Category Archives: Financial Health

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.

The “Budget Filing System”

Keeping categories separate lets you see at a glance.

Save first. Once you’ve put your savings into their allotted accounts, separate your budgeted money into three categories… Rent/Mortgage, Regular Bills, and Occasional Bills.  Open a checking account for each one.  Doing so, keeps you ‘on target’ with money in each when the bill comes in.

Rent/Mortgage:  Meaning your ‘overhead expense’ – Rent, or if you have a mortgage (which includes PITI (Principal, Interest, R.E. Taxes, Insurance), and Condo Fees if you own a condo.

Regular Bills:  Meaning monthly bills, the ‘Have to’s’ … Heat, Light, Food, Health Insurance Premiums, Phone, Car or transit costs, internet.

Occasional Bills: Meaning annual, semi-annual insurances, RMV excise tax etc.  Clothing, entertainment, gift giving are in this category too, however, these can be trimmed to the bone, or omitted.  Get along with the clothing you have, Drastically cut entertainment and gift giving. Your goal here is to get out of debt, save every penny you can.  You can do this.

After having made your budget, figure how much of your income should go in each category, and deposit that amount in the appropriate account each payday.  When paying a particular bill, withdraw it from…only…that account category.

Doing so keeps things in order. It allows you to, at a glance, know exactly if, and where, you’re falling short and the need to re-evaluate your budget…immediately.

A suggestion for all, but especially the rent/mortgage account – begin with a ‘cushion’… some extra money. Costs rise – the cushion will help while you re-evaluate your budget accordingly.

Rent/Mortgage Account -start out with, or add to it – an extra month or two of your ‘overhead’ cost….this insures the roof over your head, meaning there is excess there should condo fees or real estate taxes rise….or if your rent rises, it also means, should you move, money is there for that ‘overlap’ of the moving month, and the deposit needed for the new place.

Continually check and recheck your budget. Recalculate so there is always enough in each account….seeing at a glance where your spending can be whittled down. When done regularly it takes about 15 minutes, keeping you financially savvy and aware of where your money goes.

 

 

 

 

Are You Paying Only The Minimum Each Month?

Results of paying only minimum

You have a credit card or more than one.  You’ve spent and spent, and there are balances on each.  Within those balances are interest charges – every month, and possibly late fee charges.  The interest, now being part of the balance owed, will, next month, and every month until the bill is paid off, will add interest on the interest already there (it’s part of the balance owed). The thing is, whatever the interest rate is,  it’s a waste of your hard earned money. On most cards it’s anywhere from about 14% -28% (maybe more).

This means when you purchased an item(s) for $100.00, and when the bill came in, you paid the minimum – about $25.00, when the bill comes in next month, you still have $75.00 remaining on the item(s) purchased, but the balance due has interest added  to that amount at the rate in the credit card agreement.  Again, you pay the minimum, $25.00, but you missed the due date.  When the bill comes in the following month, you have the balance of the item(s) bought, $50.00, interest added on that remaining balance, plus the interest charges to date, plus a late fee of about $35.00.  That $100.00 item(s) are now costing you far more than that.

Adding purchases to the bill each month adds to the problem too.  By paying only the minimum each month, you will eventually be paying more in interest and any late fees than you do in your purchases.

This is how so many people get caught up in the vicious circle of financial debt.

The only way….. the only way to get out of it is to stop using credit cards, and pay off your balance(s) as quickly as you can.

If you insist upon using credit cards, and if you want to stay out of credit card debt, do not make a purchase that you don’t have the money for.  And when the bill comes due, pay the entire balance in full and before the due date.

It’s the only way to use a credit card.  It’s common sense. It can be done.

Digging Out Of The Debt Hole

Getting Rid of Outstanding Debt is a Priority

There are millions of people who have debt, but some have staggering debt.  Sad but true. Paying down your debt, continuing to do so until you pay it off and vowing to never allowing yourself to get buried in that hole again, is your goal.  Make it your priority…. It’s imperative.

You will have to cut your expenses to the bare bones.  So start chopping…there’s no other way.  Gather your debt statements.  Call the creditors and tell them you are serious about paying it off, letting them know that you are putting serious effort into getting down to a zero balance.

If the debt is your home, (if you’ve missed some payments) – that will have to be paid first, or you’ll find yourself on the street. Call the landlord or the mortgage lender and let them know you want to catch up with back payments owed, and then continue paying current payments.  Unpaid mortgages means foreclosure.  The bank repossesses the property, and you lose all you’ve put into it.  And renters can come home to find that the locks have been changed.

If the debt is your car, it may be your transportation to work. So, if it’s repossessed, whatever you’ve paid into is is now gone along with the car.  The only way to get it back is to pay all the back payments owed as well as the repossession costs (towing, storing etc). You may no longer be able to get to work if you don’t have your car, so losing your income is added to the mix.

If it’s credit card debt, stop using the credit card(s) immediately.  it means you’ve been overspending.,,,buying what you can’t afford, and not paying for what you do buy when the bill comes due, thus allowing the balance to accumulate along with added fees.  In checking your credit card statement(s), you will notice that a good deal of the balance is a high interest balance that has been included – which is money you now have to pay, but have nothing in your hand to show for it.  Also, if you’ve paid late, that tacks on an additional fee for each occurrence, …completely wasted money.  Stop using, but don’t cancel your cards.  Cancelling will decrease your already plummeting Credit Score.  Hide the card(s).  Or better yet, shred them.

Whatever the cause of the debt, paying it off, repairing your Credit Score, and living within your means is key.  You can turn your Financial Health around.  Learn from your mistakes, and don’t fall into the debt hole ever again.  Once out of debt, you can begin to add to your various savings accounts, by using the money you’re now not wasting on fees and old debt.  A gift you give yourself.

Why Am I Living Paycheck To Paycheck?

You Work Hard For Your Money – Know Where It Goes

Everyone, at some time or other, has said, “I don’t know why I have no money”….or some such phrase.  You work hard, get paid, pay the bills, and there’s nothing left.  Where…did the money go?  Good question…..do you ‘know’ what you spend your money on?  Really, ‘know’????

A good guess is you are wasting a lot of money…..without even realizing it.  So, grab paper and pen.  Make a list of ‘incidentals’…. stopping for coffee, lunches, vending snacks, entertainment, gift giving…..  You get the picture….they are anything other than necessary living expenses (‘have to’s).  Think through a few days last week. Where did you stop to get an item, and come out with a few?   Add up what you spend each week on incidentals. Surprised? Those quick stops can be costly.

Some of these items, although necessary sometimes, can be easily scaled back.  Quite often, these are the things that eat up a good chunk of your budget each month — far more than you thought.

Paying bills on time and in full, will eliminate interest charges and late fees which are a complete waste of money.

There are hidden, and easy, ways you can lower costs on other items in your monthly expenses too, which leaves more of your money going into your savings, whether it be your Retirement, Emergency Reserve 6-12 month ‘Cushion’, or Liquid Emergency Account.

Once you get the hang of it, you’ll be able to continually scrutinize your entire budget, and find some savvy ways of shaving your expenses.

 

Setting up a budget

See it in black and white

Most people truly have no idea where their money goes.  They spend, pay the bills and then wonder…. ‘where did it all go’? …. So, get paper and pen.

Make a list of all your monthly expenses….every single one of them.  List according to priority.  Any outstanding debt should be paid off as soon as possible.  Now, make a second list of all your annual expenses… such as insurance, life, home, car, excise, RMV expenses, birthday, anniversary, holiday gifts etc.  Don’t miss any.   Add them up.  The total should not be more than your take home income.

Once your outstanding debt is paid off, begin to save.  Savings should now be listed first in your budget….’Pay yourself first’. it’s an ‘expense’ which is, in truth, a gift to yourself.  And you need to get in the habit of saving.

If your expenses are less than your take home pay, kudos to you!  Keep up the good work!

If your expenses are more than your income…..common sense…..you are overspending!  You are living beyond your means.  It’s time to take a hard look at exactly where your money has been going, and make a serious commitment to cutting back, going on a spending ‘diet’.

It’s time to start backing off on incidentals… shaving unnecessary spending.  This will be easier than you think.  Really.  Start by listing things you can cut back on – even here and there, or maybe completely. Examples:  Make coffee at home 3 times a week, dine out once a month instead of once a week.  Cut out vending machine food.  These are starters, but you’ll come up with more.

Seeing it all in black and white, and where and how your money has been spent, will help get you on track to keeping your financial health in check.  It’s a matter of continued discipline, and it’s easier than you think.  You’ll be very happy you did.

Having your financial health in order relieves stress in your life.  Knowing that, should an emergency arise, you have the money already set aside to handle it.  You’ll also be able to enjoy the lifestyle you chose when it’s time to retire, because you’ve been saving for it all along.

 

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Ways To Trim Your ‘Monthly Have To Have’ Things

Common Sense ways to cut back — it can be done, saving $$$.

Heat/AC – When the heating season begins, don’t put the thermostat on what you’d have it on in Winter months.  Instead, as needed, start with 59-60.  You’ll become accustomed to that for a while.   Next month, add a degree or two – only if needed….and so on. Wear a sweater.  Before you know it, it’s Spring and begin to reverse the thermostat.  This saves $$$ over the Winter months.  In the Summer run the A/C the same as the heat, but in reverse.  Running a fan is even cheaper.  Follow the sun with your blinds – open to sun in Winter, close to sun in Summer.

Light – Proper lighting is needed for reading, project work, doing anything requiring seeing and avoiding eyestrain or falls. But when not needed, and certainly when leaving a room, shut off the lights.  Use energy saving bulbs in all light fixtures.  Night lights give off a lot of light too.

Food – Don’t waste food.  Eat or freeze leftovers. If expiration dates are coming due, cook and freeze.  Use coupons when shopping.

Phone – Make sure you’re getting the plan that fits your needs so you don’t pay extra charges.

Health Ins. Premiums – At ‘open enrollment’ check all plans and pick what works best for you.

Internet – Having internet allows you to have internet along with streaming features.  But rather than paying cable charges for channels they choose but you never use, drop the TV part of the bill.   Streaming services are available for $10 -15 a month, and gives you more than an ample variety of all kinds of shows and movies.  Each service has their own specials as well and they update often.

Car/transit costs – Keep your car in good working order. Pay your insurance premium when due, and in full, saving 5% or more.  Follow the rules of the road, avoiding tickets etc., and it also give an additional discount on your insurance premium.  Check all discounts you may be eligible for.