Over the years, I’ve noticed that many people do not save for retirement until they are well into their working lives. Often times, people don’t even start saving until they’re in their mid- to late-twenties. Having a father who is a Certified Public Accountant, I was made aware of the benefits of saving while I was young.

While you are young, though you earn less money, it’s taxed much less. Last year, for example, I got basically all of my Federal taxes back. Since I’m taxed at such a low bracket, the money I made last year (and the year ending this April 15) is good to invest in a tax-exempt account, like a Roth IRA. These accounts are nice, because the money in them can grow tax-free. I don’t have to worry about paying taxes when I take my money out, and I don’t need to worry about paying a penalty so long as I don’t take out more money than I put in the previous year. This makes it a great savings tool for the long run - retirement - and also good for other things like a down payment on a house, though personally I will invest my money differently.

Once you have any earned income, you can put money into your Roth IRA; as much earned income as you have. By putting money into my Roth IRA for the past few years, I essentially have a huge amount of money waiting for me when I am 60 even if I don’t add any more money for 40 years.

Another benefit of saving money early is to help keep yourself out of debt. While I strongly encourage everybody to live well within their means, sometimes there are unexpected emergencies that can cause hundreds or thousands of dollars - car problems, health issues, etc…by saving money early, I’ll be more prepared to handle tough financial situations in the future.

On average, Americans typically spend more money than we make. Certainly this is obviously not true for everyone, hopefully everybody who reads this, but it’s still a scary statistic. Putting away 2%-5% of your gross income can greatly help you accomplish future goals, and will give you peace of mind by knowing that you’re financially secure.

In the meantime, I’ve found that the Roth IRA calculator at DinkyTown.net is a good tool to see roughly how much you may have in your Roth at retirement. If I don’t add anything else in, I will have about $188K assuming a 9% return rate. Not bad, for not throwing any more money in there; so just think about how much that’ll grow when I do add money each year!

Habits are always a touchy subject for some people. They can have both positive and negative influences on our overall health. Saving for retirement automatically, spending a few extra minutes thinking over purchases, paying off your credit card as soon as you use it - these are good habits that will help us. What about the bad habits? Drinking, smoking -things that, for the most part, you know are bad for you, but you continue to do them anyways because of, likely, a physical addiction.

You always hear about the bad habits from people telling you that if you stop, it will help you out. Stop drinking, you’ll spend less money and you won’t risk as much being injured in a drunk driving accident. Stop smoking, you’ll help prevent cancer and you’ll cut back on $5 a day if you’re smoking a pack a day. It’s the habits that don’t seem bad for you that, financially, can be devastating. Take, for example, a morning coffee stop at Starbucks - or another coffee place. On average, a coffee probably costs you $4. Over the course of a week, $20. Over the course of a year, roughly $1000. Now $1000 may not seem like a lot to some people, but when you’re living on minimum wage like me (post coming later, so heads up!) those $4 mornings can get quite pricey.

I recently gave up drinking alcohol for three and a half months. Even though I’m underage, I’m in college and drinking is a big part of college life here at my school; it’s a great social outlet. Besides the obvious legal and physical ramifications of drinking, it was taking its toll on my bank account. Over the summer, I spent far too much money on alcohol - I’ve estimated that, since I stopped drinking one month ago, I’ve saved about $200-$300 that I would have otherwise spent on alcohol. That’s a pretty hefty chunk of change for any college student, and I’ll be happily shoving that money into my Roth IRA. Kicking bad habits improves physical and financial health. I have no question that whatever a bad habit is, getting rid of it will help you financially and physically.

That being said, it’s vital that good habits are developed to help you improve your physical/emotional health, and your financial health. Saving for retirement is something that I - ignorantly - thought most people would be doing. Having my father be a Certified Public Accountant has put some huge discipline on me when it comes to my finances, so I’ve been saving for retirement in a Roth IRA for a number of years already. If you don’t already have a retirement account, open one as soon as you can. It’s a great way to protect your money from, well, yourself, and also have it grow exponentially. This Roth IRA calculator is a rough estimate of how much a Roth IRA will be worth given your current age, your age of retirement, yearly additions (max this year is 5K, although that number will be increasing), marginal tax rate, and expected rate of return. I myself should have over $1.5M in my Roth IRA alone by the time I am 60 - I was going to say the time I retire, but I hope to retire far earlier than that.

Saving can be difficult when it’s something you have to think about. I will be the first to admit that if I have cash in my wallet, I am going to spend it, and it’s very likely that it’ll be on something I don’t need. For that reason, I’ve set up automatic transfers from my checking account to two of my other savings account to take a total of $400. When I made my budget (they are a good way of helping measure your financial progress), I had to figure that I had $400 less a month to spend on something - fun money, bills, etc. It’s made me rework some of my variable expenses - cutting back on drinking alone helps me save over half of this money. Automated transfers are an invaluable resource to help you stash away money. You no longer have to think about it, you just automatically do it - and help yourself in the long run. If you can’t save $400, save $100, save $10 - any amount is better than spending it on variable expenses that are luxuries. If you can save more, do it; if you invest wisely, your money will grow for you.

Paying off your credit card bill immediately and thinking about purchases don’t really need much said about them. They’ll help keep your debt and unnecessary purchases under control, which will help you be able to kick in more money to your savings.

Instead of working for your money, make your money work for you. Kick the bad habits, promote the good ones. If you can’t kick a habit completely (I am only giving up drinking until I turn 21, and then it’ll be in moderation to save my liver and my wallet), cut back as much as you can. Stretch your comfort for a while. Most of the time we continue a bad habit because it’s a comfort for us - our coffee gives us energy for the day, but so can something else. Satisfying a physical addiction can be comforting. But if you can stop and still be moderately comfortable, you’ll find, like me, that you don’t need alcohol or nicotine or your morning coffee to feel good. If you’re struggling to get ahead, I bet that you won’t unless you evaluate your actions and figure out what needs to go and what needs to stay.

Earlier this morning I called in to my credit card and requested a credit limit increase (CLI). I ended up getting a 50% increase on my card; a relatively huge boost for me considering I have three cards and this one had the highest limit on it to begin with.

Getting CLI’s is a good way to help your credit, IF you handle it with care. Just because I got an increase on my card doesn’t mean that I will be using it more. I still will carry no balance on that card, even though I “could afford” to charge everything and pay it off month by month…of course, I’d have to take a hit on my credit for a while.

Why will getting a CLI help my credit? Look at the picture below:

Part of the ‘Amounts Owed’ also looks at your overall utilization - how much of your credit you are using in relation to how much you have available. By getting more available, I am utilizing less of my credit percentage-wise.

There are other things to help you keep your credit in good standing. As you can see, your payment history is the most important factor. Not paying your bills on time severely hurts your credit, as does maxing out your cards even if you do pay the minimum each month. For that reason, I pay off my cards in full every month no matter how much I have on there. Sometimes it’s hard to remember that I don’t necessarily have all the money I need to pay for something in the bank, and that’s where most people will run in to trouble.

Credit History is the one thing that me, and most other college students, are getting the shaft on. There’s no way for us to really improve that because of its nature; the longer your history is, the better it is for your score. It shows that you can manage credit over a period of time. Being added as an Authorized User on a card of your mom or dad can help this, as it should show up on your credit report as being your card also; thus, if they’ve had a card for 10 or 15 years, it’ll show that you’ve had the same. I even heard of somebody who was 18 have a credit history of 20 years because of that! Be careful, though, because if your parents have late payments or that account isn’t in good standing for whatever reason, it could hurt your score.

Also not applying for a whole slew of new credit cards if you need good credit to get a home or car loan is advisable. Although not the biggest factor by any means, lots of inquiries for new credit can be alarming for some lenders. I try to only apply for cards when I really feel I need them, and as of right now I have no use for more cards; I’ve got three right now, one of which is a store credit card (I’ll talk about these in the future), and only use one for daily purchases.

Perhaps one of these days I’ll make a guide to understanding credit and how, from what I know, to best utilize your available credit.

I’ve seen many complaints on other blogs about how qualified a blogger is to write about finances. Most people who write about finances, as far as I’ve seen, are not professionals in regards to finances. I’ve seen people who are writers, engineers, and other. No matter your occupation, finances are important for helping plan your future.

Why then, should you listen to what a student has to say? Second (or third, or more) opinions on a subject are always healthy.  As a college student, I can relate to many different types of people - other students, younger people who are not students, people without jobs, and people with low incomes. Much of what I read on financial forums doesn’t pertain to me; I don’t have thousands of dollars to invest. I don’t have expendable income. I am a poor college student squeaking by on a 30-hour-a-week job at minimum wage. Because of that, and because I’m still managing to not only stay afloat but also improve my financial situation, I think it’s easier for those people in situations like me to relate. Sure, I’ll talk about things that the middle and upper classes can endulge themselves in that I cannot; but I will also relate it to how those of us with less income can get ahead. Too long have low-income families and students gone unnoticed in the financial world. People tell me it’s nearly impossible to save for retirement making less than $20K a year; I’ll use my experiences to show you how I am saving for the future and hopefully you can take something out of that.

As always, take anything you read with a grain of salt. I’m not perfect. I will make mistakes on here. If I do, just kindly correct me; it’s not the end of the world. You will make mistakes, too. To quote Batman Begins: “Why do we fall down? So we can learn to pick ourselves up.” Let’s learn.

Today the Federal Reserve met again and decided to cut rates - by half a percent. If you recall, last week the Fed also cut rates by three quarters of a percent, meaning a drop of 1.25 percent in the past 8 days. Rate dropping certainly isn’t something new - the Federal Reserve cut rates down by five percent over a one-year period in 2000. Nonetheless, such a huge decrease in rates has caused some Americans to become alarmed, and others to be confused.

Why does the Fed cut rates? What does it do? The Federal Reserve essentially sets the rate at which banks can borrow money from other banks. The lower the rates, the more money banks can borrow and thus give out to people in the form of loans for homes, cars, and other expensive goods. Historically, the Fed has cut rates drastically when they fear a recession - an overall slowing of the economy for six months - is imminent. It’s hope, then, is to jump-start the economy. By creating lower interest rates for banks, they are able to lend out money to consumers at lower interest rates. This is generally good news for people interested in purchasing a house, car, or anything else one might need a loan for in the near future.

The bad news is that for people like me, the Fed cutting its rates kind of sucks. With last weeks .75% rate cut, my online bank account at IGN dropped its rates a bit. I can only imagine that this rate cut will do the same.

Hopefully the combination of the tax refund (still unsure how I feel about it) and rate cuts will help jump-start the economy a bit.

Things are getting pretty close to situated…should be up and running by the weekend.

I’d like to welcome everybody to My Two Cents, a financial blog where I throw out my two cents about finances and things happening in the world. Please bear with me as I update the blog and such over the next few days.