MONEY

6 Things Millennials Should Do Now That Will Pay Off Big Later On

Try these tips for getting started when you have limited funds and lots to pay for

young hipster couple in apartment
Getty Images

Getting started as a saver and investor can be a tricky balancing act. You have bills to pay, student loans to settle, and a career to jump start. You have to create a cash cushion for emergencies at the same time that you are being urged to salt away money for a far-off retirement date. Here’s some smart advice on how set your priorities.

Adapted from “101 Ways to Build Wealth,” by Daniel Bortz, Kara Brandeisky, Paul J. Lim, and Taylor Tepper, which originally appeared in the May 2015 issue of MONEY magazine.

  • 1. Tuck away a month of expenses.

    money tucked in mattress
    Steven Puetzer—Getty Images

    Even if this means paying off debt more slowly. The money can cover surprises like car repairs. Once you’ve hit that point, says financial planner Matt Becker, focus on the next goal: six months of expenses, to cover you should you lose a job.

  • 2. Juggle emergency saving and a 401(k) by playing it safe.

    Szefei Wong—Alamy

    Until you have six months’ liquid savings (see No. 1), investing isn’t a top priority. But you should put enough into a 401(k) to get an employer match. To partly reconcile the two goals, hold some less risky fare like bonds, says Lillian Wu of Research Affiliates. With taxes and penalties, cashing out a 401(k) is a last resort. But if you’re forced to do it, it’s better to have some safe money.

  • 3. Start first, be an expert later.

    pyramid of money on table
    Martin Poole—Getty Images

    Getting going on a 401(k) can feel like jumping into the deep end. How much in stock funds? What about bonds? But early on, saving at all matters more than picking the best mix. Say you put away 6% of your pay, with a 3% match, starting at 25. For 10 years you earn a lousy 2%, and then adjust your portfolio so that you earn 6% for the next 30 years. That wobbly first decade will still have added 47% to your total wealth by age 65.

  • 4. Begin your career in a wealth-building city.

    Indianapolis
    Katina—age fotostock Carmel, Indiana

    Zillow.com says these metros offer job growth above the median 1.3% and homes for less than the typical 2.9 times income:

    Dallas: Its many affordable ‘burbs include MONEY’s No. 1 Best Place to Live in 2014, McKinney.
    Job Growth: 3.3% Housing Cost: 2.5 x income

    Atlanta: Home to HQs of Fortune 500 companies including Coca-Cola and the United Parcel Service
    Job Growth: 2.4% Housing Cost: 2.7 x income

    Indianapolis: Metro boasts another Best Place: walkable, arts-rich Carmel.
    Job Growth: 2% Housing Cost: 2.4 x income

  • 5. Go ahead, have a latte.

    roommates in kitchen
    Bill Cheyrou—Alamy

    Reducing small expenses can’t hurt, but housing is where you can save real money when you’re young. Rent on a two-bedroom, with a roommate, can be 44% less than for a one-bedroom alone, according to Apartment List data.

  • 6. Spend money to invest in yourself too.

    student in computer lab
    Hill Street Studios—Getty Images

    Economists at the Federal Reserve Bank of New York have found that most Americans get their biggest raises during their first decade in the workforce. So lay the groundwork for wage growth early. Don’t be afraid to shell out some money for a business communication class, technology training, or an additional job certification, says Michael Kitces, co-founder of XY Planning Network, a group of planners with Gen X and Y clients. A $500 class that leads to a promotion and raise could pay off in compounding returns throughout your career, as future raises build on top of your higher base wage. “It may literally be the single greatest investment you can make,” says Kitces.

MONEY

Why Millennials Are in for a Worse Midlife Crisis than their Parents

senior man in motorcycle gear
Henrik Sorensen—Getty Images

Marriage, it turns out, lessens the dip in happiness that happens in one's late 40s. But most Gen Y-ers have steered clear of the altar.

I’m a happily married 28-year-old with a beautiful wife and son. My life is good.

But if research is correct, I will grow increasingly more dissatisfied with my life over the next 20 years. Which is terrifying.

The midlife crisis is very real.

Studies show that people are pretty happy when they’re young and when they’re older—thank youthful exuberance and not having to work, respectively. But between 46 and 55, folks endure peak ennui.

That happiness ebbs as one ages is not particularly surprising. Careers plateau, dreams are deferred and bills increase in quantity and frequency.

This U-shaped happiness curve has been the focus of a lot of research recently and many nations (from Britain to Bhutan) have shown interest in augmenting citizens well-being with the intent that gross happiness is just as important to the economy as the gross domestic product.

One recent study on the topic—published in the National Bureau of Economic Research—has me feeling just a little bit less sad about my upcoming depression. It found that married folks like myself will experience a less dramatic midlife crisis than their non-married peers.

Authors Shawn Grover and John Helliwell used data from two U.K. surveys and found that while life-satisfaction levels declined for those who married and those who didn’t, the middle-age drop was much less severe for the betrothed, even when controlling for premarital happiness.

Having a dedicated partner, it seems, eases the burden of watching your youth pass slowly through your fingers. Tying the knot can soften the blow, in the other words.

Moreover, people who consider their partner a friend enjoy the most happiness.

“We explore friendship as a mechanism which could help explain a casual relationship between marriage and life satisfaction, and find that well-being effects of marriage are about twice as large for those whose spouse is also their best friend,” the authors wrote.

These findings could leave many of my peers in an emotional nadir: According to data from the Pew Research Center, millennials just aren’t terribly interested in the institution of marriage. Only 26% of people aged 18 to 32 were married in 2013—10 points lower than Gen X when they were of a similar age in 1997, and 22 points below boomers’ marriage patterns in 1960.

My generation still has a few years before they hit the bottom of the U curve. And perhaps an improving economy will make the prospect of marriage more attractive to those in my cohort. Here’s hoping.

I didn’t plan to marry when I did—like most of my generation the thought really didn’t occur to me. But my longtime girlfriend and I walked down the aisle after we found out she was pregnant. And from my current pre-midlife-crisis vantage point, I can see why marrying someone I love and with whom I share a common worldview will make the process of aging slightly less pale and ugly.

Life’s hard, but it turns out that it’s nice to have someone you love to complain about it with.

More From the First-Time Dad:

MONEY Sports

Why NFL Players Are So Likely to Declare Bankruptcy

Former Tampa Bay Buccaneers defensive tackle Warren Sapp wipes his face as he is inducted into the team's Ring of Honor during half time in an NFL football game against the Miami Dolphins Monday, Nov. 11, 2013, in Tampa, Fla.
Brian Blanco—AP Former Tampa Bay Buccaneers defensive tackle Warren Sapp wipes his face as he is inducted into the team's Ring of Honor during half time in an NFL football game against the Miami Dolphins Monday, Nov. 11, 2013, in Tampa, Fla.

Retirement is supposed to represent one's golden years. But for former NFL players—who are typically out of the game by age 30—retirement is often accompanied by a slew of problems.

According to a new study in the National Bureau of Economic Research (NBER), former NFL players go broke at an alarmingly high rate considering how much money they make as pro athletes.

The median NFL player is in the league for six years and during that time earns $3.2 million in 2000 dollars—more than a typical college graduate makes in a lifetime, noted this Quartz post. And yet, nearly 16% of the players included in the study—everyone drafted from 1996 to 2003—filed for bankruptcy within 12 years of retirement.

A 2009 report from Sports Illustrated found that “78% of former NFL players have gone bankrupt or are under financial stress because of joblessness or divorce” after they’d been retired only two years. Some of the stories of pro athletes losing their fortunes, chronicled in the ESPN documentary “Broke” and elsewhere, are astonishing. Warren Sapp, the seven-time Pro Bowler and Hall of Fame defensive tackle, earned $82 million during a 13-year career that ended in 2007. By the spring of 2012, however, he filed for bankruptcy, even though he was still pulling in $116,000 per month at the time as a TV analyst.

What is it about so many professional athletes—and football players in particular—that causes them to go broke in swift and dramatic fashion, despite their lofty salaries? Here are some the key factors–several of which can potentially screw up the retirement plans of anyone, not just a pro athlete.

NFL careers (and peak earning years) are short. The average annual salaries and career lengths for NFL players are smaller than their counterparts in other big-time sports. A 2013 study showed that the average (as opposed to the median noted above) NFL player earned $1.9 million per year and was in the league for 3.5 years. Both are much lower than the averages in Major League Baseball ($3.2 million annually, 5.6-year career) and the National Basketball Association ($5.15 million, 4.8-year career).

Not only do NFL players tend to earn less overall, their careers are over much more quickly. The typical NFLer is out of the game and done with his peak earning years well before he’s even turned 30. This is when the typical worker’s earning potential is just taking off.

They ignore sound investing advice. “If they are forward-looking and patient, they should save a large fraction of their income to provide for when they retire from the NFL,” the NBER study explains. But many NFL players are neither forward-looking nor patient, and they don’t save much, if anything. That goes even for players with good careers, per the study: “Having played for a long time and having been a successful and well-paid player does not provide much protection against the risk of going bankrupt.”

In the opening anecdote of the Sports Illustrated story, Raghib (Rocket) Ismail, the Notre Dame superstar who played in the CFL and NFL and earned as much as $4.5 million per year, recalled how impervious he was to financial advice early on in his career. “I once had a meeting with J.P. Morgan,” he said, “and it was literally like listening to Charlie Brown’s teacher.”

They get bad advice and make bad decisions. Ismail blew money on a wide range of sketchy investments, including a religious movie, a music label, and various high-risk restaurant and retail endeavors. Many players have sued their advisors after allegedly being scammed out of millions. In one suit filed in 2013, a group of 16 former and current NFL players claimed they were collectively bilked for more than $50 million based on the actions of an advisor who had allegedly invested the money in an illegal casino.

“Regulated or not, shady advisors have made quite a mark on the NFL financial scene,” the authors of the 2014 book Is There Life After Football? Surviving the NFL wrote. “Before closer scrutiny was instituted, at least 78 players lost more than $42 million between 1999 and 2002 because they trusted money to agents and financial advisors with questionable backgrounds.”

More recently, seven-time Pro Bowler Dwight Freeney sued Bank of America for $20 million, because a former adviser from the bank supposedly defrauded him by (illegally) wiring millions of dollars out of Freeney’s account. In another recent case, it is a former NFL player who is himself being accused of operating a sketchy investing scheme. In early April, the SEC filed a federal fraud complaint against former NFL player Will Allen and a business associate, who together allegedly ran a Ponzi scheme, using money from some investors to pay off others. The operation was supposed to be loaning money to athletes who were short of cash, but the suit claims roughly $7 million raised from investors was used instead for personal expenses of Allen and his associate.

They get used to a certain lifestyle. Warren Sapp reportedly had 240 pairs of collectible sneakers, including 213 sets of Air Jordans, which wound up selling for more than $6,000 at auction. Former standout wide receiver Andre Rison famously blew $1 million on jewelry and routinely walked around clubs with tens of thousands of dollars in cash in his pockets, he recalled in the “Broke” documentary. Troubled cornerback Adam “Pacman” Jones has said that he once dropped $1 million in a single weekend in Las Vegas.

Extravagant spending is ingrained in NFL culture, insiders say. “Around the locker room, players’ cars, clothes, houses and ‘bling’ are constantly scrutinized. If they’re not up to par, they’re ridiculed,” former Green Bay Packers’ George E. Koonce, Jr. and his fellow authors explained in Is There Life After Football? “Players don’t see their bills or keep track of their payments. They’re in the dark about taxes. They lose touch with their own money.”

Once they retire and the millions stop flowing into their bank accounts, many players find it impossible to dramatically shift gears and adapt to life on a limited fixed income. It’s all the more difficult because they’re still relatively young and aren’t anywhere near ready to embrace the sensible, low-key, downsized lifestyle of the typical 70-year-old retiree.

They’re often crippled, mentally and physically. The consensus is that of all the major pro sports, football takes the largest toll on the minds and bodies of its combatants—making it exceptionally difficult to make a living once their (short) athletic careers are over. Studies show that players suffer concussions at disturbingly high rates, and that the frequent brain injuries of players cause a wide range of neurological problems down the road. The high level of former NFL players committing suicide (Junior Seau among others) has been tied to concussions in football games as well.

Even if players retain their cognitive skills, they often live with chronic pain in knees, hips, and joints. Debilitating pain, debilitating brain disease, or both obviously hamper one’s ability to make a living outside of football.

UPDATE: An earlier version of this story included widely disseminated information regarding the likelihood of lower life expectancy among former pro football players. Harvard researchers working on a multi-year project with the NFL concerning the medical risks of playing football say the information is outdated and inaccurate. The NFL disputes the data indicating that its players have shorter life expectancies as well, pointing to a 2012 National Institute for Occupational Safety and Health study in which researchers “found the players in our study had a much lower rate of death overall compared to men in the general population. This means that, on average, NFL players are actually living longer than men in the general population.”

The same study also found that NFL “players may be at a higher risk of death associated with Alzheimer’s and other impairments of the brain and nervous system than the general U.S. population. These results are consistent with recent studies by other research institutions that suggest an increased risk of neurodegenerative disease among football players,” though the report noted that the “findings do not establish a direct cause-effect relationship between football-related concussions and death from these neurodegenerative disorders.”

MONEY money advice

Money Advice for the Class of 2015 From 8 Recent College Grads

Who better to give real-world financial advice than recent grads who are making the transition to financial adulthood

To help new college graduates prepare for the financial challenges ahead, MONEY lined up a panel of experts: young adults from the Class of 2014 and other recent years who have already made the transition to post-college finance. These recent grads have taken big steps to launch their financial futures, and their tips address everything from managing everyday spending to planning for retirement. No matter what your age, you can learn plenty from their experience.

  • José Anaya

    150414_FF_CollegeAdvice_JoseAnaya
    Jose Anaya

    Biola University Class of 2014
    Age: 22
    Home town: San Francisco
    Master of: Debt management

    Planning his wedding and prepping for real world expenses while still a senior in college, José Anaya decided to take a conscious step toward securing his financial future. After hearing rumblings on campus about Dave Ramsey’s Financial Peace University, he started attending sessions to boost his financial savvy.

    Upon graduation, Anaya and his wife, Adaline, applied Ramsey’s strategy of assigning every dollar a purpose. The purpose they chose? Paying off their approximately $117,000 in student loans. The couple pays more than $1,100 a month and are on track to meet the government’s standard 10-year repayment plan, but for the Anayas, that’s just not fast enough.

    “We are talking with different long-term planners to figure out how to expedite our game plan,” José says. “We are trying to get rid of debt as quickly as we can.”

    Advice: “College debt and financial needs ahead could create a lot of stress. The only way to overcome that stress is by looking at the facts, crunching the numbers, and creating a game plan to tackle the financial challenges ahead. Be honest about what you owe and what it will take to pay that off, and have courage.”

  • Lisa Bernardi

    150414_FF_CollegeAdvice_Bernardi
    Lisa Bernardi

    American University of Paris Class of 2014
    Age: 22
    Home town: Chicago
    Master of: Long-term career planning

    When Lisa Bernardi returned to the United States after studying abroad, she knew she wanted to move to Chicago. With the help of a recruiting agency, she pursued two separate offers and negotiated her salary with each company. Then she took a surprising step: she accepted the lower offer.

    From her research, she had found that one of the companies had tripled in size in over a year, while the other had started small and stayed small for over a decade. “I’ve gained much more responsibility than I would have at the other one,” she says of her current position with the fast-growing company. “I also considered the offices and how happy people were here, and saw it was not the same atmosphere.”

    Even though the recruiting agency tried to convince her to take the higher-paying position, Bernardi stuck to her guns. “People don’t expect desperate college grads to stand up for themselves,” she says. “I took that risk for myself.”

    Advice: “It’s tempting to take the first offer you get, especially when you’ve been applying for months, but make sure you take some time to think it through and ask yourself about your long-term potential in that position. Where do you see yourself in six months, two years, five years, if you follow that path?”

  • Megan Beatty

    150414_FF_CollegeAdvice_Beatty
    Megan Beatty

    Biola University Class of 2014
    Age: 22
    Home town: Denver
    Master of: Thrift

    After graduation, Megan Beatty was dismayed by the amount of money she saw going toward tasks that she felt she could tackle on her own. So she starting working on do-it-yourself projects that she considered just “a Google search and an hour away.” Now Beatty has a wealth of money-saving knowledge of cars, home repair, technology, and taxation. When her laptop stopped working, for example, she fixed it on her own with tools that cost her $80 — thus avoiding an estimated $500 repair bill from Apple.

    Her research doesn’t stop there. Instead of using Uber or Lyft to get in to work every day (like some co-workers), Beatty researched cheap parking lots in the city and, through her employer, was able to use pretax dollars to pay for parking.

    Advice: “Financially, never take the first easy way out. The most accessible, easy option is always going to be the most expensive.”

  • Kirk Leonard

    150414_FF_CollegeAdvice_Leonard
    Kirk Leonard

    Lamar University Class of 2013
    Age: 24
    Home town: Nederland, Texas
    Master of: Retirement Planning

    When Kirk Leonard started his job as an office manager of a dialysis facility, the company didn’t offer a retirement plan. After witnessing a colleague leave the company in favor of a competitor that offered better benefits, he knew it was time to do something about employee retention.

    Though the company had talked for years about implementing a 401(k) for employees, high fees always halted the process. Already a savvy negotiator — during the hiring process he negotiated a 10% pay bump — he got to work researching options. He ended up proposing to his employers a Simple IRA with a 3% match, which his company agreed to implement. Now he and 35 of his colleagues have a new retirement savings plan.

    Advice: “Basically, confidence is key. Notice I said confidence, not arrogance. There’s a fine line between the two that I am constantly having to watch.”

  • David Russell

    150414_FF_CollegeAdvice_Russell
    David Russell

    Texas Christian University Class of 2012 / Oklahoma State University (M.A.) 2013
    Age: 24
    Home town: Dallas
    Master of: Negotiation

    David Russell is prepared. By researching compensation on websites like Glassdoor, he was able to interview for an analyst position with a wealth management firm in Dallas with a target salary in mind. “It’s important to do your homework,” he says. “You can’t just pull numbers out of nowhere.”

    And when you have a number in mind, don’t settle. When Russell was interviewing straight out of graduate school in 2013, he was offered a position with a starting salary that was lower than he wanted. With each party standing firm, Russell decided to walk away and pursue other options. “A few minutes later they emailed back with the number I wanted,” he says. “I think confidence and persistence at the end of the day will lead to a better negotiation as long as you’ve done your homework and show you’ve done your research.”

    Advice: “If a company is giving you a second or third interview, they are interested.”

  • Elizabeth Bybordi

    Elizabeth Bybordi
    Elizabeth Bybordi

    University of Central Florida Class of 2011
    Age: 25
    Home town: New York City
    Master of: Money management

    Elizabeth Bybordi manages daily spending with a simple comparison: value vs. price. “I’d much rather bring lunch and have a night out or go to brunch on Sunday with my friends than buy a $10 salad for lunch every day,” she says.

    To keep herself focused, she views her money as lump sums. After moving 33% of her paycheck into a savings account (from which she makes automatic contributions to her Roth IRA), she lives on the remaining 67%. After rent and bills, she can spend down her remaining funds because she’s already taken care of important expenses and savings.

    Her penny-pinching strategies include walking 30 minutes to work to avoid paying subway and cab fares, and lugging her laundry from her Manhattan apartment building — which lacks a laundry room — to a self-service laundromat down the street. These small sacrifices allow her to spend money on things that are important to her.

    “I don’t want to just deny myself everything,” she says. “What’s the point of living in New York City when you’re young if you can’t enjoy it?”

    Advice: Check your bank account daily. “If you’re going over, at that point reevaluate to see where you have to cut back and determine what’s wasteful or unnecessary.”

  • Kristine Nicolaysen-Dowhan

    Kristine Nicolaysen-Dowhan, University of Michigan class of 2012
    Dustin Aksland

    University of Michigan Class of 2012
    Age: 24
    Home town: Grosse Ile, Mich.
    Master of: Housing, Saving, Retirement Planning

    For Kristine Dowhan, the transition back into her mom and stepdad’s home after graduation was fairly easy. An independent youth, she was already used to doing her own laundry and buying her own specialty food items. And rent? Her parents didn’t charge it.

    How do parents feel about kids who boomerang home? “I think with parents, they don’t necessarily mind,” she says, “as long as they don’t feel that they’re going to be stuck with you forever.”

    And Dowhan took advantage of her low-cost housing. Her first paycheck went to necessities like new work clothes, the second went to paying off her credit card, and the third went to Christmas presents. By that time she received her fourth paycheck, she qualified for her company’s 401(k) and began directing 75% of her income into retirement savings.

    “If you’re only home four nights a week because you’re visiting friends the other nights,” she says, “why waste money on your own place?”

    Dowhan lived at home for a year, during which she spent enough time at her job to know it was a good fit. She also saved up enough money to buy her own house: a fixer-upper with spare rooms she may rent out.

    Advice: “You never know where life will take you, or what opportunities might come up. So don’t rush.”

  • Sean Starling

    Sean Starling, Morehouse College class of 2013
    Dustin Aksland

    Morehouse College Class of 2013
    Age: 25
    Home town: Atlanta
    Master of: Budgeting

    After graduation, Sean Starling was shocked by the financial realities that hit him.

    Accustomed to living in a dorm and eating on a meal plan, Starling “didn’t really know much about how far the dollar went,” he says. Once he became responsible for bills and rent, he knew he had to get a handle on his spending. “What I really had to do was just budget and determine what was a need versus a want,” he says. He started using the finance tracking website Mint.com, which he says gave him a clear, concise way to look at what he was saving versus what he was spending. Later on, he found he was more comfortable tracking his money with an Excel spreadsheet, so he used that instead.

    Advice: “Whether you use a piggy bank or Mint or an Excel spreadsheet, find a way to make the savings process your own.”

MONEY Saving

9 Ways to Trick Yourself Into Getting Rich

Profitable ways to retrain your brain

Building wealth is about more than just hitting a number. It’s also about cultivating the habits of mind that make saving second nature—or at least a whole lot less painful. But as anyone who’s ever tried to get in shape can tell you, changing behavior isn’t easy. Sometimes you need a clever “cheat” to help you on your way. So here are 8 mental tricks that can speed you on the path to financial security.

Adapted from “101 Ways to Build Wealth,” by Daniel Bortz, Kara Brandeisky, Paul J. Lim, and Taylor Tepper, which originally appeared in the May 2015 issue of MONEY magazine.

  • 1. Set a savings goal that matches your money mindset.

    hand throwing dart
    Getty Images—(c) PM Images

    When you hear the word “saving,” do you imagine the retirement you hope to enjoy? Or does your brain go right to the 401(k) forms you need to fill out? For those who tend to focus on the big picture, a specific target (say, to reach a balance of $50,000 by a certain date) can motivate saving, says Gülden Ülkümen, a business professor at the University of Southern California. If you’re thinking mainly of the nuts and bolts, though, picking a dollar figure may make the task feel harder. Instead, concentrate on putting away as much as you can.

  • 2. Whatever the goal, keep it real.

    money sitting on top of target
    Getty Images

    “You don’t want goals that are so aggressive that you’ll lose steam,” says Lisa Ordóñez of the University of Arizona, who has studied the effects of goals on behavior.

  • 3. Use windfalls to ramp up.

    stack of cash
    Jonathan Kitchen—Getty Images

    The easiest dollars to set aside are the ones you aren’t used to spending. So put a portion of bonuses and tax refunds into savings. Make raises an occasion to up your 401(k) contribution. About 44% of plans have some kind of auto-escalation feature, which allows your savings rate to rise with your income, but you may have to specifically sign up for this option.

  • 4. Don’t make financial decisions after a rough day at work.

    woman after rough day at work
    Garry Wade—Getty Images

    You save more when you feel powerful, even when it’s for a quirky reason. A recent study in the Journal of Consumer Research found that people who had just answered questions while sitting in a tall chair were more likely to save money than those on a low ottoman. A practical takeaway: Consider reserving your major financial chores for “up” days when you are feeling in command, says study coauthor Anne-Kathrin Klesse.

  • 5. Ignore the three-year plan.

    person on starting line of race
    Louis Fox—Getty Images

    Credit card statements must show how much you’d pay if you settle in three years, if paying the minimum takes longer. That’s good if it speeds you up. But business professors Neal Roese and Hal Hershfield have found that people who see a three-year example may pay back more slowly than otherwise, perhaps because they (incorrectly) take the example as a suggestion. Faster is better: Pay a $5,000 credit card debt (at 15%APR) in one year instead of three, and you’ll save $824.

  • 6. Start small to pay off big debt.

    balls of cash increasing in size
    Getty Images

    If heavy balances are weighing you down, start paying off the smallest balance first, suggests Beverly Harzog, author of The Debt Escape Plan. The math says to go after the card with the highest interest. But unless there’s a big difference in two cards’ rates, it’s often more helpful to get positive mental feedback from clearing a debt so that you sustain your repayment plan.

  • 7. Lobby yourself.

    hand mirror on yellow
    Judith Collins—Alamy

    At the end of the day, the only person who can persuade you to be a disciplined saver is you. Now there’s a way to communicate with your future self. Go to FutureMe.org and send yourself an email, which you can schedule for delivery at a later date. For instance, if you know that a bonus is coming at the end of the year, send yourself a reminder to sock the money away for retirement. You’ll thank yourself later.

  • 8. Budget like it’s yesterday.

    piggy bank divided in sections
    Alamy

    Maybe you have several recurring bills that are on the verge of going away, like car loans or student debt payments. When that happens, don’t free up the cash. Instead, set aside the same amount of money—you’ve shown you can afford it—to bolster your nest egg. For example, keep saving $450 a month (the typical nut on a five-year auto loan for $25,000) after the SUV is paid off, and you’ll drive off with more than $140,000 in 15 years, assuming 7% annual returns.

  • 9. Shift your view.

    hands holding binoculars
    Getty Images

    Around age 50, you enter peak saving years. Imagine your goal now not as a lump sum—which can be abstract—but as a monthly retirement income. A study in the Journal of Public Economics found that savers who were shown income projections socked away more. To get a ballpark sense of where you are, use T. Rowe Price’s free online retirement-income planner.

MONEY Taxes

Is Your Tax Refund Too Big?

massive amount of cash in pocket
William Howell—iStock

Getting a big check from the IRS is exciting, but it might not be the best for your long-term financial health.

Taxpayers getting back money from the government this year have received an average refund of $2,893 so far, according to March 26 data from the Internal Revenue Service. That’s a nice bump up in cash flow, and a lot of people look forward to it as a chance to splurge, pay down debt or add to their savings.

But those people could have had that money all year, had they withheld less of their paycheck. Getting a big refund means you essentially gave the government an interest-free loan, when you could have put the money in a savings or retirement account to earn interest. You may see that money as a windfall, but you should really see it as the government making good on a year-long IOU.

There’s no right or wrong answer to how much of a refund you should aim to get, because it’s very much a matter of personal preference, and it can also be tricky to estimate. No matter how you choose to deal with your taxes, it’s worthwhile to regularly evaluate your withholdings. Here’s why.

Your Life Changes

About 82% of taxpayers receive refunds, but even if you’ve consistently gotten one, a significant life change may affect how much you receive or if you get one at all. Marriage, divorce, the birth or adoption of a child, or a drastic income change should trigger a review of how much you have withheld from your paycheck.

You Should Look for Patterns

Beyond re-evaluating your tax situation in the wake of a noteworthy life event, your tax-filing history will give you a good idea of when you should consider changing how much is withheld from your paycheck. It can be a difficult thing to estimate, because as much as you want may want to avoid owing the Internal Revenue Service in April, getting too much in return may not be the best for your long-term financial health.

“A good place to be is owing a little bit or getting a little bit back,” said Elliott Freirich, a certified public accountant in Chicago. But where exactly is that “good place”? “There’s no right answer. It’s a gray area, but I would tell people if they could kind of keep (their refund) under $1,000. … It’s not like it would go away and they would never have it if they reduce their withholding.”

Know Your Own Saving/Spending Habits

Some people feel that way — that they wouldn’t be disciplined enough to set aside the money they would otherwise get from a large refund.

“It’s sort of like forced savings,” said Jorie Johnson, a certified financial planner in New Jersey. She said she suggests her clients re-evaluate their withholding if their refund exceeds $5,000. “I encourage them to use half of their refund toward their IRA, if they haven’t already maxed it out, and the other half on themselves, as a reward — that’s assuming they don’t have any debt.”

Consider the big picture: Do you look forward to a large tax refund but struggle to meet your savings goals on a monthly basis? If you’re trying to work your way out of debt or regularly find yourself financing your lifestyle while also getting a large refund check every tax season, that’s a sign you need to revisit your withholding (you might need to re-evaluate your spending habits, too).

Remember that withholding is just an estimate of what you’ll owe, and it may take you a few years of consistent tax outcomes to confidently adjust that estimate to meet your tax needs without owing or receiving a large sum come tax time.

More from Credit.com

This article originally appeared on Credit.com.

MONEY Kids and Money

The Best Way to Bank Your Kid’s Savings

150403_FF_KidBankAcct
YinYang—Getty Images

After the piggy bank fills up, here's how to launch your child on the path of saving and investing.

When I told my 7-year-old that her wallet was getting full and it was time to open a bank account, her eyes widened. She wanted to know if she would be allowed to carry her own ATM card.

Um, no.

When transitioning from a piggy bank to handling a debit card linked to an active account, financial experts say it is best to start with a trip to a bank, but which one and when? Here are some steps to get started:

1. Bank of Mom and Dad

Don’t be in a rush to move away from the bookshelf bank, says financial literacy expert Susan Beacham. There are lessons to be learned from physical contact with money.

Sticking with a piggy can be especially effective if you teach your kids to divide their money into categories. Beacham’s Money Savvy Pig has four slots: save, spend, donate, invest.

When you cannot stuff one more dime into the slots, it is time to crack it open and seek your next teachable moment.

2. Neighborhood Convenience

Many adults bank online, but kids still benefit from visiting a branch, says Elizabeth Odders-White, an associate dean at the Wisconsin School of Business in Madison.

Do not worry about the interest, Beacham says. “A young child who gets a penny more than they put in thinks it’s magical. You’re not trying to grow their money as much as grow their habits.”

Your second consideration should be fees. Your best bet may be where you bank, where fees would be determined by your overall balance and you could link accounts.

Another option is a community bank, particularly a credit union, which are among the last bastions of free checking accounts.

“The difference between credit unions and banks is that credit unions are not-for-profit and owned by depositors,” says Mike Schenk, a vice president of the Credit Union National Association.

At either type of institution, you could open a joint account, which would be best for older kids because it allows them to have access to funds through an ATM or online, says Nessa Feddis, a senior vice president at the American Bankers Association.

Or you could open a custodial account, for which you would typically need to supply a birth certificate and the child’s Social Security number. Taxes on interest earned would be the child’s responsibility, but likely would not add up to much on a small account. A minor account must be transferred by age 18 to the child’s full control.

3. Big Money

If your child earns taxable income, the money should go into a Roth individual retirement account, experts say. There is usually no minimum age and many brokerage firms have low or no minimums to start an account. You can pick a mix of low-cost ETFs, and let it ride.

Putting away $1,000 at age 15 would turn into nearly $30,000 by age 65, at a moderate growth rate, according to Bankrate.com’s retirement calculator.

Not all kids can bear to part with their earnings, but there are workarounds. One tactic: a parent or grandparent supplies all or part of the funds that go into the Roth, akin to a corporate matching program.

The other is to work with your child to understand long-term and short-term cash needs. That is what certified financial planner Marguerita Cheng of Blue Ocean Global Wealth in Potomac, Maryland, did with her daughter, who is now in her first year of college.

While mom and dad pay for basic things like tuition, the teen decided to pool several thousand dollars from her summer lifeguard earnings, money from her on-campus job and gifts from her grandparents to fund several educational trips.

“She would make money investing, but it’s only appropriate if you have a longer time horizon,” says Cheng. “It’s not even about the money, it’s the pride she gets from paying for it herself.”

MONEY Saving

U.S. Savings Rate Hits Two-Year High

150330_INV_HighSavings
GK Hart/Vikki Hart—Getty Images

Americans are saving 5.8% of income, according to a new report.

Americans are saving a larger portion of their income than they have in two years, according to a new report from the Department of Commerce. The numbers show savings amounted to $768.6 billion in February, or 5.8% of total disposable income. The last time Americans had a higher savings rate was in December 2012, when individuals saved 10.5% of their disposable earnings.

The higher savings rate corresponds with a small drop in inflation-adjusted spending and suggests Americans continue to use the recent drop in gasoline prices as a chance to beef up their bank balances or pay down debt.

More savings and less spending could have a negative impact on the economy, which has already seen slower growth in recent months. But Americans are still socking away less money than they did during the recession and its aftermath, when the savings rate regularly hovered around 6% and above:

150330_INV_HighSavings2

Paul Ashworth, chief U.S. economist at Capital Economics in Toronto, told Reuters that while consumption is currently down, strong economic fundamentals suggest spending should pick up again as the year progresses.

“Households are still flush with the money saved from the big drop-off in gasoline prices and, with the labor market still on fire, incomes should continue to increase at a solid pace,” Ashworth said.

Read next: Why Many Middle-Class Households Are Outsaving the Wealthy

MONEY 401k plans

What You Can Learn From 401(k) Millionaires in the Making

These folks are doing all the right things to reach retirement with a seven-figure nest egg.

The 401(k) has become the No. 1 way for Americans to save for retirement. And save they have. The average plan balance has hit a record high, and the number of million-dollar-plus 401(k)s has more than doubled since 2012. In the first part of this series, we shared tips for building a $1 million retirement plan. Now meet workers on track to join the millionaires club—and get inspired by their smart moves. Once you hit your goal, learn more about making your money last and getting smart about taxes when you draw down that $1 million.
  • Greg and Jesseca Lyons, both 30

    Greg and Jesseca Lyons

    Carmel, Indiana
    Years to $1 million: 15
    Best move: Never cashed out their 401(k)s

    Though only 30, Greg and Jesseca Lyons are well on their way to reaching their retirement goals. The Lyons—he’s an operations manager for a small research company, she’s a product development engineer for a medical device maker—are on the same page when it comes to planning for the future.

    College sweethearts who have been married seven years, they made a commitment to start investing for retirement with their first jobs. They contribute 15% of their salaries. Employer matches bring that annual savings rate to about 19%. Together, they have $250,000 in their retirement accounts, invested 90% in stocks and 10% in bonds.

    Unlike many young people, they have resisted the temptation to cash out their 401(k)s when they changed jobs. Though they dialed back contributions for about six months when they were saving for a down payment, the Lyons didn’t stop putting money away. “We have stuck with the idea that retirement money is retirement money forever,” says Greg. His goal is to retire by age 60. For Jesseca, saving is about independence and financial security. “I love what I do, so I don’t see retiring early. But I don’t want to be worried or stressed out about our money either,” she says. “I am not going to sacrifice our retirement just to live a certain lifestyle now.”

  • Tajuana Hill, 46

    By starting to save for retirement at age 26, Tajuana Hill has put herselv on track to grow a seven-figure 401(k).
    Jesse Burke

    Indianapolis
    Years to $1 million: 17
    Best Move: Keeps raising her savings rate

    It’s taken Tajuana Hill, an employee trainer with Rolls-Royce, two decades to max out her 401(k), but she’s been a steady saver since her twenties. When she joined the firm at age 26, she put 10% of her pay into her plan right away. As her income rose, she ramped that up to 12%, then 17%, and finally 20% in January.

    Her reward: $224,000 in her 401(k)—all the more impressive since her employer offers no match. What has helped Hill is a side business she launched three years ago, Mimosa and a Masterpiece, an art studio where students can sip a drink during painting classes taught by local artists. The extra income let her pay off her credit cards, freeing up earnings from her day job so she could boost her 401(k) contributions.

    “When I retire, I hope to do it as a millionaire,” says Hill. If she sticks to this regimen, her 401(k) could top $1 million just as she reaches 65.

  • Steven and Melanie Thorne, both 37

    Steve and Melanie Thorne have been disciplined about hiking their retirement contributions with every raise. Melanie saves 10% of her pay in her plan, while Steve sets aside 12%. They even save extra in Roth IRAs.
    Jesse Burke

    York, Pennsylvania
    Years to $1 million: 15
    Best move: Invest in low-cost stock index funds

    Having a healthy stake in stocks is a hallmark of 401(k) millionaires. With decades to go until retirement, you can ride out market swings. That’s a philosophy Steven and Melanie Thorne have embraced. Together they have $310,000 in their workplace retirement plans, Roth IRAs, and a brokerage account, all invested 100% in stocks. “We are young, so we can be more aggressive,” says Steve, a security officer at a nuclear power plant.

    Investing is a passion for Steven, who first started saving for retirement with a Roth IRA when he was 18. He says he follows Warren Buffett’s philosophy about buying stocks: Be greedy when others are fearful, be fearful when others are greedy. But, he says, he and Melanie, a nurse, are buy-and-hold investors and keep most of their portfolio in low-cost index funds.

    Steven and Melanie have been disciplined about hiking their retirement contributions with every raise. Melanie saves 10% of her pay in her plan, while Steven sets aside 12%. They even save extra in Roth IRAs. They live below their means and direct tax refunds into retirement accounts, as well as save for college for their five year old son Chase. “We look for extra ways to save cash and keep our investment costs low,” says Steven.

  • Jonathan and Margaret Kallay, 56 and 53

    By saving more as big expenses fell away and their incomes rose, Jonathan and Margaret Kallay have been able to amass 401(k)s worth a combined $750,000.
    Jesse Burke

    Westerville, Ohio
    Years to $1 million: Four
    Best move: Power saving late

    Life can get in the way of saving for retirement, but ramping up your savings later in your career pays off. Jonathan and Margaret Kallay contributed only small amounts to their retirement plans early on. “It wasn’t much, about $50 a paycheck on a $13,000-a-year salary,” says Jonathan, a firefighter. Margaret, then an ER nurse, put away 5% of her pay.

    As big expenses fell away, the Kallays saved more. Married in 1993, the couple each paid child support for daughters from previous marriages until the girls reached 18. Once that ended and they paid off car loans, the money went toward retirement.

    Earning more has helped too. Jonathan worked extra shifts as a paramedic. Margaret got a business degree and is now a vice president at an insurance company, where she gets a generous company match. They each put about 15% in their 401(k)s, which total $750,000 and could hit $1 million in four years. They plan to quit work soon to spend more time traveling and spending time with their daughters and 5-year-old twin grandsons. “We’ve made a lot of sacrifices to invest for retirement,” says Jonathan. “It’s all been worth it.”

  • Mel and Heather Petersen, both 35

    Mel and Heather Petersen with sons Carter and Perry

    Reidsville, N.C.
    Years to $1 million: 17
    Best move: Buying rental properties to bring in more money

    Despite modest incomes in the early years of their careers, Mel and Heather Petersen have accumulated nearly $200,000 in retirement savings. Their strategy: Consistent saving. Mel, a public school teacher, says his salary has averaged about $40,000 most of his working life. Today he earns $50,000 a year. Heather, a marketing analyst who contributes 10% of her income to her 401(k), has seen a steadier increase in her earnings over the years, bringing the couple to a six-figure combined income.

    “We have always saved money for retirement no matter what our income, and never stopped no matter what financial challenges we have faced,” says Mel, dad to two boys, 8-year-old Carter and 4-year-old Perry.

    It helps that the Petersens supplement their retirement savings with income from rental properties that they began buying seven years ago. Several are paid off, and after expenses they gross about $5,000 a month in rental income. They hope to continue investing in real estate to boost their retirement savings. “We want to max out our retirement accounts down the road,” says Mel.

  • Larry and Christianne Schertel, both 58

    Larry and Christie Schertel

    Valatie, New York
    Years to $1 million: zero
    Best move: Kept faith in stocks

    Investors have enjoyed a roaring bull market for the past six years. But financial markets are cyclical. Even the most dedicated savers can panic and abandon stocks when the markets goes south.

    Despite the massive downturn during the Great Recession, Larry and Christianne Schertel didn’t budge from their 75% stock allocation. “When the market collapsed in 2008, we stayed the course and were nicely rewarded as the markets rebounded,” says Larry, an operations manager at a transportation company until his retirement this January. As they closed in on retirement, the Schertels reduced equities to about 60%. Together with Christianne, who works as an elementary school teaching assistant, the Schertels have just over $1 million in retirement accounts.

    In addition to their resolve during market fluctuations, the Schertels say automating their savings, living below their means, limiting debt, and investing in low-cost funds helped them reach the $1 million mark. “There really is no magic to it,” says Larry. “It is just being disciplined.”

MONEY Taxes

11 Smart Ways to Use Your Tax Refund

Tax refund check with post-it saying "$$$ for Me"
Eleanor Ivins—Getty Images

You could pay down debt, travel, tend to your health, or shrink your mortgage, among many other ideas.

Here we are, in the thick of tax season. That means many mailboxes and bank accounts are receiving tax refunds. A tax refund can feel like a windfall, even though it’s really a portion of your earnings from the past year that the IRS has held for you, in case you owed it in taxes. Still, it’s a small or large wad of money that you suddenly have in your possession. Here are some ideas for how you might best spend it.

First, though, a tip: If you’re eager to spend your refund, but haven’t yet received it, you can click over to the IRS’s “Where’s My Refund?” site to track its progress through the IRS system. Now on to the suggestions for things to do with your tax refund:

Pay down debt: Paying down debt is a top-notch idea for how to spend your tax refund — even more so if you’re carrying high-interest rate debt, such as credit card debt. If you owe $10,000 and are being charged 25% annually, that can cost $2,500 in interest alone each year. Pay down that debt, and it’s like earning 25% on every dollar with which you reduce your balance. Happily, according to a recent survey by the National Retail Federation, 39% of taxpayers plan to spend their refund paying off debt.

Establish or bulk up an emergency fund: If you don’t have an emergency fund, or if it’s not yet able to cover your living expenses for three to nine months, put your tax refund into such a fund. You’ll thank yourself if you unexpectedly experience a job loss or health setback, or even a broken transmission.

Open or fund an IRA: You can make your retirement more comfy by plumping up your tax-advantaged retirement accounts, such as traditional or Roth IRAs. Better yet, you can still make contributions for the 2014 tax year — up until April 15. The maximum for 2014 and 2015 is $5,500 for most folks, and $6,500 for those 50 or older.

Add money to a Health Savings Account: Folks with high-deductible health insurance plans can make tax-deductible contributions to HSAs and pay for qualifying medical expenses with tax-free money. Individuals can sock away up to $3,350 in 2015, while the limit is $6,650 for families, plus an extra $1,000 for those 55 or older. Another option is a Flexible Spending Account (FSA), which has a lower maximum contribution of $2,550. There are a bunch of rules for both, so read up before signing up.

Visit a financial professional: You can give yourself a big gift by spending your tax refund on some professional financial services. For example, you might consult an estate-planning expert to get your will drawn up, along with powers of attorney, a living will, and an advance medical directive. If a trust makes sense for you, setting one up can eat up a chunk of a tax refund, too. A financial planner can be another great investment. Even if one costs you $1,000-$2,000, they might save or make you far more than that as they optimize your investment allocations and ensure you’re on track for a solid retirement.

Make an extra mortgage payment or two: By paying off a little more of your mortgage principle, you’ll end up paying less interest in the long run. Do so regularly, and you can lop years off of your mortgage, too.

Save it: You might simply park that money in the bank or a brokerage account, aiming to accumulate a big sum for a major purchase, such as a house, new car, college tuition, or even starting a business. Sums you’ll need within a few or as many as 10 years should not be in stocks, though — favor CDs or money market accounts for short-term savings.

Invest it: Long-term money in a brokerage account can serve you well, growing and helping secure your retirement. If you simply stick with an inexpensive, broad-market index fund such as the SPDR S&P 500 ETF, Vanguard Total Stock Market ETF, or Vanguard Total World Stock ETF, you might average as much as 10% annually over many years. A $3,000 tax refund that grows at 10% for 20 years will grow to more than $20,000 — a rather useful sum.

Give it away: If you’re lucky enough to be in good shape financially, consider giving some or all of your tax refund away. You can collect a nice tax deduction for doing so, too. Even if you’re not yet in the best financial shape, it’s good to remember that millions of people are in poverty and in desperate need of help.

Invest in yourself: You might also invest in yourself, perhaps by advancing your career potential via some coursework or a new certification. You might even learn enough to change careers entirely, to one you like more, or that might pay you more. You can also invest in yourself health-wise, perhaps by joining a gym, signing up for yoga classes, or hiring a personal trainer. If you’ve been putting off necessary dental work, a tax refund can come in handy for that, too.

Create wonderful memories: Studies have shown that experiences make us happier than possessions, so if your financial life is in order, and you can truly afford to spend your tax refund on pleasure, buy a great experience — such as travel. You don’t have to spend a fortune, either. A visit to Washington, D.C., for example, will get you to a host of enormous, free museums focused on art, history, science, and more. For more money, perhaps finally visit Paris, go on an African safari, or take a cruise through the fjords of Norway. If travel isn’t of interest, maybe take some dance or archery lessons, or enjoy a weekend of wine-tasting at a nearby location.

Don’t end up, months from now, wondering where your tax refund money has gone. Make a plan, and make the most of those funds, as they can do a lot for you. Remember, too, that you may be able to split your refund across several of the options above.

Your browser is out of date. Please update your browser at http://update.microsoft.com