This Week In Your Wallet: You’re Saving More, Keep It Up!
Money Rule #44: Don’t Shop Hungry. That’s long been among my favorites of my roughly 100 Money Rules, but it just moved up the ladder a notch. Why? Because I love to be proven right.
Sure, your mother was right when she told you not to go to the grocery store on an empty stomach. But as University of Minnesota researcher Allison Xing Ju found (and the Wall Street Journal detailed) it’s not just Oreos your rumbling tummy makes you reach for. Hunger simply makes us want more stuff, more of everything. And once we get it, we’re not inclined to like it any more than a satiated person who gets a reasonable amount of whatever the random object of desire happens to be.
Bottom line: Eat first, shop second. And don’t shop when you’re sad (#43) or angry (#42) either.
You’re Saving More. Keep It Up!
Consumer spending fell flat in April, but incomes and personal saving rates are on the rise. That’s right, what you’re not spending, you’re saving. As USA TODAY reports, yesterday’s release of Commerce Department data shows the rise in incomes, and the decline in spending, has lead to a personal savings rate of 5.6 percent of after-tax incomes — the second highest level its hit since December of 2012.
Different data from the Employee Benefit Research Institute (EBRI) shows that IRAs are benefitting, too: more people are contributing, and they’re contributing more to them. While the overall percentage of people who contributed to IRAs grew from 12.1 percent to 13.8 percent from 2010 to 2013, the average contribution amount for IRAs increased from $3,335 to $4,145. The latter represents a significant 25% pop. As a result, the average account balance for individuals owning at least one IRA increased to $119,804 in 2013 — an increase of over 30 percent from 2010, and 14 percent from 2012.
“Consumer spending is not rising,” said Dallas Salisbury, president and CEO of EBRI. “And in spite of how long we’ve been in recovery — they [consumers] are saving a lot more and are still saving.” This, he notes, along with increased contributions to 401(k)s and other defined contribution plans is a “wonderful thing, especially as we work on getting the American public to think a little more about thrift, and a little less about consumption.”
Craig Copeland, senior research associate at EBRI and author of the report, says that the IRS increase of IRA contribution limits by $500 in 2013 (from $5000 to $5,500), allowed for a bigger bump. “You can see of those who contributed the max in 2012, 60 percent of them contributed the max in 2013, too,” says Copeland. As for this year, the IRA contribution limit will remain at $5,500, though people 50 and up can kick in an extra $1,000 in the form of a catch-up contribution. Notes Salisbury: “We’re hopeful this is the beginning of a cultural change toward a culture of saving and thrift.”
Here’s Your Diploma, Now Let’s Talk Retirement
Do you know one of the 1.8 million college students graduating this spring? If so, help her or him start off on the right financial footing by sharing MarketWatch’s seven money moves to make post-college.
In the year ahead, they’ll be experiencing their first taste of adulthood: working hard to earn a living, and paying the bills for it, too. Encourage them to get organized by getting their papers in order first. If you’ve been holding on to their birth certificates, Social Security cards or car titles, it’s time to pass them off. Just make sure they’re keeping them in a safe place, like a home safe or safe-deposit box.
It’s time for them to map out their student loan payments, too. Students typically have six months grace after graduation, then payments kick in. If they have federal loans, they can go for the standard option (10-year term with a fixed payment amount) or the income-based one (up to a 25-year term with payments based on how much you’re earning). Or, they might want to consolidate loans with different interest rates into one lump sum with a fixed rate. Remind them that making these payments will be much easier with a budget in place. That’s the third money move to make, along with establishing credit, padding your savings and getting retirement savings on the radar. Too soon? Not at all. The reality is, the sooner they start saving, the better off they’ll be.
Are You Missing $200 Or More?
What’s better than finding $20 in the wash? Perhaps discovering you have $200 worth of unclaimed cash or benefits. That’s about the average amount of missing money for every U.S. resident, because right now there’s more than $60 billion worth of unclaimed money and benefits being held by states and federal agencies and organizations.
How did you miss it? The funds can come from a variety of sources, like forgotten utility refunds, insurance payments or abandoned accounts (e.g. savings, closed checking accounts and stocks). LowCards.com lists the common sources, and says not to dally – particularly if you live in a state facing budget cuts. Go to Unclaimed.org or MissingMoney.com. (These sites don’t cover all 50 states, but they do cover most.) If you had an FHA loan, go to HUD.gov and search their refund database. And if you think you left some money behind in a former company’s retirement plan, then look to the National Registry of Unclaimed Retirement Benefits — employers use this site to list former employees who are MIA (i.e. they can’t find you) and are due retirement benefits.
Happy hunting – and have a great week,
Jean
