Author Archives: Common Cents

Your Financial Future Is At Stake

Prepare …… you’ll need to clean sweep your finances

Prepare now for your Financial Future. Save every penny you can.  You won’t be sorry you did.

The word BUDGET is extremely important.  It will be mentioned numerous times throughout these pages. Scramble the letters in budget, and you’ll find the word DEBT. Always remember …..  If you find yourself in DEBT, you most definitely need to BUDGET. Scramble the word again, and you’ll find the word DUE. The payment is due. Scramble again and there’s BUT.  And remember….there are no buts about it.  Budget!  Another word you’ll find it GET.  So, GET GOING!  BUDGET!

Create a budget……and stick to it.  Go over your expenses, all of them.  Some, like rent/mortgage is a set expense.  But the heat/light, cable, phone, and even food can be pared down. Use the money you were able to pare off your bill by paying off your outstanding debt. Once you pay off a debt…and you will….save that amount.  As soon as you receive it, put it in your savings  Each month, continue to pare down anything you can.

Until…….  (you notice the word ‘If’ isn’t used)….. Until you pay off your debt, you have to learn to live on just necessities . The  phrases ‘I want’, ‘I need’, ‘I have to have’, are phrases of the past.

Living on a budget means you’ll now be spending less.  And the money you’re now not spending, is the money you’ll now use to pay off your outstanding debt.

Depending on how much outstanding debt you are carrying, will depend on how long you must live on bare bones.  But, honestly, as you see your debt pile dwindle, living on bare bones won’t bother you at all….because you’ll actually feel better.  Stress drags you down and affects your physical and mental health.  You will notice the difference.

Your goal is to become debt free. It is possible.  This can happen.  You will make it happen.  You can do this.

 

 

Adding Beneficiaries to Your Accounts

Cover Your Bases…..Add Beneficiaries

We all think, and most likely will, live to a ripe old age.  However, one never knows for sure, so it’s best to prepare for anything. You should also talk to a close relative or friend about what your thoughts and wishes are regarding your final wishes. This can be a hard, yet necessary subject to bring up, however, it should really be discussed so someone will know and do their best to see that your wishes are fulfilled

Your money is hard earned, and you were disciplined and savvy enough to handle it properly.  It will be there for you, but should the unexpected happen, you want to be sure it doesn’t sit in limbo for years because no one you would have wanted to pass it on to even knows it’s there.  Or worse, the person(s) you’d least want to have it knows and goes after it.  In some, if not all states, if there are no beneficiaries listed, the state has the final say regarding any monies according to, and in a certain order, the next of kin: parents, siblings and so on.  It may be, but maybe not be what you’d want.  So, while you can, make those choices yourself.  It’s easy….and wise…and free.

None of your personal information regarding your account(s) is given or known to your beneficiary.

You need to put a beneficiary or beneficiaries on everything…some banks use the term payable on death (POD).  Adding beneficiaries will give you peace of mind knowing that when you do pass on, whatever is left, will go directly to someone of your choice.  Each time you open an account add beneficiaries.  You would need their name, date of birth, city where they live, and sometimes their Social Security number. Sometimes you need to tell their relationship to you (parent, sibling, child etc). If you haven’t already done this, it can be added, or changed, at any time. There is no cost to do this.

There are two beneficiary categories:  Primary (first) and Contingent (second).  You can change your beneficiary selections at any time and should check them over every so often as there are always life changes….. marriage, divorce, birth, death.  You want to update and change the beneficiaries at those times…..either adding or subtracting as the circumstance warrants.

There will always be one primary, but you can choose all as primaries.  The account will be shared equally, or divided as you chose – in percentages – all totaling up to 100%.  Or, you can split them into the two categories. Those listed as primary would receive the account as stipulated.  However, if they have died, the account is now divided by the contingents.

There are other documents that should be drawn up to cover any and all circumstances that may arise where you cannot make legal or financial decisions for yourself.  This is called Estate Planning…. to have them done gives you the assurance that you have made choices yourself.  And it relieves those left behind from the task to choose for you, and although doing their best, may choose differently for you.

 

Nip, Tuck, and Sculpt

Continually audit your budget

Nip…….Overspending in the bud.  Your budget should consist of absolute essentials: Savings, Rent/Mortgage, Heat, Light, Phone, Food, Health needs, Internet, Transportation and Insurance. Although essential, some can be trimmed down. Anything beyond that can be nipped.  There are, of course, times when incidentals are needed and should be purchased.  And spending for an occasional treat is good for the psyche.  But each paycheck, nip everything possible.

Tuck…..Tuck everything you nip from the budget and add the money saved to one of your savings accounts. Even a small amount counts…..it all adds up.

Sculpt…..Sculpt your dreams and goals around your Retirement Portfolio, and aim for saving to meet those goals and to one day make those dreams reality. Time moves quickly…..plan and prepare.

Couples And Budget Knowledge

Each of you need to know how to handle budget matters.

In a relationship there are two of you.  You are in it equally and therefore add to, as in income, as well as subtract from, as in spending, and everything else in between.

This means you both – equally – fall into the ‘Need to Know Category’.

Set time aside each week, say one hour (more if needed), to go over all the finances from the past week.  Knowing how hectic life can be is a known factor, but this one hour date each week is essential to staying on top of your finances – getting a handle on it right away if it needs fixing.

It’s not handled by one and not the other…..it’s something that is shared – done together.  The income of it, the saving of it, the spending of it, the balancing of it.  Each should know where the money has gone…and why.  Spending should not be done without the knowledge of it to the other.  Special occasion gifts might be the exception to the rule.  But other than that, set a limit – say $50-100., that cannot be spent without letting the other know first.  Keep it all above board.

Too often we hear, “Oh, he takes care of all the bills, I have no idea about that”.  Or, “She’s better with money, so she handles all of it, I don’t have time, or a clue on how to do it”.  As soon as the relationship starts to get serious, work on the budget together.  If already in the relationship, start now….right now. Make a spreadsheet, so it’s all there, in black in white.

As time moves forward in the relationship, knowing what you have, and how to save, how to budget and stay within it, and how/when bills are paid so there are no interest charges or late fees, is common sense.  It’s doable and easy…… no excuses not to.

It is inevitable that we all take our last breath.  Knowing all about every aspect of your Financial Health over the years together, will be one less thing the remaining spouse/partner will have to try and figure out at an already stressful time.

Renting An Apartment?

Living alone or sharing, some tips to follow…..

Congratulations!  You are on your own and looking forward to living in, and decorating your own home.

Until you can purchase furniture pieces you choose yourself, many will use ‘hand me downs’, which is fine, and often some of those pieces will last for many years and be very useful to you.

If you can buy your own furniture, it is best to choose good, sturdy pieces so you won’t have to replace it in a couple of years.  It’s better to buy a few needed pieces, ones that will last, and hold off on others until you have the money to buy them…..this also gives you the enjoyment of ‘a treat’ here and there.  Choosing pieces that ‘store’ things do double duty… choosing a table with a drawer and/or bottom shelf, or a small chest of drawers in a hallway etc., can automatically keep things out of sight and neat.

A cleaning hint: instead of furniture polish,, dampen a micro fabric cloth with water, squeeze it out tight, and after having cleared the items off the furniture wipe it down with the micro cloth, let the furniture dry completely, then replace the items back on it.  No furniture polish to buy.

Keep things simple…… sparse is better.  It looks neater (and less to keep clean).

If any problem arises (with plumbing, leaks, large appliances, electrical, anything having to do with the apartment itself), notify the landlord or rental agent immediately.  A phone call is fine, and especially in an emergency, but an added “insurance” for you is to have it in writing as well.  So send an e-mail, stating that you are following up with your phone call, and put all the details in writing.  This gives you written verification… something to fall back on… should you have a problem arise about  any….”you didn’t say that before” conversations.  Always get/put things in writing.

Landlords typically ask for first and last months’ rent, along with a security deposit, (often a full months’ rent).  The security deposit is held by the landlord separately in a savings account, and when you move out, the security deposit, along with interest, is returned to you, providing there is no damage to the apartment done by you. ‘Normal wear’ is not counted as damage, nor is the replacement of old or now non working appliances.  If there is damage caused by you, the cost of repair(s) is taken out of your security deposit, and the balance (if any) is returned to you after you vacate the apartment. This can take 30-60 days), so keep tabs, and be sure you get any money due you.

It’s a good idea to have a separate account for your rent…. You should add a ‘cushion’ of a month or two of the cost of rent, and each month round up the rent figure and add that too.  Remember when you move, there will be moving costs, along with first, last, and security deposit for the next apartment.  This is 3 months of rent money you’ll need up front.  If there is a rental agent/broker, there is usually a fee for them too.

An important note, if you’re sharing the apartment, and the cost of rent, along with any related costs (utilities, food etc),  keep up with your savings account, but do so privately.  Do it separately.  Do not use that account as the one you use to share the rental fees.

Bottom line…..Be prepared…… have 3-4 months ‘rent’ money set aside for next time. You will need it, so don’t use it for anything else. And again, keep this account separate if your sharing the apartment.

Enjoy your new place!

 

A Few Ways to Accelerate Your Savings

Stay on budget while adding to savings……

Sometimes it’s hard to save.  We all go through times when life gets in the way with unexpected expenses.  But there are a few things that are easy, common sense ways, to continue to add to your savings.

If you have a loan you’re paying, say a car loan, when the maturity date arrives and the payments are all paid up, continue ‘paying the loan’, but put that amount into your savings account(s).  You got along without it these past years, so you still can.

Make lunches to bring to work and school.  Cook meals at home rather than eating out at restaurants…. homemade meals are far cheaper than eating out.

Make your coffee/tea/cocoa at home and put in a travel mug to take along.  Even one cup of your favorite beverage every day bought at your favorite stop, times seven days a week gets pretty pricey.  Get a pen and paper and figure out what it costs for a year…. until the figure is seen in black and white, quite often we don’t give it a second thought, and have no idea it is costing us that much.

Cut back at the grocery store by using store brands, coupons, watching for sale items and buying what you need while the sale is on (there is usually a 6 week cycle for items on sale). The snack aisle can be a costly aisle to walk down.  It’s another area where you add things to your cart without thinking of the cost.  Add the cost of the snacks in your pantry…. leave the snacks out of one grocery shopping trip….then every other. Put that money you would have spent into your savings.

Talk to all those you exchange gifts with, and instead of gift giving, maybe instead of individual gifts, you all could have a get together with each bringing a ‘grab gift’. Have a ‘potluck’ dinner with each bringing something to eat.  The money saved on gift giving can then go to your savings. And the get-together will be a lot of fun and make great memories.

If you get a pay raise at work, put the difference of what you had received before and the amount you now receive into your savings. Again, you got along without it before.

And of course, if you’ve been paying down your credit cards and now have zero balance(s), kudos to you!  But continue ‘paying’ the amount by adding it to your savings now.

All easy, but common sense ways to see more going to your savings.

 

 

Credit Cards

Credit Cards aren’t for everyone

Credit cards are a means of purchasing something without handing over cash.  They are a convenience when used properly….and they can be a curse if not.  They can be a financial nightmare.

The convenience is that a card is handier than cash.  Or you’re making a purchase of something ‘on sale’, and don’t have the cash with you. They are a curse when you don’t pay it before the due date or don’t have the full amount to pay it, adding a late fee as well as interest charges on the remaining balance, thus wiping out the ‘on sale’ amount.  Before you slide the chip in, ask yourself “Is the money there to pay for it”? – “Do I really need this?”  If the answer is no, put the item back, and walk away.

Keeping up with paying for purchases made in full and on time adds points to your Credit Score.  Something you need to do to stay in good  standing with creditors. Your score is a link to your credit history – how you pay off your debt.  A score in the excellent range can get you a lower interest rate on a loan, or a house/apartment over someone else with a lower score than yours. Your credit score follows you throughout your life, and if you’re ‘a couple’, the score of your ‘other half’ is factored in to yours.  It’s why it’s imperative that you talk finances and have all debt paid off, for both, before you say “I do”.  Their financial mess is yours, and vice versa.

Credit cards are not to be used carelessly.  Until, and only if you are disciplined enough to pay in full for purchases when the bill comes due, do not use them.  Do not open one.

Do your homework before you open a credit card.  Some have an annual fee, so watch out for that…..there are a wide variety that are free.  Each come with their own features – many with rewards.  Unless you can use their type of rewards, pass on that one, and look for another.  Read the material and ask questions before you open one.  If you don’t follow the guidelines —- it can cost you plenty. And if you don’t pay in full and on time each month, adding purchases on top of those already there, and still paying only the minimum, turns into a financial hole that can take years to climb out of.

Do not put another person on your credit card.  Don’t be tempted with ‘their’ extra points to get you travel benefits or whatever the rewards are.  They will all be wiped clean if the other person doesn’t pay for the purchases he/she has made, both in full and before the due date….and their credit score is linked to yours because of this card.

We often pull out the credit card, swipe it, and forget about the purchase, only to be shocked at the balance at month’s end.  We open the bill, stare at the balance, and think, “that can’t be right’.  So, during the month, call the Customer Service number on the back of the card, they’ll ask a question or two and then give the balance as of that day.  Get used to checking on this at least twice a month, so if you’re getting close to what you can pay when the bill comes due, you can stop using the card so you won’t overbuy.  This will prevent surprises when the bill comes in, as well as not being able to pay it in full resulting in interest charges on the unpaid balance next month.

Be credit card savvy.

 

 

 

 

Why Separate Savings Accounts?

Savings at a Glance

Keeping your budget on a spreadsheet, seeing at a glance what you have and what you spend, is the best way to stay disciplined.

The same holds true for your savings.  You should have separate savings accounts, so you can see at a glance, not only how much is there, but how much you need to add to each for their specific use.

Cash Reserve Account:  This is the one that you would use only if you, for one reason or another, lost your job… that your income has stopped. It is for no other reason. In this account, there should be a total of 9-12 months of your total income.  Should you get laid off, or need medical leave, the 9-12 months amount will pay for your monthly expenses until you return to work and have wages coming in.

While you’re out of work, do not buy incidentals, do not eat out, this account is only to be used for necessary living expenses.  And, on your return to work, you need to replenish what you withdrew to keep it current with the 9-12 month figure.

Liquid Emergency Account:  This is the one that you have for an emergency purchase.  Liquid means it’s there, it’s available to use.  This account should have a few thousand dollars in it. Should an emergency arise you’ll have the money to take care of it.  This is not for buying a new outfit or shoes, or dining out.  Emergencies here mean, car repairs, tires, root canal, eyeglasses, plumbing etc.  Emergencies mean a stressful situation.  Having the cash to pay to have it fixed takes some of that stress away.  And remember, you need to replenish whatever you take out.

Retirement Account:  This is the account that you set monies aside for your future.  For your retirement years.  You will need it. There are many types of accounts for this.  Seek out a Fiduciary…a Financial Adviser to help you, explaining each ‘vehicle’ available – be sure you ask questions and understand what the rules are, and understand completely what you’re signing on for.  Retirement accounts are meant for just retirement.  So, that said, know that any money put into a Retirement Account stays there until no earlier than when you turn 59 1/2, and some not until you’re 72.  There are both tax penalties and early surrender charges if you don’t follow the rules.  Ask questions.  Understand answers. And, do not count on Social Security.

Rental/Moving Account: This is one where it is a good idea to have money set aside for moving costs and also first, last, security, and sometimes, broker fees.  Should you choose to or need to move, the money is available when you find the new place. If you don’t have this set aside being able to put a hold on it, you could lose the apartment to someone who had saved up.

Down Payment for a Home Account:  Those choosing to buy a home, should have a down payment of at least 20% of the cost of the house they are purchasing.  In this account there should also be extra money for Closing Costs (lawyer, title, Registry of Deeds), which can run a few thousand dollars.  And remember, you’ll need a lawn mower, shovel, etc., so save for that.

Bottom line…….    It’s imperative that you save……. Save every penny you can. Every cent counts.

Mortgage Dictionary – Some Terms To Know

Buying a home? ….terms to be familiar with.

  • Offer to purchase – You’ve found a home you’d like to buy – to ‘hold’ it, sign an Offer To Purchase and put approximately $1,000 down.
  • Home Inspection – It’s a wise idea to have the home inspected (approximately $500.  Both inside and outside is checked for any issues that need repair: insulation,  heating/AC, roof,  appliances, plumbing, etc,… You’re informed of anything that may be a cost issue for you.  If repairs will be costly, now is the time to back out, or have – in writing – that the owner will pay for the repairs. If you back out, your Offer to Purchase money is returned in full.
  • Down Payment – This along with the Offer to Purchase money, totaling (usually 20%), is now your Down Payment….It cannot be refunded.  If you are at this step, you’re buying the home. If you back out, the seller gets the down payment to keep.
  • Closing Costs – Depending on the cost of the home, closing costs usually run around $5,000. more or less.  These are costs for Registry of Deeds, R.E. Lawyer, Title Search and incidentals related to the closing of the property.
  • Homestead Act – Important to get at the time of closing.  The cost is $35. for $300,000. coverage in the event that you are sued up to that amount.  Let your lawyer know beforehand, and remind him/her again before the closing, that you want to get it, and have the $35. to give the lawyer at that time,  It’s also done at the Registry of Deeds, and is more than worth the charge.  It’s an important document, keep it safe.
  • Interest Rate – Choose a fixed over a variable.  Fixed stays the same, and you know what your paying all along.  A varied changes, sometimes dramatically, and can raise the mortgage payments.  If your Credit Score is high, you can get a lower (1/4 – 1/2%) rate.
  • PITI – Principal, Interest, R.E. Taxes, Insurance – Your mortgage will equal these four items… Principal and Interest is the part of the figure which is the actual mortgage figure reducing your loan.  Real Estate Taxes and Insurance are a part of the total figure, but held by the lender and they pay the taxes and insurance from the money held (escrow), when these bills become due. Taxes and Insurance may change occasionally.  The principal and interest figure remain the same, and each payment reduces the loan.
  • Mortgage Insurance – protects the lender if you default on your mortgage payments…it does not protect you. If you put a down payment of 20% or more, you don’t have to buy/pay for this.  But… any less than 20% down, means you must get Mortgage Insurance and make payments to it, until 20% of the cost of your home is paid. Try not to do this. Put 20% or more down. The more money you put down, the less the mortgage payment each month.
  • Condo Fees –  If you purchased a free standing home, you don’t have condo fees.  If you purchased a condo, the condo association charges fees for maintenance and upkeep of the building and land.  These are in addition to and separate from any mortgage related costs
  • Equity – principal and interest are paid either monthly or bi-weekly.  In the beginning of the loan, you’re paying almost all interest, and very little principal.  Each month, a bit more of the principal is paid and a bit less of the interest — over time, the principal outweighs the interest.  When the loan is paid in full, and the home is sold, the amount of principal is yours, if it’s sold for more than you paid, the difference is yours too minus closing costs. Equity is sort of a savings account for you.  It’s the best reason over renting (with rent, you pay it, it’s all gone). with buying, the principal paid comes back to you when sold.
  • Escrow – The ‘name’ of the account held by the lender holding the taxes and insurance part of your mortgage payment until the payments are due – they’re paid from that account by the lender, who will let you know the taxes and insurance have been paid.

 

 

Tweens and Teens

Be the money savvy one in the crowd

Everyone likes to have friends, be in a group, be popular.  But you have to be wise too.  Just because everyone else is doing it, doesn’t mean it’s the right thing to do…… you’ve definitely heard that phrase before….but it’s true. Think for yourself. Trust your gut.

The majority of those your age truly don’t know how to handle money.  Maybe it’s simply because no one has brought it up.  However, before you know it you’ll be out in the world, a job, college, an apartment….and bills.  Bills you incurred, and are responsible for paying.

Learn before then – when you’re receiving an allowance (hopefully you’ve done chores to earn it) or maybe babysitting or mowing lawns etc.  Doing something that gives you some money for yourself.  Learn how to budget, how to divvy your money into categories.  Saving, holding aside, spending.  By starting now, saving right from the beginning, you’ll be way ahead of everyone.

The first rule is….Pay Yourself First.  That means… Save … some. Be disciplined about saving. Open a bank account and deposit it as soon as possible after you receive it.  Put some aside if you’re saving up for something in particular, thus teaching you that until you have the full amount to pay for an item, you don’t buy it. And yes….. you can spend some, and have a little fun.

Loaning money to your friends….hmm….maybe to get a bite to eat, is okay, but the word ‘loan’, means the borrower will pay the money back to you as soon as possible.  Do it once, and once only….If they have ‘forgotten’ to pay it back, don’t be shy, ask for it.  Do not loan a second time If they have yet to pay back the first loan.  This works both ways….if you need to borrow a few dollars…, be responsible, pay it back as quickly as possible – it’s the right thing to do.

Learn how to use a check register (or make a spreadsheet).  It’s easy, and it lets you know where your money came from and where it went.  It will keep you watching for overspending and nip it in the bud…..in that way it won’t get out of control.  You will get in the budget habit right away, and you’ll have the pleasure of watching your savings grow as well.  Every cent counts.

If you learn how to handle money properly early on, you will be less apt to get into a financial mess later on.  Discipline is key.