Kansas State University

search

Powercat Financial

Tag: saving

IRAs: What They Are and What They Can Do For You

Posted on by christyne

What is an IRA?

An IRA is an individual retirement account in which you can contribute up to $5,500 per year (2014), with an additional $1000 when you are 50 years and older, to save for your retirement. Most banks, mutual fund companies, and brokerage firms offer IRAs.  You must have earned income in order to contribute, and you can start withdrawing at age 59½.  There are two types of IRAs:

Traditional IRA:

  • Money goes in before taxes
  • Taxed on withdrawals
  • Must start withdrawing specified amounts at age 70½
  • 10% early withdrawal fee in most cases

Roth IRA:

  • Money goes in after taxes
  • Money isn’t taxed again, not even on the interest accrued or at withdrawal – allows your money to grow tax free
  • Not required to withdraw money at a specific age
  • Can withdraw early with no penalty for a first-time home purchase (up to $10,000) or in the event you become disabled

Some logic to consider about these is that when you first graduate and start out at a new job, generally you will be in a lower tax bracket than you will be as you reach retirement.  This being the case, it may be better to go with a Roth IRA so that you are taxed at a lower rate than you would be if you paid taxes upon withdrawal as with a traditional IRA.  On the other hand, if you don’t open an IRA until you have been working for several years and you are in a higher tax bracket, you may want a traditional IRA instead, since you will most likely drop to a lower tax bracket by the time you withdraw funds—this would happen if you were no longer earning income.  Try to choose the one that is the most taxably efficient for you depending on your situation and your plans.  Historically, tax rates tend to increase over time; however, there is always a possibility that the rates will be lower when you withdraw the funds, so this is another factor to consider as well.

Why Save Now?

You might be thinking, “I have student loans I need to pay off for the next 10 years, I can’t afford to save now,” or, “I’m only in my early 20’s, I have plenty of time to save for retirement.”  While these may be true, the reality is that life costs money.  Saving early, even if it is a minimal amount, will pay off.  If you are thinking that you want to retire at age 65 to 67, you have to consider how much you will realistically need to live on for 20-30 years after you retire.  You should also consider that you may not be the only one you need to provide for during that time: you may have a family to support as well.  Time is of the essence when it comes to saving for retirement.  If you start early, you will save yourself much stress later on.  If your employer offers you a retirement plan, take full advantage of it.  That alone, however, may not be enough to support you in retirement; this is why it is important to consider other avenues of saving such as IRAs, a savings account through your bank, or even investment portfolios.

Even if you have student loans or any other debt you are paying—such as a mortgage or car loan—it is still important to be saving.  Think of it as paying yourself.  You want to “pay yourself first”—you are investing in your future!  A good rule of thumb for saving is to set aside 10% of each paycheck.  Depending on your situation, you may want to save less than that in order to pay your bills, but if you are able to save more than that, you should.  There may come a time in your life when you aren’t able to save much at all for whatever reason, and you want to be able to have a cushion for those times.

The following is an example from PracticalMoneySkills.com of how postponing savings can hurt you:

The longer you delay saving, the harder it is to catch up…if you saved $100 a month at 8% interest, after 20 years your account would be worth $57,266. But wait only two years to begin saving and that balance would shrink to only $46,865 – over $10,000 less. A five-year delay would reduce the balance to only $33,978.

The Magic that is Compound Interest

Compound interest is a very powerful tool.  To illustrate, let’s say you are able to find a savings account that offered 8% interest on your money—this, unfortunately, is not a realistic bank account rate currently; however, if you shop around in the investment arena, you should be able to find higher rates of return.  If you started putting $100 per month into the account, you would have $450,000 by age 65.  If you put in $200 per month, you would have $900,000 in the same amount of time; and if you increased the amount to $300, you would have $1,000,000!  How cool is that?  This is how IRAs work.

This site also has many other calculators that you might find useful.

To learn more about compound interest, visit: http://www.practicalmoneyskills.com/personalfinance/experts/practicalmoneymatters/columns/compounding_110708.php

Saving Tips

If it is hard for you to save, whether it is something you easily forget, or it is just difficult for you to physically transfer money into savings, one simple solution is to have a portion of your paycheck go directly into savings.  When setting up a direct deposit through your job, you can specify how much you want to put into a separate savings account, whether this be a percentage or a dollar amount.  This way you won’t “miss” the money; you will be accumulating funds without even noticing that the money isn’t in your checking account.  You can also set up an automatic transfers from your checking to your saving account by talking with your bank.

Resources

Rachel Vogler
Peer Counselor II
Powercat Financial Counseling
www.k-state.edu/pfc

Save a Bundle Every Time You Shop!

Posted on by christyne

Shopping at the grocery store can be a daunting task for anyone. From the amount of time it takes to purchase your food items to the bill that you receive when you check out, it can be difficult to enjoy a trip to the grocery store. However, there are many tools available to make your shopping trip run smoothly and to make sure you do not overspend while you are there. It takes planning and discipline, but over time you will find that shopping with a plan will make your grocery store shopping experience much better overall. Here are just a few ways that you can save money while you are at the grocery store:

Sign Up for Weekly Advertisements

Every grocery store has an option to sign up for weekly ads to be sent to you via e-mail. This is a great way to be able to comparison shop right from the comfort of your own home. Create a list of things you need and then go through the weekly ads and see what the stores in your area are offering. You can often times find very good deals on things on your shopping list by shopping this way. Be careful though!  Sometimes advertisements can sway you to buy things you never intended to. If you are purchasing more than you can use to get a special deal, then it is probably not a good deal for you at all. Be aware of “10 for $10” or “Buy 3 get one free” type of advertisements. While these may seem like good deals, the average college student probably does not need everything that the sale is offering. Make a detailed list of your needs and stick to it.

Shop With a Plan

There are few things more dangerous than shopping at the grocery store with no clear idea of what you really need. Grocery stores thrive on customers who mindlessly buy products they don’t really need. The best way to combat overspending and mindless spending is to go in with a plan. The best way to plan is by making a list of everything you need before you go to the grocery store. Make a plan of all of the meals that you will eat for the week and buy only what you need to make those meals. Go through your fridge and pantry and make sure you are not buying things you already have. When you go into the store, stick to your list and avoid putting things in your cart that you did not write down. Another way to combat overspending at the grocery store is to simply stick with cash. By only bringing in a set amount of cash with, you will never be able to overspend. Only having cash forces you to keep track of what you are putting in your cart and what your total will be. No more mindless spending!

Buy Your Produce in Season

One of the best ways to save money at the grocery store is by purchasing produce only when it is in season. Buying produce during its harvesting season will ensure that you don’t overpay while buying fresh fruits and vegetables. The best way to know what is in season is to download a chart or table for your area that lists all of the produce typically sold in your local grocery store.

How much could you save from buying produce in season? Take asparagus for example. Currently, at the supermarket, asparagus is selling anywhere from $3.99-$4.99 a pound. Compare this to prices in April when asparagus can be found for around a $1.50-2.50 a pound. That’s 50% cheaper just by buying it during its growing season. Use this method for all of your fresh fruits and vegetables to save big while shopping.

Get the Most Out of Your Loyalty Card
A grocery store loyalty card is a great way to save money while you shop. By using the card in the store, you can save on many items just by scanning your card. Best of all, many of these cards offer rewards such as discounts on gas and exclusive coupons. Keep your eyes open for deals that these cards offer. These loyalty cards are completely free and are a great way to save several dollars on food and gas every time you shop!

Use Apps Created by your Grocery Store

A great way to save money and stay focused on your shopping trip is to download an app for the store you are shopping at. A few grocery stores in Manhattan offer this convenience. Usually the app will have a copy of your store rewards card so that you never forget it! These apps also have the weekly advertisement available so that you can check for savings while you shop. Many manufacturers will post their digital coupons on these apps to allow you to download them. Saving money has never been so easy! Another great feature is the ability to create a list right in the app. This will ensure that you buy only the things you need. These grocery store apps provide a “one stop shop” for all of your grocery store savings needs.

While these are just a few tips to save money while at the grocery store, there are still many more that can be used while shopping. Do you have any tips or trick that you use at the grocery store? Feel free to share them with us; we would love to hear from you! At Powercat Financial Counseling, we strive to provide tips to students at K-State to help them save money in their everyday lives. Have a question about saving, budgeting, or anything else related to your personal finances? Powercat Financial is here to help. Set up an appointment with us today and we can help you create a spending plan that works for you!

Tyler Pemble
Peer Counselor II
Powercat Financial Counseling
www.k-state.edu/pfc

How To Save Money As A College Student

Posted on by christyne

1.    Create a Budget

Before you start saving money, make sure you have enough to save. Start by creating a budget and see where your money is going. This will help you cut on unnecessary spending and allow you to contribute more to your savings.  Details on the process and a downloadable spending plan worksheet can found on our site at http://www.k-state.edu/pfc/budgeting/.

2.    Utilize Student Discounts

Take advantage of the perks of being a college student. When you go out to Carmike Seth Childs’ to watch a movie with your friends, show your student ID.  If you would like to save a lot more, be a little patient and wait for the new movie you really want to watch to be shown at the by UPC in the Union.

Use the CampusSpecial coupon book that’s being distributed to students, you’ll save plenty over the semester when you go out to eat.  Many restaurants offer perks for showing your student ID – just ask!

3.    Avoid ATM Fees

Brick and mortar banks are facing stiff competition from online banks. If your bank is only located in your home town and there isn’t a single ATM in Manhattan, then you may be paying annoying ATM fees when you have to withdraw money. Well, there’s a solution out there! Most online banks do not charge ATM fees and if you do get charged by the ATM you withdraw from your online bank will fully reimburse you! Some brick and mortar banks charge monthly maintenance fees and this isn’t the case for most online banks. They are growing in popularity and if you would like to save on ATM fees and account charges this might be something to consider. Remember to make sure that the online bank you choose is FDIC insured!

ATM fees can also be avoided by getting cash back with your debit card at the store.  Simply run it as debit and respond to the question with how much cash back you would like.

4.    Grow Your Savings Further

If you have money left over after taking care of all your expenses, then you can consider building your wealth.  Choosing the type of account depends on the individual and the financial goals in mind. Below are a few accounts to consider. 

Basic Savings Account

Offers low interest rates and allows a limited number of free withdrawals a month depending on the bank. It is very easy to access, especially if you use your current bank. The interest that you could earn ranges from 0.01-0.9%. In other words, this is an account to put money aside for rainy days and emergencies, not your entire life savings! 

Certificate of Deposit (CD)

You can earn a little more money by putting your money away for a set amount of time ranging from a month to 5 years. The certificate entitles you to receive a fixed amount in interest payments. Interest on CDs range from 0.15-2.35% depending on the length of time and amount of deposit.  They can easily be set up at any commercial bank.  Be aware that there are fees for withdrawing the money prior to the agreed upon time.

Money Market Account

MMAs offer a higher interest rate (0.05-1.02%) than a savings account and you can write checks against your deposit. However, you have to maintain a higher minimum balance compared to a savings account, hence the higher interest rate. Again, if you decide to open up this account, make sure the account is FDIC insured. 

Mutual Funds

If you would like to earn greater returns on the money you have left over after putting some aside in a safe savings account or MMA, then this is another vehicle to consider. Most of us don’t have millions of dollars to invest like Warren Buffett or Carl Icahn, but this fund allows the ordinary individual to be able to afford and hold a piece of the same fund that a billionaire is invested in. It is a pool of funds invested in stocks, bonds and other money market instruments. Their purpose is to beat the market and manage volatility by pooling money and diversifying investments. They are more risky compared to savings accounts, CDs and MMAs and they are more expensive since they are actively managed, but they have the potential for a higher yield.

Online Brokerage Account

If you would like to build your wealth, then you should have a long-term strategy – a brokerage account is one way to get there. You can create your own portfolio and allocate your funds into stocks, bonds and other funds however you please. The allocation depends upon your risk tolerance. When you are young, you can afford to lose more money, so it’s okay to have an aggressive portfolio (invested in more equities than bonds) as long as you understand the risks. When you reach your thirties, it’s recommended to reallocate your portfolio and lower the amount you have invested in equities and when you are close to retirement, you should have more in bonds than equities since bonds are safer and offer fixed, stable payments to the bondholder. Setting up an account is simple, but make sure to shop around first. Some accounts don’t require minimum deposits and others offer cheap trading costs. Learn about investing strategies before you put your money in the market!  Visit finance pages such as Google Finance, Yahoo Finance, Morning Star, Bank Rate, and Investopedia.

Gerald Mashange
Peer Counselor II
Powercat Financial Counseling
www.k-state.edu/pfc

Grad Sense: A Financial Tool for Graduate Students

Posted on by kdarnell

Thinking about grad school but you just are not sure how much it will benefit you?
GradSense.org is a website that helps you calculate how much you will get paid with a bachelor’s, master’s, doctorate, or professional degree. This website also gives you valuable savings tips, loan repayment options, and job finding tips.

What is the average pay for people that graduate with your degree?
On the home screen it will prompt you with a question asking what your highest level of education will be at graduation. The next question asks what field of study you will attain with your degree. Grad Sense then takes this information and gives you a low median and high level of pay that you can expect after graduation.

How can you save money?
Under the Add It Up tab, Grad Sense gives you examples of ways that you could be saving money on everyday expenses. The compound interest calculator provides information on how much you can expect to save annually based on if you make your coffee at home rather than from a coffee shop, for example, while you’re in school. The calculator then shows you how much you can have saved by the time you retire if you invest these savings after graduation.

Do you want to know how long it will take you to repay your student loans?
Grad Sense shows you the different repayment options for federal student loans as well as some useful links under the Loan Repayment tab. It also gives you an example of how much a student with a $40,000 federal student loan would pay monthly under the standard, graduated, or extended repayment plans.

Need some job tips?
Grad Sense provides information about choosing a job based on the benefits it offers and even helps you develop good salary negotiating skills. Job salary is not everything. Sometimes job benefits can be very helpful, and you should make sure you know what benefits each company offers. After looking at the company’s benefits you need to negotiate your salary. Your job is to know what the salary range is for your position and negotiate your salary based on your experience and skills.

Tyler Larson
Peer Counselor I
Powercat Financial Counseling
www.k-state.edu/pfc

Preparing for Next Semester

Posted on by kdarnell

With finals right around the corner and winter break fast approaching, you may not even want to think about next semester yet.  However, it can save money to get ready for it sooner rather than later and you won’t have to worry about it when returning to campus.

There are many things you’ll need to consider when thinking about next semester including budgeting, financial aid, school supplies, textbooks, class registration, and class drop dates.

Budgeting

The first thing to do when preparing for next semester is to determine a budget.  A budget can help keep you on track and set financial goals, such as saving up for spring break.  It can help you know what spending money you have available and where you can work on spending less (and can even help you determine some New Year’s resolutions).

Financial Aid

Part of the budgeting process may involve student loans, scholarships, grants, and fellowships.  Look back over this past semester and see how much financial aid you accepted and determine if it was just enough or if you could have gotten by with less.  This involves taking a hard look at your spending over the past semester and seeing if there were times you could have saved money.  If you could have gotten by with less, then contact the financial aid office (http://www.k-state.edu/sfa/) to ask them to reduce the disbursement for next semester.  This will not only help you learn to control spending, but will also save you money in student loans and interest costs down the road.

School Supplies

School supplies can be relatively inexpensive by themselves, but over time, the total cost accumulates to a big amount.  Some ways to save money on school supplies are:

  • Make a list of what you need and stick to it.  It can be tempting to want to buy some supplies that could be useful, but you may not use them or need them when it comes time.
  • Buy in bulk.  If you know you will be using a certain supply frequently, it will save money to buy the large quantity that’s cheaper per unit.  For example, if you know you’ll be printing a lot of articles, contemplate buying the multiple pack of ink cartridges or the carton of paper instead of a ream each time you run out.  Costco can be a good place to look for bulk supplies
  • Look for coupons.  Many stores have coupons or weekly ads available on their sites and may advertise for upcoming sales.  Before setting out to shop, make sure to look for coupons or sales by going to the stores’ websites. Staples also has a 20-25% off brown bag sale for back-to-school times, so keep on the lookout for when that will be!
  • Think about holiday sales.  Some stores also have sales on holidays such as Boxing Day (December 26th) that can save you money.
  • Look around for what you may already have.  It can be easy to lose pens, pencils, highlighters, etc. Before going out and buying new supplies, scour your room for these missing items.

Textbooks

College textbooks can be a major drain to the bank account.  You can learn ways to save money on them by implementing these few tips.

Book requirements can be found at http://courses.k-state.edu/.  You can click course schedules, then select the year, select course schedule and finally select the department (which are arranged by colleges).  There’s a book icon you can click that will list the required, recommended, and optional books.  The direct link for next semesters’ books is http://courses.k-state.edu/spring2014/schedule.html.

Consider buying used instead of new.  Used books range from like-new to acceptable and are offered at a significantly reduced price.  Used books are sold by bookstores, major companies such as Amazon, and private sellers such as students who took the course previously.  You can compare used book prices at the following sites:

Consider renting textbooks instead of buying.  For some textbooks, you may only want to have the book for the course and won’t use it afterwards.  There are many sites, including Chegg and Amazon, that offer the option to rent the book for a month, a quarter, or a semester.  If you decide that you want to own the book after using it, you can pay the difference between the buy price and rent price and not have to return the book.  Beware when renting to return the book on time.  You may be charged late fees, an extra semester, or the cost of the book if you are late.

And finally, email your professors about buying international editions or previous versions.  Many textbook makers make a few changes and rerelease the book as a new version that can be charged at a higher price for those few changes.  Many times professors use the older version book anyway and would allow you to buy the old version as well.  This can shave a lot off the list price of the new version.  International versions typically have different covers, page numbers, and chapter orders than the United States versions, but contain the same information.  This can complicate reading assignments when you’re given the page numbers or chapter names, but can cut costs sometimes up to 50-75%.  For both of these options, make sure to ask your professors before making the purchases.

For more information on saving money on textbooks, you can visit http://lifehacker.com/5613591/the-complete-guide-to-getting-cheap-textbooks.

Registration/Drop Dates

You probably are already registered for classes next semester.  However, since your tuition is calculated based on the courses you are enrolled in, if you are contemplating adding or dropping a course, it may be helpful to make the final decision sooner rather than late.  That way, you won’t have to deal the complexities of either paying extra for a class added or going through the process of getting a refund to your account for classes dropped.

It’s also important to know when the refund drop dates are for courses.  These dates can be found by going through the academic calendar at http://www.k-state.edu/cgi-bin/eventview/registrar/academic.  For the spring 2014 semester, the last day to drop a course, but still get 100% of the tuition costs back is February 10th.  After that, you will only get 50% of the tuition cost back.  The last day to get 50% of the cost back will be February 17th.  If you are contemplating dropping a course, try and make this decision before these dates in order to get back your tuition costs.

The academic calendar will also inform you about the last days to drop a course before receiving a W or a WF.

Resources

For other money saving tips throughout the semester, check out these sites:

http://www.shmoop.com/college/save-money-in-college.html

http://moneyfor20s.about.com/u/ua/studentloans/best_college_savings_tips.htm

http://collegelife.about.com/od/moneyfinances/a/ManagingMoney.htm

http://blog.chegg.com/2013/08/02/on-a-budget-top-10-ways-to-save-money-at-college/

Christyne Stephenson
Peer Financial Counselor I
Powercat Financial Counseling
www.k-state.edu/pfc

Brewing Up a Challenge

Posted on by kdarnell

Powercat Financial Counseling is giving away two Keurigs! To put your name in the drawing for the raffle, all you need to do is complete a 10-question online scavenger hunt. The answers can be found on our website, www.k-state.edu/pfc. The form was an attachment on an email sent out to the student body by Jodi Kaus on October 22nd. The completed forms are due by 5:00 PM on November 11th. To submit the form, you can either email it to powercatfinancial@ksu.edu or physically drop if off in Union Room 809 in the Office of Student Activities and Services.

The winner will be announced at our Thrifty Gifting event held on November 14th at 4:30 in the Flint Hills Room of the Union. Come have fun and learn about ways to save money during the holiday season while also getting the chance to win other prizes.

Do you really want to win that Keurig? You can increase your chances by earning additional entries into the drawing. Scheduling a counseling session and signing up for one of the websites that are linked on the PFC website each gives you a better chance to win. More details of the bonus entries can be found on the scavenger hunt form.

Good luck!

David Biggs
Peer Financial Counselor II
Powercat Financial Counseling
www.ksu.edu/pfc