May is national Save for Your Future month. Because most of us want a little direction in making saving and investing decisions, a Web site has been designed to help you make specific decisions.
The Choose to Save Web site at http://www.choosetosave.org/tools/fincalcs.htm has 125 interactive calculators where you can enter your own data and personalize the answers. Here are a few examples:
- What’s it worth to reduce my spending?" calculator. You are asked how much you might be able to save by waiting to buy a new car, buying fewer clothes, paying off credit cards and so forth. The answer shows how much you could save each year and how much you could accumulate in 10 years if you reduced your spending. For example, I said I could save $450 a month by waiting to buy a new car and another $150 a month by buying fewer clothes. In 10 years, I could accumulate $20,039 after paying income taxes.
- How important is the interest rate?" calculator. This exercise was interesting although more extensive than what I needed. If I started with a credit card balance of $5,000 at 17 percent interest and continued to charge an additional $275 each month – and if I made payments of $350 per month – it would take me more than 21 years to pay off the $5,000 balance. If the credit card interest was 9 percent rather than 17 percent, I would pay off the balance in a little over eight years. Eight years is still too long to tie up your money, but you get the idea.
- How long should I keep a car?" calculator. Two comparisons were made: you buy and keep your car for a long period or you buy and sell cars more often. If you bought a new car for $15,000 and kept it for 10 years, it would cost you $13,960 less than if you bought and sold four cars in the same time period.
- Should I convert my IRA into a Roth IRA?" calculator. This one was fairly complicated and allowed for the inclusion of very personalized data. The analysis states that the decision to switch to a Roth IRA (and pay taxes immediately) depends a great deal on your income tax rate during retirement.
Check out these calculators. They can be very helpful and provide a good basis for making complicated financial decisions.