The Great Recession – it began in December 2007 and we may be officially climbing out of it now. Unfortunately it appears as though our nation is dealing with a jobless recovery. Yesterday, I discussed that fewer Americans are saving for retirement than just a year ago. Today I’m building on that – not only are savings down but spending is up despite the fact that salaries remain relatively flat.

This video from CNN explains it a bit more.

No related posts.

While taking the kids to school this morning, I heard a shocking statistic on CNN Headline news. More than one-fourth of American workers have less than $1,000 in their retirement savings account. In its most recent survey, the Employee Benefit Research Institute found that 27% of American workers have less than $1,000 in retirement savings. This is up from 20% just a year ago.

If you expand this to $10,000, 43% of American workers have less than $10,000 in retirement savings today – this is up from 39% in 2009. Obviously, the economic recession and the jobless crisis are contributing to this problem. If you can’t find a job, how can you save for retirement? If you can’t pay your mortgage, how can you save for retirement?

This is creating a new problem – Americans have to work longer in order to have the money they need to retire. This is keeping people in the workforce longer, which makes it more difficult to find a job. It is almost like a vicious cycle that needs to be broken.

So people aren’t saving for retirement but they also aren’t projecting what they’ll need to retire with dignity. Oh, and to make matters worse, some companies have stopped 401k matches due to the financial crisis.

In order to achieve the goal of retiring with dignity, Beth McHugh with Fidelity Investments suggests that Americans need to save approximately 6-10 % of their salary. If you follow Dave Ramsey’s plan, he suggests saving 15% of your salary once you reach Baby Step Four.

So some of these Americans may just be temporarily postponing their retirement savings in order to pay down consumer debt but I’d venture to guess that it is a very small percentage.

Although we’re trying to follow Dave Ramsey’s Baby Steps, we are continuing a smallish contribution to 401k savings plans. We are doing this to attempt to avoid the Alternative Minimum Tax trap for 2010. If I’m going to have to pay out $5k in taxes, I’d rather defer some of my pre-tax income to an investment engine. I don’t know if this plan will work but we can only hope.

I’m curious, are you saving for retirement? If not, why? If you are…how much of your annual salary are you setting aside for retirement?

Photo: Alex E. Proimos

No related posts.

As promised, here is a video from the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009 live chat hosted by CreditCards.com on February 22, 2010.

Note to email subscribers: There is a video embedded in this post, please click through to the blog to view the video.

Related posts:

1. CARD Act of 2009 Goes Live

Tomorrow, the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009 goes live. According to the White House Blog, “The law bans unfair rate increases, prevents unfair fee traps, requires plain language in plain sight for disclosures, increases accountability all around, and institutes protections for students and young people just for starters.”

If you have a credit card, you may have noticed some new information on your statement. This information is just part of the credit reform act. In addition to your minimum payment, you will now see how long it will take you to pay off the credit card only paying the minimum payment every month (think 25+ years). There will also be a second figure showing how an increased and regular monthly payment will allow you to pay off your card much more quickly (think 3 years).

The credit card reform can be a bit confusing and to help alleviate this confusion, the White House Council of Economic Advisors is hosting a live video discussion tomorrow. The chat will be hosted on the CreditCards.com website at 2:00 pm ET.

If this video chat follows others that the White House participates in, a video archive of the chat will likely be available as early as tomorrow evening. I will keep an eye out for it and post it here at Six Figures and Broke as soon as I see it.

Related posts:

1. CARD Act of 2009 – Credit Card Reform Q&A

If you’ve heard the phrase “sinking funds” and wondered how it pertains to personal finance, this is the blog post for you. A sinking fund is simply a pool of money that you use to save for a specific expense. For example, if you own a car then you know that the car will need tires every 50,000 miles (or so). This isn’t a surprise expense. This isn’t an emergency expense. However, it can quickly become an unplanned expense. However, a sinking fund takes out the unplanned aspect and allows you to save for new tires on a monthly basis instead of freaking out when it is time for new tires and you don’t have the cash to pay for it.

Let’s look at an example using numbers:

New tires – $1000.00 (nice tires)
Annual mileage – 25,000 (you drive a lot)
Time to expected expense – 24 months
Savings per month – $41.67

So if you are planning to spend $1000 on tires every two years, you can set aside $41.67 per month into a sinking fund. This way, you can fully fund your new tire purchase with cash without touching your emergency fund, using a 90-days same as cash offer, or putting it on a credit card.

Where to Put the Sinking Fund Money?
Now that you have a better idea as to what a sinking fund is, you may be asking yourself where to store the money. Some people store the money in a cash envelope in their house and others store it in an interest-bearing checking account. I store my sinking fund money in an ING savings account. I choose ING because the money takes 48 hours to get to and I’m less likely to use it for an impulse purchase. Impulse purchases is one of my bad money habits and so for me, it is important that this money be out of reach from an impulse purchase perspective.

Although I have several sinking funds, I only have one physical sinking fund account. The account may have $1000 in there but a portion of it may be for the new tire sinking fund while another portion is for Christmas shopping. I keep track of how much I have in each of my individual, virtual sinking funds via a spreadsheet. So a monthly deposit of $200 to the sinking funds ING account may be earmarked for five different sinking funds. It may sound a little confusing at first but it is easy once you do it a few times.

Common Sinking Fund Items
Okay you know what a sinking fund is and you know where to put it, now on to what kind of sinking funds you need. This is going to vary by family and really puts the PERSONAL into PERSONAL FINANCE. Some families may be able to cash flow an oil change and tire rotation every 3 months while other families need to approach it from a sinking fund perspective.

So here is a list of some common sinking fund items that you can use to get started with your sinking fund accounts:

• Auto Repairs & Maintenance
• Tires
• Homeowner’s Insurance (not paid monthly)
• Clothing
• Vacations
• Birthdays and Other Celebrations

You can have as many or as few sinking funds as you need. Regardless of how many you choose, sinking funds are a great way to plan for expenses that aren’t unexpected but aren’t usually a part of the typical monthly budget.

Photo: alancleaver_2000

No related posts.

Since my husband and I began to really focus on paying down our consumer debt, a few new doors have opened for us. My husband’s first commission check is going to be about 33% larger than I originally budgeted. Then I picked up a new freelance writing client. It is only an additional $100/mo but it is only about 1 hour per week of my time – I’ll take the $25/hr that it translates into.

Then, a current client asked me if I wanted to write more for their site. Heck ya! I will be able to make an extra $400 – $1000/mo, depending on how many extra articles I write. Last week I only managed to squeeze two in due to some health issues but I’m focusing on getting a full week’s worth in this week.

I love how I’m putting out there that I want to reduce my debt now and I’m getting this good news back. I’m not exactly a believer in the Law of Attraction because I’ve seen it interpreted in some very negative ways (for example, a mom had a baby with a birth defect and felt that the baby didn’t manifest strongly enough while in utero). However, I do believe that there is some sort of force out there that is working.

Photo: borman818

No related posts.

President Obama is proposing that the largest banks be assessed a bailout fee to help recover some of the TARP funding that these banks received to stay afloat and pretty much avert a total collapse of the American economy. Although he has many supporters, he also has many that oppose this proposed bailout fee, including personal finance guru Suze Orman. What do you think, will the bank bailout fees affect you?

Related posts:

1. Who is This Dave Ramsey Guy Anyway?

I was browsing the CNNMoney.com website and came across Money Magazine’s list of the best jobs in America for 2009. The site ranked 50 different professions and systems engineer topped the list. Employment in the systems engineering profession is expected to grow by 45% in the next decade.

According to the site, an undergraduate degree in engineering will be required and many companies are also requesting that their systems engineers carry a certified systems engineering professional (CSEP) certification. My husband is a systems engineer and loves his job, I’m sure he’ll be excited to hear that it was named the best job in America.

Other professions that made the top ten list include physician assistant, college professor, nurse practitioner, information technology project manager, certified public accountant, physical therapist, computer/network security consultant, intelligence analyst, and sales director.

Further down the list at number 28 is technical writer. In May, I’ll graduate with my Bachelor’s Degree in Multimedia Writing and Technical Communication. Expected job growth over the next decade is 20%. I plan to continue freelancing but hope to pick up a few technical writing clients after I graduate, hopefully this job growth holds true for my industry.

After looking at the whole list, do you have one of the best jobs in America? If your profession isn’t on the list but you feel that you have an amazing job, I’d love to hear about it.

No related posts.

Suze Orman speaks with CNN’s Anderson Cooper about the state of personal finance in 2010. Orman cautions everyone to be careful: get out of debt, have an expansive emergency fund, etc – even if they weren’t affected by the unemployment and financial crises of 2009. Orman calls this the “Back to Cash Movement.” Ramsey fans are already back to cash but now Orman fans will be joining them.

Note to email subscribers, please click through to view these videos.

Related posts:

1. CARD Act of 2009 – Credit Card Reform Q&A
2. Personal Finance: What are Sinking Funds?
3. Will the Bank Bailout Fees Affect You?

Although I just relaunched my blog, I’ve already mentioned Dave Ramsey a few times. Instead of trying to tell you who this Dave Ramsey guy is, I’m going to let him explain it to you himself. The following video was filmed during the creation of the Maxed Out documentary (which I highly recommend).

Note to email subscribers, please click through to my blog to view the embedded video.

Related posts:

1. CARD Act of 2009 – Credit Card Reform Q&A