Is Your Budget Too Ambitious?
Budgeting is a popular topic among people of all ages, and for good reason.
It can help you save money, stay on top of your finances and even reach financial goals. But how do you know if your budget will work for you?
To help determine that, you’ll need to consider two things: if category groupings make sense for your family, and whether the amounts allotted for those categories are reasonable.
For instance, is your entertainment category too inclusive and/or is the amount too high? Does it include money to cover gifts for friends’ birthdays or other events, or just what’s needed for your own entertainment, like streaming services or concerts? Having categories that are too inclusive or vague may tempt you to overspend on certain items.
And there’s another danger—maybe the amount assigned to your entertainment category is too low and you’ve budgeted all the fun out of your life! If your budget is too strict, you may not feel like you can enjoy going out to eat or buying something special for the kids once in a while. You may feel like you’re always saying “no” to your friends and family.
But if you have too many “nitpicky” categories, you may feel overwhelmed and frustrated trying to keep up with all of them each month.
It’s important that your budget is realistic and works for you and your family’s unique situation. If it doesn’t, you may find yourself getting discouraged and giving up!
So when you’re creating your budget, keep in mind there are other alternatives to spending a lot of money. For entertainment for example, explore creative and cheap ways to have fun with your family. Organize a park day, go on a hike, or visit a free museum.
It’s also important to be flexible. If you’re going out with friends, don’t feel like you have to buy the cheapest item on the menu! And when someone suggests doing something that isn’t on budget but sounds fun, don’t say no right off the bat—see if you can work within your limitations or cut back somewhere else.
In conclusion, definitely budget! Just don’t make your budget a chore or painful to stick with.
The 5 Things To Do With Your Inheritance
If you are in the position of receiving an inheritance, congratulations!
You have a chance to make your life even better with this gift. However, it’s important to handle it wisely so you don’t create any regrets down the line!
Pay down debt.
Receiving a sudden windfall is the perfect opportunity to take a chunk out of any credit card debt or student loans that are hanging over you. You may even be able to pay off your car or house!
The simple fact is that debt wears down your ability to build wealth. Using your inheritance to help pay off your loans can position you to start building wealth sooner rather than later.
Build your emergency fund.
Having cash on hand can be a game-changer. It empowers you to tackle emergencies like a child’s broken arm, an unexpected car repair, or even short-term unemployment—without turning to debt.
If you don’t have three months of expenses saved, consider using your inheritance to create some financial peace of mind for your family by setting up an emergency fund.
Save for retirement.
Now that you’ve covered your bases, you can start using your inheritance to start building wealth for the future. As soon as you can, meet with a licensed and qualified financial professional to start developing a strategy that will make your money work for your future!
Fund your kids’ college education. College is pricey. Whether your children are very young or almost at university age, now is a good time to start saving for college. Once again, it’s best to meet with a financial professional to decide the best way to go about funding your child’s education.
Finally, have fun!
You’ve done the hard work of getting rid of debt and building your emergency fund. Now that you have a college education and/or your retirement savings strategies in place, there’s no reason not to splurge on something fun with your inheritance! Just be sure that your fun doesn’t send you back into debt or dip into your emergency fund!
Should You Apply For a Personal Loan?
Sometimes the world throws financial obstacles your way.
And that’s normally when your emergency fund would kick in. But what if you don’t have an emergency fund? Or what if there isn’t enough money in it to cover your current catastrophe? If you find yourself in this situation, you might consider applying for a personal loan to close the gap—but should you?
The simple answer? Probably not.
Starting with the basics—what is a personal loan? A personal loan is an unsecured debt that allows people or companies in need of money to borrow funds from lenders for any reason including but not limited to…
- Home improvements
- Medical expenses
- Debt consolidation
These loans are often set up for a short period of time with fixed monthly payments.
There are pros and cons to any form of debt. Personal loans are no different—they have their own set of benefits and drawbacks.
Personal loans can offer lower interest rates than credit cards, which can help you save money on interest payments. That can make them useful for consolidating other high interest rate loans.
However, personal loans can come with higher fees and significant interest rates. And for most financial emergencies, personal loans simply aren’t your best option. For instance, if you’re struggling with medical debt, you should first consider negotiating with your doctor’s office for more favorable payment terms first.
It’s not advisable to use a personal loan to make a large purchase, like a new TV, either. If you’re using the money for anything other than a last resort for emergencies or debt consolidation, it’s probably not worth it and could end up costing you more in interest payments down the road.
In conclusion, personal loans can be useful in specific circumstances or if you’re at the end of your financial rope. But they shouldn’t be your first option. Making sure you’ve got a sufficient emergency fund in place, a well-thought-out budget, and a solid savings strategy set up as soon as possible may help avoid the need for a loan and create more debt.
Two Techniques to Help You Prepare for Retirement
As with anything important, saving for retirement can be intimidating.
It’s a natural instinct to avoid tasks that seem overwhelming. But not preparing adequately for retirement can have serious consequences—you may find yourself rapidly approaching that time in your life with little saved!
Here are two simple, actionable steps that can help you overcome the intimidation of saving and move you closer towards your financial goals.
Save 15% of your income.
This is a good rule to follow for the long term, but it may not be realistic all the time. Elderly parents living with you? A child going through college? If saving 15% feels impossible or overwhelming, start by setting aside something more manageable. Saving 1% of your income may not feel like much, but it’s far better than putting away nothing! And once you get used to saving, you might be surprised by how eager you are to increase that percentage.
Automate savings so they happen without any effort on your part.
Set up an automatic monthly transfer from your checking into your savings accounts. This way, you’ll never have to worry about forgetting or neglecting your savings. It’s helpful to schedule the transfer right after you get paid. This technique, called “paying yourself first”, results in your paycheck helping to build wealth for you, and not someone else!
It’s never too early–or too late–to start saving for retirement. The earlier you begin, the more time your money has to grow and compound over a lifetime. And even starting closer to retirement is still better than never starting at all! Begin with these two techniques, and develop your strategy from there.
Four Ways to Fend Off Credit Card Fraud
The internet has made it possible for someone to steal personal information and commit credit card fraud from the comfort of their own home.
Being a victim of credit card fraud can seriously impact your financial well-being by decreasing your credit score and sinking you deep into debt. Repairing the damage can be stressful and time-consuming. Take a look at some tips on how you can fend off credit card fraud and stay safe online.
Don’t give your credit card number to anyone who calls you on the phone. Hang up and call their customer service line directly. Unless you can verify that you’re speaking with a legitimate institution, keep your card information to yourself. The same is true for emails, sketchy websites and landing pages, and social media posts.
Avoid sensitive accounts on public Wi-Fi. If you’re using a public Wi-Fi network, it’s possible that someone could be eavesdropping on your information. That’s because public internet is relatively insecure—hackers have far easier access to your passwords and account information in a coffee shop than in your workplace. It’s always safer to check your bank accounts on a private Wi-Fi connection that’s password-protected.
Review transactions often, if not daily. Make it a habit to check your credit card account regularly to ensure all charges are accurate. If you notice any suspicious activity, whether it’s a store you’re not familiar with or a charge from a location in another state, contact your credit card customer service immediately.
Separate your cards from your wallet. If a thief nabs your purse or wallet, will they have access to your credit cards? Consider buying a separate wallet to carry your credit and debit cards. It’s a simple step that might protect your bank account from pickpockets and muggers. (Hint: Consider using a minimalist wallet for your cards. Carrying two bulky wallets would just be inconvenient!)
In conclusion, there are many ways to avoid credit card fraud. Try following the tips in this article, and stay vigilant about your account information.
What Can You Do To Increase Your Credit Score?
For many families, a good credit score is the key to not only borrowing money but also buying your dream home and starting a family.
But what if you have bad credit? This blog post will explore strategies that might help increase your credit score so that you can borrow more money or get approved for loans more easily.
Keep your credit card balances low. Part of your credit score depends on something called credit utilization. Using up your credit limit can negatively impact your score and drag it down. That’s why it’s best to restrict your credit card usage to certain types of purchases. If you start closing in on that credit limit, consider putting yourself on a spending freeze or using cash for a while.
Don’t close old accounts that you have a good history of paying on time. Why? Because closing accounts can technically lower your credit limit. Even though you’re not borrowing more money, you’re suddenly utilizing a greater percentage of your credit. That can result in your credit score taking a hit, even though your credit habits haven’t changed. So keep those old accounts with good payment histories open!
Check your credit report for errors and inaccuracies. Did you know that anyone can get a copy of your credit report? It’s true! You’re entitled to a free copy of your credit report every 12 months. Visit the Federal Trade Commission’s official website to discover how you can get your report. Once you have it, you can check it for errors that may have negatively impacted your score.
If you’re curious about how your credit score impacts your ability to make big purchases, let me know! We can review your situation and work on a game plan to improve your score and move towards your goals.
What You Need to Know About Debt Consolidation
You’ve been struggling to keep up with your debt payments for weeks, months—maybe even years.
You’re tired of feeling like you’re drowning in a sea of credit card balances and student loans. The good news is that there are options available to help you break free from this cycle!
One option is debt consolidation. It involves taking out one large loan (typically through a bank) to pay off all your other smaller debts.
Let’s discuss how debt consolidation works, who may benefit from it most, and what you need to know before making a decision about whether or not this option is right for you.
Debt consolidation is a way to combine some or all of your debt into one loan. This can make a significant difference in your debt reduction by…
- Simplifying the repayment process
- Potentially lowering your interest rate
Let’s consider an example. Let’s say you have two debts, one that’s $3,000 at 10% interest and another that’s $5,000 at 15% interest. If the term of both loans is 5 years, you would pay almost $3,000 in interest! Consolidating your debt into one loan that’s $8,000 at 7% would almost halve your interest payments.
There are several types of loans that this process can deal with, including home equity loans or car loans. It’s also possible to use a new credit card with a promotional interest rate and high credit limit to pay down your other debts (use this method with caution). Debt management programs sometimes offer debt consolidation for unsecured debt like credit cards and medical debt. Just know that you may not qualify for these types of loans if it’s too soon after filing bankruptcy or if you have a low credit score.
But debt consolidation may not always be your best option, especially if you can’t secure a lower interest rate or the term of the loan is significantly longer than your current loans. It’s best to collaborate with a financial professional who can help you assess your situation and create the right debt-busting strategy!
How To Retire With Less
If you had to totally trash your retirement strategy, how would you do it?
There are plenty of extravagant solutions—a gambling spree in Vegas, buying a boat, or shopping only at designer stores would probably do the trick!
But there are less obvious ways to retire with less. There are subtle misteps that may not lead to financial trainwrecks, but may still result in retiring with less. Here are a few!
Never start saving for retirement. The same is true for every undertaking. The easiest way to torpedo your music career? Never practice. It’s unwise to expect your retirement to be financially sound if you don’t start preparing and saving for it today. Starting is the most important step in your journey!
Buy a house you can’t afford. Few things will consume your cash flow and ability to build wealth more than a house that’s out of your budget. Mortgage payments, emergency repairs, and renovations can be costly even after extensive planning and saving. These expenses can scuttle your ability to build wealth if you end up becoming “house poor”.
Buy things you don’t need. Make no mistake—there’s a place for splurging and treating yourself. But there’s a point where buying more stuff simply weighs you down, both emotionally and financially. And if you’re using debt to keep shopping, you might be setting yourself up for less in retirement.
Be afraid of change. It’s incredibly difficult to pursue better opportunities if you fear change. Improving your financial situation, by definition, requires you to do something different, whether it’s spending less or changing careers. Unless you’re already on track for retirement, a fear of change can hinder your ability to reach your goals and live your dreams.
Never learn how money works. This is the easiest item on the list to avoid. Most people are never taught what their money can actually do and how to build wealth. But it can have serious consequences for your future. Not knowing how money works can prevent you from using critical tools like the Rule of 72 and the Power of Compound Interest to detect both bad deals and wealth building opportunities.
If any of these rung a bell with you, contact me. We can discuss strategies to start preparing for retirement, cut your spending, and find opportunities to increase your income!
5 Common Financial Mistakes That Parents Make
It happens every day. Parents make financial blunders that can impact their children’s future.
These mistakes are often avoidable. But a parent who has the best intentions and lacks the knowledge needed to properly manage their finances may not recognize these errors until the damage has been done.
Here are 5 common financial mistakes every parent should be aware of!
1. Not saving for their children’s education.
You know the numbers—it seems higher education is growing more and more expensive every year. So the time to start financially preparing for your child’s university years is today. Meet with a financial professional to discuss how you can pay for college without resorting to student loans!
2. Not saving for retirement.
Skimping on your long-term savings might be tempting, especially if your budget feels stretched to the breaking point by the basic expenses of providing for your family!
But saving can support your long-term financial position. It gives you a shot to pay for your own retirement, it can reduce the impact of long-term care on your family, and it might even create a financial legacy to leave to your children.
3. Spending too much on credit cards.
It’s not just parents. Many Americans overuse their credit cards. But it can be a little too easy to do for parents on tight budgets. Don’t have enough in cash to buy your child a new toy? Just put it on the card!
Unfortunately, credit cards can become a significant drain on your cash flow. And the less available cash you have on hand, the less you’ll be able to save for your other financial goals!
4. Buying a house they can’t afford.
Make no mistake—your family needs space. You need space! Just make sure that the house you buy is actually within your budget. Mortgage payments can chip away at your cash flow and reduce your wealth building and education funding power. And don’t forget to factor in the cost of house maintenance before you move in.
5. Buying things they don’t need to impress other parents.
You love your kids and want the best for them. That’s what makes you a great parent!
But be mindful of why you buy things for your family. Are you providing for your kids? Or are you simply trying to impress your friends and neighbors? Take care that you put the wellbeing of your family first, not the opinions of others.
If you need help navigating your financial responsibilities, contact me! We can discuss strategies that might give your family the upper hand they need to thrive.
3 Truths About Credit Cards
Credit cards can be dangerous if you don’t understand them.
That’s why it’s crucial to learn how credit cards work before deciding whether or not to get one. Here are three important truths that everyone should know about credit cards.
Credit cards are NOT free money.
You read that correctly. Every time you make a purchase with your credit card, you’re actually borrowing money. Lenders want you to pay that money back—and then some. Using your card for purchases outside of your budget or to buy expensive toys beyond your means can result in a stunning level of debt. But that’s not all…
Credit card debt can take years to eliminate.
Credit cards are notorious for high interest rates, averaging 18.43% in the August of 2022.¹ That makes paying down credit card debt especially difficult. In fact, it might take years to pay off some cards if you made the minimum payments alone. Limiting your usage and paying your bill on time every month is an absolute must if you’re going to use a credit card.
Credit cards can be a great way to build credit.
But credit cards aren’t all bad! Consistently paying your bill on time and limiting your credit usage can indicate to future lenders that you ll be trustworthy with a loan. They may offer you more favorable interest rates and terms if you have a great credit score!
Credit card usage has the potential to make or break your financial wellness. Recognizing the risks—and benefits—that easily accessible credit can bring should inspire you to navigate your finances with care and intention.
Critical Financial Moves After Your Child’s Birth
You did it! You brought an adorable, tiny human into this world. Congratulations!
By now, you’ve probably noticed that there’s a lot that goes into caring for your newest family member. Between the diaper changes, sleepless nights, and feedings, take a few moments to make these critical financial moves. They may bring you the peace of mind and financial security your family needs!
Add your child to your health insurance coverage.
Once your child is born, you have between 30 and 60 days to enroll your newborn in your health insurance plan.¹ Fortunately, it’s not a difficult task. Have your child’s birth certificate and social security number handy, and then call your health insurance provider. Share the good news that you’ve had a child and would like to add them to your plan. If your health insurance plan is through work, you’ll need to contact your HR department and go through the same process.
Find the right childcare for your family.
Childcare can be pricey, with over half of American families spend over $10,000 annually.² If both you and your spouse work, you’ll need to find a way to budget in this significant expense.
Review the costs of local daycare centers. Nannies are worth investigating, but can be more expensive than other forms of childcare. Consider asking your stay-at-home friends or family if they can tend to your children while you’re away from home. You might land a sweetheart deal that builds relationships and saves you money!
Protect your family with life insurance.
There is no better time to consider life insurance than after the birth of your child. Raising a kid is expensive! Food, education, and clothing can require significant financial resources. The right life insurance policy can protect your family’s financial stability even if you pass away or if you get sick or injured and can no longer earn an income. Now’s the time to provide the financial security that your loved ones may need in the future.
The first few months of a baby’s life are crazy—they depend on you for everything! Just be sure to take some time between caring for their physical and developmental needs to tend to your financial concerns. It’s one of the greatest services you can offer them!