The concept behind pay-per-click marketing is pretty straightforward. You select keywords, write your ad, bid on the keywords, and pay for the number of clicks that you receive, with the amount owed based on what you bid and the number of clicks that were received.

The more you bid, the higher your ad is placed on the web page. There are many ways you can use PPC to your advantage.

Here is a look at the top five:

1. Using PPC for Direct Sales of Products
   Selling a product with PPC is really quite easy. As always, the first objective is to ensure that you bid enough on your selected keywords to ensure that your ad is placed high enough to be seen – preferably on the first page of the search results for your keywords. You select keywords directly related to how people search for your product.
2. Using PPC to Build an Opt-In List
   Since you will be paying for the clicks, you definitely want to build an opt-in list, regardless of what the bigger purpose of running the ad is. Otherwise you will be wasting a great deal money paying for one-time traffic. If you can persuade a certain portion of that traffic to give you their email address, in effect you get more mileage for your PPC dollar. In fact, some people run PPC ad campaigns for the sole purpose of building an opt-in list.
3. Using PPC as a Lead Generator
   Many people confuse lead generation with building an opt-in list. They are not quite the same thing, although they are similar. When you collect opt-ins, it’s inevitable that you will end up with some freebie seekers on your list — and these are not necessarily leads. To generate true leads, you will need to select different variations of your keywords and write your ad in a way that pre-qualifies searchers as true leads. You aren’t just looking for people who are interested. You are looking for people who fall somewhere between “interested” and “ready to buy.”
4. Using PPC as a Viral Generator
   Viral marketing is a big deal on the Internet. What you must remember is that the Internet has no borders – no limits. It reaches far and wide, and it is impossible to reach your entire market all by yourself. You need help, and this is where viral marketing comes in. PPC ads can send searchers to your branded viral marketing collateral, which can take many forms. The simplest viral tool can be a free PDF report that includes affiliate links or links to your money site. But you can also give searchers access to an online report populated with affiliate links, a free branded software download, or even a quiz or poll that inculdes a “tell-a-friend” script.
5. Using PPC with Landing Pages
   Landing pages are great for really targeting your audience. You can have various landing pages for different products, but with the use of PPC, you can also create dynamic landing pages, with different sales copy, based on the ad that was clicked on.

The above are just five ways marketers can harness the power of PPC. PPC continues to grow and so do the possibilities for PPC and affiliate marketers.

If you understand the PPC concepts that level the playing field, even the “little guy” can compete with big corporations who have the deep pockets to pay for placement on the most trafficked keywords.

You just need to be sure that you have a firm grasp on what the purpose of your PPC campaign is. That allows you to write effective ads that target the people who will bring in the revenue, as well as determine a workable budget.

Most failure with PPC does not come from not choosing the right keywords. The fastest way to fail with PPC is to not know and convey your purpose in the ad, regardless of whether or not you are in the top position on the page. It’s not just in what you say and where you say it – it’s in how you say it and in how it is understood that counts.

1. Watch your budget. The first stages of a new campaign can be intensive. Expect to watch your campaigns carefully during the first two-three weeks. And be sure you set your daily budget to a level you can afford.
2. Build a complete site with keyword specific pages. If you’refairly certian the niche is a winner, create a 20-30 page site with content, plus specific landing pages that revolve around your most important, high traffic keywords.
3. Split test landing pages. By split testing two landing pages, you can make huge increases in your conversions and thus in your income. Be sure to split test just one thing on the page at a time, and make sure your results are statistically valid.
4. Experiment with a page that work in organic search. If you already have a page, such as an opt-in page, that converts well with organic search, try this experiment, Test how well your opt-in page works for paid traffic versus organic traffic. Do this by creating a duplicate landing page that is exactly like the one that gets organic traffic. Drive a little pay-per-click traffic to it, and see what happens.
5. Theoretically the SEO page should not convert as well with paid traffic, but you never know. Of course if it doesn’t, you’ve now got the ad and campaign all set up, and just need to tweak the landing page accordingly.
6. Optimize! After you give you campaign a little time to produce data, be sure to kill the keywords are that aren’t converting and put your money into the keywords that are. This is called optimization, and it’s extremely important.

Keeping your bid price high enough so your ads appear in the “sweet spot” for rankings is essential. In fact, avoiding the first position is actually a good idea. Some advertisers have found that the first position generates a lot of interest clicks that don’t result in good conversion ratios.

Pay-per-click is a terrific way to great targeted, affordable traffic, though it does take a watchful eye to get it right. But if you don’t overspend and keep a steady eye on what creates sales and what doesn’t, you will have found an excellent way to grow your business without being at the mercy of the search engine algorithms.

Here’s 10 reasons why…

1. Free Traffic - Traffic from articles is essentially free. While writing and submitting them takes time, once your articles are published, clicks on your resource box links don’t cost you a dime. So even if your article traffic is high and your conversions are low, no harm done, since you’re not paying for any of those visitors.
2. Low Cost – Article marketing allows you to play in niches where you couldn’t afford the high cost of PPC ads. Even if you outsource articles, a $15-$20 article can generate many thousands of visitors in a very short time. Compare that to the cost of just 100 clicks on a high-ticket PPC ad.
3. Low Risk – It costs you $50 worth of your time to write and submit two articles. You get 1000 visitors but no sales. How much money have you lost? Really none! You actually “bought” targeted traffic at only 5 cents a visitor ($50 divided by 1000 visitors). Where else can you get niche traffic for just 5 cents a visitor? Just work on your resource box and landing page to get some conversions.
4. Test Any Product or Niche – Testing an off-the-beaten-path niche or a brand new product is easy with article marketing. It’s also quick – you’ll usually know whether you’ve got a winner in a week or less.
5. “Forever” Traffic – Once an article gets published online, it will send you traffic for months and years to come. That’s why it’s especially important to write titles that are not just keyworded, but grab the attention of webmasters and readers. The more attractive your article – and the more clickable your resource box – the steadier the flow of lifetime traffic.
6. No Slaps – You don’t need to worry about waking up one morning to find that clicks on your articles are costing you 10 times more money – heck, they don’t cost you any money! You can also send visitors to a website designed in whatever way you choose, instead of being penalized for including a squeeze page or other marketing device that does not meet a “quality standard.”
7. SEO Benefits – Articles submitted to the top directories and syndicated on authority sites can have long term SEO benefits. They’ll get indexed quickly, and they provide backlinks to your websites.
8. Market-Driven – Provided you learn how to really research article marketing niches, the readership in that niche will tell you what to write about and which types of products to promote.
9. Easy Outsourcing and Automation – Article marketing has been around for so long, it’s not difficult to find good freelance writers who know article marketing and can help you multiply your efforts. This is especially true if you master some outsourcing tricks for getting quality articles at lower cost. And you’ll find that today’s article submission services, such as Article Marketer, can save you hundreds of hours over the course of a year.
10. Recycle Content – You can reuse your articles – either as-is or lightly rewritten – in a blog, social network site, newsletter, ebook, or special report.

A blog is a web site where you could write about anything you like from A to Z. Its like a diary and you could write on your blog at any convenient time. People may blog for many reasons either to share their personal experiences or to share their knowledge with others. Blogging is one of the interesting hobby for me too. It’s quite interesting that you could make money from your blogs. There are many successful entrepreneurs who are living a life by earning decent income from blogging. Keeping that in mind, this article helps beginners to understand the steps to make money from blogs. It’s simple, easy to manage a blog and you don’t need any great technical skills.

Step 1: Choose A Blog Topic.

The first and most important step is choosing a topic for your blog. I will suggest you two options to select a topic.

First, it’s based on your own interests. List down your interests and decide a topic that you are more passionate about because you have to write useful articles on that topic in your blog.

Second, select a topic based on the market demand. Use keyword research tools like Google Keyword Tool to find the topic which has high demand for information. My advice, always select a moderately demanding topic because it will easy to face the competition.

Step 2: Start A Free or Paid Blog.

Once you have the topic ready, go to blogger.com and create a free blog. If you are ready to invest money then get a self hosted domain from Godaddy or Hostgator and install WordPress. I recommend, beginners to go for blogger.com, you could move to a self hosted blog anytime in the future. Most important, select a catchy blog name because people has to remember your blog.

Step 3: Publishing “Useful” Articles.

Now it is time to build your blog. You have to write useful articles. You should not copy the content from other web sites, this is one of the common beginners mistake. Write original articles which solve the visitor problems. Focus on the topic and keep the visitors in mind, while writing articles for your blog. You have to write content for “life time” on your blog & hence blogging requires consistency. Have a writing schedule (for example, at least 1 article per day) and stick to that. Over a period of time (usually in 3 to 6 months), your blog gains decent amount of search engine traffic.

Step 4: Marketing Your Blog.

Promoting and marketing a blog is one of the toughest part of this game to drive traffic to your blog. Producing useful content gains authority on search engines by itself. But you have to build quality links pointing to your blog which tells search engines that your blog is popular & every one refers to it. So focus towards producing quality content and building back links.

Writing comments on related dofollow blogs, writing guest posts on established blogs, posting on related forums are few of the simple link building techniques. Keep in mind that marketing is a long term approach and it goes through the blogging life cycle to drive huge traffic.

Step 5: Make Money From Your Blog.

Now you have a great blog and it is getting enough number of visitors (say, 100 to 200 visitors per day). Its the right time to think about making money. To start with apply for Google Adsense (read their program policy first) and run Google Ads on your blog. For every click on the advertisement, your blog makes you money. Join clickbank, CJ and select quality products which are related to your blog topic. Pick the affiliate link, promote them on your blog and earn commissions. If you consistently publish useful articles and markets your blog, money rolls into your bank account.

Blogging is a long term business model and it takes time to pick up. But once your blog reached that level of success, you could make decent income every month.

I learned later on that it takes four crucial elements for a rose to grow. These same elements are essential for growing a strong 401K. Like roses and redwoods, a 401K needs strong roots if it has a chance to survive.

Here are 4 key ingredients for growing a strong 401K for your retirement.

Key Element #1: Time

Imagine dropping some rose seeds into the ground, covering them up with dirt and then expecting a bed of roses over night. Forget it, because it ain’t gonna happen! If you want your 401K to grow into the financial monster you’ll need, give it time to grow. The best evidence of this is the power of compound interest.

When you owe interest on your credit card, it compounds each month. A $100 credit car bill can become a $132 bill 30 days later. That $32 is leaving your pocket and going to the credit card companies. This is compound interest working against you. But if you’re investing $100 a month in your 401K, each month that interest is working for you.

I’ll never forget the first time I saw my 401K statement. At the time the $50 a month I was investing didn’t seem like much. But with a 50% employee match, that $50 quickly turned into $3,000 6-8 months later! If you continue to give your 401K time to grow, you could be looking at a six or seven figure retirement next egg!

Key Element #2: Regular Deposits

From roses to daisies flowers need water to hit the seeds. If there’s no water there’s no growth. If you’re not making regular deposits into your 401K or IRA, it won’t grow very fast. Here’s a good rule of thumb. When you first start investing into your 401K at work, go with 3%. A year later you should move up to 5%. You may want to set a goal of investing 10% of your paycheck a month, 1-2 years after that. Most employers will match up to 50% of your investment. Here’s what can happen when you steadily “water” your 401K.

One of the best things about a 401K is that you don’t have to be rich to make it grow. Look at what can happen if you make only $35,000 a year.

Let’s say you decide to work 20 years for your employer. And you get zealous and invest 10% of your monthly income. You start out with a 401K balance of only $500. Now we’ll throw in a salary increase of 3% a year, employer frequency match of 6% and a rate of return of 9%.

At the end of your first year you’ll have $5,237.13 socked away for retirement. If that doesn’t make you smell the roses, let’s fast forward to 20 years later. If you stay diligent and keep watering, you’re looking at $299,837.38! Not bad for some time in the old 401K garden.

Keep in mind this is if you don’t get creative. You can be as conservative or aggressive as you want with your 401K.

If you’re more conservative, go with a 5% contribution. At the end of the first year, you’ll have $3,241.06. At the end of year 20, $173,476.54! When you combine time with “watering”, your 401K will grow into the strong fund you want it to become.

Key Element #3: Expertise

Unless you’re a financial wizard with an MBA in finance, let me make a suggestion. Enlist the services of a Financial Planner. Anyone who wants to become a master gardener should learn from one. Treating your personal finances like a hobby is a quick way to retirement poverty! A Financial Planner can show you where to invest percentages of your 401K. Sectors like healthcare, energy and defense normally do well in down economies. Allow them to help you cultivate your 401K. It will grow properly over time.

Key Element #4: Patience

If there was ever a word folks don’t like its patience. I hate waiting. How about you? This is no different when it comes to our money. I want my 401K to grow fast. But that’s not always possible. The markets have moved up and down over the past year. At last count 401K’s have lost 20% of their value. That’s tough to take when we’re talking about your retirement income! But patience is a powerful equalizer. Stick to your plan and be patient. Financial collapses pass. New investment opportunities are out there. If you use patience instead of blind emotion your 401K will rebound.

Practice using these 4 key elements no matter what the economy does. When you do your 401K will grow. During retirement you’ll have money strong enough to sustain you!

Clyde McDade is a Financial Copywriter. He can be reached at accelcs@comcast.net.

Building a retirement plan is no different from building a Christmas tree. You need the right elements to produce the right income for your retirement. And here’s the best part. Your loved ones will also benefit. These benefits will come in the form of college money or beneficiary payments.

Here are the key elements you need to build a retirement plan that’ll keep on giving!

The Right Tree

Some Christmas trees are better than others. I love the “fake” ones, because I don’t have to worry about them drying out or catching fire. Everyone has to have a tree that fits them. Depending on the size of your house or apartment, you need a tree that will go with your home.

The first thing to consider in building your retirement plan is the plan that fits your needs. Here’s a small list of “Retirement Trees” you can use.

Tree #1: Roth IRA (Individual Retirement Account)
If you’re looking for a retirement account that escapes Uncle Sam’s taxes, this is the one for you. A Roth IRA allows you to save money without being taxed when you retire. Even if you pass away, your beneficiary will receive tax free money. Also, you don’t have to worry about an early distribution penalty or taking minimum withdrawals after age 701/2. No minimum distribution rules apply to the Roth IRA. You can steadily earn income and build your Roth IRA until you retire.

The contribution limit for Roth IRA’s in 2009 is $105,000 for singles and $166,000 for married couples filing jointly. And you can put money into your Roth IRA at any age.

Tree #2: Traditional IRA
A Fir tree is the original Christmas tree. It’s the one you could find in any home over the past decades. The Traditional IRA the one that started it all. You can invest $3,000 or more in it. But you have to start taking money out at age 591/2 and remove retirement dollars at age 701/2. Be careful on this one. The original IRA has a pitfall. Remove retirement funds before age 591/2 and you’ll pay a 10% penalty fee.
Making $43,000 as a single or $60,000 as a couple disqualifies you from having a Traditional IRA. This is a great way to build up retirement funds if your employer doesn’t offer one. You can do this through your bank or Financial Planner.

Tree #3: Traditional 401K
You most likely have this one already. Employers will match up to 50% of your contributions and up to 6% of your annual salary. The point is to encourage you to start saving for your retirement. You have several advantages with this one. The plan can be automatically deducted from your paycheck. You won’t have to worry about your money getting sucked up by your checking account. It’s nice to have money you’re investing matched by someone else. You’re basically getting free money from your employer. With the auto and financial industries getting billion dollar bailouts, it’s nice to know someone is throwing you a bone! Unlike the Roth IRA your money will be taxed at current rates when you retire. But you can grow your 401K with the right funds and sectors.

The Right Decorations

After you find the right tree for your home, you’ve got to get the right decorations. You place them carefully on the right spots on the tree. We do this for a few reasons. One, we want it to be visually appealing. Two, it brings the tree to life. And three, it’s a complete waste of time and money not to.

When you pick the right investment plan you need the right asset allocation. Like decorations on your Christmas tree you have to put your money into the right sectors and companies. Here’s an example.

During the “Tech Wreck” of 2000, investors lost 44% value in their technology stocks. Today those same stocks are worth 99% less than they were in 2000! They’re biggest mistake was not diversifying their investments. They put 65-85% of their capital into one sector. When you set up a Roth IRA, Traditional IRA or 401K choose a mix of sectors and companies. Some of these include healthcare, energy or commodities.

Let’s take a quick look at how this can work to your advantage.

401K Asset Allocation Plan

On paper this looks pretty good. Your assets are spread out in sectors that normally perform quite well. But what if you got aggressive and moved up to 75% into your growth stocks? If that sector takes a huge hit, you could lose what most 401K folks lost. At least 20% of their 401K’s value! By putting money into the right places, your retirement fund will continue to grow even when you take some losses.

In “How to Build a Strong Portfolio in Your 401K” Samuel D. Swisher, JD of Vantage Financial Partners Limited writes:

“It has been shown that 94% of the variability in a portfolios return is explained by the asset allocation mix and not by security (stock) selection or market timing.”

He’s saying putting your eggs into a bunch of baskets instead of one is what makes your 401K grow.

Now folks that’s financial advice even Santa can’t give you!

Opening the Gifts

Okay, so you’ve picked the right tree, decorations and put them in the right spots. Your tree is glowing and the gifts have been piling up. Your 401K, Roth IRA or Traditional IRA has done the same thing. You’ve picked the right plan, put money in the right spots and money’s been piling up like Christmas gifts under the tree.

When it comes time to retire you’ll get a gift you won’t forget. Depending on how much you’ve invested, your employer match, etc., you’ll open a financial gift of 6 or seven figures! And trust me when I say you deserve it.

Take the time to carefully build your Retirement Christmas Tree. When you do you’ll have a gift that keeps on giving to you and your loved ones. From myself and the folks at www.retirementcalc.com, have a Merry Christmas!

Clyde McDade is the author of the upcoming e-book, “How to Grow More Money for Your Retirement and Child’s College Fund.”

I knew the issue of withdrawing money during a down market is real because when the money is taken out of the account it is no longer available to help recover when the market eventually turns positive. In addition, I wanted to know what the best asset allocation would be to weather the storm of a down market.

There are only a few sources in the literature that deal with the issue of retirement withdrawals. These models tend to be extremely conservative. They severely restrict the money you can withdraw in order to be statistically certain that your money will last.

I was looking for a more realistic model for examining the impact of withdrawals on retirement savings accounts. I realize that there are no guarantees of future performance. Nevertheless an examination of past performance and a look at how major market downturns impacted that performance seemed like a prudent approach to understanding how to optimize my withdrawals.

We constructed the Retirement Calculator based on these historical scenarios. We examined the last fifty years of stock and bond performance. The calculator begins with the 1973/1974 market downturn and continues thru the most recent major downturn of 2000/2002. Both of these downturns were significant with stocks falling more than 40 percent.

The Retirement Calculator assumes you were unfortunate and began withdrawing money in 1973 for a period of 30 years. The calculator looks at various asset allocation strategies between stocks and bonds and shows you the optimum asset allocation for managing your money thru these downturns. It shows the optimum withdrawal rate so that your money has a reasonable chance of lasting a lifetime.

The calculator also includes additional features. The inflation factor allows you to adjust your withdrawals to compensate for annual inflation. For those who invest in mutual funds or employ a financial advisor a feature is included for reducing investment performance to account for the management fees that are included in these services.

The Retirement Calculator shows that using just the historical long term average return for market performance can lead to erroneous results. There is definitely an impact from withdrawing money from your account during market downturns. The greatest value of the calculator is that it shows you that you don’t have to live in fear of major market downturns. You can withdraw a significant amount from your savings even though the market is falling.

The calculator shows you that you can successfully withdraw significant amounts from your account by using asset allocation to weather those market downturns.

Robert J. Phillips
Chief Retirement Consultant

Several factors can affect your decision. First is your life expectancy. If you are in good health and have a family history of living beyond 90 then waiting for full benefits may be best. Two other factors impact this decision. First and most important is the value of money or your expected return from your investments. If you are using other investments instead of social security to fund your retirement you should use the rate of return of these investments as your value of money. There is another way to look at the value of money. If you do not require the social security money to live, you can invest the distributions for the future. The rate of return of this investment is your value of money. If your investments will make larger returns such as stocks this would favor taking the early withdrawal.

The last factor impacting your decision is inflation. Social security includes an annual adjustment based on inflation. You cannot control this variable but you should be aware of its impact. If future inflation is significant it will favor a later full distribution.

Calculator to assist in analyzing the impact of taking early benefits at age 62 or waiting for full benefits at age 66 to 67 depending on the year you were born…If you were born in 1960 or later your full benefits will begin at age 67 and your reduction for early benefits at age 62 will be 30%. If you were born between 1946 and 1960 your full benefits begin as early as age 66. We have included a chart that summarizes information.

To use the calculator you need to input your year of birth. You also need to input a value of money up to 10% and a projected inflation adjustment. The calculator analyzes income generated over time from both the early and full benefit investments. It calculates the age at which full social security will catch up and breakeven with the early withdrawal. If you were born before 1960 your breakeven age will be impacted by the year you were born. An early breakeven age favors waiting for full benefits.

The social security calculator is not the final answer whether to take an early withdrawal but it does give you additional economic data to assist in that decision. Ultimately you must balance income, investments and lifestyle to optimize your enjoyment during your retirement years.

Not only are you concerned about college money for your kids, but there’s your own retirement. Dealing with a sunken 401K is like trying to raise an old ship. Both are fragile, but if you follow a few simple steps it can be done. But first, let’s take a look at why you may not have started the salvage process.

Four Reasons We Don’t “Salvage” Our 401K’s

As a hard working single mother you’re attached to every dollar you make. When you opened that envelope and saw your 401K statement, it hurt. This is because the first reason we don’t salvage a 401K quickly is emotion. Think of all the hard work and hours you put into building it. You’ve dealt with overtime, rude customers and aching muscles. Finding out most of it was wiped out makes you angry.

Second, you realize it’s lost too much value. The loss is so steep you feel like you can’t make it up again. It’s like finding a ship at the bottom of the abyss. The damage is so extensive, why bother to put it all back together?

The third reason is understandable. When something is difficult and we don’t want to do it, it’s easy to procrastinate. With a 401K you realize too much time has passed. Why go through the trouble of building it back up again?

And the fourth reason may surprise you. Maybe you decided to take other money and invest it elsewhere. You’re so ticked off it’s easier to focus investing in something else. I can’t blame you there. But remember something about your 401K. You can grow it at any time. Don’t leave it at the bottom of your personal finance ocean. It can be salvaged and even rebuilt to sail toward retirement.

Here are four easy ways to pull it off!

Four Easy 401K Salvage Methods

Salvage Method #1: Slowly Add Value

Long before salvage experts bring up a ship, they attach lines or straps. But they do this slowly. It took weeks for divers to attach lines to one sunken ship. They had to make sure they were in the right spots. This is no different with salvaging your 401K. When you first started building it, maybe you added money at a steady clip. But in these tough economic times, moving slow is wise. Start by contributing 3-5%. You need all the money you can get from your paycheck. But putting in even 3%, let’s you know you’re still saving for the future. In time you’ll be able to contribute 5-10%.

Salvage Method #2: Earn Side Money

When I was fourteen I needed to make some extra money. What did I do? During the summer I mowed lawns. I invested an extra 2-4 hours a week and it literally paid off. What can you do to add a few extra dollars to your income? Here’s what the money will do. First, it’ll allow you and your kids to have a little fun. Catch a movie or go to a special lunch. But here’s something else it’ll do. You won’t have to invest more of your paycheck into your 401K. Let’s say you can make an extra $1,200 per month writing resumes. Feel free to keep $800 for yourself and invest $400 into your 401K. You pick what side job you can do to earn some side money. I assure you it’ll help you to salvage your 401K.

Salvage Method #3: Move Slowly

Expert Salvagers have a surprising method for moving a sunken ship. It’s one I never thought could work. Once the straps or lines are in place, they’ll begin to raise it. But they don’t always bring it to the top. Instead the ship or submarine is moved underwater. They won’t fully raise it until it’s near the dock. Once the value of your 401K starts to rise, keep adding money slowly. Don’t be tempted to invest 7, 8, 9 or 10% to your 401K, right now. If you move like the expert salvagers do, you’ll be docking in your retirement sooner than you think!

Salvage Method #4: Restoration

Restoring an old boat or ship takes time. The work done is comprised of skill, patience and care. The same ingredients are needed to restore your 401K. The goal isn’t just to start putting more money into it. You want to make sure it’s strong and beautiful. For your 401k that means making it diversified with steady growth. Ask a Financial Planner to help you pick the right mix of mutual funds. They’ll know what’s bringing in a good return and ones to avoid.

As a single mother its tough out there. Personal Finance can be a “taboo” term to deal with. But if you start by using these simple steps, you’ll get back on course for a much deserved retirement!

Clyde McDade is the author of the upcoming e-book, “How to Grow More Money for Your Retirement and Child’s College Fund.” He can be reached at accelcs@comcast.net.

Here’s a look at the four rings that land you there.

Ring #1: Credit Cards

Most Americans rack up credit card debt. It’s so easy to whip out the plastic for items like gum on up to Christmas gifts. Once you replace cash with plastic your 401K can dwindle like sand in an hour glass.

The average U.S. household carries $9,840 in credit card debt as of 2007. This is up 25% since 2000. Let me ask you a question. What can $9,840 do for your retirement each year? With the power of compound interest you’d be sitting on top of 7 figures for your golden years! But it’ll never see the light of day if you keep relying on credit cards.

The current financial mess has caused an increase in credit card delinquencies. The American Bankers Association reports that credit card delinquencies rose to 4.51% in the first quarter of 2008. This beat the five year average of 4.4%!

Let’s say you open a 15 year 401K with $9,840. If you make an average salary of $40,000, earn an annual 3% salary increase and invest 5% of your salary, here’s what will happen. With an employer match of 50%, and a 9% compound interest rate you’ll end up with $140,067.78! Stretch that out to 30 years or more and you’ll hit 7 figures for your retirement.

If you’re relying on credit cards during the credit crunch, your hopes of a fat 401K are dying by the interest point.

Ring #2: Pay Day Loans

Okay, okay. I’m as guilty as the next retirement hopeful on this one. If you haven’t fallen into this little trap, don’t follow in my footsteps. It took several months to get out of this and I won’t be back.

The Center for Responsible Lending reports that the pay day loan industry sucks $3.4 billion out of our wallets each year. Did you know 91% of pay day loans goes to folks who take one out 5 or more loans per year?

When you need some quick cash it’s easy to run down to your local loan shark, I mean pay day loan center. On the surface everything seems fine. You hand over your banking and employment information and they hand you cash. It’ll be conveniently taken out of your account on pay day. But in reality you’re robbing Peter to pay Paul.

Guess what? You’re Peter!

This is how the cycle worked for me. I’d get a pay day loan for $800. The fee cost me $95. Yes, I had real cash in my hand, but the $800 plus $95 was coming out in a week. The money got me by, but things came up and I needed more money. With loans and fees ranging from $595-$895 coming out of my account, it caused a “loan roulette.” With creativity and patience that money could’ve went to my 401K.

Let’s use this same formula for $595 being invested yearly. With employer matches and compound interest, your 401K will rake in $106.393.03 after 15 years!
Stay away from this path of quick cash. Just like a casino in Vegas the house always wins.

Ring #3: Check Roulette

The banking industry has been working on a hot scheme for the past ten years. It’s called the “overdraft fee.” Banks offer clients the convenience of covering bounced checks. It’s supposed to cover essentials like a car or mortgage payment. But the fees can add up. Most fees range from $20-$50. But the scheme works in favor of the banks. They’ll pay a large ticket item like your rent. Then smaller checks for gas, clothes or a night out on the town will bounce. The bank “comes to the rescue” and pays these items for a fee.

You’re responsible for the amount of each check bounced and the overdraft fee. You might be able to get away with this for awhile. But unexpected expenses come up. When you’re writing checks hoping they’ll be covered by the bank, it’s called “check roulette.” Sometimes the ball lands in your favor. And other times it won’t.
Banks don’t have to tell you how often their fees go up. They can also give your account a “false balance.” This is when the overdraft protection limit is higher than the actual balance. It looks like you have more money than you really do.

Constant overdraft charges can snatch $4,000-$6,000 a month from your account. In the end your 401K has less money to make it grow. Using the formula above your retirement will be worth $118,795.68.

Risk your money on your 401K rather than check roulette.

Ring #4: Overspending

If you don’t understand money or how to manage it, this trap is easy to fall into. Have you ever asked yourself why you spend money? Do you do it to feel better? Or do you believe you deserve something “special?” There’s no doubt you’ve work hard for your money. Blowing it on things that won’t help you enjoy your golden years is not worth it. To find out if you’re overspending, carry a small notepad and pen for a week. Every time you buy something write down the cost. When I first did this I discovered I was spending $25 a week on snack food! Think of what $100 into your 401K can do for your retirement.

Ring #5: Debt

That’s right my friend, the big “D”! America is carrying $2.6 trillion in consumer debt. If you’re drowning in debt having enough money to enjoy retirement won’t happen. There are plenty of sad stories of those who can never retire. Instead they have to hold down a job to make ends meet. How do you wrestle your 401K money from this 5th ring?

First, start paying yourself. No one has worked harder for your money than you. Have $25-$100 per paycheck automatically sent to a savings account. When it reaches $5,000, roll 10% into your 401K. Its money you won’t see until “Retirement Day.” While you’re leaving it alone your 401K will grow.

Second, get a reality check. Sit down and list out your monthly expenses. These will include your mortgage, car payment, groceries, utilities, etc. Find categories where you can save money. When we realized we were blowing $150 a month on tanning and gym memberships, we got an apartment with both at no charge.

Third, make a budget. If it weren’t for our electronic check register, we’d be financially blind! A budget is a warning sign to not go over the edge. It’s okay to set aside some “mad money” for fun activities. But budget for it. A budget keeps you from overspending.

Fourth, get all the help you can. I hesitate to recommend debt relief agencies. Some are as predatory as pay day loan centers. There are many good books on the subject. If you’re looking for something radical, I’d highly recommend “The Total Money Makeover”, by Dave Ramsey. He has a hot plan for getting out of debt fast! Another great read is “Money, Everything You Need to Manage Your Personal Finances Wisely”, by Peter Sander, M.B.A. Read as many books on debt management and personal finance as you can. And of course you can always read articles on our sites.

Escaping the 5th ring of financial hell will ensure a fat 401K for your retirement.

Clyde McDade is a Financial Copywriter. He can be reached at accelcs@comcast.net.