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My Employer is Eliminating 401(k) Matches

retirement Companies are responding aggressively to the bad economic news. Layoffs, hiring freezes, and salary freezes have been some of the most common actions so far.

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Now, more and more employers are looking at eliminating the matching of 401(k) contributions. According to a survey by Watson Wyatt, the global human resources and financial services firm, things are changing quickly. In October, 2% of firms said they had already cut back on these matches and 4% said they planned to. Two months later, in December, 3% had already made the cut and 7% said they intended to.

And these are large companies. Established brands that we all know. Motorola, FedEx, Kodak, and Starbucks just to name a few.

They’re usually using the word “suspend” rather than “eliminate” when they announce these cuts. But it raises a question:

If my employer stops matching my contribution to my
401(k), should I still keep making contributions myself?

It forces us to save

This is perhaps the biggest reason to keep making contributions. Financial planners have said for years that we should pay ourselves first. Investing it before we get it, as we do with our 401(k), is the best way to make sure that happens.

Most people report that they don’t really miss the money. It’s like the taxes that are deducted from our paychecks – the government knows most of us won’t miss the money if we don’t see it.

Of course, there are ways to set up an automatic deduction from our checking or savings account for investments outside of a 401(k). That’s really close to having it deducted from our paycheck, but it’s not quite the same. That little variation can make a bigg difference for some people. You have to judge that for yourself.

Higher limits

The next best option to a 401(k) for most people would be an IRA because contributions may also be deductible. You should check with your financial advisor about the specifics of your situation.

Because you invest before paying taxes, it’s as if the government is making part of the contribution for you. For example, if you made a $1,000 contribution to one of these retirement plans and you’re in the 25% tax bracket, you would pay $250 less in taxes. So, in essence, you’re only out of pocket $750.

With either plan, you don’t pay taxes on the money you earn on your investments until you pull it out. Deductible and deferred – that’s a pretty powerful combination.

Where the 401(k) gains favor is that it has higher maximum limits – your contributions to your 401(k) can total up to $16,500 in 2009 ($22,000 if you’re over 50). You can’t contribute more than $5,000 to an IRA in most cases.

If my employer cuts or eliminates my 401(k) match, are there
reasons to fund my retirement through another vehicle?

A lot of 401(k) plans offer fairly limited investment options and you may pay lower fees in a plan that’s not a 401(k). 

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The bigger issue

It’s not like we don’t already have a sense of it. But recent months have reinforced this paradigm. We can’t count on anyone or anything for any part of our financial future. We must take full control of our own finances. We have to build our own safety nets to make sure we are financially secure.

How much will you have at retirement?

It really boils down to three factors:

  • how much we invest
  • how much we earn on our investment (after all fees and taxes)
  • how long it is invested

From these three factors, we see that we have three options if we don’t want to retire on less money:

1st – We can try to earn more on the money we invest.
That involves taking more risk and we don’t have much appetite for that right now. So this probably isn’t going to fly with most of us.

2nd – We can postpone our retirement.
This buys us more time. People who are really close to retirement right now may not have much of a choice. They may have to do this. But if you still have some time on your side, there may be a better way.

3rd – We can increase our contributions.
Look at your budget and see if there is any way you can make up for the investment your company was making.

If your employer reinstates matching contributions, you can stop contributing at the increased rate and enjoy the extra money in your budget … or …

… you can keep making your higher contributions to give your retirement a kick!

To all our readers in Australia, happy Australia Day! And we hope our friends in India enjoy Republic Day!

And thank you so much for spending time with us today. Join us next time when we discuss extreme multi-tasking. Until then, here’s to your bigg success!

 

Direct link to The Bigg Success Show audio file:
http://media.libsyn.com/media/biggsuccess/00316-012609.mp3

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Is Convenience Busting Your Budget?

time-money The good people at CareerBuilder recently posted the results of a survey of workers. Forty-seven percent of the people surveyed said they “always” or “usually” live paycheck to paycheck.

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Does more money help?

One way to stop living paycheck to paycheck is to make more money. Forty-two percent said an additional $500 each month would help make ends meet.  Fourteen percent already work more than one job.

The amount of money that comes into a household does make a difference, but not as much as you might think. Twenty-one percent with salaries of $100,000 or more said they also live from payday to payday.

We’re working ourselves to death instead of thinking about the other solution to the more month than money problem. We need to look at our lifestyle. We’re so busy trying to make more money to support our lifestyle that we end up spending money we wouldn’t need to spend if we just slowed down and honestly assessed our situation.

Convenience expenses

We’re so busy that we spend more money on “convenience expenses”. We define convenience expenses as the premium we pay for goods and services because we don’t have time.

So we end up in a downward spiral – we work more to have more, but then we
spend more and we don’t have any time to figure out how to do anything differently.

One example of a convenience expense is that we eat out more than we plan to. An appointment runs long. We get stuck in a traffic jam. The boss needs to talk. The next thing you know it’s late. Now we feel we have no choice. We’ve hit that wall. We’re hungry now! We’re too tired to do anything but grab some carry-out or order delivery.

Cutting back

It may seem like a small expense, but it eats away at your budget (pun intended). If you’re feeling like we’ve described you perfectly, don’t feel like you’re alone. We’re right there with you! Here are some ways we’ve found to cut back on this convenience expense:

Always stock some food that’s easy to stick in the oven or microwave.

Then if you’re running late, you can have less expensive convenience food. Plus you’ll save the time of stopping or running out for carry-out.

Plan for leftovers

If our next week’s schedule looks busy, we’ll cook up a little extra food on the weekend so we have leftovers which can be nuked in a matter of minutes. These leftovers are also an excellent way to save money on going out for lunch. There are more productive ways to spend a lunch hour than driving back and forth.

Invest time today to save money tomorrow

By planning next week’s meals, you can find coupons for the items you want to purchase. It’s like printing money legally as we learned from Crissy Thompson, who often spends as little as $10 a week to feed her family of five.

You can also think about where you shop. They’re called “convenience stores” for a reason! We pay a price to be able to run into the store and grab something on our way home.

This is just one example of the many convenience expenses. If you’re living payday to payday or not saving as much as you would like, think about your convenience expenses and the time / money interplay.

There is a huge trade-off between time and money. If you have money,
you can save time. If you don’t have money, it’s important to really
 think about how you’re using your time and try to save money.

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Subscribing to the Bigg Success Weekly! It’s conveniently e-mailed to you once a week. And it doesn’t cost you any money! But the time you spend reading it will help you make and save money! How’s that for a deal?

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Next time, we’ll discuss how to create wealth in today’s new economy. Until then, here’s to your bigg success!

 

Direct link to The Bigg Success Show audio file:
http://media.libsyn.com/media/biggsuccess/00261-111008.mp3

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Save the Holiday Party!

holiday We face many important issues in the coming months and years. So we decided to start a movement – to save the holiday party!

Okay, maybe that’s not the most important thing we could address, but we still think that many business owners are making a bigg mistake by eliminating this annual tradition.

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A recent survey by executive search firm Battalia Winston found that fewer firms plan to host a holiday party for their employees this year. In fact, it’s the lowest number in the twenty year history of the study. The primary reason cited is the poor economy.

We think this sends the wrong message. Leaders who portray gloom and doom create an environment of uncertainty. It scares people. People today are looking for signs of reassurance, not signals of impending disaster.

Holiday parties aren’t just about having a party. They’re a great opportunity to show your appreciation to your people. They can help build your team by getting together without the pressure of work. Yet people inevitably talk about work, recalling fun times together from the past year. This builds a sense of comradery which helps get things done at work.

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If last year’s party is beyond this year’s budget, get creative. There are ways to keep the party without busting the bank. Here are some thoughts:

Look for deals

With more companies cutting back, you might be surprised to learn that facilities are more aggressive in pricing deals for those people who still plan to hold an event. You’ll never know if you don’t ask!

Keep it on site

If you can’t find a good deal, consider having it on site if your facility will accommodate it. Then look for a good deal on catering. You might find that catering firms offer a good alternative since they’re not paying for the overhead of a facility.

Go potluck

If that’s still too expensive, have a potluck. Ask your employees to bring a dish. Consider making it a day-long event. People can “graze” and chat. Just for one day, accept a more relaxed environment full of impromptu conversations.

Make it fun

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marylynnSanta visited us at a radio station I worked at. The employees brought their kids in to tell him what they wanted. It was a lot of fun – all for the price of renting a Santa suit since our General Manager played Santa.

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There are many other ways to make it an event, even if it doesn’t fit the mold of a traditional holiday party. Give out awards. Have an employee who’s into such things produce a fun video or audio.

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marylynnAt one radio station, our production manager put together a fun audio of all of our commercial outtakes. As the disc jockeys recorded commercials, he kept the bloopers and played them at our annual holiday get-together. It was so funny!

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georgeWe gave out gag gifts at one of the companies I owned. They reflected something that an employee had done over the past year that made people laugh. It brought up the joke again and everybody loved it.

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Hold it after the New Year

A number of companies are turning their “holiday” party into an “annual” party. Instead of competing for space during the busy holiday season, they hold it after the New Year. A lot of people really like this because we’re all so busy at the end of the year.

We have friends who turned their annual holiday party into “Christmas in July.” We were fortunate enough to get invited. They had a Christmas tree and played holiday music. It made for a fun evening.

If you do end up doing something different, don’t present it as just the result of budget cutbacks. Tell your people that you want to try something different. Get them involved in finding a good solution.

What do you think? Does canceling the holiday party send the wrong message to your people? What are you doing this year for your people?

 

Direct link to The Bigg Success Show audio file:
http://media.libsyn.com/media/biggsuccess/00259-110608.mp3

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The Happiness Battle of the Sexes

happy
What makes you happy?

We now know what makes our Australian friends happy thanks to a recent study by The Leading Edge, a marketing consulting firm, based in Sydney.

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It’s interesting to look at the similarities and differences between men and women.

Entertainment was the #1 choice for men and the #2 selection for women. Rest and recreation was the opposite – women selected it as #1 and men said it was #2.

One bigg difference was where they ranked sex. Women would rather enjoy a family meal, play with their children, or even play with their pets, than have sex according to the study.

But before you guys snicker too much – more men would rather surf the internet than make love! Read the study … we’re not making this up!

In fact, surfing the net ranked #3 with men, but barely made the list at #10 for women. This was the single biggest disparity in the top 10 list between men and women – followed by sex, which was #5 for men and #9 for women.  

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marylynn
I wonder … if men spent less time surfing the net, would their women be more interested in sex?

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georgeWell, maybe the women should pay less attention to their pet and more attention to their man!

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Both sexes agreed on the joy of spending quality time with their partner. It ranked #4 on both lists. Ah … isn’t that sweet?

Only thirty percent of the women ranked shopping as the single activity that made them the happiest, which was lower than the researchers expected. Of course, men ranked shopping far down on their list, living up to expectations.

The conclusion from this research, as you look at the full list of responses by men and women, is that happiness is not about acquiring material goods or even accomplishments. It comes from good relationships and great experiences.

Your own survey

As we carve out our time for play, it’s important to set aside time for just you, for just your spouse, and for your immediate family. Of course, you’ll also plan to spend time with friends and your extended family from time to time.

As we talked about this survey in Australia, we realized that it would be good to conduct our own survey of our own loved ones. Ask your spouse what makes him or her happy. Ask your kids what they would think would be fun.

Then compare notes and develop an activity plan to make sure that everyone in your family is getting their share of chosen activities.

The best recipe for bigg fun is creating great experiences with the ones you love. 

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Get the tips and tools you need to be a BIGG success!
Subscribe to the Bigg Success Weekly – it’s FREE!

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We’ve heard a lot of talk recently about toxic assets. Next time, we’ll discuss toxic debt. Until then, here’s to your bigg success!

 

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Direct link to The Bigg Success Show audio file:
http://media.libsyn.com/media/biggsuccess/00245-101708.mp3

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