Model of a House Our personal-finance pro answers your money questions:
Q: I know I can earn a bit more interest with an online bank, but I'm worried about security. What do you think?
A. I've read the same scary hacking news stories you have. But think of it this way: The biggest business threat to any online bank is losing the security of your information and holdings, so protecting that is its number one job. "Banks offer software that can prevent malware from infecting end users' machines in the first place and from stealing their information when they bank online and use other websites," says Yishay Yovel, VP of marketing for Trusteer, a security firm that works with more than 200 banks and credit unions.
Also know that banks confirm your identity with a username/password system and may ask security questions if they don't recognize your device's unique IP address. Tip: As I've been telling folks for years, the best way to protect yourself is never to respond to an unsolicited request from a source that looks like your bank but asks you to send back personal information.
Last, let me mention that online banks don't have to pay salaries for tellers or rent for branches, so they offer higher interest rates and fewer fees. Do, however, make sure the bank you choose is FDIC-insured and has good ratings for customer service. A quick, free search on bankrate.com shows that ING Direct offers 0.8% interest on savings accounts with no minimum balance or fees. For checking accounts, Ally Bank is offering 0.4% with no minimum balance or fees. In terms of brick-and-mortar businesses, only credit unions can come close to offering that kind of deal.
Related: 12 Travel Deals and Steals
Q: The headlines have me scared of the stock market, but the returns on other retirement investments are so low. Should I be in the market?
A. I'll assume your permanent date with a beach chair is 10 to 20-plus years away. You have a long-term goal of retirement as far as this money goes, but you're looking at short-term numbers - that darned 2% to 4%. To earn more, you must expose yourself to risk. It's the trade-off, as it is in life.
First, make your stomach less queasy by educating yourself about where your money is and what your options are. You definitely should not have all your money in the stock market at one time (even if you have decades until retirement), and steer clear of holding individual stocks - too risky. You need a mix of assets, but most of all, you need a strategy. When was the last time you sat with your 401(k) administrator or adviser? Through recent regulations by the Department of Labor, 401(k) providers are required to provide plan participants not only with information about a plan's administrative and investment fees, but also with investment information in a way that allows the participants to "meaningfully compare the investment options." In addition, your employer may offer you the services of an adviser. If it doesn't, or if you don't feel comfortable with the individual, find a qualified financial planner at fpanet.org. Then ask for info on different funds' performance over time and at various risk levels. And be clear regarding your concerns: "I'm nervous; what can I do to reach my long-term goals but also protect what I have from market swings?"
As you take in the advice, use this cheat sheet: Most retirement plans have categories you can choose to invest in, which tend to use certain words, such as "value," to describe stock funds that may hold undervalued (or, as I like to say, "really well priced!") companies. These often pay a dividend, or returns on each share. The "growth" option may be more risky - these are invested in, say, growing tech firms - but for someone with 20-plus years until retirement, this is worth a slice of your investing pie so you can capture some profit. "Money market" or stable funds are considered the most conservative investments, but they won't turbo-charge your profits. "Small-cap" refers to smaller, riskier companies and "large-cap" to larger, often safer ones. You want a mix of risk levels and returns that fits your situation. Above all, keep a long-term view. Schedule specific times to look at your investments - say, once per quarter. As for daily headlines? They can be an expensive distraction that keeps you from where you should be looking - toward the end of the long work road.
Related: 23 Ways to Decorate on a Budget
Q: I'm overwhelmed with bills. We haven't earned enough this year to stay on time with everything. Whom should I pay first every month?
A. You're in a tough situation, but I've got a system called PCF (Pay, Cut, Find) to help you stay on top of your bills. First, find out exactly whom you owe, what you owe, and how much it's costing you (interest and fees). Set up a simple list or spreadsheet pulling together all the bills for the month (feel free to arrange for a "reward" while doing this - a brownie or a glass of wine). Note interest rates, totals owed, minimum payments, fees, and due dates.
Now you need to "Pay," and the priority is the roof over your head. Always pay your mortgage (or rent), homeowners' insurance, and property taxes first. Then move on to "C," for "cutting other costs." Set a date on your calendar this week to shop around for lower-cost utilities; try lowermybills.com. If you're well behind with these bills, call your service provider and ask for a payment plan that can help you catch up. You probably need to drive to work, but can you carpool or ask your boss if you can work from home one day a week, thereby reducing your commuting costs?
Also note that you can often cut down those debt payments by calling your lender to negotiate lower rates or even a settlement. If you're skittish about making these calls, see a local nonprofit credit counselor (nfcc.org) for a low-cost assessment of your debt and tips on how to pay less.
Now, "F," for "find more money": Are you open to doing household tasks such as pet care, laundry, or running errands for pay? Or maybe you have other skills that you have time to share? Taskrabbit.com lets you offer yourself up locally for various tasks for a fee. Do you have a recent-model car that you can rent out? Getaround.com and relayrides.com let you rent your car out by the hour, day, or week. And if you have an extra bedroom, offer it up for a bed-and-breakfast - type rental at airbnb.com. There are also sites that let you rent out equipment you own, such as lawn-care items.
Following PCF will set you up not only to get on track with your bills this month, but to stay that way years from now. Thank goodness for that!
More from Good Housekeeping: