I wish all my readers a safe and happy holiday week. This is likely my last post of the year as I am taking some vacation time and still working to polish my January main site article.
JOE
Did you know that money deposited to a Roth Ira, while not deductible, may be withdrawn with no penalty? Here’s what this means for you: If you are struggling between the need for an emergency account and saving for retirement, consider opening a Roth IRA, and within the account just buy a CD. As you are able to save more than the Roth limits ($5000 this year or $6000 if you are 50 or older this year, 2012) you will have built up an emergency account outside the Roth and can begin to invest the Roth more aggressively. No, you can’t have you cake and eat it, too, but your Roth can perform double duty helping you jump start your retirement savings while acting as an emergency fund. A no-lose proposition.
JOE
Indeed, the use, and more to the point, the misuse of debt can lead to a snowball effect. The new charges and the interest piling up and getting out of control, like a snowball about to trigger an avalanche. But author Dave Ramsey using the expression debt snowball to refer to his methodology to eliminate debt. He suggests lining up your credit cards by balance and making the minimum payment on all but the last one, the one with the lowest balance. That would pay off the lowest balance cards first, freeing up their entire payment for the next card in line. I like the advice to eliminate one’s debt, but I’d suggest lining those cards up by rate. An extra $1000 against the highest rate card may save you $240 per year in interest or more. But against that last teaser rate card you got, 4% for 18 months, just $40 the first year. Any argument I see in favor of Dave’s priority suggests that there’s a good feeling to knock off the debt from one card and count down the cards. Me, I’d rather keep a spreadsheet, or notebook, showing each balance along with the interest charged each year. The half of the money at the highest rates can easily have total interest of twice the bottom half. Pay those cards and see the real snowball effect. And see this example, let me know if you disagree.
JOE
On my main site, I recently posted an article “Getting Started” and led off with a Dickens quote:
| “Annual income twenty pounds, annual expenditure nineteen nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.” -Wilkins Micawber in Charles Dickens’ novel David Copperfield | |||
I came across this clip which was too good to ignore, sorry if you’ve seen it, it just struck me as appropriate for this time of year. (Disclaimer – neither my wife nor 9 year old found this funny at all, I’ll let you decide for yourself.)
No, I don’t plan to make these clips a habit, not many are this good.
JOE
A few years back, my wife received a letter from her doctor. The doctor was giving up her practice to open a clinic that served women who are homeless or marginally housed in the Greater Boston area. We’ve made annual donations, but this year we were made aware that donations in general are down and the clinic is struggling. Please visit Women of Means, and consider adding this charity to your year end donation plans. I had the thought that someone with a huge heart and a wallet to match might make a substantial donation. I’ll keep that hope alive. Thanks for reading today!
JOE