Saving for retirement is difficult so many employers have provided retirement plans to their employees, with the most popular being the 401(k) plan.  A 401(k) plan is a defined-contribution plan, where you make regular contributions into an account that you own and make all of the investment decisions for.  401(k) plans allow people to finance their own retirement and have sole authority over the decisions that will affect their future.

Employer-sponsored 401(k) plans are one of the best places to save for retirement because many employers match your contribution up to a certain amount, giving employees a guaranteed return on their money.  There is also numerous tax benefits associated with these plans, including allowing employees to make their contributions on money that has not yet been taxed, reducing their taxable income by the amount contributed.

Saving in a 401(k) plan is simple.  You decide the amount to contribute, typically 3%-10% of your salary, and the amount to contribute is automatically deducted from your paycheck each pay period.  Contributions are held in your account and are invested in mutual funds chosen for the plan by the company.  Most companies will have a wide selection of different mutual funds to choose from reflecting differing levels of risk and the employee picks which mutual fund to invest the money in their 401(k) account in.

The maximum contribution to a 401(k) plan is $16,500 annually.  Individuals that are 50 or older can contribute an additional $5,500 to their 401(k) plan as a “catch-up contribution.”  The money in your 401(k) account will grow tax-free, but tax penalties will be charged on all withdrawals from the account made before you reach the age of 59 ½.  This penalty fee is generally 10% on top of ordinary income taxes on the money withdrawn.   To avoid the penalties, the money in your 401(k) account should be left alone until you retire.

Retirement plans differ from company to company, but most medium-sized and large companies offer 401(k) plans.  Certain employees of public schools, hospitals, and certain tax-exempt organizations offer their employees 403(b) plans and government employees are offered 457 plans, both of which are very similar to 401(k) plans.  Most companies have phased out their pension plans due the high costs of the plans, so most people need to think about financing their own retirement.

If you’re already doing a 401K, you might plan on adding an IRA to the mix. The Lending Club IRA is a great option. Some are concerned about Lending Club, but there is no Lending Club Scam. Lending Club has a B+ rating from the Better Business Bureau and is regulated by the SEC.

Many people are struggling with debt and are worried about being able to pay for higher education.  Being able to go to a university and earn a degree is becoming an important part of today’s job market and a higher education will be even more important for obtaining a job when younger generations enter the job market.  A college education is the first step to have all the tools that are needed to succeed in this job market.  Being able to save for higher education can go a long way towards giving yourself or your child an advantage in life.

Saving Methods

There are a number of different ways that can be used for saving for a university education.  One of the most popular ways to save is to put money into a 529 College Savings Plan.  Once enrollment has been assured, the money that has been placed into the savings plan can be used to pay for tuition to the university.  The rules of the 529 College Savings Plan dictate how the money may be used and any limitations are disclosed before investment in the plan begins.

Another saving option is interest bearing savings accounts.  These accounts are popular because the money saved earns interest, increasing the amount in the account that can be used for higher education.  Many of these savings accounts have a low rate of return because of the level of risk associated with savings accounts, but the money saved in these accounts can be accessed at any time and can be used to pay for whatever it is needed for, including food, books, or dormitory furnishings. 

People without a lot of disposable income can still save for higher education.  Placing $25 per month into a savings account can help with a head start on their future that will be greatly appreciated.  When it is time to apply, applying for scholarships may pay for a portion of the tuition costs and the student may be able to supplement the funds by working part-time. Having savings in reserve will ensure that the student has enough financial backing to pay for their education until they receive their degree.

This is a guest post by Car Finance 247 who are based in the UK and specialise in helping people with bad credit.

Having an emergency savings account can be very important to your financial stability as the money saved in this account is typically used for financial emergencies in place of taking out a loan or using a credit card.  Unexpected expenses arise all of the time and it is best to be prepared with an adequate emergency savings account to avoid any unpleasant surprises or the inability to take care of an emergency situation.  With a few tips and a little bit of time, you can be well on your way to having an adequate emergency savings account.

Calculate Your Expenses

The first step in starting an emergency savings account is calculating your expenses so you will know how much money you will need to keep in the account.  The easiest way to calculate your expenses is to take your major expenses from the previous month and add them together to see how much was spent.  After you have made a reasonable calculation of your expenses, multiply the number by 6 to calculate the six months of savings that should always be in your emergency savings account.

Open A Separate Savings Account

The biggest mistake that anyone can make with emergency savings is placing the savings into an account that is accessed for other reasons.  If the money is placed in an account that is accessed frequently, it increases the chances that the money marked for saving will be spent on other items.  It is important to open a separate savings account that will not be accessed except in the event of a financial emergency.  As most banks offer free accounts, it should not cost you anything to open a separate account.

Set Up A Recurring Deposit

Many employers will now allow employees to deposit their paychecks in up to three separate bank accounts to make it easier for employees to manage their money.  This is great because you can set up a recurring deposit for your emergency savings account for a set amount of money each payday.  Having these funds deposited directly into the bank account from your company’s payroll department reduces the chances that you will spend the money instead of saving it for emergencies.  The amount deposited can be a percentage of your paycheck or a specific dollar amount.

Leave The Account Alone

The most important part of starting an emergency savings account is actually saving the money for an emergency.  Once the savings goal has been reached, the savings account should remain untouched unless there is an emergency that cannot be handled any other way, such as the loss of a job, a serious illness, or emergency repairs to a crucial part of your home or vehicle.  After all, that is why the money has been saved.

Whether we’re talking about eliminating our debt or building up of our savings, there’s one thing that’s crucial to that success, and that is to have at least one long term goal in place, and hopefully more.

Of course you can have more than one long-term goal because you can have personal goals, financial goals, professional goals, family goals, etc.

The reason why you should and must have a long term goal in place is because when you’re looking at putting away savings and building up wealth, along with eliminating your debt, there is always short-term pain involved, which if you don’t deal with, will cause you to quit very easily and revert back to past practices which have led you to where you’re at now, with debt overload and no ability to put away money for the future.

In other words, there’s a lot of psychology involved with defeating your debt and having healthy finances, and a key to successfully navigating those waters is to have long term goals in place which you can use as inspiration and guidelines for the reason you’re deferring gratification till a later date.

Almost everyone that doesn’t do this is destined to fail in their financial efforts, as there is very little motivation to take care of things today if you have no hope for tomorrow.

What we must all do in reference to debt is immediately eliminate our bad spending habits in order to begin a program which will give us hope of victory and eventual release from the huge debt burden we carry.

That requires the setting of long term goals which will be what you continually remind yourself concerning as to why you’re experiencing short-term pain. As athletes have said in the past: no pain, no gain. And that’s true. But the other element involved is they definitely have a goal and purpose as to why they’re training and what they’re shooting for.

No athlete goes through the training because they just love to train or for the sake of training itself. Athletes go through the rigorous training they do because they have a personal or team goal of becoming excellent and a top competitor in the sport they’re involved in.

That’s just another way of saying they have a long term goal. You get the point.

There is no way you can endure deferred gratification if you don’t have specific goals set before you which motivate you to endure the pain of paying down debt and to quit spending on things you think you ‘must’ have, but in reality usually buy because you saw or heard someone else having it and decided right away that you do too.

Paying down debt or putting away money for savings means that the money set aside can’t be used for purposes you would prefer. That’s the pain aspect of it. The long term gain is you will eventually be able to buy or do whatever you want once you’re free from the burden of heavy debt, and when you buy things at that time it’ll be a positive experience as you won’t be thinking in terms of how you’re going to pay for it going forward.

If you want to successfully save money and build up your wealth, there are things you won’t be able to do that others who are increasing their debt will be able to, although at eventual and extreme burden to themselves as the bills eventually mount up to the point of no return, as many have recently.

The key is to neglect what appears to be affluence, but in reality is someone in debt over their heads who are building that appearance at the risk of losing everything.

Set yourself some long term goals which can help you discipline yourself and keep in mind why you’re going through some short-term pain. You’ll eventually be thankful you’ve taken these steps and will enjoy the lifestyle you want without the concern you’re one job loss away from losing everything.

When someone puts away money into savings, the first purpose in doing it should be to build up a safety net for a minimum period of six months. In our current economic climate that could be extended to twelve months if you’re able to swing it.

Building up a personal cash reserve for at least a six-month period means you could continue living like you are and take care of all reflects the money you’re currently making at your existing job. So whatever you’re making on the job monthly now, you should multiply by six and have a goal of having at least that in your cash reserve.

Most of us know about or have heard something like this before, so we won’t get into that part of it. What I want to do is help you understand that reasons behind that financial safety net and not to move off of it no matter what happens.

I’ve been talking about investing in low interest rate and potentially high inflationary periods of time recently, and that can have the type of negative effect on someone in regard to their cash reserves if they attempt to battle those factors to the neglect of the purpose behind having a financial safety net under you.

The first thing to remember is your financial safety net is just for that and nothing else. No matter what happens, your purpose is to have a minimum of six months cash on hand available to take you through that time without suffering any losses. Nothing should move you off of that, even things like interest rates and inflation.

Now it doesn’t hurt to understand these pressures and know how to combat them, as long as it doesn’t cut into your saved capital.

So what you don’t want to do is start moving out of your comfort zone or the safety factor of your backup fund in order to beat inflation or get a better yield, if it has risk associated with it that could lose you money, or possibly cost you more through fees to change it to another account type which may give you a better return, but cost you as much to make the change.

If inflation does rear its ugly head in a big way, sure we must be mindful of that, as it could cut into the funds we have set aside to protect ourselves in difficult times. So what at one time was money set aside for six months could fairly quickly only pay for five months of living if inflation really takes off; which it probably will over the next couple of years.

At the same time though, the low interest rate environment should also stop, as it’s thought they should start rising sometime near the end of 2010, assuming the job market changes, which the Federal Reserve says will be largely the determining factor in keeping rates low if it doesn’t improve.

If inflation rises along with interest rates, you should be able to hold pretty steady for your safety fund, as they will grow together, hopefully close enough so you won’t have to try to increase your risk factor to keep up with it. Resist that temptation.

It would also be better to go over your financial obligations and habits in order to find places you can cut back if the cost of living goes up, as your primary financial goal should be to have enough put away in case of emergency. Everything else is build out from that foundation.

The bottom line is you must understand why you have a safety net in the first place, and even if outside factors like inflation cut into the buying power of that fund, you can either add more money to it to make up for that, or simply have a little less time to buy if things get bad unexpectedly for you. The worst thing to do would be to take steps which could threaten your protective nest egg.

A financial safety net is just that, and no outside force should do anything to make you start to take money out of it, other than for the purpose it exists: you lose your job and need to buy time to find a new source of income. That’s the purpose of putting money away: to buy time, and nothing else.

Now a little earlier in the article I mentioned something about the economic times we live in. Not only am I talking about the job market and inflationary pressures, neither am I talking about the pathetic returns we’re getting on our money. Rather, I’m talking about an even more increasing practice of businesses in outsourcing, hiring on a temporary basis, and moving to a more part-time culture.

With that in mind, it’s more important than ever to build up a cash reserve fund for yourself, as this will usually mean times of feast or famine for you, and developing the practice of putting away money when you have it is the best financial discipline you can have going forward.

Remember, a financial safety net exists for financial safety. Don’t do anything to tap into it unless it meets the needs you build it up for in the first place.

Other than a different name, a liquid CD is really not much different than a regular Cd, with the obvious exception of having access to you capital at any time.

You may also ask, if that’s the case, wouldn’t it be the same as a money market account and savings account? The answer would be: absolutely yes – but with an exception we’ll get into in a moment.

So you don’t get confused, a liquid CD is still a CD. You buy it in the same way you would a regular CD, only now you have access to your cash when you want it.

Similar to a regular CD, a liquid CD will also be insured by the FDIC, but your allowed withdrawals will be penalty-free, in contrast to a regular CD.

One thing to keep in mind when looking at investing in a liquid CD is the terms offered by the various institutions. In some cases a bank will cap the amount you can withdraw, so the liquidity offered is limited. In these cases there should be a trade-off of a higher interest rate in comparison to other liquid CDs offered by other banks, otherwise there would be no incentive to buy one.

Other limitiations some banks include are how many withdrawals you can make within a specified time period, or some banks leave the entire withdrawal situation alone and allow you to withdraw however much you want when you want. Again, if there are restrictions, look for higher interest rates or don’t bother with them, as there’s no reason in the world to get a limited product that is offered by someone else with the same or higher interest rates with no limitations. If there’s no added incentive to buy a CD with limits on withdrawals, simply pass on it and buy one that allows unlimited withdrawals with similar interest rates.

Now the interesting thing about a liquid CD, is it might be marketed by a bank as a great alternative to a regular CD, and it is as far as liquidity goes. But the problem is there are already savings products available like a money market account and a regular savings account where you have liquidity already.

So why would you even want to consider a liquid CD if there’s no real obvious advantage to buying one? The answer is it has to do with interest rates.

If we’re in a time of interest rates falling, then acquiring a liquid CD instead of using a savings account or money market account makes sense, as it will protect you from lowered returns during that period, while having immediate access to your money.

But if interest rates are bottomed out, like they are as of this writing, a liquid CD really offers no value at all, and performs exactly the same a a money market or savings account. It won’t hurt you, but it won’t help you either. The only thing it could do is lock you in to lower interest rates, keeping you from enjoying better returns.

Consequently, in a low interest rate environment like we are in today, there is no value in a liquid CD, and if you think interest rates will rise sometime soon, you could miss out if you’re locked into a liquid CD rate.

On the other hand, if interest rates start to move up and look like they’ll start declining again, a liquid CD makes sense, and it is the only real time it adds any value to your savings strategy.

As many people have learned during these recession time, saving real cash is the best way to make a purchase and the safest way to stay out of debt. While many people understand that saving cash is for the best, many still have great difficulty find money to put away when they need a new car, have to pay for college, or even saving for retirement.

In the 1970′s, Americans managed to save more than 10% of their disposable income compared to the 0.4% saved in 2005. In 2009, we’ve kicked it up a bit and saved a decent 5.7 % of our disposable income. It seems everyone is having difficulty saving for a rainy day. Since many are already on a strict budget with little to nothing left over, it seems that putting such little money aside each week is pointless. Plus there is always the possibility an unexpected emergency will arise. But experts suggest that you in fact go back to your budget and get rid of what it is you really don’t need. The only other alternative is to make more money.

The rule of thumb for your income is as follows:
50% – used for your necessities
30% – used for your wants
20% – used for your debts and savings accounts

Getting money to save will take discipline and a desire to succeed at saving money. Different savings goals need different types of attention. Here is how you can start:

Emergency Fund
Financial experts agree that having an emergency backup account that has at least 3-6 months worth of living expenses in an account is the place to start. Before saving for any other goal, you need the security of an emergency account that will help the family get by in the event of an emergency, such as medical problems or a job loss or other unexpected but true emergencies.

Short-Term Savings Goals
Short term savings goals can be established for things such a family vacations, new furniture, or a new car. You need to figure out how much money you need to save each week by dividing the purchase price into the number of weeks you have to save.. Say you are going on a family vacation one year from now that costs a total of $3000. You can determine the amount you need to save each week will be around $58. That money can be put into a interest-earning account and regular contributions need to be made in order to stay on track. You may also look into CD’s and money markets to increase your earning potential over time as you save.

Mid-Term Savings Goals
Mid-Term savings goals are similar to short-term savings but require the individual to save for a longer period of time. These savings will go towards college expenses, wedding preparations, a downpayment on a home. Depending on what it is you are specifically saving for, you will need to explore your options. For instance, a 529 savings plan would b a good investment for the college tuition portion of your mid-term goals. Safe avenues for savings such as CD’s, money markets, and savings accounts are all good places to stash your cash for when you need it. Purchasing stocks to fund mid-term goals ma not be a great way to increase your capital.

Long-Term Savings Goals
Long-term savings generally involve retirement funds. Experts agree that in order to reach a comfortable retirement is to invest a certain percentage amount into stocks in order to keep the pace with inflation. Recently tumbles in the stock market have shaken some and those individuals may prefer to keep their retirement savings in the traditional 401(k) and similar plans. You may consider checking out an IRA if your employer does not offer you a retirement savings account. A goal of 10% of your gross income is recommended at the target number for your retirement savings plan.

While many people will say that it is very important to have a savings account, not all will be able to answer the question as to why. A savings account, in some ways, seems to promote some sense of financial security. But while people continue to strive to put money away, few have a clear understanding of what the money in the savings account truly represents.

One of the important parts of dealing with your finances is to set goals for yourself and your money. Stating a savings account with specific goals can help you not only reach your intended financial goals by motivating your for all of the right reasons, it will also help you manage your money better. There are several goals you can set in conjunction with your savings account and here we will discuss some of those goals.

Emergency Funds
Collecting money towards any unexpected emergencies is a great idea to prevent having to use credit cards or suffer unneeded stress to take care of the emergency. Unexpected expenses can sometimes break you financially and having an emergency fund from which to draw needed funds is important to financial stability. This money should remain untouched and gather interest until needed. This money can add up nicely over time if no such emergencies arise and will provide comfort in the event something does spring up.

Short Term Savings
If your family is planning a vacation or a major purchase, you can add money into your savings account to save for these plans. You can save for one or more goals at the same time by dividing available funds and tracking the amounts on paper if you only have one account. By proper pre-planning and consistent deposits into your savings account, no financial goal is unattainable and will prevent you from having to bring in debt worries or credit card concerns to get what you want.

Long Term Savings
Many people are saving with bigger goals. If you want a down payment for a home or a car, you can plan to save more long term in order to reach your goals. This too takes pre-planning and consistency to accomplish but having the cash outright to make your dreams a reality is a sign of financial success.

Annual Expenses
There are several expenses that families will incur on an annual basis that can really cause havoc to your budget. For instance, car insurance and homeowner’s insurance premiums can be cheaper if you pay in one lump sum. Start saving some smaller amounts each month to tackle these bills in full and benefit from the added savings. Take the amount of your bills and divide them by the 12 months of the year. This total will likely be small and much easier to put away than one large amount at a time.

With the unsteady economy still plaguing millions of workers around the country, it is surprising that more people are not preparing for the possibility of unemployment long before the situation arises. Granted not everyone will end up without a job, but those that do will certainly benefit from being prepared. In this day and age, there is just no telling who is at risk for being let go from their job. Even if you don’t feel at risk, you are not harming anyone by tucking away a little cash for a rainy day.

While it may be difficult to put away money due to the increase in the cost of so many things, it should be a priority to budget ever last penny and look for ways to save enough to live well below what you are earning. That extra funding can be placed into a high interest savings account. In addition to the budgeting, cutting costs now while you are still making a regular paycheck can pay off in a big way. You will be able to learn better money management habit regardless of your financial situation. In the event you do suffer a job loss, a lifestyle change will be less transitional and the money in your savings will be there to back you up.

Not only is a job loss a reason for saving more money in a savings account. As many people are struggling to make ends meet, there may come a time when a total career overhaul is necessary.  Since many people are prevented from being able to make a job switch due to money, many will eventually find that in order to make more money or get better benefits, changing jobs or careers is their only solution. If you do not have a savings amount to fall back on while you search for new opportunities, you will likely give up the search quickly and continue to make less money than you deserve and less money than you need to be making to live comfortably.

Being financially prepared means being able to see the big picture and anticipate the unthinkable. If you are stocking away some cash now while you are doing well, imagine how much that money will mean to you when times get tough. No matter how much you can afford to save, savings should be a priority. If you have to give up your lunches out or your morning cup of Starbucks to find the extra cash to slip into savings.