So why do Americans suck at retirement plans? The issue is that even though 401(k) plans intend to complement Social Security, the sums paid out by the government are meager. The average Social Security retirement payout is $1,470 per month or $17,640 per year.

According to the most recent figures on consumer expenditures, the average American spent roughly $3,900 per month last year on necessities like food, housing, utilities, transportation, and health care. The retirement funds, such as pensions, 401(k)s, and individual retirement accounts, will close the deficit.

But that’s not the case with 401(k) plans. According to at least one economist, the issues with the programs are the main ones, not Americans’ saving practices. Everyone secretly believes they are making mistakes because the system aims to make individuals feel horrible about themselves. However, if everyone is making mistakes, there must be a problem in the system.

Issues with the present system

401(k)s and other similarly structured retirement plans have become popular as American corporations stop providing pensions. But since so many people lack access to employer-based retirement plans, the biggest issue with using 401(k) plans to supplement Social Security benefits is that they are not available to everyone.

The biggest issue is a coverage issue. Nearly 40 million workers in the private sector do not have access to an employer-sponsored retirement plan.

Most persons without any 401(k) savings do not have access to a plan through their employer, frequently because they work part-time or do not have employment by the company for enough time to qualify.

401(k) plans have no intention to replace a pension, even if people are covered and participate in their retirement plans.

First, even with the modifications lawmakers have made to make it simpler for customers to get started, 401(k) plans can be challenging for employees to understand. According to data, 65% of businesses with more than 5,000 employees last year automatically enrolled employees in 401(k) plans at a low set deferral rate. These schemes frequently start with a 3% contribution rate for employees and progressively boost it to 6%.

Although these auto-enrolment services help consumers get started, it can be challenging to manage the predictions and assumptions they must make.

You need to estimate your lifetime earnings and make certain market return assumptions to figure out how much you should invest to retire comfortably.

Even a tiny change in those presumptions can have a significant impact. You can receive findings that say you need to be saving close to half of your income if you slightly adjust your assumptions to be more pessimistic or more conservative.

According to recent academic studies, millennials will need to save 40% of their income over the next 30 years if investments yield less than 3% if they wish to retire at 65 and have enough to live off even half of their final pay, for instance.

People give up on that kind of savings goal when it gets overwhelming to achieve.

In addition, 401(k) contributions are optional, and you can use your money for a thing before retirement, making these kinds of retirement savings accounts more “susceptible” to economic downturns than traditional pension benefits.

Ways to increase your savings

The good news for millennials is that it’s not too late to save for retirement. It can be to balance saving for retirement with paying growing monthly housing, health care, and living costs and working to pay off existing debt, but it is achievable.

Spend some time first prioritizing your financial objectives. Millennials need to be clear about what matters most in the long run. Kids? House? experiences in life? There might need to be trade-offs.

Making a detailed monthly budget and exercising caution with your credit can also be helpful. Teenagers should exercise extreme caution while substantially raising their standard of living. After you have ratcheted up, it is tougher to ratchet it down.

It is worthwhile to sign up for your employer’s retirement plan if you are qualified, even though they are not perfect. You must choose how to invest your money after your 401(k) account is started and payments are starting to come in; otherwise, your retirement funds would effectively behave like savings accounts.

Millennials need to be clear about what matters most in the long run.

Professional financial planner(CFP)

Do not forget to contribute enough to qualify for any matching funds your employer may be willing to provide. Depending on the type of program, some employers will match your 401(k) contributions up to a particular amount. For example, if you contribute 5% of your salary to your 401(k), your employer might also tag along. 4% is the average matching percentage for Vanguard 401(k) plans.

Finally, you might want to analyze putting off your Social Security claim while you continue to work.

If you apply for Social Security at age 70 instead of 62, your benefits will be 76% greater. which can replace a significant amount of additional savings.

If you can, avoid retiring and continue working as long as possible. Work part-time if you are unable to work full-time. Each little bit counts.

Retirement Plans: Why Americans Are Bad At Planning? is a post from: When Life Gives You Lemons. Did you like the post? Follow me on Twitter, like me on Facebook, or hop on over to my blog and leave me your feedback.

More than a third of people surveyed about how they’re going to pay for retirement would rather wait in line at the Department of Motor Vehicles than research or review their retirement plan options.

That’s just one of the things that many of the more than 1,000 people surveyed by Voya Financial said they’d rather do because they dislike working on their retirement plan so much.

Retirement planning isn’t something that should be done just once and then forgotten. It should be reviewed each year to reflect major life changes that can affect a person’s or family’s finances.

The survey found that 53 percent of people didn’t review their retirement plan after experiencing such a major life change.

Procrastination is common

Planning for retirement takes time, but it’s something many people put off. While 37 percent of survey respondents said they’d rather wait in a DMV line that look at retirement plan options, the good news is that 57 percent said they would rather review their retirement plan.

Such tasks include retirement plan research, reviewing retirement assets and fund allocations, and reviewing their plan performance.

Here are some more statistics from the survey:

• 63% said they spent little or no time on the retirement plan process.
• In the past year, more than twice as many people reviewed or adjusted their phone, cable/internet service (43%) than they did their retirement plans (20%).
• Personal insurance was also a higher priority, with 36% saying they reviewed auto or home insurance.
• 26% admitted they’d procrastinate longer on making a retirement plan decision than they would on other activities. These include speaking in public (23%), studying for an important exam (17%), and researching a personal loan (17%).

Millennials were four times as likely (63%) to update their social media profiles than they were to review or make adjustments to a retirement plan (17%). Only 11 percent of them have a retirement plan, the survey found.

Impact of life events on retirement plans

Getting married, divorced, having a baby, and changing or losing a job are major events that impact life and can affect personal finance decisions. As mentioned above, 53 percent of respondents didn’t review their retirement plan after such an event.

Other figures also stood out. Even if a major life event didn’t impact their finances, 35 percent of respondents didn’t review their retirement plan after a major life event.

A smaller group of 7 percent didn’t have a retirement plan, while 4 percent hadn’t yet experienced an event that impacted their finances.

DMV Line Better Than Reviewing Retirement Plan for Many is a post from: When Life Gives You Lemons. Did you like the post? Follow me on Twitter, like me on Facebook, or hop on over to my blog and leave me your feedback.

The 20 percent mortgage down payment rule is all but dead. Still, many home buyers think they need that much or near it to qualify for a home loan.

The average down payment on a home with a mortgage was 11 percent in 2016, according to a report by the National Association of Realtors. For borrowers under age 35, the average down payment was just under 8 percent.

Coming up with any down payment — whether it’s $20,000 for a 10 percent down payment on a $200,000 loan, or less, — can be difficult.

Some home buyers may consider getting the money from a source where they may have a lot of money stashed away — their 401(k) retirement plan. Borrowing against the balance of an employer-sponsored retirement account is an option in 53 percent of 401(k) plans, according to the Employee Benefits Research Institute.

Up to half of an account balance or $50,000, whichever is smaller, can be borrowed in a 401(k) loan. A credit check isn’t needed for approval. Interest rates are usually low, about two points above the prime rate.

Borrowing from yourself for down payment

The loan must be repaid, with interest, in monthly or quarterly installments. The full loan must typically be repaid within five years, though it can be extended if used for a down payment on a primary residence. You’re essentially paying yourself in principal and interest, instead of a bank.

If a payment isn’t made within 90 days, the amount borrowed is considered a distribution from the retirement account and is taxed as income. If you’re under age 59-1/2, you’ll also pay a 10 percent early withdrawal penalty.

If you quit or lose your job before the loan is repaid, you must pay the outstanding balance within 60 days.

Down payment can lower compounding interest

In the long term, a 401(k) loan leaves you losing out on compounding interest on the money you’ve borrowed. Also, people with such loans have been found to decrease or stop contributing to their retirement account during the years they’re repaying it. All of this can hurt your retirement fund balance.

A 401(k) loan should probably be your last option for coming up with a down payment for a home. Even if your retirement plan allows it, there are other options such as grants and other financial assistance programs through various housing agencies that are better alternatives.

But if a 401(k) loan is something you think you can repay within a few years, and you don’t have better options, then it may be worth exploring.

Why You Don’t Want to Borrow From 401(k) for Home Down Payment is a post from: When Life Gives You Lemons. Did you like the post? Follow me on Twitter, like me on Facebook, or hop on over to my blog and leave me your feedback.

People are Living Longer

It is projected that in 2050, over 20% of the population will be 65 years or older. That’s up from 12% in 2000. With more people living longer, there comes more time to enjoy life and work if you choose to. 65 doesn’t automatically mean you have to give up your job.

In fact, 65 doesn’t mean a decline in health or physical capabilities, so if you want to work, you shouldn’t let age hold you back.

You should never retire just because of the stigma around age. In fact, adults are expected to live to at least 84 years once they make it to their 65th birthday. That’s almost an extra 20 years. Can you imagine being retired for 20 years?

No Retirement Security

It is well known that saving for retirement is important. However, many baby boomers, Gen X’ers, and Millennials still aren’t saving and investing. This leads to a lower amount in savings, and a lower amount of money that can be used once a person has retired.

You should never retire if you feel you can’t make ends meet. Even if you can afford your lifestyle, money is never guaranteed. Having a job, even if part-time, or a side hustle can offer you more flexibility, and money in your pocket.

Could Reduce Aging Illnesses

Did you know that it studies have shown that people who never retire actually have decreased health issues, slightly happier outlooks on life, and even increased mental health? If you want to keep yourself in optimal health, never retire, because you may be putting yourself at a disadvantage.

While retiring doesn’t automatically mean health issues, short or long term, it could still be fulfilling to work or volunteer your time. Plus, who doesn’t want to have slightly happier outlooks on life?

Boredom Isn’t an Option if You Never Retire

If you are working, even part-time, you won’t have the opportunity to get bored in your day to day life. A common complaint amongst retirement aged people is that after a while, there’s not much else to do, especially if you are low income. By working or volunteering, you aren’t giving yourself the option to feel boredom.

You don’t have to work a traditional 9 to 5 your entire life. And, you certainly don’t have to have a job that is physically demanding and exhausting. But just taking a few hours out of the week to work or volunteer can keep you from feeling bored, lonely, or even depressed.

Even if you do choose to retire, pick a hobby that gives you the opportunity to get out of the house multiple times a week, and gets you in front of people. By giving yourself this opportunity, you’ll keep yourself happier, and kick boredom to the curb.

Extra Money Doesn’t Hurt

Who doesn’t love extra money? Even if you earned and saved enough to retire at 65 (as stated above), doesn’t mean you can’t earn even more. It could be money you save in a trust fund or splurge on you and your spouse. The fact is, even if you have to or want to work, the extra money can come in handy.

Another great reason to keep earning money, even after a certain age, is to save for healthcare. Nursing homes, private caregivers, and the like are expensive. Even those who saved their entire lives can get into a situation where they can’t afford care. By working, you are giving yourself the opportunity to afford these options if that time ever happens to you.

You should never retire, because it’s not as important as many people think it is. But if you do choose to retire, at least keep your mind, and body, happy and active.

5 Reasons Why You Should Never Retire is a post from: When Life Gives You Lemons. Did you like the post? Follow me on Twitter, like me on Facebook, or hop on over to my blog and leave me your feedback.

Finance, pensions, and savings are always a hot topic for people under 35. People are living longer and with the retirement age continuing to rise, the question is, how can young people adequately prepare for later-life?

There’s no doubt that we should be doing this, though, and financial planning isn’t something you leave until you’re in your 40s or 50s. 

It’s difficult to talk about money. A report by Fidelity found that although 92% of women want to learn about financial planning, 80% said they refrain from talking about money with family and friends. When you think about the student or credit card debt that a lot of us are in, it can be embarrassing to discuss this with friends – after all, we’re told that financial matters should be kept private.

So what should we do? Of course, my advice is always to warn against burying your head in the sand. If you’re worried about money or need help with financial planning, there are countless resources out there to help.

Younger people, especially millennials, have a reputation for being careless with money, but I don’t think that’s true. We’re savvy and when it comes to research, I like to think we’re pretty good at it. I know I’ve never taken a financial decision lightly and there are so many resources out there these days, which makes things much easier.

I think the key here is to take action now. Yes, that’s much easier said than done, but taking action means different things to different people.

For some, it means having funeral costs sorted out in order to beat further price rises down the line. For others, it means simply opening a high-interest savings account and storing away $100 every month. Investments are another option too, and although they require a little more research, they can really pay off. It all depends on your personal circumstances and what suits your current situation.

It’s true what they say – the sooner you save for retirement, the better. The ‘golden rule’ of saving around 10% of your annual salary is certainly a reasonable amount to strive for, and shouldn’t impact too much on your day-to-day living. If it does, reassess what you can afford and aim for that, with the overall goal of slowly bumping your savings up to the recommended percentage. It means you don’t need to play catch-up when you hit 40, where you’ll only end up needing to save a higher percentage to make up for it.   

Financial Planning — Not Just for People Over 50 is a post from: When Life Gives You Lemons. Did you like the post? Follow me on Twitter, like me on Facebook, or hop on over to my blog and leave me your feedback.

I’ve never been in major debt in my life, mainly for one overriding reason: I don’t like the idea of owing anyone money.

I’m in favor of good debt — such as getting a mortgage to buy a home, or a student loan to attend college, up to a certain point — but owing a company or someone money has always left me with a nagging feeling. I’m even happy to pay an annual fee for my rewards credit card so my family can use the reward points for free hotel rooms during vacations — but only because we pay the monthly bill off on time and don’t pay interest.

Here’s an example of how crazy I am about avoiding debt, even though it was only $20 from a friend:

In August I went with my daughter to her middle school for orientation, which included buying gym clothes. I mistakingly thought a credit card would be allowed to buy the items, so I left my checkbook at home and didn’t bring cash.  When I found out that only cash or check were allowed, I borrowed $20 in cash from a friend who was there with their daughter so that I didn’t have to return to the school and buy the stuff later.

A few hours later, I made a point of going to an ATM to withdraw $20 and deliver it to my friend. It was an obligation I wanted to fulfill that day, partly because I wanted to thank them for the quick loan, and also so I wouldn’t forget to pay them later.

My point is that even with a small amount of debt between friends, debt can be a bad habit that can easily get worse before it gets better.

Saving for a nest egg of debt

I have a desk calendar from The Onion, the satirical news site, and a recent entry had this headline:

“Couple Has Nest Egg Of Debt To Make Sure They’ve Got Some Money To Owe Down The Road.”

Beneath it was a short, funny story about a couple always having debt that will “hopefully provide us with a nice chunk of debt we can dig into later on if we happen to run into any unexpected prosperity.”

If they stuck to their debt plan, “they would have enough outstanding payments stashed away to not only retire in debt but also to ensure that their children could inherit some of their debt as well.”

While it’s just silly satire, The Onion story makes a few points that really stand out for me:

Debt hinders prosperity

Saving a “nest egg” of debt for retirement sounds preposterous, but it’s what some people are essentially doing by allowing themselves to be in debt as they prepare for retirement.

Think about what you could do if you did’t have debt to deal with. Yes, you could easily spend it on more things — clothes, dinner out, a new car, travel — or you could allow yourself to be prosperous.

With debt, any unexpected prosperity that does come along — such as a bonus at work, tax refund or an unexpected new client — will put a cloud over the extra money that just came your way. Paying off debt with such a bonus is a smart move — but not having that debt when a bonus comes around could lead to a lot more prosperity down the road.

Don’t give debt to your kids

Debt can’t be inherited, so that isn’t something to be worried about. Your hospital bills at the end of your life don’t have to be paid for by your heirs.

But constantly trying to tackle debt and taking on more debt is a lesson you don’t want to teach your children.

It goes back to the idea of hindering your future prosperity by always having debt. It can be a constant struggle to get ahead in life and have the money you need to improve your life if you’re always taking on more debt.

I bought three websites this year to help me earn some passive income, and I vowed not to buy more websites until the ones I have are profitable. I’ve had an opportunity recently to buy another site that should lead to some decent passive income, but I’ve followed by own advice and decided not to buy until I’m out of the hole with the other sites, including this one.

It’s debt I could probably afford, but I want to continue paying myself back for the outlay for the other websites until they’ve paid for themselves.

No one seriously grows their debt so that they’ll be in debt during retirement, but that’s essentially what people are doing by taking on more debt and barely paying off their debt when they’re young and working.

If that doesn’t put a sinking feeling in your gut, as it does mine, try imagining your retirement every time you pull out your credit card.

How Debt Sets You Up for Failure is a post from: When Life Gives You Lemons. Did you like the post? Follow me on Twitter, like me on Facebook, or hop on over to my blog and leave me your feedback.

They mean well, but they may be doing themselves and their children a disservice with less money saved and less tax relief.

Along with the traditional ways of saving for college with a 529 or a Coverdell Education Savings Account, parents are also saving for a college education through savings accounts and their retirement plans.

45% save for college in savings account

A recent study by T. Rowe Price found that 45 percent of parents saving for their kids’ college education are using a regular savings account, and 30 percent are using their 401(k) retirement account.

The study found that 31 percent are using a 529 account that’s designed to give them the most taxable savings when saving for college.

By not using a college savings account, they’re not only losing tax benefits, but may be making a lot less money on the interest rates the accounts make. And even if they’re making more money in a retirement account, that benefit may be lost when it’s time to pay income taxes.

Using a comparison calculator at Savingforcollege.com and researching federal income tax rates and average returns, here are how different savings vehicles would help in saving for a college education:

529 Plan

Federal income tax: Non-deductible contributions; withdrawn earnings excluded from income to extent of qualified higher education expenses.

Rate of return: Returns vary by state, but the Colorado plan, for example, has a return rate of 3.09 percent per year in 2015.

Overall, an average rate of return of 6-7 percent could be expected in a 529 plan for a college education.

Coverdell

Federal income tax: Non-deductible contributions; withdrawn earnings excluded from income to extent of qualified higher education expenses and qualified K-12 expenses also excluded.

Rate of return: One online calculator puts the default return rate for a Coverdell account at 8 percent. A Franklin Templeton guide to Coverdells also puts the average annual return at 8 percent.

Making a $2,000 contribution to a Coverdell account each year for 18 years with an 8 percent average annual return, compounded monthly, would result in $16,448 more in a tax-deferred investment than in a taxable investment, according to the guide. The tax-deferred Coverdell account in this scenario would have $83,524 after 18 years.

Savings account

Federal income tax: Interest earned on savings account is taxed as income.

Rate of return: As of Sept. 10, 2015, the standard rate of return for a money market savings account at Bank of America was 0.03 percent. We only chose BoA because it’s one of the biggest banks in the country.

One-year certificates of deposit are averaging 0.23 percent. That just barely beats the U.S. inflation rate of 0.2 percent.

U.S. savings bonds

Federal income tax: Tax-deferred for federal; tax-free for state; certain post-1989 EE and I bonds may be redeemed federal tax-free for qualified higher education expenses.

Rate of return: Series EE bonds pay 0.30 percent after 20 years, which is almost enough time before a newborn starts college.

Roth IRA

Federal income tax: Non-deductible contributions; withdrawn earnings excluded from income after age 59 1/2 – and five years; 10 percent penalty on early withdrawals waived if used for qualified higher education expenses.

Rate of return: The S&P 500 has an annual rate of return of 8.06 percent for the past 10 years. From January 1970 through December 2014 the S&P 500 has a return of 10.7 percent.

Traditional IRA

Federal income tax: Deductible or non-deductible contributions; withdrawals in excess of basis subject to tax; 10 percent penalty on early withdrawals waived if used for qualified higher education expenses.

Rate of return: Fidelity gives the example of a 7 percent rate of return for an IRA contribution.

401(k) retirement account

Federal income tax: Same as for a traditional IRA, except there isn’t a penalty waiver if the money is used for college expenses. In other words, a 401(k) shouldn’t be used to pay for college.

A loan from a 401(k) retirement plan can be taken out. Plan loans aren’t taxed or penalized if the loan is repaid within a specific period of time, generally within five years.

Rate of return: The Vanguard Wellington mutual fund, which is one of the most common balanced funds found in 401(k) plans, has an average annual five-year return rate of 12.07 percent as of June 30, 2015. Pulling money out through a loan to fund a college education would of course lessen the amount of money earning the return rate.

How to pay for a college education

Among all of these methods, borrowing or withdrawing money from a retirement account to pay for a college education seems like the biggest potential for not making as much money as you would through an education savings accounts. You might get a higher rate of return, but the tax implications could negate it.

But as college appears closer and closer, maybe that’s the best choice for parents who have put off or completely ignored saving for their child’s college education from the day they were born. Thinking seriously about it when high school graduation is only a few years away may help their kid get through college without any debt, but they may be giving up part of their retirement plans in the process.

If that’s the case, make sure your child graduates with a college education in a well-paying major so they can help support you in your old age.

Most Parents Saving for Kids’ College Education in Wrong Places is a post from: When Life Gives You Lemons. Did you like the post? Follow me on Twitter, like me on Facebook, or hop on over to my blog and leave me your feedback.

As with most finance questions I come across, this one got me thinking about my own money mistakes and the financial lessons I wish I had taken full advantage of in my 30s. Here are six financial lessons, most of which I followed:

Buy real estate ASAP

Owning a home isn’t for everyone. Renting makes more sense if your job is mobile and you’re not sure where you’ll be living in a few years. Renting also makes sense if it’s a lot cheaper than owning a home.

My answer to the curious blogger about financial lessons was to buy real estate when you get the chance to. I don’t mean just when it fits into your finances and lifestyle — such as having a steady job and being married. My point, which I didn’t elaborate on in my quick response to him, was that buying real estate as an investment when you’re young can be a smart move many years later if you bought at a time when the real estate market was down.

You don’t necessarily have to live in the house you’re buying, though that does have good tax benefits.

For example: About 15 years ago a relative bought a townhouse in a nearby city. The townhouse was next to a major shopping center that would only get bigger in the coming years as more people moved to the area. Even back then, it was obvious to me that it was a growing area and that home prices would only go up. They did, and are now worth 10 times what they were 15 years ago.

I didn’t buy a townhome there then, but wish I had taken out a bank loan and got a second job, if needed, to buy one and then have tenants pay the mortgage from then on. That’s the first financial lesson I’d offer.

Save for investments

One thing I wish I did more of in my 30s financially was save more money for investing. Like everyone else, I’m busy working so I can pay the bills and hopefully have a little extra each month to enjoy dinner out or something, along with saving money for retirement and an emergency fund.

But if you can afford it in your 30s, it can help to save some fun money that you’re willing to put into an investment. The caveat is you have to be willing to lose that money. While that obviously isn’t the main objective, it’s a possibility to consider in this financial lesson.

You don’t want to look back years later and regret that you didn’t buy Apple stock at $10 a share when it was being beaten down and you knew it was going to bounce back. (Yes, this happened to me.)

While any amount is good, I’d recommend $5,000. It’s enough to hurt your bank account and enough to make you think hard about the potential investment. As you’ll see from other financial lessons I offer here, having money set aside for investments or something else is key to making the most of your finances in the long run.

You can also invest a little at a time, such as through a Dividend Reinvestment Plan, where $100 or so a month is automatically invested into a stock. I’ve done this too and have come out ahead.

Run your car forever

I owned my previous car for 23 years before buying a used car last year. I didn’t have car payments for 18 years, giving me a lot of time to save for a car when my 1991 Acura Integra finally got too old for me.

I probably could have kept using the car for another five years or more — mainly because I hardly put any miles on it each year. But too many small things kept falling apart — though no major mechanical failures — that I didn’t want to put up with the headaches anymore.

However tempting it is to buy a new car every 3-5 years, avoid it and just consider your car what it should be: A way to get from Point A to Point B. There’s little point in putting extra money into it if you don’t have to.

Don’t commute

This is as much of a lifestyle benefit as it is a financial one as a financial lesson. I’ve been working since I graduated from college, and I’ve never had to commute. Part of this is by choice, and some by luck.

I chose a career — journalism — where I thought it was important to live in the city where I worked if I was going to cover that city well. That worked out great for me as a reporter and later as an editor, allowing me to come up with stories that others who lived outside of the area didn’t think of.

Living near work allowed me to leave for work 10 minutes before starting time, and got me home a lot quicker than I would have it I commuted. I also saved on gas, car insurance and mileage, decreasing the need for a new car.

Save for your child’s education

I know I’m proposing saving a lot of money in your 30s for different purposes, but this financial lesson is one you at least owe your child in part if you want them to get ahead in the world.

I’m not saying you should save enough to pay for their entire college education, but starting a college savings plan when they’re first born should help them pay for close to half of it. The rest they can work for, either as teens or while in college.

Fund a retirement plan

If your employer offers a 401(k) retirement plan, join it, especially if it matches your contribution. Contribute as much as you can so that you feel it each month in your lifestyle.

I won’t go into all of the benefits of the power of compounding, but it should be obvious to a 30-year-old or any other adult how much better your retirement fund will be if you contribute early and often, and reinvest the returns, then if you wait 10 years or more to do it.

The last financial lesson

I could almost write a book on this subject and could include a lot more (such as buying term life insurance, having an emergency fund and buying everything at Costco), but I see that this post has already hit the 1,000-word mark, and I’m wondering if that’s too long to grab a reader’s attention span.

But for the sake of trying to be extra helpful, here’s a bonus financial lesson to take advantage of in your 30s: Negotiate your salary.

Asking for a higher salary is a request you’ll never regret. Even if you don’t get it, the request alerts your employer (or potential employer) that you think you’re worth the extra cost, and you plan to do everything you can in the coming year to prove it to them.

An extra $5,000 or so per year could be enough to encourage you to save it for an investment, such as a house in an up-and-coming neighborhood, which you can rent for years before selling it for a $500,000 profit so you can retire early.

6 Financial Lessons Worth Learning in Your 30s is a post from: When Life Gives You Lemons. Did you like the post? Follow me on Twitter, like me on Facebook, or hop on over to my blog and leave me your feedback.

But long-term savings can turn that extra $1,000 into thousands more, protecting you in retirement, as an emergency fund or as a down payment on a car or house.

I’m focusing on this extra $1,000 figure because it’s roughly the amount I wrote about recently that could be saved by making coffee at home. The annual savings was $1,077.12, to be exact, for one person, and $2,154.24 per couple.

I asked financial experts, mostly financial planners, for their ideas on what to do with that extra $1,000 to $2,000 other than spend it.

Try automatic transfers

The trick, however, is to put aside that extra $1,000 or so saved each month by making coffee at home. As anyone who has tried to save money probably realizes, any savings from eliminating an expense can easily get lost in your checking account and be spent elsewhere. But automatically transferring $90 a month to a savings account or some other account will easily get you to that extra $1,000 annual total.

And $1,000 can be just the start. For a couple, saving $167 per month will add up to $2,000 in a year.

If you have a federal tax refund coming, you could put it all into savings and start earning money on it immediately. The average tax refund is around $2,500, according to the IRS.

What to do first

Each person’s financial situation differs, but there are some first steps to take with that extra $1,000-$2,000 before saving it, says Kate Holmes, a certified financial planner:

• Pay off credit card debt first, and put the extra money you’re saving toward the principal.
• Boost your 401(k) retirement plan savings if you’re not already taking full advantage of your 401(k) match. Then you won’t have that money in your take-home pay to tempt you as you pass coffee shops!
• If you’re saving for a big trip or fun adventure, set up automatic transfers to savings each month to supercharge that account.
• Look at each line item in your expenses and ask how much happiness it brings, Holmes says. You may find other areas to easily cut back, freeing up more money for your “maximum happiness” items.

Here are some ways to save that extra $1,000 or more:

Roth IRA

Put this extra money into a Roth IRA and then invest in the Vanguard Small Cap Value Index ETF, recommends Marcio Silveira, a certified financial planner. The index invests in companies that are small and “cheap,” Silveira says.

A Roth IRA the money will grow tax free as long as it remains in the account, he says. The owner can liquidate it after age 59 1/2 and pay no tax whatsoever.

The economic theory behind the small cap index is that the riskier smaller companies that trade at low valuations will outperform the broad market over the long term, he says. The Vanguard fund has low expenses of less than a tenth of 1 percent, he says

Return: Silveira estimates the annual outperformance of the fund to be about 2 percent. So, if the S&P 500 is expected to return 10 percent per year, the small cap value segment should return 12 percent.

Investing $2,000 at 12 percent for 25 years becomes $34,000.

If a 25-year-old investor does this and the expected return is realized, the total is more than $186,000 at age 65, he says.

For shorter term returns, it’s more difficult to predict, but if the expected return is realized after one year the investor could expect to have $2,240 and after five years it would be $3,525, after an initial investment of $2,000, Silveira says.

Another certified financial planner, Andrew Mohrmann, also recommends that Vanguard fund. Even with the 2008 stock market crash, the fund has returned 8.89 percent during the past 10 years, says Mohrmann, founder of Modern Dollar Planning at modern-dollar.com.

A $1,000 investment in the fund in 2004 would now be worth $2,265.15, he says.

“Small cap value stocks will have higher expected returns over long periods because they are riskier than the big companies like Apple or Walmart,” Mohrmann says. “As an investor, you get better returns in the long run for bearing more risk.”

Build up your emergency fund

An emergency fund can be a lifesaver. Having three to six months’ of savings set aside can help if you lose your job, your car needs major repairs, you’re in the hospital, or any other emergency that you can think of happens.

Financial coach Katie Brewer says that after paying off debt such as credit cards, student loans and car loans, an emergency savings fund is a great way to save an extra $1,000 or more. The fund makes a lot more sense than charging such large expenses to a credit card and then accruing interest.

Invest in a dull index fund

After first investing 25 percent of your savings in your community, such as through a local organization you support, you then invest the rest in “a low-cost, dull index fund in accordance with your risk tolerance,” says Christina Guglielmetti, president of Future Perfect Planning.

“The more boring, the better,” Guglielmetti says. “Investing should be like watching paint dry or watching grass grow.”

Set up regular transfers to your account, she says, which increases the power of compounding. She chose the middle ground for our savings experiment, going with investing $1,500 per year after donating $500 per year. She notes that if it’s money you need in the next five years, don’t follow this advice because the financial markets swing so much in the short term.

Return: With an 8 percent annual return, after 25 years of investing $750 per year and giving away $250, you’d have $20,400.

For a couple making coffee at home and investing the savings of $1,500 per year and donating $500, the savings would double to $40,800 after 25 years, Guglielmetti says.

“Not bad for a pretty painless change, and this doesn’t even take inflation into account,” she says. Presumably, the Starbucks prices would rise faster than the price of coffee beans, she says.

What other ways would you invest an extra $1,000 to $2,000 per year?

What to Do With an Extra $1,000 is a post from: When Life Gives You Lemons. Did you like the post? Follow me on Twitter, like me on Facebook, or hop on over to my blog and leave me your feedback.

What this means, is that I spend a lot of time in my day job screening people out of opportunities that they have expressed interest in, and a lot of time in my spare time studying exactly what it is that is holding so many of us back.

I don’t believe that the cause of women’s issues lands squarely on women’s shoulders, but I do think that we have to take responsibility for some (if not many) of the things that limit us in the workplace and in our relationships.

Often, our behaviours is what hinders our potential, security, and success. Our behaviours can hold us back from getting that promotion (even if we earned it), getting the recognition we deserve, and getting what we want.

These are behaviours that I see over and over again with women of all ages, but particularly of the millennial generation. I struggle with them too. We need to learn to get past these four deadly sins.

Lack Confidence – And Show It

We’re all a little unsure of ourselves at times. Some days, we don’t wake up feeling like Superwoman.

Whether we feel that we bit off more than we can chew, or we’re just having an off day, lacking confidence in ourselves is a huge barrier to our own success. There’s a difference between lacking confidence outwardly, and strategically hiding our doubts.

Have you ever met somebody who just seems so sure of themselves? They do things with such ease and confidence, things that you would be shaking in your boots to do? Like those people who go up on stage in front of 500 people and carry out a presentation or speech effortlessly, without even a single stutter?

They’re nervous. They are not 100% confident in their ability to deliver that speech, despite their calm demeanour.

Fake it until you make it. Practice your “I know what I’m doing” attitude in the mirror, whether you are starting an internship or your on the first day at the job, or whether you’re trying to not make an ass out of yourself in front of your new boss. It’s an attitude that comes with practice, and you need to know how to fake it so people can take you seriously and you can get ahead.

Use Language That Minimizes Your Contributions and Achievements

 Which sentence sounds better, more professional, like it’s coming from somebody who you would respect and take seriously?:

“I’m not sure if I’m on the right track but I actually just thought I’d take a second to see whether this statement in the report is right? I just thought it happened differently.”

“I noticed that this statement in the report is mis-worded.  It supposedly happened differently”.

I don’t know about you, but I think the first one is a statement from a person just begging you not to take them seriously. You “just” wanted to do something? Is it that minor? You “actually” thought? Is it a surprise that you were thinking and analyzing the report?

There are a lot of things wrong with the first statement, and it minimizes the person’s contributions. There is a great article on this on Huffington Post.

Let People Put Their Needs/Wants in Front of Your Own

 A sure-fire way to make sure nobody takes you seriously is to let people bulldoze you. Women, in general, get a lot of flack for exhibiting the same behaviours that men are respected for. If a woman is direct and firm, she’s described as “bitchy”. If a man is direct and firm, he’s described as “smart” and “powerful”.

We’re all wading shoulder deep in gender stereotypes (including men), so lets start rejecting them and standing up for ourselves.

You’re not a “bitch” if you tell somebody who cut in front of you in a line that they cut in front of you. You’re not being “catty” or “dramatic” if you stand up for yourself if somebody is attacking your idea at work.

On the same note, stop being everybody’s assistant. If you take on assistant type duties (making the coffee, taking your coworkers papers to be filed), you’re single handedly stunting your growth. Studies show that women are more likely to pick up the assistant type tasks, just because they see that it needs to get done and nobody else will do it. STOP. Somebody else will do it. If you don’t, there will be others.

I’m not saying you shouldn’t help people out, but don’t sequester yourself into a role that is not yours.

 Don’t Protect Yourself

Here’s the thing. I’m a practical person. I love my boyfriend, but I have seen many, many couples divorce and split up. It’s sad, but it happens. Nobody gets married thinking “Hey, if it doesn’t work out, there’s always divorce!”; but you’ll never meet a successful company that doesn’t have a contingency plan, and you should have one too.

As women, we have a duty to ourselves; we must protect ourselves. I believe that each member of a couple should have their own RRSP, own career (even if one of you has to put it on hold for a short while for children or dream chasing), own car (or method of transportation), and own emergency fund. You may not hold the same beliefs, and that is fine, but if you don’t, then find another way to protect yourself.

I’m simply saying that no matter how in love you are, and no matter how good things are going, protect yourselves. Nobody else is going to watch out for you if anything happens.

It’s sad to see so many women stunt their own growth and undermine their capabilities, even subconsciously.

4 Ways to Hinder Your Potential, Security and Success (For Women) is a post from: When Life Gives You Lemons. Did you like the post? Follow me on Twitter, like me on Facebook, or hop on over to my blog and leave me your feedback.