Author Archive

Planning for your Second Life: The New Retirement

Monday, November 17th, 2014

From our money & finance contributor, Kelly Whalen.

Note: This will be my last post as a contributor for MomAdvice. Thank you for all the thoughtful comments, support, and most especially thank you to Amy for the opportunity. My hope is that if you look through the archives of my posts you will get a clear financial education from beginning to end. It only seems fitting to end our journey with retirement.

Planning for your Second Life The New Retirement

Most of us grew up with the notion that retirement came after 40+ years in the workforce and came with golf, social security checks, and retiring to somewhere warm. For most Americans that dream of the ‘golden years’ has disappeared. Somewhere during our recent recession it became more obvious that the idea of traditional retirement wasn’t going to be an option for most people. In fact over 60% of Americans have under $25,000 saved for retirement. *

That doesn’t have to be a bad thing, though. You no longer have to tie yourself to a cubicle or labor every day and then sit on your buns from 65 on. Instead you can plan for a second life that will be just as fulfilling as your first career — a second life that may even start sooner than you think.

Planning for your Second Life: Financial Planning

Start Saving Now

Saving early means your savings have longer to grow. If you haven’t started saving now is the time to start. If you have been saving for retirement consider ramping up your savings for 2015.

Take Advantage of your Retirement Options

  • 401ks are popular for companies and they offer a great advantage—free money in the form of matching from your employer.
  • Roth IRAs are another great option. In addition to using the funds for retirement you can also use them for educational costs. This allows you to bank money for your kids’ college educations, but if they don’t need or use it you can continue to bank on it for retirement.
  • If you’re self-employed look into a self-employed 401k. They offer you the ability to save more than most retirement options and have low maintenance costs.

Live on Less
It’s always good to live on less, but especially when you start to think about retiring. Cutting back on expenses now not only means more savings to grow, but you will become accustomed to living well within your means.

Planning for your Second Life: Work

Don’t Stop Working
The reality for many of us is that we will continue to work well past the traditional retirement age of 65. While you may not be suited to your current career there are other opportunities to use your skills to earn an income. Below are a few options to consider.

  • Finding a Work/Live Job: House sitting, live-in jobs such as caretaking or management can provide you with a place to live rent-free. This can be a great option in retirement to slash housing costs, and allow you to earn an income.
  • Offering your Skills as a Consultant: While you may leave your 9 to 5 gig you can still use your skills to earn income as a consultant. Whether you work with a consulting company or strike out on your own you may find you can earn even more than your typical paycheck as a consultant.
  • Bartering or Work for Trade: Relying on your skills and hobbies will allow you to barter or trade services with others. For instance, a former CPA may do taxes for a small business client bartering for their services. You can also trade your time for services such as working the front desk at your local gym for 5 hours per week in exchange for free membership.

Planning for your Second Life: Housing

Go Multi-Generational
As housing costs and expenses soar it makes sense to share housing costs, but instead of renting out a room to a stranger, or downsizing consider living with family members. While it may not work for everyone it can be a huge money saver and a way to stay connected with your family members. The big benefit comes in divvying up the housing costs and the household chores.

Planning for your Second Life: Phase Two Begins

Start Phase Two Now
Instead of waiting until your kids are all grown and you’re in your 60s to retire take a hard look at what it would take for you to be able to work less, downsize, or move somewhere more affordable now. While you may not be able to retire in the traditional sense you can realign your budget and thinking to fit a lower stress phase two of life and possibly even find room in the budget to take on a project or build a new career based on your passions instead of the need to climb the corporate ladder.

With careful and strategic planning you can move into the next phase of your life and find it just as fulfilling (if not more so) than your first life.

*Source: Employee Benefit Research Institute

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Do You Really Need That Degree? College Loans, Options, and Savings

Monday, October 27th, 2014

From our money & finance contributor, Kelly Whalen.

College debt has reached an all-time high in the United States. Collectively, we owe over a trillion dollars in student loan debt. Yes, trillion with a capital T. It’s actually over $1,200,000,000,000. Ouch.

Is that degree really worth it

Student loan debt is unlike most other debts though in that it is nearly impossible to get rid of, known as forgiveness or discharge. This means even if you fall on hard times, lose a job, or your life circumstances change drastically it’s extremely uncommon to have that debt wiped away – you’re pretty much stuck with it. For some adults this means they will be carrying debt from choices made in their teens and twenties well into their middle age and often they’ll still be paying off those debts while paying for their children’s education.

When considering our finances it’s important to look at the impact student loan debt has since many readers are impacted by college debt. It’s likely you still owe for your college education if you have one (and often even if you don’t have a degree!). Others may be considering college costs for their children whether they’re toddlers or getting ready to head to college. Finally, there are many adults who go back to school when they change professions or need additional education to improve their earning power.

Since there are a lot of scenarios to cover here I’ll break them down, and you can head to the subsection that applies to you.

Already in Student Loan Debt

You already have a degree and the debt to prove it. While you may owe anywhere from a few thousand to tens of thousands the advice to not get into debt doesn’t apply. You need solutions and advice on getting out of student loan debt.

Consolidate

If you have multiple loans look into consolidation. You can consolidate loans with your spouse as well. This may allow you to get a lower interest rate or lower monthly payment, but it also makes it easier to manage than several loans.

Pay More than the Minimum

While it’s common sense, paying more than the minimum means you will pay it off sooner. Some ways you can ‘find’ more than the minimum in your budget include: slashing expenses (like dropping cable or getting a cheaper cell phone plan) or adding any pay raises to your loan payment.

Work a Side Gig or Second Job

Need to earn extra money to meet your loan payments or increase your payments to pay it off quicker? Get a side gig or work a second job to earn extra money to put towards your college loans.

Investigate Options

If you’re really struggling financially like having no job call your student loan company before you skip a payment. They may be able to hold or defer payments or offer some other options to help keep you from defaulting on your loans.

Getting Ready or Going to College

If you or someone in your family is headed to school or back to school for a degree it’s the perfect time to consider all the options.

Do you Really Need That Degree?

While a college degree is still statistically going to increase your earning ability over time it’s not always a necessity in every profession. Some professions simply don’t require a degree, and many trades are desperately seeking qualified and well-trained individuals.

Additionally, the job market has changed drastically to allow small businesses with little overhead to thrive. In an age of consulting, freelancing, and startups a degree is nice-but it’s not exactly a requirement. Depending on your skillset you may not have the need for a traditional college diploma.

Check Pay Rates and Rental/Home Prices

Whether you’re going back to school or headed to college for the first time you need to consider the cost versus the income you will earn in the future. While we all know there are no guarantees of future income checking pay rates in your area and investigating the cost of housing will help you get a general idea of what you’ll have to spend on student loan repayment.

For instance, it doesn’t financially make sense to spend $150,000 on a degree if the average entry-level earnings are $35,000 per year and average rentals cost $750/month.

The math would show you it would take an awfully long time to pay back your loans, and in the end it’s unlikely to be worth the added stress and costs when you could get a solid education and degree for 1/4 that cost.

Exhaust Scholarship and Grant Options

Grants and scholarships are plentiful, but it takes some hunting and some time to getting the most money you can for school. If you dedicate the time upfront though you could end up saving thousands of dollars. There are scholarships and grants that are high value and competitive, and there are smaller scholarships and grants that are for less money and more obscure.

Consider Starting Small

Instead of diving into a 4 year college with big expenses consider a local, smaller school to get your initial credits out of the way. You could even consider an online education if you’re an adult or need to work full-time to fund your education.

Saving for Future College Costs

Saving for your children or family members who you hope to help go to college is a great gift, but you have to consider all the options before you start saving.

It’s vital to be sure you aren’t locking up money that is needed for an emergency fund or for retirement first and foremost.

However, if you have a healthy emergency fund and are (mostly) on track with retirement savings here are come options to consider:

529 Plans

529s are a great option since they offer no taxes when withdrawn for qualified education expenses like tuition. Many states also have no tax on withdraws.

There are two types:

  • Pre-paid plans: You pay for college costs at today’s rates even if costs go up when your student goes to school.
  • Saving plans: Savings plans are based on the stock market with a mix of investments that get more conservative as your child nears college age.

The downside: Funds that aren’t used for college are taxed fully and a 10% penalty is tacked on. While it’s hard to tell when they’re infants, it’s not exactly ideal if Junior decides not to go to school or ends up with a full scholarship.

Roth IRAs

Roth IRAs are a retirement savings vehicle, but they also offer the option of withdraw for college expenses. This can offer the best of both options for families who need to get the most out of their long-term savings.

With a Roth IRA you can use funds for educational expenses OR retirement meaning if your child doesn’t need all the funds you can continue to grow them for retirement without paying penalties.

The downside: Current Roth IRA limits mean you can only save $5,500 each year or $6,500 if you’re over 50 in these accounts.

Note on investing for college: You can encourage family members to add to your little tyke’s college fund (for instance in lieu of gifts for the holidays or birthday presents). For instance grandparents can gift funds to each child, currently you can give $14,000 per year without penalties. 

When Should You NOT Save?

If you’re in debt or struggling financially saving for college shouldn’t even be a consideration. High interest debt (i.e., not your mortgage or your own student loans!) should be tackled before you consider saving for college. If you’re paying 14.99% on your credit cards the math is against you saving for college costs…for now.

Parents often make the mistake of saving for college funds over retirement thinking they have less time to ‘catchup’ on college education costs, but if they aren’t maxing out their retirement savings they could be in major trouble later in life.

While it is a great goal to make sure your children enter adulthood debt-free it shouldn’t come at the cost of your own savings and financial stability-that will impact your children now.

What it comes down to is this–take care and consider all your options whether you’re paying off college costs or saving for your children’s future.

What are your thoughts on student loan debt and college savings? Do you still owe for your education or are you worried about financing your children’s education?

 

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5 Ways to Teach Kids Money Management

Monday, September 15th, 2014

From our money & finance contributor, Kelly Whalen.

5 Ways to Teach Kids Money Management
Teaching kids to manage money can be a challenge, but with a little planning you can share lifelong skills that will help the kids in your life live a richer life.

5 Ways to Teach Kids Money Management

 

1. Give an Allowance

Allowances are useful tools that allow kids to manage their own money on a small scale. There are lots of considerations when giving your child an allowance.

  • Should you give it to them weekly? Bi-weekly? Monthly?
  • Will you track via an app or will you give the kids cash?
  • Should you tie it to chores or simply use the allowance as a tool for learning?

What works for you and your children may take some time to sort out. Additionally it will depend on their age what you consider an appropriate amount of money and how often they should receive it. For instance, a 5 year old may only get $1 per week to spend and save, while a 14 year old may need $15 per week for things like school lunches, spending money, and savings.

Manage their expectations by being clear about the rules of how they spend their money. These are a few rules that we use with our kids that you may find helpful:

  • No going into debt with the Bank of Mom & Dad
  • Savings must equal 10% or more
  • Giving must equal 10% or more
  • Mom & Dad have final approval over all purchases

Start your kids on an allowance early (around age 5) and you’ll find plenty of teachable moments as they learn to manage their money.

Read more: Kids and Allowance

2. Make Giving a Priority

Giving back is an important part of our financial life so we pass on this value to our kids by making it clear that giving back is a priority. You can do this through monetary donations, but don’t overlook the value of time as well.

Ideas for Incorporating Giving Back as a Family:

  • Set aside a % of allowance for donations
  • Commit to donating X hours of time each month as a family
  • Participate in community events like Fun Runs to raise funds and awareness for a cause
  • Find small ways to give back such as buying extra school supplies for your children’s teachers or collecting gently used winter gear for kids in your community
  • Give back by donating items you no longer need like giving used books to your local public or your school library

Read more: 5 Ways you Can Teach Your Kids to Give Back.

3. Encourage Mistakes Now

Encourage your kids to have some freedom to make mistakes with their money now so that they learn when they are young how those mistakes can impact their long-term goals.

For instance, if your child decides they “must have” a toy or item that you know won’t be worth the money you can explain it to them, but also allow them room to make their own decision. They will quickly learn how certain toys are marketed to seem much more fun than they really are!

While it’s hard to watch your child make mistakes they will learn from their actions instead words, and those lessons tend to stick with them much longer. It’s better to make a $10 mistake now than it is to make a $10,000 one when they are an adult.

4. Practice what you Preach

Speaking of actions being louder than words-be sure to show your kids a good example as well. While we’ve covered a range of financial topics here in the past it’s the everyday decisions our kids seem to latch onto readily.

By doing things like shopping with a list, avoiding impulse purchases, and sticking to your budget you will be doing more than just saving yourself money-you’ll be teaching your kids to do the same.

5. Involve Kids in Family Money Decisions

While some families may feel the family money is a private matter be sure to be open about how the bills are paid and how family money decisions are made.  For instance, if you’re planning a family vacation you can set up a family money jar and discuss what things the family can cut back on to make the vacation a reality.

As kids get older you can become more open about your finances and teach them the real nuts and bolts of managing credit, debt, and making the tough financial decisions that most of us face.

While your 6 year old may not need to know how much you pay for electricity each month you can explain how much you save if he turns his light off before he leaves for school. The older your child becomes the more you should share with them. For instance perhaps with a 16 year old you may be more apt to discuss car payments, insurance, and maintenance as they learn to drive.

What advice do you have for teaching kids money management skills?

 

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Can Debt be “Good” Debt?

Tuesday, August 12th, 2014

From our money & finance contributor, Kelly Whalen.

Debt is a four letter word for many of us. We don’t want to carry debt. We don’t want to owe money to anyone. We work hard to eliminate debt and keep ourselves from going into debt through careful spending and strategic saving. But is there ever a time when debt is good? Can it help us meet our goals?

Can debt be good debt via MomAdvice.com

Mortgage Debt

While it would be lovely to buy a home outright, for most of us a little mortgage debt is necessary. Mortgage debt can be considered ‘good’ debt since the mortgage interest is tax deductible, mortgages allow you to settle into a home (and community) for a long period of time, and it offers you a stable monthly payment for your housing.

In the boom of the 2000s when mortgages were cheap and houses were expensive everyone was buying a house whether it made financial sense or not. Now the market has stabilized somewhat and in many housing markets it’s a great time to buy. You can find a home for much cheaper than you can rent in the same community. In addition, you may be able to build value by buying a home that has been foreclosed or needs some TLC.

Already own a home? Consider that debt to be a stable ‘rent’ you’re paying each month. You’ll get to live ‘rent’ free once your mortgage is paid off allowing for a lot more flexibility than an actual rental home.

If your home is underwater or you owe near what it’s worth consider your options when it comes to housing. Could you refinance and save on monthly payments? Could you pay it off faster with a shorter term mortgage? Would a short sale make sense for you financially? In some cases it may still be cheaper to stay in your home than move and pay for a rental home.

Education Debt

Americans owe over a trillion dollars in student loan debt, and student loan debt now tops all other forms of debt. While there is a cautionary tale here about not going too deeply into debt for your education, there are times when student loan debt is ‘good’ debt.

Education debt can be a smart financial move if you want to go into certain careers like becoming a doctor or lawyer. Mastering certain skills may require higher eduction as well. In addition some careers or jobs benefit from the networking that happens on a college campus.

Beyond college-aged kids though, there are other reasons you may go back to school as an older student. You may have had a life issue interrupt your schooling at the typical college age, or you may go back to school for a higher degree like a Master’s in Education. In these cases you may get some help from your employer to cover school costs or qualify for different grants and scholarships than younger students.

Earning a degree may be expensive but if it allows you to improve your income and offers you more stability in your career, then the benefit can outweigh the costs.

Car Debt

In most cases automobile loans are ‘bad’ debt, but in some cases a reliable car is a necessity and can help you earn a better income. If your job relies on a car, then having a set of wheels and good insurance is key to maintaining that job. In many suburban areas a lack of public transportation, reasonable transportation options, or safe walking and biking lanes can keep you from commuting to your job via an alternative method (you can read more about saving with these alternative methods of transportation here).

While saving and paying cash for a car is ideal, in some cases taking on car debt instead of spending all your savings may make sense. Just be sure when you’re weighing the cost of a new or newer used car versus something you can buy outright you take into account the maintenance needed or cost to own.

Other Debt

When you’re weighing whether debt is ‘good or ‘bad’ you need to take into account four things:

  1. Is your current debt-to-income ratio less than 35% (at the high end) or 25% (a more conservative balance)?
  2. Will the debt increase your earnings or earning potential?—Earning more can make a big impact on your bottom line.
  3. Is the reason you’re adding debt a need? Or a want?—Can you find a reasonably less expensive alternative?
  4. Are there other options that are less expensive but still provide what you need?—Would a local college give the same experience as an expensive university?

Do you think there is such a thing as good debt and bad debt? What do you consider to be ‘good’ debt?

 

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Cars, Trains, Bikes, and Feet: How to Get Around for Less

Tuesday, July 15th, 2014

From our money & finance contributor, Kelly Whalen.

Transportation costs are often the second largest expense after our homes. For cars, the cost of ownership goes beyond the sticker price and includes everything from oil changes to replacing tires and wiper blades regularly. Train and bus passes may save you big bucks, but they can also add up to lots of time (especially if you encounter delays). Walking is by far the cheapest way to get around, but it also takes the most time and may not make sense more suburban and rural areas.

In the end it doesn’t matter much how you travel- by train, by car, or by your own two feet -they all cost time and money. So, let’s dig into how to get around for less.

How to Get Around for Less

Location, location, location:

They say it’s true for real estate, but it’s also true when it comes to public transportation. If you live in an area that’s far away from work, school, and activities you will spend more time behind the wheel. If you live somewhere that has decent public transportation you may be able to rely on it for commuting. In suburban areas you may be able to do a combo of using both trains and buses and relying on your car for things like errands. While we can’t always pack up and move it’s worth a second look at what your community offers in terms of transportation.

What to look for: Look for bike routes, walking paths, bus stations, trains, and car sharing options in your local area. Try using Google Maps to create your route and look at what public transportation options are available. While biking and walking directions should be examined closely in street view (as they are in beta in many areas) you may be pleasantly surprised to find new ways to travel.

Do the math: If moving is an option look at what you could save on transportation costs. If it’s not an option consider what you’d save by using public transportation, carpooling, walking, or biking 3 days a week. Challenge yourself to see what you can save. Consider monthly passes for public transportation as well. Many locations offer monthly passes at a steep discount if you’re a regular commuter.

Consider Going Carless

For many families, but especially those in the suburbs or country, a two car way of life is the only way that their family can meet all their obligations. Mom and Dad may work in different directions while the kids need to go to after school programs. Even if one parent stays at home it may be inconvenient to spend an hour or more dropping off and picking up their spouse to work with kids in tow.

What to consider: Look at the family obligations as a whole and see if you could juggle having one car. Consider parking one for a few days or a week as a trial. You could always keep it around if it’s not costing much in insurance money for times when it is needed. This will work especially well for families with an at-home parent who either stays at home or works from home. The office worker in the family can drive in most days, look at public transportation options for a few days a week, or even consider carpooling with a local co-worker.

My one car experience: We were a one car family for several months after my husband’s car needed repairs that cost more than the car was worth. We sold the car, paid down some debt, and worked out our schedules to make one car work. It wasn’t easy but it allowed us some time to save up for our next car purchase, and definitely challenged us to be more thoughtful about our driving. You can read more about it here.

Do the math: A car payment + maintenance + gas can add up to $100s each month. If you have a car that’s paid in full you’re still looking at thousands of dollars in maintenance cost. If you could commit to going car-free or cutting back to one car for a year you could easily save upwards of $3,000-$5,000.

Save on Buying your Next Car:

Buying a car can be an intimidating prospect. Considering that most of us only do it a few times in our lives it’s not something that’s easy to ‘practice.’ The buying process can trick you into thinking you’re saving big money, but the truth is most often the dealer will always do well since it’s a process they go through regularly. But there is good news. The internet makes it easier to find out what people are actually paying for cars (both new and used) and you can use it to your advantage to source the exact car you want at a price you want to pay.

Do the math: While it’s fun to consider snazzy features and brand names that include jaw-dropping sticker prices you should really look at function over form. You want a car that has a low cost of ownership, has the features you need (and okay maybe a few you want), and holds its’ value well.

When it’s time to buy you should put everything you can reasonably afford into the purchase so you have low or no car payments. While the old adage is that used is always better and a new car loses 20-40% of its value the second you drive it off the lot that’s not always the case. For cars that hold their value well you may even find that a newly used car (like 1-2 model years old) will be just as expensive as a brand new car.

Whether you get around on foot, by bike, train, bus or car, you’re sure to have ideas on additional ways to save. Share in the comments.

 

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Evaluating the Cost of Home: Renting vs Buying

Tuesday, June 10th, 2014

From our money & finance contributor, Kelly Whalen.

One of the largest expenses we have is our homes. Whether you’re renting or buying your home it can add up fast. While most financial experts recommend you spend 25% or less of your earnings on your home costs, location plays a huge factor in whether you can meet that guideline or not. This month we’ll be evaluating how to make the decision to rent or buy, and I’ll share some money saving tips that will help whether you rent or own your home.

Evaluating the Cost of Home Renting vs. Buying

When deciding if you should rent or buy it’s important to consider a number of factors:

1. Evaluate your Needs and Where you Are
Knowing what you need in a home or rental is the first step to your evaluation between renting vs buying. In addition to knowing what you need in a home, location plays a big factor. Look at the community you want to live in, but don’t be afraid to look outside your ideal area because the savings may be worth it.

Renting: If you’re renting it’s easier to look for something that fits you right now, but that may be a mistake. Consider what plans you have in the next several years because it is easier to stay put than it is to move you want to ensure you don’t go through the upheaval of moving multiple times especially if you have a family.

Money saving tip: Before you sign a lease find out if your rent is negotiable. For instance you may be able to make repairs or improvements for savings.

Buying: If you’re buying or own a home you will want to consider a little more long-term. For instance, if you’re planning to add children to your family or possibly care for an elderly relative you’ll want to be sure your home has enough room to grow into.

Money saving tip: Homeowners should evaluate their mortgage to see if refinancing will save them money.

2. Cost is King
Cost is a major factor in your decision to rent or buy. The costs of home ownership and rentals in your area will play a big role in your decision. In some communities and urban areas it never makes sense to buy because rent is low and home prices are high. In most areas though it can save you money in the long run to own your own home. As rental prices increase your mortgage payment will stay the same.

Renting: One of the major costs of renting a home is the deposit you have to put down. Generally this will be 2-3 times the monthly rent. In some urban areas they will require a larger deposit especially if you have poor credit. This could end up costing you several thousand dollars to tens of thousands in higher priced areas. In addition, you will have to factor in what other costs are covered (or not) by renting. Your rent could include utilities, WiFi, and water bills or might even include a building gym or services especially if you live in a metropolitan area.

Money saving tip: Consider all the costs you will have to pay when comparing rentals. If you find a rental that’s going for $1,000/month but you have to pay $300/month in costs for electric, water, and association dues that is more expensive than the $1,250/month rental that includes everything.

Buying: The major cost for buying is the down payment on your home. With the collapse of the housing market options have become more limited for people who don’t have a large down payment. However there are options to consider, so be sure to check with your local bank and mortgage broker. In addition you will have moving costs and repairs to consider if your home needs anything immediately.

Money saving tip: Shop around for pre-approval for a mortgage if you decide to buy. You can save tens of thousands of dollars by doing your homework on mortgage rates.

Prepare to Save

No matter if you’re buying or renting here are some steps you can take to get a better deal:

1. Improve your credit-
Use your free credit reports (1 per agency each year) to ensure everything on your report actually belongs to you and there are no false reports on your credit. I

Money saving tip: A credit dispute can take up several weeks to be fixed and can affect your mortgage interest rate and your ability to rent.

2. Research, research, research-
Knowing what typical rent and home prices are is the key to finding a good deal and simply not overspending on your home. You can use sites like Zillow, RedFin and local realtor sites to get an idea of pricing.

Money saving tip: Set up email alerts or app alerts so you don’t miss when new properties become available.

3. Set Expectations-
Know that there will never be the ‘perfect’ home. In most cases we have to choose the best options out of what is available and what we can afford. In some cases this means trading square footage for location or choosing an older home because the neighborhood schools are worth sacrificing granite countertops.

Choose the things that are the most important to you now and think ahead for the next several years. Will this house or rental suit your needs as your kids get older? Or are your kids older and you’ll be able to live with less space in a few years?

4. Real Estate is not an Investment (for Most of Us)-
While there are exceptions (like people who make it their business to buy and sell real estate) for most of us our homes are simply a place to live. While it’s important to pay attention to the costs it’s unlikely the housing market will climb the way it did pre-housing boom in most areas.

Since most families don’t stay in their homes and locations the way they did in past generations it’s not as common to pay off your home mortgage. Even if your mortgage is paid off and you own your home outright you will still have the costs of repairs and upkeep. When/if you do eventually sell a paid-off home you’re going to use that money to buy again.

5. Repairs are Costly-
If you’re renting, having a landlord means you will have someone to lean on when things need to be repaired and won’t have to cover the cost yourself. While you may not incur the cost directly it will be passed on in the form of your rent.

If you buy a home all the cost and work of repairs will be on you. While you can DIY some things larger repairs can be get expensive. An inspection before you buy will help identify some needed fixes when buying a home, but you may encounter things you didn’t expect.

No matter what you choose or how you save money on your home it can be challenging but worth it both financially and for your happiness. Examining costs and weighing your options may not seem especially exciting but by saving on the place you call home you can slash your budget significantly.

Of course there is one thing you can’t put a price on and that’s the feeling you get when you’re truly home.

For more in our series of money savvy tips read:

 

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Earn More Money to Help Save More and Pay off Debt Faster

Tuesday, May 13th, 2014

From our money & finance contributor, Kelly Whalen.

Saving and cutting back are not the only way to get your finances in order – in our series we’ve discussed reducing expenses, how to deal with unexpected expenses, and 5 easy steps to a budget that works. But slashing spending is only half the battle. The other half is earning more money so that you can save more, pay off debt, and reach your financial goals faster. Today I’m sharing some ways you could potentially earn more as well as some ways to make sure that extra money doesn’t end up in extra spending.

Earn More Money

Earn More Money

Earning more money is essential if you’re struggling to make ends meet. Here are some ideas to get you started on the path to earning more:

  • Ask for a Raise or more Responsibility at Work. There are many reasons to ask for a raise including being underpaid, having extra responsibilities, and being responsible for generating new income or cutting costs for your company. There are lots of tips for negotiating but the best way to get your boss to say “yes,” is to show your value.
  • Time to Job Hunt. If you are in a position where there’s no room for growth it’s time to look at new jobs. Your skills could be more valuable elsewhere. People often see a jump in income when they make a lateral move from one company to another.
  • Start a Side Gig. Whether you have an idea for a small home business or can tutor kids from home in the evenings’ it’s likely you have skills or hobbies that could be used to earn you some extra money.
  • Get a Second Job. Getting a second job may not sound ideal but look for work that fits your schedule. You don’t have to work two 40 hour a week jobs. You may find a part-time or job you can do online or at home when your regular work day is done. Use your network, friends, and family to find something that is a good fit. This could be anything from a part-time barista job to being a virtual assistant from your computer at home.
  • Improve your Education or Training. If you’ve reached as far as you can go with your current role it may be time to look at more education or training. For some industries it makes sense to go back to school for an advanced degree while for others a certification course will help improve their skill set. If you’re short on cash to pay for further education look for training, programs, or degrees that will be covered by your current employer.
  • Add New Skills to your Resumé. For many people they have a set of skills that they work with each day. Look at related skills to help improve your value to your current or future employers. For ideas on things you might consider search LinkedIn for colleagues or those with similar titles at other companies.
  • Start a Blog. Read some great advice from Amy on long-term tips for bloggers. Blogging is definitely not a ‘get rich quick scheme’ but it can be helpful for reaching new clients for your day job or be a creative outlet that’s totally different from what you do from 9 to 5. And yes it can eventually earn you some extra dough.

Temporary Boosts in Income

While the following ideas won’t get you out of debt entirely or help you save every year they can be a great way to jumpstart your financial goals:

  • Sell Off Items. Whether it is baby gear you no longer need or housewares that aren’t getting use daily you can earn some extra cash by selling items you no longer need or want. Using Craig’s List or other services works well for local only items (like the play kitchen your kids outgrew) while eBay works well for items like collectibles, designer clothes, and electronics.
  • Take Surveys. There are multiple sites that will allow you to earn cash for answering a few questions. Some are based on your fit for the survey while others offer to pay for your feedback no matter your personal fit.
  • Use Apps that help you Earn. Apps are available to help you earn now. The Ibotta app allows you to earn cash for shopping after answering a question or two, liking on Facebook, or even watching a short video. GigWalk is another app that allows users to take photos, submit surveys, and share info with companies that are looking for ‘on the ground’ help.

In the end earning more only helps you reach your goals if you stick to your budget. While it can be tempting to spend a little more on things since you’re earning more-don’t. It’s pretty easy to get yourself right back into living paycheck to paycheck if you aren’t careful. A simple way to manage the extra funds is to have them deposited into a separate account that you use to save, pay off your debt, or reach your other financial goals.

These are just a few ways to earn more. What are some ways you’ve earned more?

 

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Money Savvy: How to Deal with the Unexpected

Tuesday, April 8th, 2014

From our money & finance contributor, Kelly Whalen.

When it comes to budgeting and financial planning it can be a challenge to deal with the unexpected or fluctuations. Budgets often only allow us to work within set parameters like a regular monthly income and monthly expenses. What happens when you’re hit with an unexpected repair bill to the tune of $1,000 or you get some extra income (for example in the form of a tax refund) that’s more than $100? Most often this is when your budget can fail. It’s when even the best laid financial plans get derailed.

We’ve covered your regular budget, and we’ve discussed putting the ‘personal’ in your finances by finding what you value, but now it’s time to consider how to deal with those ups and downs that life is sure to throw your way.

How to Deal With Unexpected Expenses.jpg

Unexpected expenses are no fun for anyone. While they can not be avoided, they can be dealt with without causing too much frustration and difficulty with your budget.

How to Deal with Unexpected Expenses

Let’s start with what unexpected expenses are and are not. Funds to cover the below costs should be in your checking account or a savings account attached to your checking account (for ease of access). This account is not your emergency fund.

Unexpected expenses are NOT:

  • Regular bills. You can and should budget for your monthly, quarterly, and yearly bills with your budget.
  • Typical spending. For instance if spending $300 each Spring on new clothes for your family is your average then that should be included in your spending budget.
  • Replacement items. Whether you need to replace your car in 3 years or by a new coffeemaker this season you can and should plan for replacing items your own. Setting up a separate savings account for these items is a great way to ‘self-insure’ (and save money on extended warranties).
  • Regular maintenance. We know cars need regular maintenance. You should build that cost into your spending. At times you will need to decide if it’s worth repairing or replacing something (for instance spending $200 to repair a vacuum cleaner when you can buy a new one for the same cost may not make financial sense).
  • Deductibles. Your insurance policies lay out your out of pocket costs, so have funds on hand to pay the deductible when and if needed.

Unexpected or emergency expenses are things like:

  • Repairs, both big and small, such as replacing a broken window or fixing a leaking toilet.
  • Health related expenses such as emergency medical or dental expenses for you or your family members.
  • Travel costs related to death or illness in your family or extended family.
  • Displacement costs due to power outage/weather (for instance having to evacuate due to an impending hurricane).
  • Job loss or loss of regular income.
  • Pet expenses related to pet illness or injury.

The unexpected expenses above should be covered by your emergency fund. Ideally you should have a minimum of one month saved for emergencies if you’re paying off debt, and you should work towards saving a full year’s worth of expenses (note: not income, but expenses).

Planning ahead for emergencies and expenses is not exactly fun, but having a plan in place will offer you some peace of mind when you do encounter a tough (and expensive) situation.

How to Deal with Unexpected Income

How to Deal with Unexpected Income

Extra income can be exciting or paralyzing. For some you’ll see it as a nice way to treat yourselves to that handbag you’ve had your eye on or a weekend getaway with the family. For others it will disappear into your checking account and paralyzed by what to do with your funds it will just sit in your account. Of course there are those of you who will also see it disappear in your checking account as you suddenly ramp up your spending because you can suddenly ‘afford’ more.

The key to dealing with extra income is to have a plan. Whether it’s $50 or $50,000, by creating a constantly changing lists of ‘extras’ you can make sure your money is spent (or saved) well.

Here are options to consider for extra income:

  • Consider taxes: This is always first when you have extra income. For smaller amounts it’s unlikely to make a difference, while larger dollar amounts mean you must explore what you’ll owe in taxes (if anything).
  • Have Fun: Take 10% and use it for something meaningful or fun for you and your family. You may simply treat the family to a dinner out on the town, or you might buy new board games to enjoy at home for years to come. Whatever you value spending extra on – now is the time to do it.
  • Save: Whether you need to beef up your emergency fund or you are saving up for long-term goals, consider using most of the funds to increase your savings.
  • Pay off Debt: If you are in debt make sure you have a one month emergency fund in place and then tackle those debts.
  • Give 10%: We can’t always give back as much as we’d like, so take 10% and donate it to a cause or nonprofit that you support.
  • Head to your list(s): I’m a BIG list lover so I recommend creating a list of items you want, things that need to be replaced, and those bigger ticket items that you’d like to get done. I keep a list on hand of items we want that aren’t necessities, like a new quilt for our master bedroom, and eventual replacements, like a new cutting board for the kitchen. I also keep a more expensive list of eventual home improvements like creating a deck in our backyard or buying new interior doors.

While having a plan in place doesn’t guarantee you no stress it will certainly make the unexpected easier on your bank account.

How have you dealt with emergencies or extra income? Did you have a plan in place?

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Reducing Expenses: Put the ‘Personal’ In Your Finances

Tuesday, March 11th, 2014

From our money & finance contributor, Kelly Whalen.

How to Reduce Your Expenses

Personal finance is called ‘personal’ for a reason. No matter what advice or best practices exist, money—how we earn, spend, and save it—is intertwined with our values, beliefs, and experience.  By exploring not only the practical side but also the personal side, you will find that you not only can ‘find’ more money, but you’ll be happier because you’ve given your personal finances careful thought.

Knowing your goals and setting up a budget that works are the first steps in putting the personal in your finances. Once you know where your money is going and how much you’re spending you can challenge yourself and your family to reduce or eliminate unnecessary spending by examining what you’re spending through the filter of your goals.

Each expense should be evaluated and considered. Is it essential? Could it be reduced? Should we be ‘investing’ more in this area?

Let’s examine a few common areas where you may be able to find savings that can really add up:

 

Trivial Spending

Buying a cup of $3 coffee at work or spending $10 on lunch out with co-workers every week may not seem like a big deal, but it can add up…and fast! Spending $30/week on those little things can add up to over $1,500/year!

Tips to Manage Trivial Spending:
Choose intentional spending instead. If you know you are going to spend money on little thing it’s best to set a budget of yourself-or an allowance. Once you’ve spent your ‘allowance’ you will have to skip the little expenses for the rest of the month. This will allow you some freedom while staying within your budget.

Stop, Think, Spend Strategy

This simple strategy will keep you from overspending. Stop before you go to the checkout counter. Think about what you’re buying. Go over a few questions in your head to get yourself to be in the moment. No justifying the clearance cost or the unnecessary stuff.

Tips for using Spending Strategy: 
Some sample questions you can either keep in mind or have a list in your wallet (ideally in front of your credit or debit card)

  • Is it a need or want?
  • Can you use something else in place of the item you’re going to purchase?
  • Can you find a better price elsewhere?

Only after you’ve given it the stop and think then and only then is it time to spend.

Lists, Lists, and More Lists

One of the best strategies I have is to always shop with a list. I keep running lists on my phone and in a notebook I carry. This includes everything we need and things I’m looking out for-like a new pair of curtains and the budget I have for those items. If it’s not on the list we don’t purchase it. This keeps me from impulse purchases (my weakness!) and allows me to keep track of things we need that may not be at the forefront of my mind.

Tips for using Lists: 
Use your phone or a dedicated notebook to keep track of your lists. There are plenty of apps that work great for this including Notes (on iPhone), Moleskine’s app, and Taasky.

Unwanted Expenses

We all have things in our budget we’d rather not spend money on-not the things we have to (like home repairs), but expenses that come from a lack of time management or organization. Some examples include; late fees, parking tickets, monthly contracts, or convenience fees. It could be you forgot to return your library books or you needed to pay a bill online that day and had to pay a $3.95/fee. You may have signed up for a ‘free’ trial and forgotten to cancel. While these may seem like small time they can add up if you aren’t careful.

Tips to Avoid Unwanted Expenses:
Avoid unwanted expenses when possible, but also make sure to have some room in your budget (Misc. category) for paying off those unwanted expenses now. To keep from making the same mistake again you can set reminders in your phone or have notes on your planner for due dates and mark down the day you should cancel a ‘free trail’.

Cutting the Cable(s)

One expense most families have is their cable bill. It can add up to more than $150 with internet access, cable channels, premium channels, DVRs, and a home phone. That’s a lot of dough! While internet access may be a requirement at home cutting the cable or dumping the home phone are both ways you can save big bucks.

Tips for Cutting the Cable:
Cutting the cable doesn’t mean never watching TV or movies! You can get a membership to Netflix, use Hulu, HuluPlus subscription, or Amazon’s Prime to stream movies and TV for cheap or free. The best part is you aren’t in a contract so you can cancel or ‘pause’ your membership at any time.

Reducing Interest Payments and Debt

The best way to reduce your expenses is to cut back on interest and debt payments. After all, saving more doesn’t make sense if you’re spending 10% or more on interest payments or more a large percentage of your earnings on debt. Debt isn’t all bad-it may allow you to pursue higher education, purchase your home, or finance a business. Revolving debt, loans, and high interest rates are an expense we should fight to eliminate.

Tips to Reduce Interest: 
While you’re working to pay off debts you can reduce interest rates by:

  • refinance your mortgage-you may be able to refinance for a lower interest rate
  • call your credit card company-call your credit card company and ask for a lower interest rate
  • switch credit card companies-0% intro rates are a great way to eliminate interest (be mindful of fees for transferring balances)
  • consolidate loans-by consolidating loans into one payment you can often reduce interest rates

What are effective ways you’ve reduced expenses?

 

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Budgeting 101: 5 Easy Steps to a Budget that Works

Tuesday, February 11th, 2014

From our money & finance contributor, Kelly Whalen.

I am so excited to introduce you to Kelly Whalen from The Centsible Life. Not only is Kelly a fantastic resource on frugal living, but she is also a dear blogging friend! Kelly has promised to walk us all through the basics of budgeting from start to finish so that you will be able to have a stronger grasp on managing your family’s personal finance. No matter when you join us, you can go back through our archives and read all of Kelly’s words of wisdom on money management. I am so thrilled she is joining us! 
Budgeting 101

Creating a budget will allow you to take charge of your money and save more than ever before. You may also find that you are able to spend on the things that matter to you whether that’s travel, home improvements, or charity when you have a budget in place.

In today’s post I’ll show you 5 easy steps to create and keep track of a budget that will really work for you and your family.

1. Where is your money now?

The 1st step to creating a budget is to sort out what accounts you have and where. For some folks this list will be small, but you may find between savings, checking, retirement, college savings, and credit cards you have more than a handful of accounts to track.

The simplest way to do this is to make a list. Include what you owe, what you’ve saved, and all your assets (savings, cars, your home, etc.). You can find a printable debt tracker at my site.

In addition to knowing where your money is you can easily tally up your debts and your assets to find your net worth too.

What is Net Worth? Assets (money, investments, value of your property) – Debts = Net Worth

Below you’ll see an example of how to calculate your net worth:

$25,000 (emergency savings) + $75,000 (retirement accounts-401k and Roth IRAs) + $125,000 (value of home) + $25,000 (value of cars)= $250,000 in assets

$5,000 (credit card debt) + $10,000 (car loan) + $15,000 (student loans) + $75,000 (mortgage)= $100,000 in debt

$250,000- $100,000= $150,000 (Net Worth)

2. What are you spending?

Now that you know what money you’ve accumulated it’s time to look at where you are spending your money. Gather up the last three months of bank and credit card statements and let’s dig in.

To start, you’ll want to use a handful of categories. If you’re using a pen and paper you can choose the categories that make sense for you. If you are using a website, app, or program like Mint or Quicken you can use their preset categories.

Some examples of categories are:

  • Savings, Retirement, and Investments
  • Charity
  • Rent/Mortgage
  • Childcare
  • Healthcare
  • Insurance (Car, Health, Life, Home, Renter’s, etc.)
  • Loans and Debts
  • Maintenance (Car & Home)
  • Entertainment (including outings and services like Netflix or cable)
  • Clothing and Personal Care
  • Food and Dining Out
  • Travel
  • Hobbies or Allowances (for kid or adult allowances)
  • Holiday
  • Misc.

With 3 months of data on hand you can see some slight fluctuations like spending increasing at the holidays or dining out costs going up when work is busy.

Now that you have that data, take a deep breathe. That’s what you did spend, and your future spending and saving habits are going to change with our next step.

3. What are your goals?

Most often we’d jump into what to cut, and we might even judge ourselves a bit when we see how much we really spend on manicures or on our kids’ clothes. Instead let’s turn that around and focus on the positive. What are your personal goals? What are your goals as a family? As a couple?

It’s time to sit down and think about what you want your money to do for you. After all, we work hard for every dollar so it should work hard for us, too!

I find this process works best if you lay out not only your own goals but the goals of your spouse or partner and family as well. For instance, your #1 personal goal may be to save for an anniversary trip with your spouse, but that goal could effect a family goal to get a family pet, or your partner’s goal to have an emergency fund that would last you a full year.

Start by writing out every goal you have. Do you have a ‘life list’ or ‘bucket list’? Include some money that will go towards those goals. Next you’ll want to order your goals. Now some will be tie for a spot on your list, and that’s ok. The idea is we want to bring the most important things to the forefront.

I recently shared this concept with a reader who sent back this list after she and her family prioritized their goals.

  1. Emergency Saving: Emergency Fund for 1 Year’s Expenses
  2. Reduce Food Spending: Learn to cook more meals, find ways to slash budget 25% by end of year.
  3. Family Trip: Save for a family trip to the Grand Canyon.
  4. Pay off ALL Student Loans: Get rid of our student loan debt by 2015.
  5. Fully Fund College Savings: Make sure both girls have enough in their accounts to fully fund their tuition.

While there were many other things the family wanted to do with their money these goals were their top 5. Once they have completed the goals they have outlined they can bump up more items from their list or reassess their goals.

Bonus Tip: Make a vision board to create a visual reminder of your goals (such as a photo of the Grand Canyon) and create a spreadsheet to track your progress.

4. Stop spending on ‘stuff’ you don’t care about.

Now that you know where your money is, where your money has been going, and where you want it to go it’s time to start making that happen. Now is the time to get really serious about where you want your money to go. Look at each and every category and assess if it’s worth the money it’s pulling away from your goals. In some cases we have no choice (yes, you need to pay your mortgage) but you can often reduce or eliminate some of your expenses.

For instance, cable TV is a great example of an unnecessary expense. Your cable bill may be close to $50/month or more if you have speciality channels. Consider cutting the cable. You can watch less TV and utilizing free or low-cost services to watch some TV and movies.

I call this process an expense audit. Each expense will be considered. Can you reduce it? Eliminate it? Choose a lower cost provider?

5. Make a budget.

Only after steps 1-4 are you able to make your budget. Using the same categories you used to assess your spending create a budget based on what you have been spending. While it’s tempting to say you’ll slash your grocery budget from $1,000 to $500 it’s not very realistic. Start with where you are, and as your spending decreases or your dump expenses that you’ve opted to do without you can adjust your budget.

The key to remember is once you’ve made a budget that it is NOT set in stone. It will guide you when it comes to your spending habits, but your budget should shift as you reduce expenses and focus on reaching your goals.

Bonus Tip: Remember that your financial goals are personal. Keep yourself on track by reminding yourself of your goals, and not looking at what the Joneses are spending.

Let’s look at a sample budget to help you get the idea.

Anna’s Family Budget
(Based on $3,000/month income after taxes, 401ks, health care premiums)

  • $250 – Savings (Retirement goes directly to her 401k)
  • $125 – Charity
  • $850 – Rent/Mortgage
  • $150 – Childcare (after-school)
  • $125 – Healthcare (this is an average spent per month on co-pays and medication)
  • $100 – Insurance (Car, Health (premiums come out of paycheck), Life, Home (included in mortgage))
  • $200 – Loans and Debts (Student Loans)
  • $200 – Maintenance & Gas (Car & Home)–goes into savings fund for repairs
  • $100 – Entertainment (including outings and services like Netflix or cable)
  • $100 – Clothing and Personal Care (clothing for 4, haircuts, makeup)
  • $400 – Food and Dining Out
  • $100 – Travel (savings or day trips)
  • $200 – Hobbies or Allowances (for kid or adult allowances)– $50/per adult, $50/child for activities
  • $50 – Holiday/Birthdays (goes into holiday savings account)
  • $50 – Misc.

Total: $3,000 Expenses

Now that we’ve covered the basics of budgeting, I want to know what you’d like to know more about in the future. Share with me in the comments!

Kelly

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