It makes sense. Life is hectic. Schedules are full. Sometimes, you feel like you hardly have a second to brush your teeth, much less have time to sit down and enjoy a heart-to-heart conversation with a friend. And so important decisions get pushed further and further into the future.
That’s fine in some cases. Do you need to decide how to organize your garage right now, at this very moment? No, probably not.
But with something like your finances, procrastination can cause disaster. Why? Because time is the secret ingredient for building wealth. The sooner you start saving, the greater your money’s growth potential. Likewise, the sooner you get your debt under control, the more manageable it becomes.
And with your money, the stakes couldn’t be higher. After all, it’s your future prosperity and well-being that could be at risk. Procrastination is downright dangerous.
That urgency, however, doesn’t make it easier to start saving. In fact, you may have noticed that finances suffer more from procrastination than anything else.
There’s a very good reason for that. Procrastination is driven, above all else, by perfectionism. Failing feels awful, especially when you know the stakes are high. Your brain sees the discomfort of trying to master your finances and failing, and decides that it would feel safer to not try at all.
It’s a critical miscalculation. Making an attempt to master your finances can at least help move you closer to your goals. Procrastinating never does.
Think of it like this—50% success is better than 0% success.
The key to beating procrastinating, then, is to conquer the perfectionist mindset and fear of failure. It’s no small feat. Those habits of mind are often deeply ingrained. They won’t vanish overnight. But there are some simple steps you can take, like…
Break big goals down into small steps. This relieves the overwhelm that many feel when facing important tasks. As you knock out those small steps, you’ll feel empowered to keep moving forward.
Don’t go it alone. Procrastination thrives in isolation. Seek out a friend, loved one, or co-worker to help hold you accountable and share the load—even if it’s just a weekly check-in to see how each other are doing.
Work in short, uninterrupted bursts. Set a timer. Put down the phone. Work. After about 15 minutes, you’ll notice something strange happening. Time starts to either speed up or slow down. Distracting thoughts vanish. The lines between you, your focus, and the task at hand start to evaporate. You feel awesome. This is called a flow state, and it’s the key to productivity. Make it your friend, and you’ll probably notice that procrastination becomes rarer and rarer.
Now that you know the cause of procrastination, try these tips for yourself. Set a 30 minute timer. Then, break your finances into tiny action steps like checking your bank account, automating saving, and budgeting. Work on each item in a quick burst until you’ve made some progress. Then, talk to a friend about your results!
Just like that, you’ve made serious headway towards beating procrastination and building wealth. Look at you go!
Whether you’re new to the world of budgets or you just want some help, this article will get you started on the right foot. There’s no one way that works for everyone, but these different methods can give you an idea of where to begin.
First, write down your total monthly take home pay. Next, break down your monthly spending into categories and write down how much you spend on each. Add those numbers together. Then, subtract that number from your take home pay.
The advantage of this method is that it’s rewarding. You get to see your budget grow from the ground up. It connects you to your money like few other projects will.
It can, however, be frustrating. You’ll run into snags, miscalculations, and old fashioned human error. And that can nip your budget in the bud.
This is an easy way to create a customized budget. There are countless templates from Google Drive, Microsoft Office, the Federal Trade Commission, Nerdwallet, and more!
Unfortunately, they still require some legwork. You may need to customize your budget to your specific needs. And they don’t sync with your bank account, meaning you’ll need to manually input your monthly spending.
They come in a variety of different flavors, but they all serve a common purpose—make budgeting as simple as possible.
Typically, these apps handle the categorizing and all the math. You simply enter your monthly income, log your spending into categories, and let the app work its magic.
Not all budgeting apps are the same. Some require you to manually enter your spending, while others sync with your bank accounts. Some are free. Some cost money.
Here are a few of the most popular budgeting apps to investigate…
Mint - most popular
YNAB (You Need a Budget) - syncs with accounts, costs $84/year
PocketGuard - designed for overspenders
Honeydue - designed for couples
There’s not one particular way to begin budgeting. It all depends on your personal needs and what you’re comfortable with.
With so many options, you should be able to find the perfect method for you.
What do you think? Do you have a simple budget? How did you start it?
And it’s true. Knowledge is power because it shows you how to act. The more informed your actions, the more likely they are to be fruitful and effective.
Here’s another quote you’ve probably heard a few times—“Know thyself.”
Why? Because there’s no greater power than power over yourself. The more you know yourself, the more capable you’ll be to shape your actions, your habits, and your destiny.
This couldn’t be more relevant than when it comes to money matters. The more you know about your financial habits and tendencies, the better equipped you’ll be to control your financial future.
Here are some ways to know thy financial self.
Like any other part of your life, emotions can affect money. They’re especially important to be aware of because they can cause you to act in ways that are counterproductive financially.
For example, have you ever felt anxious about checking your bank account?
Or felt a craving to blow some money to de-stress?
Or swelled with pride when you see how much you’ve saved?
Those are all emotions, and they’re all related to money.
So the next time you’re spending money, or checking your bank account, or pinching pennies, take a moment. Breathe. Notice how you’re feeling. Those emotions can give you valuable information that can help you make better financial decisions in the future.
Feelings almost always lead to thoughts. For instance, anxiety about looking at your bank account could lead to an internal conversation like this…
“Can I afford that? Oh, I bet I can’t. I WAY overspent the other day at… whatever, I never have enough money. I keep meaning to spend less, but I just can’t stop myself. Why do I even bother?”
See what happened? A feeling of anxiety led to a negative thought—that you can’t control your finances.
So what do you think about money? And that doesn’t mean your “opinions” about the economy, your take on billionaires going into space, or the NFTs are the fine art of the future] you share when you’re chatting with friends. It means the thoughts that flow through your mind whenever you encounter money in daily life.
Take a few moments right now and notice those thoughts. Are they positive? Are they negative? Are they neutral?
Just like a feeling almost always leads to a thought, so does a thought almost always lead to an action.
Those actions might be to ignore, or repress, or give in. But one way or another, thoughts will result in actions.
This is where budgeting helps. It’s like creating a journal of your actions, which are a window into your thoughts, your feelings, and who you are.
Notice lots of new shoes, designer handbags, or suddenly having more blingy watches than days of the week? These can reveal a facet of your financial self—maybe you think that taking advantage of every sale at the mall (i.e., buying things you don’t really need) will relieve feelings of anxiety.
Or maybe you’re penny-pinching so much that you’re surviving on peanut butter sandwiches and hating every bite. That could reveal either a hearty resourcefulness in lean times, or an unfounded worry about going without.
Or maybe you’re mindlessly wasting your dollars with nothing to show for it. Think hundreds spent on games on your phone, getting food delivered every night, or joining that fancy wine club all your friends are in. Perhaps this reveals that you are actually afraid of your finances, so afraid, in fact, that you can’t face reality.
The more you know about your financial self, the better equipped you’ll be to control your finances. You’ll see habits that you need to curb, and habits you need to cultivate.
Simple advice, but it goes a long way. Knowledge is power!
If you want to maintain a budget and save money, then you need a plan. The first step is understanding the basics—what is a budget? How does it work? What are the benefits of having one?
To effectively manage your monthly budget, you must take certain steps from day one. This article will provide some helpful tips and tricks on how to get started and keep going strong until payday rolls around!
A budget is a plan. It helps you set limits for your spending, so that you can track your income and expenses. Maintaining a budget keeps you aware of when you are spending too much or if there are areas where your money could be saved.
It can also help you understand your spending habits as well as identify problems, such as giving in to too many sales or buying expensive lattes every day. With a clear understanding of how you spend money every month, you may be able to reduce expenses and even start saving for luxuries or emergencies. You can’t have a goal of saving for your next summer vacation if you don’t know how much money you’re spending now.
The first step is to set goals for yourself for income and spending. When it comes to income, you need to consider all the ways you get paid. What is your salary—after taxes and any other contributions you make, like to a 401(k)? Is your employer cutting back your hours? Do you have another source of income such as a side job or freelance work?
Be completely honest with yourself about how much money you have coming in. Once this figure is known, you can assess your spending and determine how much of your income goes towards them every month.
Next, make a list of all fixed monthly bills, such as rent or loan repayments. Then make a list of variable expenses, such as groceries or gas. Lastly, make a list of all your monthly discretionary spending, or ‘fun money’.
If you struggle with this last step, look at your bank statements. It’s the easiest way to find a complete record of your spending. This will help you pinpoint the areas that you could cut down on or even eliminate.
Now that you have your budget, you can take action. You can save money by leveraging your budget to meet your monthly goals.
The first way is to leverage your income. If you have a job, talk to your employer about working extra hours, or ask for a raise. This will give you more money right out of the gate.
Beyond the extra income from a job, there are many other ways to add to your budget.
You can start small and pick up some side work—babysitting, dog walking, delivering pizzas, etc. If you can turn your free time into money, go for it! This all depends on your financial situation and what you feel comfortable with, so take the time to plan accordingly.
You can also think about reducing your expenses. Cutting back on luxury items can save money every month without having to work an extra job. Just think of all the things you could do with the money that’s currently going towards cable TV or eating out every day for lunch!
Don’t forget to have some fun every once in a while. Just find creative ways to have it on a budget. Plan more outings with friends like playing tennis or frisbee in the park, rather than going to the club every evening. Your community is bound to have some free local events going on, especially in warmer weather.
A budget is a way for you to track your expenses and income each month. You can leverage your budget in a number of ways, by increasing income or decreasing expenses—or both! With this knowledge, you’ll be able to save more and plan for the future.
You’re done with the 9-to-5, and ready to transition from employee to entrepreneur.
But there’s one last hurdle—how will you pay for it?
Starting a business requires resources. Whether it’s a laptop, store front, circular saw, or musical instrument, you’ll need tools to ply your trade. You’ll also need to consider the cost of hiring employees as your business grows!
There are three common strategies entrepreneurs leverage to raise money for starting a business…
1. Raise capital. Trade ownership of your business for money.
2. Borrow money. Pay interest for money.
3. Self-fund. Cover business expenses yourself.
There’s no right way to fund your business. But there are clear pros and cons to each approach. Let’s explore them further so you can have a better idea of which may be best for you!
1. Raise capital. This strategy involves scouting out wealthy individuals and institutions to give you money to fund your business. But it’s no free lunch. In exchange for funding, investors want a slice of your company. As your business grows, so does their profit.
That gives them a powerful say in the management of your business. If you raise capital this way, you may find these stakeholders calling the shots and pulling the strings instead of you.
Plus, raising capital simply is out of reach for most entrepreneurs. Unless you’re disrupting a major industry and have extensive experience, the risk-reward situation may not make sense for potential investors.
2. Borrow money. It’s straightforward—you ask a lending institution or friend for money that you’ll pay back with interest. Both parties take a calculated risk that your business will increase its value enough to repay the loan. It’s a simple, time-tested strategy for funding a new business.
The advantage of getting a business loan is that it keeps you in full control of your business. No board of directors or controlling shareholders!
But business loans require planning to manage. Your business will need to consistently make payments, meaning you’ll need to consistently earn profit. That’s rarely a surefire proposition when you’re first starting out.
So while debt can help your business expand and hire new talent, it’s typically wise to hold off on borrowing until later.
3. Self-fund. This is far and away the most realistic strategy for most entrepreneurs. It’s exactly what it sounds like—pay the upfront costs of starting a business yourself.
No debt. No working for someone else. You’re completely free to run your business. You’re also completely financially responsible for the outcome.
Will you be able to buy a storefront outright? Or start a competitive car manufacturer? Probably not. But there are dozens, if not hundreds, of opportunities that require far less capital.
Look around. You may have the tools you need to start a business at your fingertips! In fact, if you’re reading this article on a laptop or desktop, you’re positioned to start an online business right now. All you need is a service to provide clients.
The takeaway? The funding your business needs will depend on your situation. Challenging an established industry with a revolutionary approach? Then you may need outside funding. But if you’re like many, you have all the tools and resources you need to start your business.
In the years when there was an abundance of crops, it was wise to store up as much as possible in preparation for the years of famine. However, if instead of saving you ate it all up during the 7 years of abundance, the result would be starvation for you and your family during the 7 lean years. This might be an extreme example in our modern, First World society, but are you “eating it all up” now and not storing enough away for your retirement?
The definition of retirement we’ll be using is: “An indefinite period in which one is no longer actively producing income but rather relies on income generated from pensions and/or personal savings.”
According to this definition, the “years of plenty” would be the years that you are still working and generating income. While you still have regular income, you can set aside a portion of it to save for retirement. This amount is called the “Personal Savings Rate.”
According to the latest statistics, the monthly personal savings rate for Americans has plummeted to 2.4% of their income.¹ For much of the past decade it’s hovered around 7% to 8%, briefly spiking during the first months of the COVID-19 Pandemic to over 30%.
Suppose you’re looking to retire for at least 10 years (e.g., from 65 years old to 75 years old). Even if you’re planning to live on only half of the income that you were making prior to retirement, you would need to save up 5 years worth of income to last for the 10 years of your retirement. Just raw saving at average rate without the power of interest would take years before it became the wealth most people need to retire.
So unless you’ve found the elixir of everlasting life, we’re going to need to do some serious “saving” of the personal savings rate. Is there a solution to this dilemma? Yes. If you’re looking for possible ways to store up and prepare for your retirement, I’d be happy to have that conversation with you today.
¹ “Personal Saving Rate,” U.S. Bureau of Economic Analysis, Federal Reserve Bank of St. Louis, Dec 23, 2022, http://bit.ly/2qSGrR3.
For example, how much would you spend on a meal at a restaurant before it moves into lifestyles-of-the-rich-and-famous territory? $100? $50? $20? To some, enjoying a daily made-to-order burrito might be par for the course, but to others, spending $10 every day on a tortilla, a scoop of chicken, and a dollop of guacamole might seem extravagant. Chances are, there may be some areas where you’re more in line with the average person and some areas where you’re atypical – but don’t let that worry you!
In case you were wondering, the top three things that Americans spend their income on in a year are housing (33.8%), transportation (16.4%), and food (12.4%).¹
Those top three expenses might very well be about the same as your top 3, but everything else after that is a mixed bag. Your lifestyle and the unique things that make you, well you, greatly influence where you spend your money and how you should budget.
For example, let’s say the average expenditure on a pet is $600 annually, but that may lump in hamsters, guinea pigs, all the way to Siberian Huskies. As you can imagine, each could come with a very different yearly cost associated with keeping that type of pet healthy. So although the average might be $600, your actual cost could be well above $3,000 for the husky! That definitely wouldn’t be seen as ‘normal’ by any means. And that’s okay!
What are we getting at here? It’s perfectly fine to be ‘abnormal’ in some areas of your spending. You don’t need to make your budget look exactly like other people’s budgets. What matters to them might not be the same as what matters to you.
So go ahead and buy that organic, gluten-free, grass-fed kibble for Fido – he deserves it (if he didn’t pee on the carpet while you were away, that is)! If Fido’s happiness makes you happy, then more power to you. Just make sure that at the end of the day, Fido’s food bill won’t bust your budget.
¹ “Consumer Expenditures – 2021 ” Bureau of Labor Statistics, Sep 8, 2022, https://www.bls.gov/news.release/pdf/cesan.pdf
But not all goals are created equal. Planning to win the lottery is a foolish objective that won’t help you fulfill your dreams. Spending hours clipping coupons worth a few dollars is probably a waste of time.
Fortunately, establishing proper goals is actually incredibly straightforward. You want to pursue objectives that are SMART—specific, measurable, achievable, realistic, and timely. Formulating these types of goals can radically focus your energy and increase your ability to get things done. Let’s start with the first criteria!
The more specific your goal, the more clearly you’ll understand exactly what you need to do to achieve it. It’s the difference between a vague daydream and a solid plan.
When writing out your financial goals, be crystal clear on exactly what you want to accomplish and why. Outline the steps and people needed to bring about your vision. Something like “I want to make more money” becomes “I want to earn a raise at work by taking on more responsibility.”
How will you know if you’ve accomplished, exceeded, or failed your goal? Including a clear metric gives you insight into how close or far you are from completing your objective.
Decide on a clear numeric goal you can shoot for. Take a vague notion like “I want to save more money” and transform it into “I want to save 15% of my income this year for retirement.” You’ll have a clearer idea of what steps you need to take to meet that benchmark and feel a deep sense of reward once you hit the target.
Trying to attain an ill-defined, pie-in-the-sky goal will only lead to crazy behavior, incredible discouragement, or both. If you’re aiming for something huge (which is admirable), break it down into mini goals and focus on one at a time. Achieving a goal like “I want to start a multi-million dollar business” takes careful planning, a lot of research, and loads of help, but there are many, many people in the world who have done just that. How do you eat an elephant? (One bite at a time!)
Are your goals appropriate? That seems like an obvious question, but it’s a critical one to ask when establishing objectives. For instance, saving up $1,000 so you can buy your new niece a Swarovski crystal, gold-plated baby rattle (yes, that’s a real thing) might be really memorable, but do you have an emergency fund in place? Make sure you’re meeting those practical, basic financial goals before you start aiming for the non-essential ones.
Knowing that the clock is ticking is one of the most powerful motivators on the planet. You’ll want to establish a realistic time-frame, but deciding that you want to buy a house in two years or be debt free in six months can increase your intensity, narrow your focus, and inspire you to start working on your goals as soon as possible!
Do your financial goals meet these criteria? If not, don’t sweat it! Spend 15 minutes reviewing your objectives and work in specific details or break down some of your more ambitious targets. Remember, I’m here to help if you hit a financial goal roadblock and need some professional insight and clarity!
Research has shown that people who write down their goals are 33% more successful in accomplishing them than those who don’t.¹ That data seems to verify what we instinctively know. Is there anything worse than working on a project that has no clear objective or outcome defined?
But here’s the million dollar question: Have you written down your financial goals?
It’s one of those simple things that we tell ourselves we’re going to do or that we’ll get around to later, but we tend to leave undone. And that results in our earning, saving, and spending money aimlessly, without purpose. No wonder 50% of women and 47% of men approaching retirement have nothing saved for retirement!²
In case you still need convincing, here are three reasons why you should write down your financial goals the second you’re done reading this article!
Imagine trying to build a house without a blueprint. Where would you start? Would you know what supplies you’d need? What color paint you’d want? Would you end up with a basement? Who knows?
Your finances are the same way. Until you have a clear financial goal for your lifestyle and retirement, you’ll never truly know what to do with your money and how it can help you. Once you’re locked in on a vision of your future, you can start exploring the actions necessary to make your dreams become realities.
Discovering the steps you need to take to achieve your goals cuts away distractions. You’re no longer as susceptible to distractions and temptations because you’re laser-focused on creating an outcome. You can focus all of your mental and financial energy on bringing your vision to life. Clarity leads to focus. Focus creates intensity. Intensity accomplishes goals.
There are few better feelings than the one that comes after a day of hard, productive work. That’s because your brain knows that you accomplished what you set out to do.
Your finances are no different.
Setting goals for your money gives you the opportunity to feel that deep sense of reward and accomplishment. It provides your life with a source of gratification that isn’t shallow and instantaneous.
So what are you waiting for? Grab a piece of paper or pull up your note taking app and write down a few financial goals! Be realistic and hyper specific. Let’s talk about what comes to your mind and what it would take to bring that vision of your life into reality!
¹ “Goal-Setting Is Linked to Higher Achievement,” Marilyn Price-Mitchell Ph.D., Psychology Today, Mar 14, 2018, https://www.psychologytoday.com/us/blog/the-moment-youth/201803/goal-setting-is-linked-higher-achievement
² “Those Who Married Once More Likely Than Others to Have Retirement Savings,” Brittany King, United States Census Bureau, Jan 13, 2022, https://www.census.gov/library/stories/2022/01/women-more-likely-than-men-to-have-no-retirement-savings.html
It can be enlightening to see how rates are applied. Hopefully, it motivates you to pay off those cards as quickly as possible!
What is APR? At the core of understanding how finance charges are calculated is the APR, short for Annual Percentage Rate. Most credit cards now use a variable rate, which means the interest rate can adjust with the prime rate, which is the lowest interest rate available (for any entity that is not a bank) to borrow money. Banks use the prime rate for their best customers to provide funds for mortgages, loans, and credit cards.¹ Credit card companies charge a higher rate than prime, but their rate often moves in tandem with the prime rate. As of the second quarter of 2020, the average credit card interest rate on existing accounts was 14.58%.²
While the Annual Percentage Rate is a yearly rate, as its name suggests, the interest on credit card balances is calculated monthly based on an average daily balance. You may also have multiple APRs on the same account, with a separate APR for balance transfers, cash advances, and late balances.
Periodic Interest Rate. The APR is used to calculate the Periodic Interest Rate, which is a daily rate. 15% divided by 365 days in a year = 0.00041095 (the periodic rate), for example.
Average Daily Balance. If you use your credit card regularly, the balance will change with each purchase. So if credit card companies charged interest based on the balance on a given date, it would be easy to minimize the interest charges by timing your payment. This isn’t the case, however—unless you pay in full—because the interest will be based on the average daily balance for the entire billing cycle.
Let’s look at some round numbers and a 30-day billing cycle as an example.
Day 1: Balance $1,000 Day 10: Purchase $500, Balance $1,500 Day 20: Purchase $200, Balance $1,700 Day 28: Payment $700, Balance $1,000
To calculate the average daily balance, you would need to determine how many days you had at each balance.
$1,000 x 9 days $1,500 x 10 days $1,700 x 8 days $1,000 x 3 days
Some of the multiplied numbers below might look alarming, but after we divide by the number of days in the billing cycle (30), we’ll have the average daily balance. ($9,000 + $15,000 + $13,600 + $3,000)/30 = $1,353.33 (the average daily balance)
Here’s an eye-opener: If the $1,000 ending balance isn’t paid in full, interest is charged on the $1353.33, not $1,000.
We’ll also assume an interest rate of 15%, which gives a periodic (daily) rate of 0.00041095.
$1,353.33 x (0.00041095 x 30) = $16.68 finance charge
$16.68 may not sound like a lot of money, but this example is a small fraction of the average household credit card debt, which is $8,645 for households that carry balances as of 2019.³ At 15% interest, average households with balances are paying $1,297 per year in interest. Wow! What could you do with that $1,297 that could have been saved?
That was a lot of math, but it’s important to know why you’re paying what you might be paying in interest charges. Hopefully this knowledge will help you minimize future interest buildup!
Did you know?
When you make a payment, the payment is applied to interest first, with any remainder applied to the balance. This is why it can take so long to pay down a credit card, particularly a high-interest credit card. In effect, you can end up paying for the same purchase several times over due to how little is applied to the balance if you are just making minimum payments.
¹ “Prime Rate Definition,” James Chen, Investopedia, Sep 25, 2022, https://www.investopedia.com/terms/p/primerate.asp
² “What Is the Average Credit Card Interest Rate?,” Adam McCann, WalletHub, Nov 29, 2022, https://wallethub.com/edu/average-credit-card-interest-rate/50841/
³ “Credit Card Debt Study,” Alina Comoreanu, WalletHub, Nov 17, 2022, https://wallethub.com/edu/cc/credit-card-debt-study/24400
In some cases, the warnings might have been heeded but in other cases, we may have learned the cost of credit the hard way.
Using credit isn’t necessarily a bad thing, but it may be a costly thing – and sometimes even a risky thing. The interest from credit card balances can be like a ball and chain that might never seem to go away. And your financial strategy for the future may seem like a distant horizon that’s always out of reach.
It is possible to live without credit cards if you choose to do so, but it can take discipline if you’ve developed the credit habit.
Here’s some tough love. If you don’t have one already, you should hunker down and create a budget. In the beginning it doesn’t have to be complicated. First just try to determine how much you’re spending on food, utilities, transportation, and other essentials. Next, consider what you’re spending on the non-essentials – be honest with yourself!
In making a budget, you should become acutely aware of your spending habits and you’ll give yourself a chance to think about what your priorities really are. Is it really more important to spend $5-6 per day on coffee at the corner shop, or would you rather put that money towards some new clothes?
Try to set up a budget that has as strict allowances as you can handle for non-essential purchases until you can get your existing balances under control. Always keep in mind that an item you bought with credit “because it was on sale” might not end up being such a great deal if you have to pay interest on it for months (or even years).
Part of the reason we use credit cards is because they are right there in our wallets or automatically stored on our favorite shopping websites, making them easy to use. (That’s the point, right?) Fortunately, this is also easy to help fix. Put your credit cards away in a safe place at home and save them for a real emergency. Don’t save them on websites you use.
Don’t worry about actually canceling them or cutting them up. Unless there’s an annual fee for owning the card, canceling the card might not help you financially or help boost your credit score.¹
When you’re working on your budget, decide how much extra money you can afford to pay toward your credit card balances. If you just pay the minimum payment, even small balances may not get paid off for years. Try to prioritize extra payments to help the balances go down and eventually get paid off.
Make some room in your budget for some of the purchases you used to make with a credit card. If an item you’re eyeing costs $100, ask yourself if you can save $50 per month and purchase it in two months rather than immediately. Also, consider using the 30-day rule. If you see something you want – or even something you think you’ll need – wait 30 days. If the 30 days go by and you still need or want it, make sure it makes sense within your budget.
Having a solid credit history is important, so once your credit balances are under control, you may want to use one card in a disciplined way within your budget. In this case, you would just use the card for routine expenses that you are able to pay off in full at the end of the month.
Living without credit cards completely, or at least for the most part, is possible. Sticking to a budget, paying down debt, and having a solid savings strategy for the future will help make your discipline worth it!
¹ “How to repair your credit and improve your FICO® Scores,” myFico, https://www.myfico.com/credit-education/improve-your-credit-score
Much like physical health, financial health can be affected by binging, carelessness, or simply not knowing what can cause harm. But there’s a light at the end of the tunnel – as with physical health, it’s possible to reverse the downward trend if you can break your harmful habits.
A household without a budget is like a ship without a rudder, drifting aimlessly and – sooner or later – it might sink or run aground in shallow waters. Small expenses and indulgences can add up to big money over the course of a month or a year.
In nearly every household, it might be possible to find some extra money just by cutting back on non-essential spending. A budget is your way of telling yourself that you may be able to have nice things if you’re disciplined about your finances.
Credit cards always seem to get picked on when discussing personal finances, and often, they deserve the flack they get. Not having a budget can be a common reason for using credit, contributing to an average credit card debt of $6,913 for balance-carrying households.¹ At an average interest rate of over 16%, credit card debt is usually the highest interest expense in a household, several times higher than auto loans, home loans, and student loans.²
The good news is that with a little discipline, you can start to pay down your credit card debt and help reduce your interest expense.
No matter how much income you have, money can be a stressful topic in families. This can lead to one of two potentially harmful habits.
First, talking about the family finances is often simply avoided. Conversations about kids and work and what movie you want to watch happen, but conversations about money can get swept under the rug.
Are you a “saver” and your partner a “spender”? Is it the opposite? Maybe you’re both spenders or both savers. Talking (and listening) about yourself and your significant other’s tendencies can be insightful and help avoid conflicts about your finances.
If you’re like most households, having an occasional chat about the budget may help keep your family on track with your goals – or help you identify new goals – or maybe set some goals if you don’t have any.
Second, financial matters can be confusing – which may cause stress – especially once you get past the basics. This may tempt you to ignore the subject or to think “I’ll get around to it one day”.
But getting a budget and a financial strategy in place sooner rather than later may actually help you reduce stress. Think of it as “That’s one thing off my mind now!”
Taking the time to understand your money situation and getting a budget in place is the first step to put your financial house in order. As you learn more and apply changes – even small ones – you might see your efforts start to make a difference!
¹ “2020 American Household Credit Card Debt Study,” Erin El Issa, Nerdwallet, Jan 12, 2021 https://www.nerdwallet.com/blog/average-credit-card-debt-household/
² “2020 American Household Credit Card Debt Study,” Erin El Issa
In an era of less social contact, debit cards are convenient. Just swipe and go. Even more so for their mobile phone equivalents: Apple Pay, Android Pay, and Samsung Pay. We like fast, we like easy, and we like a good sale.
But are we actually spending more by not using cash like we did in the good old days?
We spend more when using plastic – and that’s true of both credit card spending and debit card spending.² Money is more easily spent with cards because you don’t “feel” it immediately. An extra $2 here, another $10 there… It adds up.
The phenomenon of reduced spending when paying with cash is a psychological “pain of payment.” Opening up your wallet at the register for a $20.00 purchase but only seeing a $10 bill in there – ouch! Maybe you’ll put back a couple of those $5 DVDs you just had to have 5 minutes ago.
When using plastic, the reality of the expense doesn’t sink in until the statement arrives. And even then it may not carry the same weight. After all, you only need to make the minimum payment, right? With cash, we’re more cautious – and that’s not a bad thing.
When you pay with cash, the expense feels real – even when it might be relatively small. Hopefully, you’ll get a sense that you’re parting with something of value in exchange for something else. You might start to ask yourself things like “Do I need this new comforter set that’s on sale – a really good sale – or, do I just want this new comforter set because it’s really cute (and it’s on sale)?” You might find yourself paying more attention to how much things cost when making purchases, and weighing that against your budget.
If you find that you have money left over at the end of the week (and you probably will because who likes to see nothing when they open their wallet), put the cash aside in an envelope and give it a label. You can call it anything you want, like “Movie Night,” for example.
As the weeks go on, you’re likely to amass a respectable amount of cash in your “rewards” fund. You might even be dreaming about what to do with that money now. You can buy something special. You can save it. The choice is yours. Well done on saving your hard-earned cash.
¹ “Debit Spending Is On The Rise, But Is It Here To Stay?” Visa Navigate, Apr 2021, https://navigate.visa.com/na/spending-insights/why-debit-spending-is-on-the-rise/
² “MIT study: Paying with credit cards activates your brain to create ‘purchase cravings’ for more spending,” Cory Stieg, CNBC, Mar 13, 2021, https://www.cnbc.com/2021/03/13/credit-cards-activate-brain-reward-network-create-cravings.html
Even though it’s not always obvious, we carry lots of assumptions and attitudes about money that might not be grounded in reality. How we perceive wealth and finances can impact how we make decisions, prioritize, and handle the money that we have. Here are a few common money mindsets that might be holding you back from reaching your full potential!
It’s simple, right? The rich are swimming in cash, so they’re able to save. They get to build businesses and live out their dreams. The rest of us have to live paycheck to paycheck, shelling out our hard earned money on rent, groceries, and other essentials.
That couldn’t be further from the truth! Sure, you might not be able to save half your income. But you might be surprised by how much you can actually stash away if you put your mind to it. And however much you can save right now, little as it might be, is much better than putting away nothing at all!
On the other side of the coin (get it?) is the notion that you have to save every last penny and dime that comes your way. There are definitely people in difficult financial situations who go to incredible lengths to make ends meet. Just ask someone who survived the Great Depression! But most of us don’t need to haggle down the price of an apple or forage around for firewood. And sometimes, the corners we cut to save a buck can come back to bite us. Set spending rules and boundaries for yourself, but make sure you’re not just eating ramen noodles and ketchup soup!
There are definitely times when you might not feel like you need to be proactive with your finances. You don’t feel like you’re spending too much, debt collectors aren’t pounding down your door, and everything seems comfortable. Budgeting is for folks with a spending problem, right?
The fact of the matter is that everyone should have a budget. It might not feel important now, but a budget is your most powerful tool for understanding where your money goes, areas where you can cut back, and how much you can put away for the future. It gives you the knowledge you need to take control of your finances!
Breaking mediocre money mindsets can be difficult. But it’s an important step on your journey towards financial independence. Once you understand money and how it works, you’re on the path to take control of your future and make your dreams a reality.
Maybe your numbers never add up or too many expenses are coming “out of the blue”. You might also feel a sense of dread every time you make a purchase. No matter what you do, this whole budgeting thing doesn’t seem to be working.
Hang in there! Here are a few budgeting potholes that might be slowing down your financial goals and how to avoid them!
Budgets are supposed to help you use your money wisely. They should be a positive part of your life—they’re not supposed to make you feel like you’re constantly failing. But sometimes our passion to save money and get our financial house in order gets the better of us, and we set up budgets that are too restrictive. While coming from good intentions, an overly thrifty budget can actually make it harder to achieve your goals. An impossible to follow plan can make you feel discouraged and resentful. You might even decide that it’s not worth the hassle! Try starting with a more reasonable strategy and then build from there!
Sometimes our budgets are just too complicated to actually be useful. Not everyone loves working with numbers, and sometimes fiddling with spreadsheets can get so overwhelming that we just want to quit. Plus, there’s plenty of room for human error! A good option is to investigate free budgeting sites or apps. All you do is punch in the correct numbers and the magic of technology will do the rest!
Life is constantly changing. Your simple, streamlined budget might be perfect for the life of a young single professional, but will it still hold up in five years? Where will the portion of your paycheck that works down your student loans go once you’re debt free? And when will you start saving for a house?
Take some time every few months to review your budget and see what’s changed. Evaluate what you’ve accomplished and areas that need improvement. Ask yourself what your next milestones should be and if those line up with your long-term goals!
Budgeting takes work. But it shouldn’t be a burden. Cut yourself some slack, prune your process, and stay consistent. You might be surprised by the difference filling in budgeting potholes can make in your financial life!
One interior decoration blog estimated that decorating a living room from scratch could cost between $14,400 to almost $50,000!(1) The numbers for the dining room, bedrooms, and kitchen are similarly high. Furnishing an apartment averages between $3500-5800.² But is there a better way? How can you save some cash if you’re trying to furnish your home? Here are a few helpful tips to guide your decorating process!
Start by taking stock of what furniture you have that can be used in your new home. Some of it might work in your new home, some of it might not. Try to get an idea of what existing furniture will go where and make note of new items you’ll need.
Arrange your list of new items in order of importance and buy those first. Mattresses for your bedroom? Top of the list. Abstract modern art to hang in your bathroom? Maybe hold off on that until you’ve taken care of the essentials!
Concerned that your kitchen is a little drab? Worried that your table cloth doesn’t match your dining room? You might be surprised how far a new paint job will get you! It might be a more budget-friendly way to spice up your living situation than tossing all your old furniture out the door, especially if you do it yourself. Things like tables and wooden chairs are all potential candidates for a new coat of paint, as are the walls of your home.
But there’s no doubt that at some point you’ll need to get a new piece of furniture. What then? Cough up and pay a ridiculous price? You might be surprised by the resources available to acquire furniture at a bargain. Local thrift stores can be treasure troves for things like chairs, coffee tables, and bookcases. Craigslist and eBay are also worth investigating, as are estate and garage sales. And you can always scour the curbs for a free sofa if you’re feeling bold!
Furnishing your new house can be fun. It’s a chance to unleash your creativity and make your home a special place. Just make sure you follow these budget-friendly tips before you start indulging!
¹ “Budget Breakdown: How Much Does It Cost To Decorate A Room?” The Kuotes, https://www.kathykuohome.com/blog/budget-breakdown-how-much-does-it-cost-decorate-a-room/
² “The Cost of Furnishing an Apartment: A Step-By-Step Guide With Breakdown Of Furniture Costs,” Bonnie Stinson, Furnishr, Jan 7, 2022 https://furnishr.com/blog/cost-furnishing-apartment/
And it’s not just a minor price hike. Used cars saw a 66%-110% price increase from December 2019 to December 2021.¹ For comparison, overall prices have increased “only” 12% from 2019 to 2022.²
Why? Like almost everything over the last two years, it all comes back to the pandemic.
Here’s the story…
New cars need microchips. That’s where all the computerized magic happens that consumers have come to expect when they drive out of the dealership.
But chip manufacturers were hit right between the eyes by the pandemic. They faced extensive lockdowns, followed by surging demand once the economy began to recover. Factories were simply unable to produce new cars quickly enough. Consumers needed alternatives. So they started buying used cars, en masse.
Demand shot up. Supply went down. And as a result, prices for used cars have soared.
Fortunately, there may be relief on the horizon. If chip manufacturers reopen and new cars hit the market, used car prices should start to trend downward. J.D. Power estimates the market will stabilize in late 2022 or early 2023.³ Morningstar puts the date in 2023.⁴
But whether those predictions become reality remains to be seen. For now, if you’re in the market for a used car, expect to pay more than you would have just a few years ago.
¹ “When Will Used-Car Prices Drop? 3 Things Car Shoppers Should Know,” Jane Ulitskaya, Cars.com, Feb 3, 2022, https://www.cars.com/articles/when-will-used-car-prices-drop-3-things-car-shoppers-should-know-446525/
² “$1 in 2019 is worth $1.12 today,” in2013dollars.com, https://www.in2013dollars.com/us/inflation/2019?amount=1#:~:text=Core%20inflation%20averaged%203.02%25%20per,2022%2C%20a%20difference%20of%20%240.09
³ “When Will Used-Car Prices Drop? 3 Things Car Shoppers Should Know,” Jane Ulitskaya, Cars.com, Feb 3, 2022, https://www.cars.com/articles/when-will-used-car-prices-drop-3-things-car-shoppers-should-know-446525/
⁴ “Used car prices continue to surge. Here’s why — and when they could come back down,” Mike Stunson, Miami Herald, https://www.miamiherald.com/news/nation-world/national/article257060717.html#storylink=cpy
Is racking up credit card debt or taking out payday loans financially dangerous? Of course! But they’re obvious. Hard to miss. They’re like a voice yelling into a megaphone “Hey! Don’t do it!”
But what about money mistakes that aren’t so obvious? Or even worse, money mistakes disguised as money wisdom?
Those may not devastate your bank account in one swoop. But they often go unaddressed. And over time, they add up.
So here are some money mistakes you might not have noticed.
Penny pinching. Sure, it sounds like a great idea in theory. But when you’re constantly scrimping and saving, it’s tough to enjoy life. What’s the point of working so hard if you can’t enjoy a reasonable treat now and then?
Plus, penny pinching may stop you from taking calculated risks that could save your money from stagnation.
So instead of extreme thriftiness, try moderation instead. You may find yourself far more inspired to budget and save than if you commit to complete frugality.
Under or over filling your emergency fund. A lot of people make the mistake of not having an emergency fund at all. It leaves them vulnerable to unexpected expenses and financial emergencies.
But when you have too much money in your emergency fund, it might be tough to make any real progress on your long-term financial goals. A good chunk of your net worth could be sunk into an account that’s not growing.
The solution? Save up 3 to 6 months of income in an easily accessible account, but no more. Use that money to cover emergencies ONLY. If it runs low, refill it.
Once your emergency fund is fully stocked, you can devote the rest of your income to building wealth.
Leaving goals undefined. It’s tough to achieve a goal you don’t have. Do you know where you’ll be financially in 5 years? 10? What are some things you’d like to save towards? A nicer home? An awesome vacation? A comfortable retirement? Not sure?
That uncertainty makes it easy to fudge good financial habits. It’s hard to see how lapses in your overall strategy can impact your big picture because you don’t have one.
So when it comes to your money, be specific. Very specific. Write out your goals and make sure they’re measurable. That way, you can monitor your progress and ensure you’re on the right track.
Be on the lookout for these dangerous money mistakes. They may seem innocuous, but they can add up over time and stop you from reaching your financial goals. Stay vigilant and steer clear of these traps!
But when your budget is already tight, they might be hard to find! Read on for 5 simple strategies to save money that may surprise you…
Cook your own food instead of eating out. Eating at a restuarant is about 300% more expensive than cooking at home. For instance, a $12 dollar burger at your favorite spot would cost $4 to prepare in your kitchen.¹
The takeaway is clear—whenever possible, prep your own food. Search the internet for recipes you love, recruit friends and family, and start creating… and saving!
Use coupons and promo codes. There are two ways to take advantage of online coupons and offers.
First, download your favorite grocery store’s app. Look for the savings section and start clipping coupons to your phone. Simply scan the app the next time you buy groceries for some potentially serious savings.
Second, install a plugin, like Honey, onto your browser. It will seek out coupons and promo codes and automatically apply them to your online purchases!
Walk and bike whenever possible. Any opportunity you have to replace your car with your feet or pedals, take it. Doing this has the potential to save you money on both gas and repairs over the long haul. Taking public transportation can also be a wise move—it’s been shown to save $10,000 per household.²
Make your own coffee at home to save money on daily expenses. Making your coffee in a traditional coffee pot can potentially save you over $1,900 annually.³ There’s nothing wrong with splurging on a coffee shop drink every now and then. But try to incorporate brewing your own coffee into your daily routine and see how it impacts your savings.
Find free entertainment. It’s not impossible! Organize a group of friends to throw a frisbee or play tag football in a park. Visit a museum with your family on a free-entry day. Go for a long walk with your partner. You might be surprised by how much fun you can have for free.
Apply these tips and let me know how much you save! What are some money saving ideas you use when you’re on a tight budget?
¹ “The True Cost Of Eating Out (And How To Save),” Amy Bergen, Money Under 30, Feb 11, 2021, https://www.moneyunder30.com/the-true-cost-of-eating-in-restaurants-and-how-to-save#:~:text=By%20contrast%2C%20the%20average%20meal,%244%20meal%20you%20prepare%20yourself.
² “Public Transportation Facts,” American Public Transportation Association, https://www.apta.com/news-publications/public-transportation-facts/#:~:text=Public%20Transportation%20Saves%20Money&text=A%20household%20can%20save%20nearly,living%20with%20one%20less%20car
³ “Here’s How Much Money You Really Save by Making Coffee at Home,” Samantha Rosen, NextAdvisor, February 3, 2021, https://time.com/nextadvisor/banking/savings/save-money-by-making-coffee-at-home/
For instance, you can increase the shelf life of cottage cheese if you store it upside down.¹ That’s a great hack if you like saving money every few weeks or eating cottage cheese. But today we’re looking at high return tricks that will impact your wallet every time you check out. And with inflation the way it is right now, these strategies could make a serious dent in your monthly expenses.
Let’s start simple!
Maybe you just get your water out of the tap, but if you’re in the habit of purchasing fancy bottled water, STOP. If you must indulge in decedent H2O, do the cost-effective thing and buy a reusable bottle with a filter. Use the $100 that most Americans spend on water annually for savings or donating to cause you care about.² At the very least, use it to buy something that doesn’t have a free alternative!
Local vendors usually don’t want to lug their unsold goods back home with them. That’s why they’ll often start discounting their produce as the day drags on. Hit them right at the end of the day to get the best deals. And don’t be afraid to ask them for items that aren’t visually perfect but are still usable.
Stores are designed as mazes. You’re meant to wander around and notice as many products as possible. Afterall, you might just see something you “need” but didn’t plan on getting!
That’s why you must bring a list with you when you go shopping. You’re far less likely to explore your options and stay on track if you have a few written objectives.
While you’re at it, try to stick to the perimeter of the store. That’s where the essential items you’ll need are often stocked!
Saving money on food is a long game. If you’re preparing your own meals instead of going out, you’re already well ahead of the curve. Try out these tips to take your frugality game to the next level!
¹ “How to Store Dairy Products to Keep Them Good As Long As Possible,” Margaret Eby, Food and Wine, Apr 3, 2020, https://www.foodandwine.com/how/how-to-store-dairy-products
² “The Money Spent Can Be Used Better Elsewhere,” The Water Project, https://thewaterproject.org/bottled-water/bottled_water_resources