 of 1 , Jan 1 4:31 AM
      1. Ace Your Retirement

      By the time you're 65, you'll need to have socked away about $25 for
      every dollar you expect to withdraw annually. That means that
      throughout your working life you must save. And save. And save. Oh,
      and don't forget picking investments and managing your portfolio year
      in, year out. Yet with one simple act, you can take care of all of
      that work.

      The Easy Way: Buy a target-retirement fund in your 401(k) A 401(k) is
      nothing if not easy: Contributions come out of your paycheck before
      you can spend them. You don't owe taxes on the money you invest, and
      earnings grow tax deferred. Sign up and aim to save 10% to 15% of
      your salary (including the company match).

      Target-retirement funds, which are becoming one of the most popular
      401(k) choices, are the ultimate in hands-off investing. You simply
      pick a fund with a date that matches the year you plan to retire -
      2010, 2020, 2030 - and you get a completely diversified mix of stocks
      and bonds that's appropriate for you. This no-brainer fund
      automatically shifts stock assets into bonds each year, becoming more
      conservative as you age.

      A target-retirement fund is a case in which simpler is actually
      better. Sure, you can come up with a smart allocation and pick top
      funds, but 401(k) investors often do a lousy job at that. What these
      funds give you is a disciplined plan, the key to retirement success.

      By Kate Ashford, Carolyn Bigda, George Mannes, Walter Updegrave and
      Penelope Wang


      2. Invest (Almost) Like a Pro
      You can put your investing strategy on autopilot with a target-
      retirement fund. But perhaps you want to manage your own portfolio.
      All it takes is a few hours a year with this two-step plan.

      Step 1: Pick a mix First decide how you'll divvy up your money
      between stocks and bonds. You can use online tools to fine-tune a mix
      for your age and appetite for risk. But the easy way to decide how
      much you should devote to stocks is to subtract your age from 120. So
      if you're 40, put 80% of your long-term savings in stocks and 20% in
      bonds. If nothing else, this simple rule of thumb ensures that you'll
      own an ample amount of stock when you're young and can take more
      risk. Every year, subtract your age from 120 again and adjust the mix
      as needed.

      Step 2: Buy index funds For an investment that doesn't require
      constant vigilance, the clear choice is an index fund. With a single
      fund, you can own virtually the entire stock or bond market.

      No index fund will ever top the charts, but history suggests that
      over the long run they'll earn a better than average return. You can
      build a perfectly adequate portfolio with just two funds: a total
      stock market index fund and a total bond market index fund, both of
      which you can find at Fidelity or Vanguard.

      By Kate Ashford, Carolyn Bigda, George Mannes, Walter Updegrave and
      Penelope Wang


      3. Cruise into College
      Want to make college savings easy? Piece of cake. Use a state 529
      savings plan. No need to select stocks, bonds or funds on your own
      and then deftly manage the money until your child enters school. Just
      pick a single age-based fund in a 529, and your work is pretty much
      done. This fund of funds will shift gradually from stocks to bonds as
      your kid nears school. Relax about taxes too. In a 529, earnings are
      tax-free as long as the money is used for college costs such as
      tuition or room and board. You don't need to remember to save either.
      Most 529s let you set up an automatic investment plan. The only
      decision is which 529 to choose.

      The Easy Way: Pick the Utah plan If you don't have the time or
      inclination to sort through 529s, go straight to the Utah Educational
      Savings Plan (800-418-2551; uesp.org). With its selection of Vanguard
      index funds, it gives you age-based choices at rock-bottom prices.
      You'll have to select one of five different stock and bond
      allocations. If in doubt, stick with option two. One drawback: You
      may be giving up valuable state tax breaks.

      Fairly Easy Way: Research your state plan In 28 states, you're
      entitled to a tax deduction or credit for money you put into your
      local 529. For your state's tax breaks and plan options, visit
      Savingforcollege.com. Stay with your state plan if you earn a
      generous tax break, you don't have to pay a sales charge to invest,
      and the plan's annual expenses are no more than 1% a year. If not,
      Utah's 529 remains your best bet.

      By Kate Ashford, Carolyn Bigda, George Mannes, Walter Updegrave and
      Penelope Wang


      4. Disaster Proof Your Family
      Life throws you a curveball sometimes: cutbacks on the job, a roof
      that needs to be replaced. You can't completely insulate yourself
      from such shocks, but three straightforward steps will protect you
      against 90% of problems.

      Step 1: Build an emergency fund Put aside at least three months'
      worth of living expenses in cash so you can get through a rough patch
      without having to borrow or dip into retirement savings (make that
      six months if your family relies on one wage earner). Two money-
      market funds that consistently pay high yields are TIAA-CREF Money
      Market Fund (TIAXX) and Vanguard Prime Money Market Fund (VMMXX).

      Step 2: Buy life insurance With insurance, the simplest choice is
      also the best. In almost every case, term insurance gives you the
      biggest death benefit for your premium. All you need to decide is how
      much and for how long. Buy life insurance equal to five to 10 times
      your annual salary. The more children you have, the more debt you
      carry and the longer your family will need help (until your kids are
      out of college, say), the closer you should be to the top end of that
      range. You can lock in your payment for 10 to 30 years, but for most
      new insurance buyers 20 years is about right. Go to QuickQuote.com or
      Insure.com to compare policy quotes from several insurers.

      You also need disability insurance, which typically pays up to 60% of
      your salary if you can't work. But this policy virtually defies
      simplification. If you don't get adequate coverage on the job, you'll
      have to confer with an agent.

      Step 3: Write a will You should have a will that, at minimum,
      appoints a guardian for your minor children, outlines how you want to
      divvy up your assets and names an executor. If you have an estate
      worth less than $2 million and you're leaving almost everything to
      your spouse and kids, you can write it yourself by using off-the-
      shelf software like Quicken's WillMaker Plus. If your situation is
      complicated, spend about $1,000 on a lawyer.

      By Kate Ashford, Carolyn Bigda, George Mannes, Walter Updegrave and
      Penelope Wang


      5. Protect Your Identity
      There's no shortage of products promising to fend off identity theft.
      The easiest solution: Follow these three steps to lock up your data
      and keep tabs on your credit.

      Step 1: Dry up junk mail Thieves use your pre-approved credit-card
      offers to open accounts in your name, which is the hardest type of ID
      theft to detect. Opt out of receiving the junk mail by calling 888-
      567-8688, a service run by the credit bureaus. Select option three to
      permanently remove your name from marketing lists (you can always opt
      in later).

      Step 2: Go paperless Shredding will eliminate your paper trail. Even
      easier is to receive and pay bills online, which ensures that info
      can't be lifted from stolen mail. Plus, with 24-hour account access,
      you'll see an unauthorized charge on your card right away.

      Step 3: Watch over your credit It's easy to request a free report
      from one of the big three bureaus every four months at
      AnnualCreditReport.com. Want more oversight? For $5 a month,
      TripleAlert.com will monitor your credit and alert you to any
      changes. Even better is a credit freeze, but just 25 states allow it,
      in some cases only for ID theft victims.

      By Kate Ashford, Carolyn Bigda, George Mannes, Walter Updegrave and
      Penelope Wang


      6. Shop Smart for a Car
      Buying a car can seem like a huge hassle, from figuring out what
      price you should pay to handling the hard sell on the dealer's lot.
      You can avoid the work in one of two ways.

      The Easy Way: Hire a car buyer If you are willing to spend an extra
      $400 to $800, you can reduce the entire car buying experience to a
      couple of phone calls and one visit to the dealer to pick up the
      keys. Car buying services such as AutoAdvisor.com and CarQ.com will
      find the model you want, negotiate a competitive price and loan terms
      with the dealer and, in many cases, set up a test drive.

      Almost as Easy: Buy online If you want to save as much money as you
      can, do it yourself. Even that doesn't have to be hard if you tap the
      Net. First go to Edmunds.com and use the True Market Value (TMV) tool
      to find out what people in your area are paying to drive your desired
      model off the lot. Aim to pay this price or less. You may also want
      to get pre-approved for a bank loan and ignore dealer financing until
      you have settled on a price.

      Next solicit dealer offers online. At Edmunds.com (or Autobytel.com),
      you enter the model you want, your contact info and your zip code (or
      nearby ones), and within a few hours you'll get quotes by e-mail or
      phone. You should have an easier time haggling because the
      dealership's Internet department makes commissions based on volume,
      not the price. They won't waste time wheeling and dealing you.

      By Kate Ashford, Carolyn Bigda, George Mannes, Walter Updegrave and
      Penelope Wang


      7. Simplify Your Credit Life
      Credit-card issuers relentlessly tempt you with new offers, even as
      they keep changing the terms of the cards you carry. All that makes
      it easy to end up with a wallet full of cards. While it's always good
      to have a backup for an emergency, sticking to one card will minimize
      the number of bills you pay and maximize your card rewards.

      If you carry a balance: Get a low rate that lasts You'll find it
      easier to chip away at a balance if your interest rate is well below
      today's 14.1% average. A 0%-balance-transfer teaser is tempting, but
      you can owe fees as high as 4% of the balance. And if you can't pay
      it off within six or 12 months, you'll be left with the hassle of
      chasing the next offer. Skip the promo and opt for a low ongoing
      rate. The American Express Blue card (800-223-2670) charges 4.99% for
      the life of the balance you transfer.

      If you pay in full: Get a rewards card you can really use If you
      don't carry a balance, make your No. 1 card a rewards card. You're
      squandering your spending power, though, if you earn miles when you
      rarely fly or you flit between two or three cards. Among today's best
      offers: The HSBC Direct Rewards card (800-975-4722) pays 5% cash back
      on gas, drugs and groceries, and 1% on all charges above $3,000.

      By Kate Ashford, Carolyn Bigda, George Mannes, Walter Updegrave and
      Penelope Wang
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