No BS Finance

The latest Money makeover shows a couple of easy fixes:

• Don’t over-withhold on your taxes - yes, a refund is certainly psychologically better than paying in on April 15th, but it’s just an interest-free loan to the government. I like to target a refund of a couple hundred dollars, solely for the intangibles.
•  Know the rules for your state’s 529 plan - many allow breaks on your state taxes

Now, Nakia Haskins also does a lot of things right, such as putting 15% of her salary into retirement savings, has an emergency fund started, and has a 529 for her son.

Tonight I started towards achieving goal #1 for 2008 - rebuilding our emergency fund to where it needs to be.This won’t get us all the way there, but starting with my next paycheck, $50 is automatically going into our ING high-yield savings account.

We’ll have extra money most months to add to that, but doing some automatically really does make it seem painless.

Over the years, ING Direct has earned my savings account business, with their service (see review). Since my goals imply I’ll be keeping the same pool of money for multiple purposes (emergency fund, real estate tax, and simply extra cash laying around), I’ve been thinking about opening a separate account elsewhere for savings towards a car.

Despite being able to simulate subaccounts by simply opening up a new account within ING, the special-purpose fund for the car is really fudgable, since I would take money out in a heartbeat if it was needed elsewhere.

The solution is really easy - still lump all the money in together, but track it myself. Using Quicken, this is done easily by setting up a Savings Goal. I almost made this tougher than it needs to be. I can keep the simplicity of 1 account, but can track separate goals as formally or casually as I care to.

Bonus link:  check out the latest savings rates for online accounts at Consumerism Commentary.

CNN Money explores 6 money dilemmas and attempts to solve them. Let’s take a look and see…

1. Pay off a credit card OR fund your 401(k)

CNN Money: pay down the credit card

Me: pay down the credit card

2. Save in a Roth 401(k) OR a regular 401(k)

CNN Money: Roth 401(k)

Me: Does anybody really have this as an option? CNN says about 25% do. Until more do, I don’t have an opinion on them.

3. Lease a car OR buy a car

CNN Money: buy

Me: Want a car payment forever? Then lease. Otherwise, buying is the way to go.

4. Prepay your mortgage OR invest

CNN Money: Invest

Me: Prepay your mortgage if you have a variable-rate mortgage, but don’t dump all your money into the house. CNN Money hits the nail on the head that you need some flexibility to cover unanticipated needs and problems.

5. Buy a home OR rent a home

CNN Money: Buy

Me: Buy, if you can realistically afford it

6. Take Social Security early OR late

CNN Money: Late

Me: Late - wait as long as possible to maximize your monthly check

Overall the full answers from CNN Money are great.

For further looks, see the posts over at Free Money Finance breaking these down in more detail.

I like to believe we make our own luck, by being prepared, open, and flexible. Over at SavingAdvice they agree, but commenter #4 also gives some personal examples that show this isn’t a black/white issue.