1) Phil's Financial Tip of the Day:
These tips will help you get started with saving, no matter your income.
6 Strategies to Save More This Year-From Kiplingers
Saving doesn't come easily for us young adults. Entry-level salaries don't give you a lot to work with. And, well, we also tend to spend what we make -- and then some -- on the latest gadgets and flashiest fashions.
SEE OUR SLIDE SHOW: 10 Low-Risk Ways to Earn More Interest on Your Savings
But don’t worry. We’re not doomed to frivolity and the wreckage it can make of our finances. Here's how you can start saving smart throughout 2012:
Periodically calculate how much you spend. What better time to review your budget than at the start of a New Year? “It’s really hard to [track your spending] each month, so aim for just once or twice a year,” says Jill Boynton, a certified financial planner in Newington, New Hampshire.
Just be sure when you do it that you track everything. Boynton recommends filling out a spreadsheet with a month’s worth of spending. Or you can try an online budgeting tool such as Mint.com (See our slide show:
Which Budgeting Site is Best for You?). But note: Mint works best for those who deal mostly in plastic as opposed to cash. When you make an ATM withdrawal, the site labels the transaction as “Cash & ATM.” Unless you diligently manage your cash transactions (you can manually edit Mint’s labels), you can easily lose track of where the money goes.
The drudgery of tracking spending can pay off when you find surprising expenses you could easily cut. At the end of 2011, I crunched my own numbers and found that I shelled out about $200 a month at Starbucks and other restaurants. I’m sure I could cut that by at least half. That’s like finding a $100 bill every month in my back pocket.
Open a separate account to keep your hands off some of your cash. Use your checking account for regular expenses, including rent, utilities, food, clothing and even entertainment. But think of your savings account as off limits.
If you set up automatic transfers to your savings account, you won’t even notice the money is missing from your checking account. And by paying yourself first, you avoid spending everything and having nothing left over to save.
It’s true that
living in a low-interest-rate world makes it harder for your savings to grow. Find banks offering the highest rates at Bankrate.com, and look for accounts with no required minimums and no fees. As of late January, Ally’s savings accounts fit the bill, yielding 0.84% with no required minimums and no fees. Sadly, 0.84% qualifies as “high yielding” these days, but it’s better than nothing, and it keeps your money secure. But, as Boynton notes, “with interest rates so low, you need to be saving even more.”
Start off small. Even if your salary is on the low end, you can always save at least a little bit. In fact, Susan Veligor, a certified financial planner in Portland, Maine, says the best way to start saving is with really small amounts that will eventually add up big time. For example, stash away just $25 a week, and in six months you’ll have a cool $650. In a year, your cash pile will grow into $1,300. Plus, starting out slow and having small successes will reinforce the habit.
Play money mind games with yourself. Here's one: When you’re spending money, don’t just think about the price tag; also think about how much money you had to earn before taxes. The mind trick will force you to realize that you had to earn, say, $12 to pay for that $10 movie ticket.
Another savings trick: When you’re budgeting, round down your income and round up your expenses. For example, if your phone bill is $92.37 per month, budget for $100. If your monthly income is $1,692.99, round down to $1,600. This move guarantees you’ll live below your means and free up some money to save each month (Read:
Just Say No to Extras to Save Money).
Resist the temptation to splurge. “It really is easy to spend nowadays,” says Veligor. “You have to disconnect yourself from society [to avoid it].” One tactic that saves me a lot of money is finding time on the weekends to plan out my lunches for the week. Buying my lunch supplies on the weekend helps me avoid splurging for $10 or more each day on convenience foods. I also eat healthier this way.
Set savings goals. Having a worthwhile target in mind, such as a luxury vacation or (thinking more long-term) a happy retirement, will help you remember that saving is not about denying yourself what you want today; saving is really about working toward future rewards. Plus, with a specific number attached to your goal, you’ll be forced to figure out how much you’ll need to save each week and month to reach it by a certain date.
Seeding an emergency fund should take first priority for your savings. You should have at least three to six months’ worth of living expenses, and the money should be risk-free -- that means savings accounts insured by the Federal Deposit Insurance Corp. -- and instantly accessible.
2) In the Markets today:
U.S. stocks gained for a third day Thursday, keeping the indexes at multi-year highs, after U.S. jobless claims dipped and Greece reached an austerity deal that should lead to a new round of international aid.
Greek deal enough for modest gains on Wall St-From Reuters
Stocks rose modestly for a third straight day on Thursday after Greece reached a deal to secure a financial bailout, but investors were cautious after weeks of gains.
Tech shares, led by Apple Inc (:AAPL.O), gave a lift to the Nasdaq index and were the session's strongest sector. Skepticism that Greece would follow through on promised austerity measures kept investors hesitant to boost stocks further.
The market's steady march higher also left investors reluctant to buy aggressively without a significant catalyst. Well over 75 percent of S&P 500 stocks are trading above their 26-week moving average, according to Thomson Reuters data. The index has finished higher on six of the last seven trading days.
"We've had a very strong run without a meaningful pullback, and a lot of people would feel like chumps for buying before we see some kind of dip," said Nicholas Colas, chief market strategist at the ConvergEx Group in New York.
Leaders from major Greek parties agreed on reforms and austerity measures needed in exchange for a new bailout package to avoid a chaotic default.
"There's some relief that they've made it this far, since the negotiations could've gone meaningfully wrong, but this was largely priced in," said Colas. "At the same time, there's still some concern that this deal isn't enough and we'll be back in this situation again later."
Euro zone officials say the full package must be agreed with Greece and approved by the EU, IMF and European Central Bank by February 15, so legal paperwork can be completed in time to avoid a chaotic default that could destabilize the global financial system.
The Dow Jones industrial average (DJI:
^DJI -
News) was up 6.51 points, or 0.05 percent, at 12,890.46. The Standard & Poor's 500 Index (SNP:
^GSPC -
News) was up 1.99 points, or 0.15 percent, at 1,351.95. The Nasdaq Composite Index (Nasdaq:
^IXIC -
News) was up 11.37 points, or 0.39 percent, at 2,927.23.
Providing support to the market was a report showing jobless claims fell last week, underscoring improvement in the labor market. That followed Friday's report of a better-than-expected rise in the number of jobs created in January.
Apple's stock hit an all-time high. Brokerage Canaccord Genuity said its checks indicated very strong iPhone 4S sales and increased its price target to $665. Website AllThingsD said Apple would introduce its latest iPad tablet version next month.
Shares of Apple surged 3.5 percent to $493.17, hitting an all-time high of $496.75 earlier. The S&P information technology sector (:.GSPT) rose 1 percent as the day's best-performing group.
But Cisco Systems Inc (:CSCO.O) limited gains by the tech sector as the network equipment maker's forecast failed to impress investors. Shares fell 2.1 percent to $20.
PepsiCo Inc (NYSE:
PEP -
News) fell 3.7 percent to $64.27 after the beverage maker forecast lower-than-expected 2012 earnings and said it would cut thousands of jobs.
Groupon Inc (NasdaqGS:
GRPN -
News) slumped 14 percent to $21.17. The daily deal website posted an unexpected loss in the first quarterly report since it went public.
Diamond Foods Inc (:DMND.O) tumbled 37 percent to $23.13 after the company removed its top management and said it would restate results due to improper accounting of payments to walnut growers.
Slightly more stocks rose than fell on the New York Stock Exchange while on the Nasdaq, 53 percent of stocks ended lower. Volume was about 7.30 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, slightly below last year's daily average of 7.84 billion.
3) Top financial story of the day:
Deal, Totaling as Much as $26 Billion With 5 Banks, Would Settle Federal, State Probes of Lenders
U.S., Banks Agree on Foreclosure Pact-From The Wall Street Journal
Government officials have finalized an agreement worth as much as $26 billion with five major banks, capping a yearlong push to settle federal and state probes of alleged foreclosure abuses by lenders.
The deal represents the largest government-industry settlement since a multistate deal with the tobacco industry in 1998.
The agreement covers five banks: Ally Financial Inc.,
Bank of America Corp.,
Citigroup Inc.,
J.P. Morgan Chase & Co., and
Wells Fargo & Co. Together, the five handle payments on 55% of all outstanding home loans, or about 27 million mortgages, according to Inside Mortgage Finance.
Federal and state officials planned to announce the settlement Thursday morning in Washington after putting the finishing touches on the deal following a marathon negotiating session that ended after midnight Thursday morning.
The agreement will include at least 49 states, and officials were finalizing a separate accord with one remaining holdout, Oklahoma.
The Obama administration made a full-court press over the past four days to secure the support of key state attorneys general, including those from Florida, California and New York. All three states are expected to be part of the announcement, people familiar with the situation said.
Representatives of the banks declined to comment.
The planned pact would involve around $5 billion in cash penalties, payable to borrowers, states and the federal government. That includes $1.5 billion in cash payments to borrowers who went through foreclosure between September 2008 and December 2011. Borrowers could receive $1,500 to $2,000 each, with the actual amount paid depending on the number of borrowers filing a claim.
The agreement is expected to call on the banks to provide $20 billion in other aid—by cutting loan balances for tens of thousands of homeowners and by refinancing thousands of borrowers who are current on their loans but owe more than their homes are worth.
Officials say the deal will help provide immediate benefits to around one million homeowners, while raising accountability for banks that work with borrowers facing foreclosure. The foreclosure process has been snarled since late 2010, after allegations that banks had serially submitted bogus mortgage documents when attempting to repossess homes from delinquent borrowers.
The bank payments would unlock a large new source of housing funding at a time when Congress doesn't appear likely to approve new spending measures to tackle lingering problems facing housing markets, such as a refinance program that President Obama unveiled last week.
The three key states overcame misgivings about the plan in recent days, people familiar with the situation said. The inclusion of California is especially important: People familiar with the discussions say the banks would have been willing to pay just $19 billion without the participation of the nation's most-populous state.
The office of California Attorney General Kamala Harris declined to comment. A spokeswoman for Florida Attorney General Pam Bondi said that "while Attorney General Bondi has not yet joined the settlement, she is hopeful that a resolution will be reached soon."
Shaun Donovan, secretary of Housing and Urban Development, became heavily invested in recent months in bringing the long-running negotiations to a conclusion. Mr. Donovan, who spent much of this week haggling with state officials over the final terms of the deal, made principal reduction a central piece of the deal but needed the support of as many states as possible to secure a price tag large enough to be meaningful.
The agreement is the latest government effort to ease housing-market problems that have plagued the economy for the past five years. Nearly 1.9 million homes have gone through foreclosure in the past two years, but just as many loans are in some stage of foreclosure
On its own, the deal won't be a cure-all for the housing market or to the majority of borrowers at risk of foreclosure. Home prices have fallen by nearly one-third over more than five years, slashing real-estate values by $7 trillion and leaving 11 million homeowners with mortgages that are exceed their property values by $750 billion. High unemployment has frustrated round after round of federal efforts to stem foreclosures.
"It is frankly a headline victory for both banks and attorneys general with a modest impact on the housing market," said Joshua Rosner, managing director of investment firm Graham Fisher & Co.
The resolution is likely remove one cloud of uncertainty that has depressed bank stocks, and analysts say it isn't likely to result to a significant hit to bank earnings. Many of the loans where banks may reduce balances have already been marked down on their balance sheets, requiring them to have already built a cushion against losses.
"It's not new money. It's all soft dollars to the banks," said Paul Miller, a bank analyst at FBR Capital Markets.
Nadine Bond, who lost her home to foreclosure in 2010, is among those who expect to benefit from the settlement. Ms. Bond says that Ally's GMAC Mortgage unit foreclosed on her the day prior to what she had been told was the due date for her first loan modification payment. Ms. Bond, a receptionist who lives in Middletown, Conn., expects to qualify for a cash payment of $1,500 or so.
GMAC Mortgage said it "makes every effort to work with borrowers and avoid foreclosure whenever possible," and that "as a general practice, the company exhausts all home ownership preservation options with borrowers needing assistance."
Her attorney, Jeff Gentes, says he is pleased that the deal won't bar her from pursuing other ways to obtain relief, such as the review process set up by federal banking regulators.
But "I have mixed feelings" about the settlement, Ms. Bond says. "It will help, but it is not going to get my home back."
4) Quote of the Day from Dave Ramsey.com:
Every great man, every successful man, no matter what the field of endeavor, has known the magic that lies in these words: every adversity has the seed of an equivalent or greater benefit. — W. Clement Stone
