Tired of Living Paycheck to Paycheck

From CNN Money:

Question: I've been trying to be a little more thrifty lately. I realize that a lot of the luxuries Americans have are "wants" not "needs." Basically, I'd like to balance my household budget so I don't end up with just $30 at the end of the month. I'd even like to start building some savings. Any suggestions? --Kim, Idaho Falls, Idaho

Answer: A lot of people are experiencing the epiphany you've had about wants vs. needs.

Of course, we also have to keep in mind that one person's indulgence may be another's necessity. For example, a recent MainStay Investments poll that asked just over 1,000 baby boomers about their attitudes toward saving for retirement found that 46% considered weekend getaways not a luxury but a basic need.

I guess I can understand that. Someone who puts in lots of hours at a high-pressure job might very well see the occasional short trip not as an extravagance but a way to preserve sanity in a hectic life. I have to admit that I'm less sympathetic, though, to the 2% of my fellow boomers who classified professional manicures and pedicures as a basic need.

But despite individual differences in what we may consider "wants," it does appear that Americans have been rediscovering thrift of late. Last week's figures from the Bureau of Economic Analysis show that Americans saved 6.4% of after-tax income in June, the highest percentage this year. Granted, that's less than the 8.2% in May 2009. But it's a huge improvement from the 1% to 3% rates that were common back before the financial crisis.

Is the 401(k) dead?

Are 401K plans still a good investment vehicle and an adequate way to prepare for retirement? Money Magazine’s Ask the Expert sheds some light on the issue. Here are some of the concerns people have:

• participants aren't particularly adept at investing their contributions
• account balances can get whacked hard during market setbacks
• turning one's 401(k) stash into a lifetime income is a major challenge

However, Mr. Updegrave, who is also the author of “How to Retire Rich in a Totally Changed World: Why You’re Not in Kansas Anymore,” points out that no one has a better alternative. He explains that we might be better off if companies stuck with the check-a-month pension plans that have disappeared in recent decades. Or, maybe we would do better if the government stepped in and guaranteed a retirement check on top of our Social Security. What are your thoughts on these ideas?

No matter what you think, use whatever vehicle you have to save for retirement. If all you can do is contribute to your employer sponsored 401(k)—make a date for yourself in the future and advantage of investing pre-tax dollars and gaining free money in the form of an employer match.
Lastly, Updegrave makes an important recommendation for older adults: You will want to protect your money from downturns in the stock market as you get older by shifting some assets to the less volatile assets like bonds and cash. Take the time to do it.

Read the full article here. Let me know your thoughts on the 401 (k) on Facebook or Twitter.

10 Reasons You Need a Mentor, Especially Mid-Career

Just before the holiday weekend The Glass Hammer – one of my favorite blogs – posted this interesting article explaining why it is important to have a career mentor, even if you have been working in the field for a few years now. As author Andrea explains, mentoring has been associated with higher job satisfaction, higher promotion rates, higher future income, increased work success, and higher retention rates.

1. Perspective and Experience. A mentor can give you the benefit of his or her perspective and experience. He or she can help you assimilate to a new position and give you an insider’s view on how to get things done.

Bayer agrees, “This was the value to me of working with my first real mentor. She knew all about navigating big, traditional companies and how the structure and promotional system works. She helped me build my ‘personal board of directors,’ people who provided support for me, and how to make a ‘dance card’ whenever I was going to a large corporate event of some type (to make sure I had people to try and talk with and know what I was going to talk about). This mentor gave me the help I needed to advance my career significantly, starting that year.”

2. Think Outside the Box. A mentor can help you look at situations in new ways. He or she can ask hard questions and help you solve problems.

“This was another critical area for me – my mentors helped me to gain a level of self awareness that I wasn’t getting to on my own. My mentor helped me to learn and use emotional intelligence, even helped me craft exercises and offered practice and reviews, so that I could become proficient in understanding myself, my impact on others, and other people’s emotional being and state, and how to use that to work together better. This was a big ‘growth spurt’ for me, both at work and personally,” Bayer said.

3. Define and Reach Long-Term Goals. A mentor can help you define your career path and ensure that you don’t lose focus and continue down that road even when you become distracted by day-to-day pressures.

IRS Announces 2010 Standard Mileage Rates

In their newest press release the IRS announced the standard mileage rates for 2010. These rates are used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2010, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

50 cents per mile for business miles driven

16.5 cents per mile driven for medical or moving purposes

14 cents per mile driven in service of charitable organizations

The new rates for business, medical and moving purposes are slightly lower than last year’s. The mileage rates for 2010 reflect generally lower transportation costs compared to a year ago.

The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs as determined by the same study. Independent contractor Runzheimer International conducted the study.

A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for any vehicle used for hire or for more than four vehicles used simultaneously.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

Revenue Procedure 2009-54 contains additional details regarding the standard mileage rates.