It’s a challenge they tackle with gusto. Shaving down expenses with couponing, hunting the best deals with an app on their phones, or simply finding creative ways to reuse a cardboard box, gives them a thrill. For others, budgeting conjures up images of living in tents, foraging for nuts and berries in the woods, and sewing together everyone’s old t-shirts to make a blanket for grandma.
To each their own! But budgeting doesn’t have to be faced like a wilderness survival reality TV competition. Sure, there might be some sacrifice and compromise involved when you first implement your budget (giving up that daily $6 latte might feel like roughing it at first), but rest assured there’s a happy middle to most things, and a way that won’t make you hate adhering to your financial goals.
Simplifying the budgeting process can help ease the transition. Check out the following suggestions to make living on a budget something you can stick to – instead of making a shelter out of sticks.
Use that smartphone. Your parents may have used a system of labeled envelopes to budget for various upcoming expenses. Debit cards have largely replaced cash these days, and all those labeled envelopes were fiddly anyway. Your best budgeting tool is probably in your pocket, your purse, or wherever your smartphone is at the moment.
Budgeting apps can connect to your bank account and keep track of incoming and outgoing cash flow, making it simple to categorize current expenses and create a solid budget. A quick analysis of the data and charts from the app can give you important clues about your spending behavior. Maybe you’ll discover that you spent $100 last week for on-demand movies. $5 here and $10 there can add up quickly. Smartphone apps can help you see (in vivid color) how your money could be evaporating in ways you might not feel on a day-to-day basis.
Some apps give you the ability to set a budget for certain categories of spending (like on-demand movies), and you can keep track of how you’re doing in relation to your defined budget. Some apps even provide alerts to help keep you aware of your spending. And if you’re feeling nostalgic, there are even apps that mimic the envelope systems of old, but with a digital spin.
Plan for unexpected expenses. Even with modern versions of budgeting, one of the biggest risks for losing your momentum is the same as it was in the days of the envelope system: unexpected expenses. Sometimes an unexpected event – like car trouble, an urgent home repair, or medical emergency – can cost more than we expected. A lot more.
A good strategy to help protect your budget from an unexpected expense is an Emergency Fund. It may take a while to build your Emergency Fund, but it will be worth it if the tire blows out, the roof starts leaking, or you throw your back out trying to fix either of those things against your doctor’s orders.
The size of your Emergency Fund will depend on your unique situation, but a goal of at least $1,000 to 3 months of your income is recommended. Three months of income may sound like a lot, but if you experience a sudden loss of income, you’d have at least three full months of breathing room to get back on track.
Go with the flow. As you work with your new budget, you may find that you miss the mark on occasion. Some months you’ll spend more. Some months you’ll spend less. That’s normal. Over time, you’ll have an average for each expense category or expense item that will reveal where you can do better – but also where you may have been more frugal than needed.
With these suggestions in mind, there is no time like the present to get started! Make that new budget, then buy yourself an ice cream or turn on the air conditioning. Once you know where you stand, where you need to tighten up on spending, and where you can let loose a little, budgeting might not seem like a punishment. In fact, you might find that it’s a useful, much-needed strategy that you CAN stick to – all part of the greater journey to your financial independence.
There’s a significant financial mistake people in their 20s and 30s make. It’s simple, but if you’re young, it could change your financial future…
Have you made this mistake? Think you know what it is?
Young people don’t save enough. Not by a long shot. On average, Millennials have only saved $23,000 for retirement.¹ And a recent survey revealed that 65% of 50 year olds felt the greatest financial mistake of their 20s and 30s was not saving.² It’s no wonder, then, that the same group feels they have under-saved and under-prepared for retirement.
So what can you do if you’re a young person seeking to build wealth? Here are three ideas…
Automate saving every month. The power of automation makes saving easy. Saving stops being a conscious decision with which you may or may not follow through. Instead, it’s a background process you can set and forget.
Meet with a financial professional. They’re the guides you need for navigating the world of budgeting, saving, and building wealth. They can help you identify the goals and strategies you need to inspire your savings.
Focus on your own financial growth. Comparing your lifestyle to your peers is tempting, especially when you’re young. But it can be dangerous, especially if it causes you to spend more than you earn. Just remember—you may not really know the financial situation of your friends as presented on social media. People tend to just show the good and not the bad. Orient yourself towards improving your own situation and building your future.
So don’t make the mistake that so many have made. Follow the tips in this article and start laying the foundation of your financial future.
¹ “Retirement Security Amid COVID-19: The Outlook of Three Generations 20th Annual Transamerica Retirement Survey of Workers,” Transamerica Center For Retirement Studies, May 2020, https://transamericacenter.org/docs/default-source/retirement-survey-of-workers/tcrs2020_sr_retirement_security_amid_covid-19.pdf
² “Money Mistakes: Exploring the financial situation of people over 50,” Caring Advisor, https://caringadvisor.com/money-mistakes/
There are a lot of reasons why. It takes planning and self-control. You’ll have to ask yourself if you can fit every purchase into your budget. It means giving up something today in order to benefit tomorrow.
These are all true, but saving doesn’t have to be hard work. One way to make it easier is to automate your savings and then watch your balance grow!
Automation is such a powerful tool because it makes saving effortless. With automation, saving is now a default, as opposed to a decision—you’re always saving in the background.
For example, you might have a goal to save $1,000 for a vacation. If you’re saving $20 per week, that would take less than a year. And the same logic applies to larger goals—it’s a key strategy for creating retirement wealth.
First, decide how much money you can afford to save each month. Then set up automatic deposits from your main bank account into your savings account. That’s it! Every month, money will go straight from your paycheck to your wealth building efforts.
Now, you’re positioned to go about your daily business, confident that you’re preparing for the future. And it only takes a few minutes to do! If you want to discover more wealth building strategies, contact me. We can review your financial situation and create a game plan.
But that doesn’t stop “budget” from being an intimidating word to many people. Some folks may think it means scrimping on everything and never going out for a night on the town. It doesn’t! Budgeting simply means that you know where your money is going and you have a way to track it.
The aim with budgeting is to be aware of your spending, plan for your expenses1, and make sure you have enough saved to pursue your goals.
Without a budget, it can be easy for expenses to climb beyond your ability to pay for them. You break out the plastic and before you know it you’ve spent fifty bucks on drinks and appetizers with the gang after work. These habits might leave you with a lot of accumulated debt. Plus, without a budget, you may not be saving for a rainy day, vacation, or your retirement. A budget allows you to enact a strategy to help pursue your goals. But what if you’ve never had a budget? Where should you start? Here’s a quick step-by-step guide on how to get your budgeting habit off the ground!
Track your expenses every day. Start by tracking your expenses. Write down everything you buy, including memberships, online streaming services, and subscriptions. It’s not complicated to do with popular mobile and web applications. You can also buy a small notebook to keep track of each purchase. Even if it’s a small pack of gum from the gas station or a quick coffee at the corner shop, jot it down. Keep track of the big stuff too, like your rent and bill payments.
Add up expenses every week and develop categories. Once you’ve collected enough data, it’s time to figure out where exactly your paycheck is going. Start with adding up your expenses every week. How much are you spending? What are you spending money on? As you add your spending up, start developing categories. The goal is to organize all your expenses so you can see what you’re spending money on. For example, if you eat out a few times per week, group those expenses under a category called “Eating Out”. Get as general or as specific as you wish. Maybe throwing all your food purchases into one bucket is all you need, or you may want to break it down by location - grocery store, big box store, restaurants, etc.
Create a monthly list of expenses. Once you’ve recorded your expenses for a full month, it’s time to create a monthly list. Now you might also have more clarity on how you want to set up your categories. Next, total each category for the month.
Adjust your spending as necessary. Compare your total expenses with your income. There are two possible outcomes. You may be spending within your income or spending outside your income. If you’re spending within your income, create a category for savings if you don’t have one. It’s a good idea to create a separate savings category for large future purchases too, like a home or a vacation. If you find you’re spending too much, you may need to cut back spending in some categories. The beauty of a budget is that once you see how much you’re spending, and on what, you’ll be able to strategize where you need to cut back.
Keep going. Once you develop the habit of budgeting, it should become part of your routine. You can look forward to working on your savings and developing a retirement strategy, but don’t forget to budget in a little fun too!
¹Jeremy Vohwinkle, “Make a Personal Budget in 6 Steps: A Step-by-Step Guide to Make a Budget,” The Balance (March 6, 2020).
The good news is, you don’t need a perfect relationship or perfect finances to have productive conversations with your partner about money, so here are some tips for handling those tricky conversations like a pro!
Be respectful. Respect should be the basis for any conversation with your significant other, but especially when dealing with potentially touchy issues like money. Be mindful to keep your tone neutral and try not to heap blame on your partner for any issues. Remember that you’re here to solve problems together.
Take responsibility. It’s perfectly normal if one person in a couple handles the finances more than the other. Just be sure to take responsibility for the decisions that you make and remember that it affects both people. You might want to establish a monthly money meeting to make sure you’re both on the same page and in the loop. Hint: Make it fun! Maybe order in, or enjoy a steak dinner while you chat.
Take a team approach. Instead of saying to your partner, “you need to do this or that,” try to frame things in a way that lets your partner know you see yourself on the same team as they are. Saying “we need to take a look at our combined spending habits” will probably be better received than “you need to stop spending so much money.”
Be positive. It can be tempting to feel defeated and hopeless that things will never get better if you’re trying to move a mountain. But this kind of thinking can be contagious and negativity may further poison your finances and your relationship. Try to focus on what you can both do to make things better and what small steps to take to get where you want to be, rather than focusing on past mistakes and problems.
Don’t ignore the negative. It’s important to stay positive, but it’s also important to face and conquer the specific problems. It gives you and your partner focused issues to work on and will help you make a game plan. Speaking of which…
Set common goals, and work toward them together. Whether it’s saving for a big vacation, your child’s college fund, getting out of debt, or making a big purchase like a car, money management and budgeting may be easier if you are both working toward a common purpose with a shared reward. Figure out your shared goals and then make a plan to accomplish them!
Accept that your partner may have a different background and approach to money. We all have our strengths, weaknesses, and different perspectives. Just because yours differs from your partner’s doesn’t mean either of you are wrong. Chances are you make allowances and balance each other out in other areas of your relationship, and you can do the same with money if you try to see things from your partner’s point of view.
Discussing and managing your finances together can be a great opportunity for growth in a relationship. Go into it with a positive attitude, respect for your partner, and a sense of your common values and priorities. Having an open, honest, and trust-based approach to money in a relationship may be challenging, but it is definitely worth it.
Many of us treat it like a guilty pleasure and almost take a little pride in our extravagant purchases, even seeing it as “self-care”. But there’s also a part of us that knows we’re not being wise when we senselessly spend money.
So how do we resolve that tension between having fun and making good decisions? Here are a few ideas to help you splurge responsibly!
Budget in advance. “Responsible splurging” might seem like a contradiction, but the key to enjoying yourself once in a while and staying on track with your financial strategy is budgeting. Maintaining a budget gives you the power to see where your money is going and if you can afford to make a big/last-minute/frivolous purchase. And when you decide that you’re going to take the plunge, a budget is your compass for how much you can spend now, or if you need to wait a little longer and save a little more.
Beware of impulse purchasing. The opposite of budgeting for a splurge is impulse buying. We’ve all been there; you’re scrolling through your favorite shopping site and you see it. That thing you didn’t know you always wanted—and it’s on sale. Just a few clicks and it could be yours!
Tempting as impulse buying might be, especially when there’s a good deal, it’s often better to pause and review your finances before adding those cute shoes to your cart. Check your budget, remember your goals, and then see if that purchase is something you can really afford!
Do your research. Have you ever spent your hard-earned money on a dream item, even if you budgeted for it, only to have it break or malfunction after a few weeks? Even worse, it might have been something as significant as a car that you wound up trying to keep alive with thousands of dollars in maintenance and repairs!
That’s why research is so important. It’s not a guarantee that your purchase will last longer, but it can help narrow your options and reduce the chance of wasting your money.
Responsible splurging is possible. Just make sure you’re financially prepared and well-researched before making those purchases!
Paying off your mortgage, car, and student loans can sometimes seem so impossible that you might not even look at the total you owe. You just keep making payments because that’s all you might think you can do. However, there is a way out! Here are 4 tips to help:
Make a Budget. Many people have a complex budget that tracks every penny that comes in and goes out. They may even make charts or graphs that show the ratio of coffee made at home to coffee purchased at a coffee shop. But it doesn’t have to be that complicated, especially if you’re new at this “budget thing”.
Start by splitting all of your spending into two categories: necessary and optional. Rent, the electric bill, and food are all examples of necessary spending, while something like a vacation or buying a third pair of black boots (even if they’re on sale) might be optional.
Figure out ways that you can cut back on your optional spending, and devote the leftover money to paying down your debt. It might mean staying in on the weekends or not buying that flashy new electronic gadget you’ve been eyeing. But reducing how much you owe will be better long-term.
Negotiate a Settlement. Creditors often negotiate with customers. After all, it stands to reason that they’d rather get a partial payment than nothing at all! But be warned; settling an account can potentially damage your credit score. Negotiating with creditors is often a last resort, not an initial strategy.
Debt Consolidation. Interest-bearing debt obligations may be negotiable. Contact a consolidation specialist for refinancing installment agreements. This debt management solution helps reduce the risk of multiple accounts becoming overdue. When fully paid, a clean credit record with an extra loan in excellent standing may be the reward if all payments are made on time.
Get a side gig. You might be in a position to work evenings or weekends to make extra cash to put towards your debt. There are a myriad of options—rideshare driving, food delivery, pet sitting, you name it! Or you might have a hobby that you could turn into a part-time business.
If you feel overwhelmed by debt, then let’s talk. We can discuss strategies that will help move you from feeling helpless to having financial control.
The older Gen Zers have just come out of college, but this group’s imprint on society is already clear. You might be surprised by their attitude towards money and wealth! Let’s explore how these digital natives interact with money and why their financial habits might be influencing your business strategy.
Social media is an integral part of their world. They spend more time on their phones, tablets, and laptops than any other generation. The iPhone was old news by the time younger Gen Zers were born. This generation needs a whole new set of rules for how they shop and find financial advice.
For instance, Gen Zers are 72% more likely to buy from brands they follow on social media.¹ And there’s been an explosion of financial advice–not all of it good–on TikTok—#personalfinance has 3.5 billion views on the platform.² So if you’re interested in not just understanding Gen Zers, but also getting their attention, it pays to keep up with social media trends.
Gen Zers have yet to accrue massive debt. Gen Zers have thus far avoided the traps of credit card and student loan debt that have burdened every generation before. The numbers aren’t stellar–on average, Gen Zers have over $10,000 in non-mortgage debt–but that’s just a fraction of the debt carried by the typical Millennial or Gen Xer.
Of course, Gen Zers haven’t had as much time to accrue debt. It could well be that in 10 years they have just as many student loans and high credit card balances as older generations. But there is hope! Why?
Gen Zers are avid budgeters. 68% of Gen Zers use some form of budgeting system.³ Only 41% of the general population can say the same.⁴ That’s a massive improvement! If Gen Zers can use their budgets to avoid massive debt, they could find themselves well positioned financially.
In other words, Gen Z is hungry to learn how money really works. They’re already taking steps to avoid the missteps of past generations. The real question is who will teach them what it takes to become wealthy?
¹ “Generation Z Spending Habits for 2021,” Lexington Law, Feb 8, 2021, https://www.lexingtonlaw.com/blog/credit-cards/generation-z-spending-habits.html
² “Viral or vicious? Financial advice blows up on TikTok,” Nicole Casperson, InvestmentNews Feb 15, 2021, https://www.investmentnews.com/financial-advice-blows-up-on-tiktok-but-at-what-cost-202260#:~:text=That%27s%20what%20financial%20advice%20is,form%20of%2060%2Dsecond%20videos.
³ “Generation Z Spending Habits for 2021,” Lexington Law, Feb 8, 2021, https://www.lexingtonlaw.com/blog/credit-cards/generation-z-spending-habits.html
⁴ “What Is a Budget and Why Should I Use One?,” Tim Stobierski, acorns, Sep 6, 2019, https://www.acorns.com/money-basics/saving-and-budgeting/budget-meaning/#:~:text=While%20many%20factors%20likely%20contribute,budget%2C%20according%20to%20U.S.%20Bank.
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.
This is how it works. At the beginning of every month, you withdraw in cash all the money you plan on spending. Then, you divvy up your money into envelopes that represent different budget categories. For example, if you’ve budgeted $100 for eating at restaurants for the month, place $100 cash into an envelope labeled “restaurants.” That’s what you’ve got to dip into when you go out to eat. You don’t have to think about it. It’s that simple!
Not convinced? Here are 6 advantages of adopting the cash envelope system!
1. It’s a great way to save money. The ultimate goal of using cash envelopes is to save money. It can be an effective system because it brings your budget out into the open and makes it tangible. It can help reduce the likelihood that you’ll break your system and overspend.
2. The cash envelope system is flexible. Regardless of your age or financial situation, the cash envelope system can help you manage your spending. Barring categories for investing or emergency savings, it empowers you to accurately track and visualize your daily expenses.
3. You can easily see where you’re overspending. Every envelope that’s empty before the end of the month is a category where you’re potentially overspending. You now know exactly where you need to cut back.
4. It helps keep your budget organized. Nothing takes the wind out of your financial strategy quite like an overly complex budget. The cash envelope system takes the guesswork out of your budgeting and let’s you know exactly how much you can spend on what categories, and how much you have left over.
5. Cash envelopes help reduce the risk of impulse purchases. Why? Because they require that all transactions are planned ahead of time. That means fewer unbudgeted and out of the blue treats, toys, and trips!
6. It’s a great way to teach your kids about money management. That’s right, the envelope system is simple enough to teach to your kids. Consider setting up envelopes to help them budget their allowance. You can even make it a fun family project and help them decorate their envelopes! Start with simple categories like saving, spending, and giving, and add more categories as time goes on.
If you need a budget that’s simple and can help save you money, cash envelopes may be for you! Identify your top spending categories, buy a few envelopes and label them, and then start filling them with cash. Let me know what results you see!
In fact, it can be a straightforward—and profoundly enlightening—exercise that reveals your available cash flow and where you can reduce spending.
Here’s your step by step guide to creating a simple budget!
Get a pen and paper (or laptop). You’ll need a place to write and crunch a few simple numbers. If you’re “old school”, a pen, piece of paper, and a calculator will work perfectly. But you can also use a text document or spreadsheet if you’d rather!
Also, consider using a budgeting app. They’re simple tools right on your phone that you can use to track your income and outgo.
Make a list of all your monthly expenses, including housing, utilities, groceries, and transportation. Then, log in to your online banking account. You should be able to determine your average monthly spending in all of your expense categories. Write down those numbers in your budget.
Add up how much you spend in each category. That’s your total average monthly spending!
Then, subtract that number from your income to calculate your average available cash flow. That’s how much money you have leftover each month to tackle debt, save for emergencies, or use to start building wealth.
If it’s a smaller number than you expected, it’s ok. You’ve taken a very important step to face reality and move forward financially! You now know what you’re spending each month, and on what. Look at categories like entertainment and dining out. Can you reduce your monthly spending in these areas?
If your budget is tight and cash still isn’t flowing as freely as you’d like, you may need to consider starting a side hustle or part-time business to help make up the difference.
Ask me if you need help constructing your budget. It’s a simple process that can seriously improve your financial wellness.
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/
All parents must contend with the cost of childcare, education, housing, and food. But there are some unexpected expenses that can blindside you if you’re not prepared for them. Here are some hidden costs that every parent should anticipate in advance!
The newborn utility bill spike When your baby first arrives home from the hospital (yay!), expect your utility bills to seriously increase. Chances are, your newest family member will require a cozy temperature all day to maintain their mood and sleep schedule. Plus, you’ll probably run a few extra loads of laundry and dishes every week! Before your child comes home, budget in some extra cash specifically for utility bills.
Birthday parties for preschoolers Nobody loves birthday parties more than preschoolers. If you’re not careful, you may end up paying far more than you ever expected on decorations, party favors, and gifts.
Come up with a budget-friendly gift giving strategy for your family early and stick with it. That might be placing a cost limit on what you give, or developing creative and heartfelt ways to make gifts from scratch.
Date nights will temporarily increase in cost Until your kids are old enough to look after themselves, you’ll need to hire a babysitter before you go on a date night.
There are responsible ways to save money on this often unexpected expense. If possible, have a family member look after your kids while you enjoy your romantic dinner. Also, consider swapping babysitting duties with a friend—you look after their kids on their date nights, they look after your kids on your date nights!
Extracurricular activities Music lessons, sports teams, and driver’s ed are sometimes far more expensive than parents realize. In addition to the upfront costs, you’ll also need to buy instruments, cleats, jerseys, and more to empower your kids to enjoy their favorite hobbies.
Create an extracurricular activities fund and start building it now. Then, decide how much you can pay each month for lessons and coaching.
What’s a parenting expense that caught you by surprise? I’d love to hear what it was and how you overcame it!
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, ranging from $9,100 to $9,600 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!
¹ “How do I sign my new baby up for health insurance?,” Nikki Davis, Bernard Benefits, Sept 2, 2020, https://blog.bernardbenefits.com/how-do-i-sign-my-new-baby-up-for-health-insurance
² “Child Care Costs by State 2020,” Procare Solutions, Jun 24, 2020, https://www.procaresoftware.com/child-care-costs-by-state-2020/
As you’re probably aware by now, growing a baby comes with serious financial responsibility. Here are a few expenses to anticipate and start planning for as soon as possible!
Prenatal care costs. Keeping both the mother and baby healthy throughout the pregnancy is a top priority. That means regular checkups and ultrasounds to make sure everything is progressing safely and normally.
Investigate what’s covered and what you’re expected to pay for beforehand. Health insurance policies will often cover prenatal care, but it’s best to find out what your expenses will be ahead of time. Out of pocket, prenatal care costs on average $2,000, so start preparing now!¹
Maternity clothes. Pregnancy requires a wardrobe overhaul for women that, on average, costs about $500.² Fortunately, there are commonsense strategies to cut back on this expense. Check local thrift stores for maternity options, and even consider buying flowy dresses or tops that are a size–or three–larger than your normal size. Also, ask family members if you can borrow their spare maternity clothes. Try to avoid designer maternity clothes which can come with a hefty price tag.
Delivery expenses. The cost of giving birth varies greatly—from $4,000 to $20,000 depending on your state and health insurance coverage.³ Again, it’s critical to consult with your healthcare and insurance providers to see what you’ll be expected to cover. The earlier you discover this information, the better—it gives you time to start saving for the hospital bill!
Budgeting for doctor visits, the delivery, and the hospital stay positions you to cover those expenses without having to borrow money. And that means you can provide your child a financially stable environment in which to grow, without the stress caused by unexpected medical expenses.
¹ “How Much Does it Cost to Have a Baby?,” Rickie Houston, SmartAsset, Oct 01, 2020, https://smartasset.com/financial-advisor/cost-of-having-a-baby#:~:text=The%20average%20price%20of%20having,and%20the%20hospital%20care%20fee.
² “Dressing for Two,” Stephie Grob Plante, Vox, Jan 30, 2018, https://www.vox.com/2018/1/30/16928328/maternity-clothes-pregnancy-miscarriage
³ “What It Costs to Have a Baby,” Heather Hatfield, WebMD, https://www.webmd.com/baby/features/cost-of-having-a-baby#1
Here’s how that works. Items are typically cheaper in thrift stores and flea markets than they are online. That means there’s potential to make a handsome profit if you buy something at a thrift store and then sell it on a digital marketplace.
Let’s look at an example…
You notice an item at your local thrift store that you’re certain sells online for about $60. You check the price tag—it’s only $5. You buy it and make a listing on your favorite digital marketplace. It sells! Let’s say shipping costs and selling fees are also $5 each. Your net profit is $45. You’ve made back triple the cost of your initial investment and business expenses.
It’s a simple, elegant, and fun business model that can potentially generate extra cash flow.
If you decide to start a thrifting business, consider these tips to maximize your profits!
Start at home. Before you send something to a landfill or thrift store, search for it on an online marketplace. You might be surprised how much of your “trash” is actually treasure! Make no mistake—some items aren’t worth your time salvaging and selling. But if you have clothes, toys, and books that are in good condition, consider listing them online and see what happens!
Scout out the right locations. Whenever possible, shop at thrift stores in wealthier neighborhoods. They’ll typically have higher-end products that fetch better prices. Also, consider using an app like Nextdoor to monitor local garage and estate sales—those are where you’ll find the real treasures at potentially deep discounts.
Prioritize the right items. Not all resale items are created equal. Books, textbooks, picture frames, and designer clothes tend to have strong returns. But always check the price of an item on eBay or another online marketplace before you buy it.
Buff up what you buy. Before you buy anything from a second-hand vendor, check it for damage or blemishes, but don’t be put off by surface-level issues. You might be surprised at how many items are simple to repair, fix, or clean. Putting in a little elbow grease may substantially boost the selling price.
Remember to have fun while you’re thrifting. The beauty of the reselling business is that it allows you to make money and enjoy a hobby at the same time. It’s perfectly fine if you don’t walk out with an incredible find. Embrace the process, see what’s out there, and make some extra cash while you’re at it!
A recent set of studies demonstrated that enjoying experiences created more anticipation, in-the-moment excitement, and longer-term satisfaction than purchasing items.¹ The results held true regardless of how much money was spent.
Why? Because an experience creates memories that last a lifetime. Possessions, however, can quickly become boring.
What does that mean for your budget?
Try shifting your discretionary spending from items to experiences for a month. Instead of spending your weekend at the mall, take your family on a day trip. Cut back on visiting designer stores and opt to walk through the park with a friend. Spend your time online planning exciting vacations instead of scrolling through store websites.
Then, take stock of how you feel. Has your quality of life–and cash flow–improved? Let me know how this simple shift makes a difference for your family and your budget!
¹ “Spending on experiences rather than things is associated with greater immediate happiness, study finds,” Susan Perry, MinnPost, Mar 12, 2020, https://www.minnpost.com/second-opinion/2020/03/spending-on-experiences-rather-than-things-is-associated-with-greater-immediate-happiness-study-finds/#:~:text=coverage%3B%20learn%20why.-,Spending%20on%20experiences%20rather%20than%20things%20is,greater%20immediate%20happiness%2C%20study%20finds&text=Plenty%20of%20recent%20research%20has,such%20as%20clothing%20and%20gadgets
A recent survey revealed that 83% of respondents underestimated their subscription spending by a wide margin.¹ On average, they thought subscriptions only cost them $80 per month. In reality, it was over $230.
That was back in 2018. Since the COVID-19 Pandemic started in 2020, that number has dramatically increased. A 2020 survey discovered that, on average, consumers added $192 in new subscriptions after lock downs started.²
The takeaway? Subscriptions might be consuming more of your cash flow than you realize.
Scroll through the apps on your phone. Are there streaming, dating, or wellness subscriptions that you pay for but never use? Unsubscribe and uninstall them!
If you and your family regularly use a streaming service, consider cancelling your cable subscription. They’re expensive, and your streaming services probably carry your favorite shows as it is.
It’s also worth investigating the value of any subscription boxes you receive. Is a monthly shipment of makeup or comic books significantly improving your life? Or do most of the items go unused? If the latter is true, consider cancelling your subscription.
Once you’ve cleared out unnecessary subscriptions, you might be surprised by how much cash flow you’ve freed up for reducing debt or building wealth.
¹ “You probably spend more on subscriptions than you realize,” Angela Moscaritolo, Mashable, Feb 20, 2019, https://mashable.com/article/you-probably-spend-more-on-subscriptions-that-you-realize/
² “Americans More Than Tripled Subscription Service Spending Amid Social Distancing,” David Dykes, Greenville Business Magazine, May 14, 2020, http://www.greenvillebusinessmag.com/2020/05/14/308970/americans-more-than-tripled-subscription-service-spending-amid-social-distancing
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 is approximately 13.6% 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, Nov 25, 2020, http://bit.ly/2qSGrR3.
It might feel like every salesperson is pulling the wool over your eyes to take as much money from you as possible while delivering the least value.
Not to worry! Here are a few car buying insights that can help you get a ride that meets your transportation needs without sacrificing your financial stability.
Buy a used car. Chances are, you’ll buy your first car with limited financial resources. You most likely just need a vehicle that reliably gets you around town without breaking the bank.
In terms of price, used cars beat new cars almost every time. And reliability is decreasingly an issue–used cars sometimes travel 100,000 before they need a major repair.¹
As a rule of thumb, look for used cars that are three years old or more. They often can have the same features as newer models, still have many miles left before they break down, and can cost a fraction of a brand new car.
Ask for a car’s VIN before you buy it. If you decide to buy used, ask for the Vehicle Identification Number (VIN) of each car you consider. A VIN gives you access to the full history of your car, including…
Once you have the VIN, check it out on the National Highway Traffic Safety Administration and the National Motor Vehicle Title Information System. They have digital resources that allow you to search VINs and discover the history of the vehicles you’re considering.
Say no to bad deals. Don’t sweat it if you find a not-so-great car at a good price. It’s perfectly fine to walk away and keep searching. 40 million used cars were sold in 2019.² You’ll find the car you want at a price you love soon enough!
Above all, do your research. Buying a first car is a serious financial commitment. The last thing you want to do is drive off with a car that costs too much or will need constant repairs and maintenance. Check out sites like Kelley Bluebook and Consumer Reports to find information on car prices and reliability. Then, start asking around. You might be surprised by how many people in your circles are trying to unload a reliable used car!
¹ “How Many Miles is Too Many on a Used Car?,” Autolist, June 27, 2017, https://www.autolist.com/guides/how-many-miles-is-too-many-used-car
² “New and used light vehicle sales in the United States from 2010 to 2019,” I. Wagner, Statista, https://www.statista.com/statistics/183713/value-of-us-passenger-cas-sales-and-leases-since-1990/#:~:text=U.S.%20new%20and%20used%20car%20sales%202010%2D2019&text=Sales%20of%20used%20light%20vehicles,and%20automobiles%20were%20sold%20here.