Tag: Automation

 

How to Break the Habit of Impulse Spending

While forming good financial habits will help keep your spending in check, there are still forces at large that will foil your best money-saving intentions.

To make things even harder for you to hold onto your money, retailers want you to cave in and make impulse purchases. They even employ clever marketing tactics to entice you to spend money.

Here 8 ways retailers try to get you to buy things — and how you can break the overwhelming urge to overspend.

1. Loss Leaders

Loss leaders are the “too good to be true” items sold at below market price.

The goal with these items is to entice you into the store so you spend money. These are the doorbusters and blue light specials that feel like a steal. So, while you may save on say, ground turkey that’s half off, you may also end up spending $50 on regular-priced products.

How to beat it: Have you ever trekked to the local grocer for some butter, only to find a few untouched sticks hidden in the back of your fridge? To help you figure out what you truly need, shop in your pantry or closet before heading out to the store. This will prevent you from doubling up on supplies you already have. Once you’ve done this, you can write a shopping list. Just make sure you stick to it.

2. The Visceral Experience

 Imagine that you arrive at your local supermarket. You smell the aroma of savory ham and cheese croissants wafting through the bakery that’s near the front entrance. When you enter the store, you listen to upbeat pop music playing in the background. And the thoughtfully designed lighting makes every product on the neatly lined shelves look fabulous.

Like an alluring enchantress, the tactile, visceral experience of shopping is so enjoyable that it makes you want to hang out in the store for longer periods of time — and, of course, you end up spending more money.

How to beat it: It’s hard not to be engrossed in a miasma of touch, smell, and sounds. The experience of shopping can provide a form of escape.

It’s also hard not to go grocery shopping, especially when you need food items. So, try picturing products on a messy shelf. If placed in a less-than-picturesque setting, do you still want to linger and shop?

3. Items Placed Next to Each Other

Curated product placement is a clever consumer psychology ploy to get you to spend more money. That’s why when you head to the chips aisle, you’ll find jars of salsa and nacho cheese stacked beside them.

How to beat it: Spend only if you really want the items, and if you can afford them. You can also track your expenses with a money saving app to see how much you have left in your monthly budget for food, clothing, or personal items.

4. Retail Therapy Is Alive and Well

There’s good reason why we enjoy shopping. Whether you’re bored, stressed, anxious, or depressed, it turns out that shopping can help you feel in control of your environment, and thus reduce residual sadness, according to the Journal of Consumer Psychology.

How to beat it: I’m guilty of shopping when I’m feeling bored or stressed. But I also know that it’s better to find other ways to alleviate stress. For instance, take a walk around your neighborhood. Or meditate. Even losing yourself in some binge watching is a better panacea than leisurely shopping, which can be dangerous to your pocketbook.

5. Anchoring

You’ve probably seen “original price” marked next to the discounted price at chain stores. This is a widely-used tactic called anchoring.

As Emily Guy Birken, a personal finance writer and author of How to End Financial Stress explains, anchoring is a term used in behavioral economics that gives you a price for how much something should cost.

Because you see the suggested retail price of $50, which is the “anchor,” the $30 on the price-tag makes it appear like a good deal. But is it really a deal?

How to break the impulse: Spend some time comparison shopping. Use a handy app to compare prices. Make sure you know whether the reduced price is truly a deal — or if the retailer is merely trying to make you believe it’s a bargain.

6. Removing Friction

Friction refers to barriers that make it more difficult or unpleasant to buy things.

Retailers want it to be as easy and painless for you to spend, either online or in the store. That’s why items you put in your online cart are left in your cart, even after you close the web page and return to it at a later date. This is also why it’s super easy to grab items on the checkout stand.

How to break the impulse: Add friction. Delete saved items in your cart, and before you head to the checkout lines, do a quick inventory of items in your basket to gauge what you really need. The more trouble it takes to buy something, the less inclined you are to make a purchase.

7. The Illusion of a Deal

From BOGOs (buy one, get one free) to bulk discounts, supposed deals actually get you to spend more. Take it from a former deal addict. I used to dump random sundry items into my cart — tubes of toothpaste, trinkets from clearance bins, sheets of stationery and stickers — merely for the thrill of scoring a bargain.

While it didn’t put me in the poorhouse, it didn’t help my financial situation, either. That money I wasted on “bargains” could’ve been put toward a higher-value item that I actually wanted.

How to break the impulse: For non-essentials, keep a 30-day list of things you want that aren’t urgent necessities. You could even challenge yourself to keep your discretionary spending to a minimum at the beginning of the month. This way, by month’s end, you might have more to spend on something you’ve had your eye on.

Also, consider auto-saving for any larger-ticket items. Even $20 a week adds up to $80 a month, or $1,040 a year.

8. Confusing Floor Plans

If you’ve ever stepped foot inside an IKEA or home improvement store, you know how the layout forces to you meander throughout the store. What’s more, it’s often hard to locate what you’re looking for. This forces you to explore and “discover” items you hadn’t even thought of purchasing.

How to break the impulse: While it may be unavoidable, try to stay focused on what you intend to buy, and ignore other products that might catch your eye.

Save More Money

While retailers employ clever tactics so that you’ll spend on impulse, you do have the power to avoid this. By understanding these 8 tactics, you’ll be more apt to keep your hard-earned cash in your bank account.

Are you ready to break the urge to impulse shop?

 

Monthly Expenses Got You Down? Zero in on Unnecessary Spending

Is turbocharging your savings your main goal this year?

If so, it’s time to get real about your spending. Perhaps you’re funneling dough to items you don’t really need.

But, did you know that most of the expenses listed out in your budget may not be actual needs? Yup, those Hulu and Amazon Prime accounts are not exactly necessary expenses.

To start creating a budget that works and reach your financial goals, you’ll first have to define your necessary and unnecessary spending. Read on to learn more.

Necessary Costs

Necessary costs are items you can’t live without. These are not items you think you can’t live without, like organic coffee beans and three streaming services. Here are a few needs that belong at the top of your budget:

  • Housing
  • Transportation
  • Insurance
  • Food and water
  • Gas and electricity
  • Medicines or medical needs
  • Non-negotiable debts, such as student loans

Unnecessary Costs

Unnecessary costs, or wants, are items that you do not need to survive. You may not want to part with your daily latte or Spotify, but you aren’t going to keel over if you cut them from your budget. Here are some examples of unnecessary costs:

  • Cable or alternative cable services, such as Hulu or Netflix
  • Monthly subscriptions like meal kits or beauty boxes
  • Gym memberships
  • Eating out
  • Travel
  • Entertainment

Fixed Costs

Now that you’ve taken a closer look at your necessary and unnecessary expenses, it’s time to look at your fixed costs. These are your monthly expenses that do not change. They are predictable costs with regular due dates. Here are some common fixed monthly expenses:

  • Rent or Mortgage: Whether you rent or own, your shelter costs will be the same each month. Since this is usually your biggest expense, prioritize it.
  • Health insurance: Health insurance premiums can increase yearly, but you won’t see an uptick in price until your renewal time. You can also opt-in to your employer’s health insurance plan to have this monthly cost taken out of your paycheck pre-tax. This allows you to declare a smaller taxable income. For example, if you make $65,000 and pay $4,000 yearly for health insurance, you are only accountable for $61,000 of earnings at tax time.
  • Car insurance: As long as you maintain a clean driving record, your rates should remain steady. My car insurance is about $1,000, split into four payments per year. I transfer $84 into a savings account each month so that I am ready for the $250 quarterly charge.
  • Internet and cable: Your Internet and cable are not necessary expenses, but they do cost the same each month. Minimize these costs by taking advantage of promotions or downsizing your package.
  • Car payments: If you didn’t pay for your car in full, then your monthly payment was locked in at the origination of the loan. If you are leasing your vehicle, be sure to follow the strict guidelines so you can turn in the car at the end of the lease term with no additional fees.

Six Actions to Cut Down Unnecessary Monthly Spending

Now that you understand your fixed expenses, it’s time to look elsewhere to save money. The natural place to cut the fat is with your unnecessary costs.

Here are six ways to trim these expenses down:

1. Pick one streaming service and ditch the rest

Do you really need Hulu, Netflix, Sling and Prime? Definitely not, especially if you also have cable. Speaking of cable, if you haven’t cut the cord, now is a good time to do it. Not only will you save money, but you might also decrease your binge-watching habit.

2. Dump your carrier’s unlimited plan

Paying a premium for unlimited data plans is pointless when you are surrounded by WiFi. Entertain the idea of joining a family plan (even with friends) to save even more on your cell phone costs.

3. Rethink your car

Is your car payment like a dead weight? Maybe it’s time to get rid of your car and take public transportation to get around. Alternatively, you can sell your wheels and buy a more affordable used car.

4. Skip brand names

This rule applies to almost everything you buy. If a brand is pouring millions into packaging and celebrity endorsements, then you can be sure that this is reflected in the cost. Mic calculates that shoppers can save up to $1,500 annually when they switch to generic brands.

5. Put an end to subscription boxes

We all love happy mail, but are your subscription boxes truly worth the cost? Initially, when you break down the cost of the items in the box, it may seem like a bargain. Yet, if you weren’t planning to purchase these items in the first place, they are a waste of money.

6. Ditch expensive gym memberships

Exercise is a necessity for a healthy lifestyle. Yet, you may be paying for an expensive gym that you never use. Instead, cancel that membership and take up running or biking. You can even connect with a friend and go for a hike once a week. Get creative and make use of the great outdoors.

Time to Take Charge of Your Budget

Stop thinking of your budget like a cage that keeps you locked up from enjoying your life. By simply cutting out unnecessary spending, you’ll have more money to devote towards your savings goals.

Just think: That freed up cash can help you go on that Tahiti vacation or afford a down payment on your first home sooner rather than later. Are you ready to zero in on your unnecessary spending and save more money?

 

How to Get Your Financial Resolutions Back on Track

Are you still on track to keep your New Year’s resolutions?

If you fell off the bandwagon, you’re not alone! In fact, according to a study completed by U.S. News and World Report, 80 percent of people fail their New Year’s resolutions by February. The good news is: You can always start again.

Maybe your goal was to pay off credit card debt, stick to a budget, save more money, or create an emergency fund. Regardless of what your original goal was, imagine what it would be like if you had accomplished it. What additional freedoms would you have? How would your life improve with financial security?

Really take time to envision your future. Once you are motivated to get started again, all you have to do is take one step at a time.

Here are five ways to get a jumpstart on your financial resolutions, no matter what time of year it is.

1. Create a Plan

Now that you have a goal, the first step is to create a plan to achieve it.

Your resolution may be so daunting that you just aren’t sure where to start. All you have to do is split your goal up into small, attainable steps. Your overarching goal is there to inspire you, but the real key to success is sticking your action plan.

So, say your financial resolution is to pay of $5,000 of debt. Take some time to break it down. How much do you have to put towards your debt every month in order to accomplish your goal? Are there things you can cut out of your budget in order to achieve your goal? Be sure to write your smaller goals down as well. This way, you can hold yourself accountable throughout the process.

2. Keep Yourself Motivated

Having a vision and creating an actionable plan is the easy part. The tricky part is finding a way to hold yourself accountable and stick to your plan.

In order to accomplish your goal, you are going to have to push yourself and stick to your plan even when you don’t feel like it.

Everyone has a different way of keeping themselves motivated. You just have to know what works for you.

Many people like a reward system. For instance, if your goal is to save $1,000 a month into an emergency fund, you can find simple ways to reward yourself for staying on track. Once you hit your savings goal for the month, maybe you allow yourself a small reward, like a manicure or that new shirt you’ve been eyeing.

Nowadays, successful people are even turning to a method called gamification. Essentially, gamification is turning your goals into a game and rewarding yourself along the way. Who knew accomplishing your goal could be fun?

If you’re a visual person, you may benefit from posting motivational messages where you can see them. You can even create vision boards and surround yourself with your favorite inspirational quotes. Need some more motivation? Check out this article on creating your perfect vision board.

3. Check-In Often

While you won’t likely achieve your goals overnight, you should check in on your progress often. You may be surprised at just how much you’re accomplishing by simply sticking to your plan. At least once a week, log into your bank account, check your credit score, and see how much debt you have.

Seeing even small improvements is often the motivation you need to keep going.

4. Automate Your Finances

Regardless of your particular financial goals, you can benefit from automating your finances.

When you automate your finances, you don’t have to give it a second thought. You are getting closer to meeting your goal without having to put in any additional effort.

For example, if you have a bank account at Chime, you can easily set up automatic savings. One of the top features allows you to save automatically when you use your Chime Visa Debit Card. Every time you make a purchase on your card, the amount is rounded up and that round up is deposited into your Savings Account.

5. Accept Failure

No goal worth achieving comes without roadblocks. Robert F. Kennedy said it best in his now famous quote: “Only those who dare to fail greatly can ever achieve greatly.”

People tend to fear failure, but it’s important to know that failure is part of the process. Maybe you totally went off your budget, or maybe you are spending your emergency fund cash instead of letting it build up. Whatever the case, there are going to be plenty of points of failure during your journey. But instead of fearing your setbacks, accept them, make changes, and continue on.

Why You Should Keep Your Financial Resolutions

Remember, resolutions aren’t easy, especially financial ones. Keeping them takes commitment and hard work.

So, don’t be hard on yourself if you face setbacks. Keep trucking along, and remind yourself why you set your goals in the first place. As you inch closer to achieving your financial resolution, take note as to what worked for you and what didn’t. This way, you are already one step ahead when it comes time to plan out next year’s financial resolutions.

Are you ready to give it a try and get your money goals back on track?

 

How Much do You Really Need in Your Emergency Fund?

Saving up an emergency fund is one of the best things you can do to prepare for unexpected expenses. Conventional wisdom says that you should save up at least three to six months’ worth of expenses.

That’s a lot of money. If you don’t earn Silicon Valley wages or if you’re just starting out from scratch, that can seem like an impossible amount to save, so why even try? But, try this on for size: Maybe you don’t necessarily need to save that much. It all depends on your personal situation.

Luckily, we’ve broken things down to help you decide what’s the right amount for you to save in an emergency fund.

How Much Money Should I Save?

The answer to this question is: It depends.

As with all rules of thumb, the three-month minimum emergency fund rule is a one-size-fits all prospect. For most people, this is great advice, and it’s infinitely better than no advice at all. But there are certain factors about your specific lifestyle and personal situation that may make you lean towards more – or less – than a three-month or six-month emergency fund.

We’ll walk through some considerations here, but in general: The riskier your situation, the more you need to save. If your situation is a little less risky, you may be able to get away with saving less.

Take a look at four questions to ask yourself when determining how much money to save:

1. Is Your Job Secure?

One of the biggest factors to think about is how stable your job situation is. After all, one of the biggest uses of emergency funds is to help you cover your costs if you lose your job. So, consider both your specific job situation and your industry in general.

If you’ve been working at your job for a long time, you may be more immune to layoffs or other unfortunate events.

Also, take a look at how your employer is doing. Do you think the company will be in business six months from now? Lastly, if you’re a freelancer, you may also want to consider saving more money since this is one of the most shaky forms of employment of all.

As far as your industry goes, consider whether it runs on a cyclical cycle. After all, the construction industry is booming right now and you may be able to find a job as a carpenter fairly easy, but five years from now it may not be the same story. The same thing goes for automation — is your job at risk for robots taking it over? If so, consider a larger emergency fund.

2. Are Your Specialized Skills in High Demand?

If you went to college or trade school to learn a specific, specialized skill, that’s supposed to help you find a job. And if you live in an area where that skill is in high demand, chances are you can find employment quickly if you lose your job. But if you live in an area where it’s not in high demand — or if jobs in your field are scattered around the U.S. — consider saving a bit more than normal.

3. How Much do You Need to Feel Comfortable?

Another consideration is simply how much money will make you feel safe. Maybe you’ve been burned in the past with outrageous home repairs, or a lemon (car) to end all lemons. If you would feel more secure and sleep better with a larger emergency fund, then go for it. If you’re OK playing with a bit more risk, then consider cutting back a bit.

4. What Type of Lifestyle do You Lead?

If you lose your job, your emergency fund is meant to tide you over until you can find gainful employment again. Most people recommend cutting back your expenses so that you can stretch your emergency fund as far as possible in this case.

But, consider this: Do you want to live the lifestyle of an ascetic monk while you’re job hunting again? Maybe you still want to go out with friends, or more importantly, attend networking opportunities.

In this case, it might be wise to err on the side of saving more money so that you can still afford these things. Conversely, if these factors don’t matter to you as much, you can get away with saving less.

Needs vs Wants: A Lesson in Essentials Assessment

Even if you don’t want to bump up your savings target to include everyday lifestyle expenses, you at least need to save a minimum amount. And for everyone, this amount will be different, because everyone has different needs.

To figure out what your basic needs are, tally up all the things that you really need to be able to continue on living. Things to include are:

  • Rent/mortgage
  • Necessary utilities (electricity, gas, water, cell phone, Internet, etc.)
  • Groceries
  • Transportation expenses

On the other hand, consider what you can cut out of your budget should you lose your job:

  • Restaurants
  • Unnecessary utilities (cable, HBO, etc.)
  • Entertainment
  • Fun money

Don’t Overfund Your Emergency Savings

We’ve given you some things to think about when deciding how much to save in your emergency fund. But also consider this: It is also possible to save too much money in your emergency fund.

For example, if your emergency fund is the only savings fund you have, you’re missing out on a lot of opportunities to save for other important things — namely, retirement. It’s a good idea to make sure you’re still saving money for your retirement, whether in a workplace 401(k) plan or an IRA. You may also have other goals you’re saving for, such as health care, vet bills, or a new car.

A Cash Reserve is Essential

Whether you choose a three-month or six-month emergency fund, one thing’s for sure: You do need a cash reserve of some sort and you can use this guide as a primer to help you figure out how much you need to save.

Also, keep in mind that no matter how much you decide to save, the most challenging thing is to get started. Once you get going, however, you can rest a bit easier. Just think: Even if you don’t have a fully-funded emergency savings account yet, every bit you save today will help keep you protected in the future.

 

4 Inspiring Stories to Motivate You to Become More Financially Literate

Let’s say you’re hanging out with a bunch of wine snobs. Everyone is talking about their favorite merlots and chardonnays and wineries. And you, a consummate beer lover, keep your mouth shut, for fear of being perceived as an uneducated philistine.

If you don’t know much about personal finance, you might behave similarly. Chances are, you don’t want to announce that there’s no money in your bank account at month’s end. You also don’t want to tell anyone that you don’t know the difference between a 401(k) and an IRA.

Your knee-jerk reaction might be to bury your head in the sand.

If you’re clueless about your finances, you’re in good company. It turns out that 32 percent of young adults have limited money management skills, according to a University of Illinois study.

But, here’s the good news: You can start taking charge of your financial situation at any time. And,  in honor of Financial Literacy month – and to give you inspiration –  we’ve rounded up stories and tips from people who went from being financially illiterate to money-saving champs. Take a look:

Get Your Side Hustle On

When Logan Allec graduated from college, he was a financial mess. At 21 years old, he had more than $35,000 in debt, no car, and zero balance in his bank account. The little money he earned straight out of college went toward rent and student loans.

Allec remembers sitting at his cubicle one morning, pondering what his life would look like in the future, and he suffered a minor panic attack.

“I saw future me living a life of want and need,” says Allec, who is now a CPA and owner of Money Done Right.

To turn things around, Allec focused on boosting his income while lowering his expenses. To increase his take-home pay, he worked as much overtime as possible at his day job while side hustling. To save on rent, he moved in with roommates and ended up sharing a room with three other guys, which lowered his rent by $275 a month. He also cut costs by preparing food at home instead of eating out, and opting for generic rather than brand-name items at the supermarket.

By the time he turned 22, Allec had over $10,000 in his savings and investment accounts, and was adding $2,000 to his balance each month.

Start Small

When Jon Dulin became interested in personal finance, he read books and blogs, and listened to podcasts on the topic.

“I wanted to understand how people build wealth so they could choose to work or not work,” says Dulin of MoneySmartGuides.com

Dulin found that all the money experts were saying the same thing: It starts with saving money. But he was still skeptical.

“I didn’t think that it really was this simple. I was certain there was a trick or secret no one was willing to share.”

Regardless, he started squirreling money into his workplace’s 401(k) plan.

“I was saving twenty dollars a paycheck. It felt pointless, but I did it anyway.”

To his surprise, by the end of the year he had close to $1,000 after growth and dividends. By the end of the second year, he was closing in on $2,000. Dulin was in disbelief.

“I realized it was that simple. Now I find every way I can to save money, even if it’s five dollars, because I know that it will grow into larger sums,” he says.

Pay Yourself First

A few years ago, Todd Kunsman was stuck in an apartment he could barely afford, had a high car payment and two student loans. To make matters worse, he was laid off from his job a few weeks shy before Christmas. This left Kunsman with just a few dollars each week in his checking account to scrape by on.

He started getting knee-deep in reading books, following blogs and listening to podcasts on his own time in order to learn more above finances and investing.

“I realized that becoming financially literate was on me,” says Kunsman.

“And while there is a lot of information, it’s not that hard to understand once you take time to digest the material.”

Fast forward to the present, and Kunsman has invested over $70,000, knocked out 95 percent of his student loan debt, and his car is fully paid off. Plus, he’s maintaining a 65 percent savings rate.

Kunsman also adopted the pay yourself first mindset. Each time he gets paid, he socks away a percentage for retirement and for his savings. To stay consistent, he suggests auto-saving for your money goals. And of course, be patient.

“Even if you can only save a few bucks each week, by the end of the year you’ll be amazed at your progress. We all have to start somewhere,” says Kunsman.

Track Your Spending

Camilo Maldonado grew up in poverty and was never taught how to manage money at home. But when he went to college and had to stretch his dollars and handle his own finances, he began using a money management app to track his spending. Knowing how much he spent in all areas — meals, entertainment, travel — changed everything.

“When I graduated and got my first job, I was already comfortable with living within my means. That experience in college fundamentally changed my attitude toward money,” says Maldonado, now a co-founder of The Finance Twins.

“If you don’t track where your money is going, you’ll never be able to master your personal finance situation. You also don’t have to use a fancy program if you don’t want to. You can start with your bank and credit card statements and a blank sheet of paper. It’s that simple,” he says.

Start Today

Are you ready to increase your financial literacy?

Even if you don’t feel like you know enough about your money matters, you can learn from these financial tips and take action today. In turn, you’ll start to make headway toward your money goals. What could be more motivating than growing your net worth?

 

This Millennial Saved $200K Before Turning 30 — Here’s How

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The majority of millennials have next to nothing in their bank accounts.

You’ve probably heard the stats: Millennials couldn’t cover a $1,000 emergency, and they have an average of $36,000 of debt. And when it comes to retirement — which, to most millennials, seems like a billion years away — 66% haven’t saved a cent.

The blogger behind Fiery Millennials, however, is tipping the scales. Gwen Merz is only 28 years old, and has already saved $200,000 for retirement. Want to know how she did it? Merz revealed her savings story to us — and also offered advice for fellow millennials who want to prepare for their futures. To learn more, keep reading.

Stumbling Upon Financial Independence

One day in college, Merz was using the 2000s relic known as StumbleUpon when an article about FIRE (financial independence, retire early) popped up in her browser. Merz, who had grown up poor, immediately became “hooked” on the ideals of frugal living and financial security.

“Here are these people who never have to worry about having enough money ever again,” she says.

“That was very appealing to me, as someone who internalized a lot of those lessons about poverty early in life.”

Though she couldn’t save much money as a college student, Merz says learning about FIRE gave her a “really good foundation” for her adult life. When she totaled her car, for example, she didn’t take out a loan, and instead bought a used vehicle with cash. And when she graduated debt-free, thanks to a full-ride scholarship and her service in the National Guard, Merz was “so ready” to put financial independence (FI)  into practice.

“I was super stoked that I got to put money in my 401(k) and open a Roth IRA,” she says. “So nerdy, but it’s true!”

The Road to $200K

After she graduated college in 2013, Merz landed a full-time information technology job at the Fortune 100 company at which she had interned.

Her base salary? A lucrative $65,000, plus bonuses that averaged $7,000 to $8,000 after taxes, and a 10% 401(k) match.

While her peers spent their paychecks on nights out and new clothes, Merz saved 60% to 80% of her income (which increased each year and eventually came close to six figures).

“It was really good that I got started so young because I didn’t have any set habits or lifestyle expectations,” she says.

Merz maxed out her 401(k) — the limit is now $19,000 per year — and her Roth IRA — the limit is now $6,000 per year — and put the rest into a health savings account (HSA) and other taxable accounts.

After six years of saving, her retirement accounts reached a balance of more than $200,000.

Cutting ‘The Big Three’

Despite her ample salary, Merz admits it wasn’t always easy to save so much.

“At the beginning, it was definitely harder. But that’s only because I was still trying to live a typical American life.”

As an example, she cites the fact that she was living in a three-bedroom house by herself — a decision she now deems “ridiculous.” So she got a roommate, and cut her monthly housing budget from $900 to $450.

She also kept the 2005 Pontiac Vibe she purchased in college. Whereas most of her peers have bought one or more new cars since graduating, her vehicle will soon hit the 200,000-mile mark.

“It’s the big three you have to watch out for: housing, cars, and food,” explains Merz.

“If you can keep those three to a manageable level — or figure out how to get rid of one — you’re going to be so much better off than the average American.”

Or, as she puts it: If “you make one or two different choices in life, that can make all the difference.”

How Millennials Can Save (No Matter Their Income)

Merz is the first to acknowledge that the FIRE movement is dripping in privilege.

“Some people say everyone can achieve FI — that’s just not true. It’s a lot easier to save half of your income if you’re earning a lot of money.” And, as she points out, it’s even easier if you don’t have student loans or dependents.

Still, Merz believes anyone can learn lessons about budgeting and consumption from the FI movement. Even if someone can’t save at high rates, for example, they can maybe build an emergency fund or open a Roth IRA.

If you want to start saving — regardless of your income — Merz says your first step should be automation.

When Merz received her first paycheck, she set up automatic withdrawals that funneled money into her savings and investment accounts.

“I never saw that money and didn’t miss it because I had never known what it was like to have that much,” she explains.

The good news with this automated saving approach is it can eliminate the need for budgeting. Since Merz covered her necessities and investment goals by paying herself first, she could then give herself “free reign” to spend whatever was left.

“There’s a lot of guilt and decision making that are involved with budgets. But if you artificially lower the amount of money that you have to spend… it’s easier to save.”

If your employer offers a 401(k) program, Merz also urges you to sign up. Not only will your contributions grow over the next several decades, potentially funding your retirement, but they will also lower your taxable income right now. For example:

  • Say you earn $50,000 per year and contribute $5,000 to your 401(k). You can deduct that $5,000 from your income, meaning you’ll only pay taxes on $45,000 of earnings.

 

  • Many employers match 401(k) contributions up to a certain percentage. A “3% match,” for example, means your employee will  match every dollar you contribute, up to 3% of your paycheck.

“There’s no reason to not save up to the match,” says Merz. “They’re giving you free money — who does that?”

When This Fiery Millennial Will Retire

When Merz began her FIRE journey, her goal was to retire at 35 with $635,000. But in the years since, her outlook has shifted.

“I don’t really have a number or a date in mind anymore. It’s less about early retirement now — and more about how can I optimize my life so I’m at peak happiness,” she says.

Even if she doesn’t retire early, Merz has learned a lot from FIRE, saying: “It’s been interesting to see all the things society says we need that I am actually quite comfortable living without.”

She has also given herself a significant amount of financial freedom in the years to come. By frontloading her retirement savings — and giving her accounts decades to compound — Merz could stop saving for retirement now and still have a healthy nest egg at 65.

“I gave myself the gift of not having to worry and stress out about money in the future,” she says.

 

How to Budget on an Irregular Income

Understanding exactly how to budget can be difficult, even for someone with a consistent income. But, think about how complicated budgeting would be if you had an irregular income.

This is what millions of Americans deal with all the time.

Freelancers, small business owners, and salespeople all have incomes that can change from month to month. Sometimes the fluctuation can be drastic, and it can make it hard to save money.

If you find yourself in this situation, how can you develop a budget when you don’t know what your income is? Keep reading as we walk you through five steps to budget on an irregular income.

1. Calculate your bare-bones budget

The very first thing you need to do is calculate your bare-bones budget. These are the essential expenses that you need to cover each month. Make sure to include categories like housing (rent or mortgage), utilities, groceries, insurance, transportation (car payments, public transportation), and other essential costs.

Housing, insurance and car payments can be easy to factor in as the monthly amounts stay about the same. However, your utilities and groceries can fluctuate. To get an accurate figure, calculate how much you’ve spent, on average, for each category during the past 12 months.

While these are the critical expenses you need to cover each month, you should also include retirement, savings and debt payments. While these are not required, they are still important.

2. Add in your discretionary expenses

Now that you’ve calculated the bare minimum you need to get by, it’s time to calculate your discretionary expenses. These are things that you spend money on but can live without.

These expenses include going out to dinner, a date night at the movies, the cost of your daughter’s dance class, etc. Figure out how much you spend on these expenses, on average, each month.

Looking back through bank or credit card statements is a great way to locate these expenses.  Budgeting apps link Mint also do a good job of breaking down your expenses into categories.

3. Build up an emergency fund

Many of you have probably heard of an emergency fund. Its sole purpose is to cover an unexpected expense. If your income is always changing, an emergency fund is a must. The last thing you need is to have an emergency pop up during a lower income month and not have anything saved.

Simon Moore, a contributor to Forbes, recommends three to six months worth of expenses in an emergency fund. David Bach, a personal finance expert, takes it a step further and recommends that you save one year’s worth of expenses.

To get started, consider opening a Chime bank account. Chime’s Automatic Savings program is a great way to build your emergency fund. Here’s how it works: Each time you use your Chime Visa® debit card, Chime will round up your purchase to the nearest dollar and transfer the difference to your savings account. Plus, Chime makes it simple to save each time you get paid. As a Chime member, you can automatically deposit 10% of your paycheck into your savings account.

4. Pay yourself a reasonable salary

Having an irregular income can be stressful. This is why a budget is so important. It helps you forecast your monthly expenses. It also gives you the ability to see how much you have in your bank account so that you can perhaps pay yourself a salary.

To start, try paying yourself based on your budget the previous month. You can do this by combining the totals from your bare-bones budget and discretionary expenses and depositing that in your checking account on the first of the month. This will cover the entire month worth of expenses. Everything else you might have made will be put toward either short- or long-term savings.

By doing this, you are never spending more money than you actually have. Instead, your income is based on the past.

5. Pay your bills using a zero-sum budget

If you’ve never heard of a zero-sum budget it’s a fairly simple budgeting method where every dollar has a purpose.

At the end of every month, your income minus your expenses should leave you with zero in your checking account. For example, if you have $200 left in your account at the end of the month, your job isn’t done. That $200 needs to be allocated to something. For example, perhaps it will go toward debt payments, retirement or short-term savings.

So, to pay your bills using a zero-sum budget, you need to start with your list of bare-bones budget items and discretionary expenses. Go down the list and pay each item, starting with the most important. Once all those are taken care of, see how much money is left over. Remember what we talked about – every dollar has a purpose. Look for a place to allocate the extra cash.

One important thing to note with a zero-sum budget is that you need to pay attention to your variable expenses throughout the month. Make sure you’re staying below the amount you budgeted for items like groceries, clothes and anything else that fluctuates.

Irregular income doesn’t need to complicate the budget

You can still budget – even with a fluctuating income.

As long as you stick to your budget and live on the income you generated from the previous month, you should begin to see your financial situation improving. Are you ready to give it a try?

 

Stop These Six Bad Money Habits and Save More Money

It’s hard to resist meeting up with friends after work for drinks, or buying that new pair of shoes right after you get paid.

But, if you want to save more money, you may have to do something to curb your spending habits. For example, do you buy a sandwich five days a week at the local bodega next to your office? Do you grab a latte every day on your way to work? Indeed, these purchases add up – fast.

Here are six habits you can easily change in order to save more money.

1. Buying coffee every day

Did you know that buying coffee Monday through Friday – especially cappuccinos and other fancy coffee drinks – can run you $25 a week or more? That’s more than $100 a month and $1,300 a year!

Instead, try brewing coffee at home and taking it with you to work. If you don’t have a coffee maker at home, purchase one on sale. Heck, you can even splurge on a fancy Nespresso machine. I bought one on sale for $199 last Christmas and absolutely love it. Yes, it was expensive. But, I now make my own lattes at home every day instead of spending five dollars a day for these drinks (yes, that’s $35 a week!)

Think of it this way: Less than six weeks of coffee runs paid for that fancy machine, which included a starter pack of 24 coffee pods. Each pod now costs around 90 cents. This leaves $4.10 a day on the table – or almost $1,500 a year to put into a bank account.

2. Purchasing lunch at work

Buying lunch every day while you’re at work will run you a pretty penny. According to CNBC, if you eat lunch out, you’ll spend an average of $10 per lunch, or about $2,500 a year.

Yet, if you make your own lunch, you’ll spend only about five to six dollars per lunch, leaving you with an extra $20-$25 a week or $1,000-$1,300 that could go into your savings account.

3. Paying full price

We get it: Not everyone likes to shop for deals or make use of those reams of CVS coupons like I do. But, you don’t have to be an expert coupon clipper to make a few small money-saving moves.

For starters, you can use shopping apps that will give you coupons, provide you with cash back or find you the best deals. Some top apps in this category include Honey, Ebates, Ibotta, and RetailMeNot.

Looking for local restaurants, activities or even a new gym? Before plunking down full price, search for neighborhood businesses on Groupon. For example, I wanted to try barre classes but I also know that boutique barre studios are expensive. So, I purchased a 10-class pass for about $79 on Groupon (or less than eight bucks a class) to a popular barre franchise. I used those classes but also discovered that I would prefer cardio classes to barre. That was a good thing as the regular price for a 10-class pack is $230! All told, using Groupon meant I saved $151.

4. Not sticking to your budget

A budget helps you stop overspending and get ahead financially.

If you haven’t created a budget yet, now is the time to do so. And, if you have a budget and still overspend, now is the time to buckle down. Why? Because if you don’t stick to your budget, it’s difficult to reach your financial goals and save money.

For example, if your budget only allows for $100 a month of “fun money” and you spend $200, that extra money has got to come from somewhere. It may mean you’re not paying off as much of your credit card debt, or you’re not saving $100 a month. Instead, commit to staying within your budget and perhaps figuring out ways to earn a bit more money each month. For instance, you can start a side hustle like driving for Uber or Lyft, walking dogs, or even teaching Pretzel Kids yoga classes.

Pick something that you can do around your schedule with little to no start-up costs. Most importantly, remember that you’ve got to live within your means if you’re going to save money.

5. Overspending on credit cards

It’s easy to spend too much with credit cards, yet this can cause you to go into debt and lead to a never-ending cycle of racking up interest. This, in turn, makes it hard to save money as any extra money you have may be going toward paying down high credit card balances.

To avoid this, try taking a break from your credit cards. Instead, use your debit card or cash. This way you’ll be more likely to buy things you can afford. Better yet, if you’re a Chime member, you can save when you spend by using your Chime Visa Debit Card. Each time you make a purchase, Chime will round up the transaction to the nearest dollar and deposit this extra change into your Chime Savings Account.

6. Not automating

Automating is our No. 1 money-saving hack. Chime helps you do this by rounding up your debit purchases. But did you also know that you can automatically save money with every paycheck?

This hack helps you save as you won’t have to manually transfer money to your savings on your own. Better yet, you won’t blow that cash on the day you get paid on a purchase you’ll later regret. Chime members, for example, can automatically save 10% of each paycheck into their Savings Account. This way your hard-earned money hits your savings automatically. Out of sight, out of mind.

Are you ready to save more money?

Even if saving money is a struggle, there are ways you can start saving right now, simply by changing a few habits. For starters, try brewing coffee and making lunches at home, shopping for deals, and sticking to your budget. From there you can take a break from your credit cards and use your debit card or cash instead. Lastly, make savings automatic.

If you follow these six simple tips, you’ll be on your way to changing your financial habits and saving more money. Are you ready to give it a try?

 

Chime’s Automatic Savings Features

When it comes financial wellness, saving money can feel like an uphill battle.

Just like how overdoing it with carbs and sweets can sabotage your health, spending more than you can afford can be disastrous to your money.

Okay, duh. Knowing what’s good for you is one thing. Actually doing it is another. If it were easy, we’d all be rock stars with money. But changing habits and shifting mindsets can take a ton of work. The good news is that there are a few simple, no-brainer tactics to save more money. My favorite one? Automatic Savings.

Here’s why auto-saving is so awesome, and how Chime’s two features, Save When You Spend and Save When You Get Paid, can help your money situation.

Why Auto-Saving Is King

As a finance nerd who has been obsessed with money since I was young (weird but true), I’ve found that the less I have to think about managing my money, the better. Granted, I do spend more time than the average person looking at my spending plan and poking around money apps. But on the day-to-day, I don’t quibble over every purchase, or fret over whether I’m saving enough.

That’s because I’ve put as much as I can on auto-pilot. I’ve set up auto payment for most of my bills, and I auto-save for my goals. This includes tucking away funds for a trip to Vietnam, a splurge fund, and a birthday bash for my mom’s milestone birthday next year. I can enjoy guilt-free spending and feel good that my money is being squared away for things that are important to me.

If you’re concerned that auto-saving might mean a greater chance that a fishy transaction might slip past you, set up alerts. I check my main checking account every few days and get alerts for major transactions through a money-saving app.

So how can you get started auto-saving? If you’re a Chime member, here are two top ways:

Save When You Spend

How it works: Every time you pay a bill or make a purchase with your Chime Visa® Debit Card, the Save When You Spend feature automatically rounds up transactions to the nearest dollar. These round up amounts are transferred from your Spending Account into your Savings Account.

For example, if you spend $1.50 on a cup of coffee in the morning, the feature will round up your transaction to two dollars, and you’ll save 50 cents. Did you throw down $8.25 for lunch at the neighborhood sandwich shop? Save When You Spend will round it up to nine dollars, and 75 cents will go toward your Savings Account.

How to make the most of it: The more you use your Chime Visa® Debit Card, the faster you’ll build your savings. So, use it to pay for everyday purchases and bills, and watch your savings grow.

You’ll also want to determine how to best use the money in your Savings Account. It can be used for when you’re having a slow month workwise and barely scraping by. Or, you can use it to cover bills. Or, maybe you can use the funds to pay for unexpected expenses or minor emergencies.

The beauty of it is that you access funds in the account immediately. So there’s no lag time between when you need the funds and when they are available to you.

Save When You Get Paid

How it works: With Chime’s Save When You Get Paid, you can opt to automatically save 10 percent of each paycheck, with a minimum amount of $500. So, if you earn $500 one week from an employer, $50 of that will go into your savings.

If you get a steady paycheck, and your take-home amount for each paycheck is $1,500, then you’ll be stashing away $150 each pay period.


How to make the most of it:
If you are a freelancer like me and aren’t sure how much you can reasonably save each month, start by linking your direct deposit with the employer that makes up the least amount of your income.

On the flip side, if you’d like to get aggressive with your saving, set up direct deposit with your employer that makes up the lion’s share of your monthly earnings. And, like with the Save When You Spend feature, you’ll want to decide how to use your saved up cash.

If you need to pay taxes every quarter, perhaps you can use that money for this purpose. Or, maybe those funds can be set away for another reason. By saving with intention, you can make the most of that 10 percent of each paycheck.

Science to Back It Up 

You don’t have to take my word for it. There are actually studies that prove how auto-saving can make things easier. For example, The Center for Advanced Hindsight, a behavioral science lab, conducted an experiment on getting people to spend less – and budget wisely – right after they get a paycheck. The study found two major barriers to get people to spend less:

1. Cognitive load. Having to check your balance regularly to figure out if you can afford daily purchases is a royal brain drain. This led to a never-ending process of weighing different opportunity costs, and then being blindsided by changing or unexpected expenses.

2. Friction to saving. Those surveyed revealed that committing to an automated direct deposit is tough if the amount they can save changes from month to month. What’s more, there was too much friction to make manually saving small, incremental amounts worth the trouble.

With Save When You Spend, however, you’ll be spared the mental exhaustion. You won’t be quibbling about whether you can afford a given purchase. And, committing to saving a percentage of your paycheck each payday with Save When You Get Paid serves a similar function. If you’re a gig economy worker and are juggling a handful of different jobs with fluctuating income, it’s a lot easier to save a small percentage of each paycheck.

Start With the Easy Stuff

Financial wellness is a muscle, and forming the habits and behaviors so you can grow wealth is a long and hard journey. Starting with something as simple as automatic savings can give you a push in the right direction, as well as help you build momentum. Onward!

 

How to Stop Taking Money out of Your Savings

Dipping into your savings account constantly can be a sign that you’re letting FOMO control your spending habits.

We’ve all been there. One week you’re patting yourself on the back for growing your savings. And the next week you’re trying to transfer money back to your checking before you get socked with an overdraft fee.

No need to beat yourself up over the past. But, if you want to change your money habits for the better, here are some tips to grow your savings.

Have a Separate Emergency Fund

Create a separate account devoted only to real emergencies. By real emergencies, I mean paying for a new engine for your car so you can get to work.

If you don’t have an emergency fund yet, make this your main money goal and build it up to at least $1,000. The longer you go without an emergency fund, the longer you’ll keep dipping into your primary savings account to pay for these expenses. Worse yet, you can go into credit card debt.

Identify the Trigger

Why do you keep dipping into your savings? Are you overspending when it comes to eating out? Or, maybe you forgot to save up for larger expenses like your car registration.

Identify what is causing you to spend and this way you can learn how to fix it.

For flexible spending categories, it can be easier to stick to a tight number if you limit yourself to cash. For example, say you are going out to lunch and Target with a friend. If you know you may overspend, take the exact amount of cash budgeted and leave your bank card at home. You’ll think twice before ordering an extra drink or buying that cute shirt.

Out of Sight, Out of Mind

When I wanted to stop taking cash out of my savings account, I opened up a new account at a different bank and set up automatic bi-monthly deposits. Since it was not my main bank, I grew my savings account as I was less tempted to withdraw money from another bank.

Get a New Mindset

When you buy a seven dollar burrito, you don’t ask for your money back a week later because your account is a tad short. When you made that purchase, you counted that money as gone forever.

You need to adopt a similar mindset with your savings.

So, deposit money into your savings account and consider it gone forever. This means that when you are $50 short before payday, you may have to curb your spending.

Another powerful mindset tool is to give your savings account a purpose. There is no fun in saving for a vague someday. Take time to think about why you want to save money and how much money you need to save.

For example, if you want to save $20,000 for a down payment for a house, this gives you something to really save up for. Every time you deposit $200, you’ve hit one percent of your goal. You’ll be less tempted to take money away from this goal, too. Just think: transferring $50 from this savings account to your checking account means you’re slipping further away from your home ownership dream.

Set Up Rewards or Punishments

Are you motivated by the thought of getting a reward? Do you want to avoid punishment? Knowing which one of these is a greater motivator can help you break the habit of dipping into your savings.

If rewards motivate you, for example, set up two to three savings goals and rewards. For instance, if you save $4,000, perhaps your reward is to buy a new gaming system guilt-free.

If fear of punishment motivates you, recruit your friends or family members to help. What embarrassing thing will you have to do if you don’t keep your savings account balance in check? Perhaps the thought of wearing a loud, outdated suit from your dad’s closet to work will be just the thing to keep you saving faithfully.

Let Your Bank Account Do the Work for You

Use the power of automation to make saving painless. The point is: When you don’t have to think about saving money, it’s easier to save.

So, consider automatically depositing money from your paycheck into your savings account – on the day it hits your account. Chime members can opt for 10% of each paycheck to go into their savings.

Another way Chime helps streamline your savings is with the Chime Visa® debit card. Just use your debit card to spend as you usually do, and Chime will round up the transaction to the nearest dollar. The difference is then transferred to your Savings Account.

Max Out Your Transfer Allowance

The Federal Reserve Board sets a limit of six transactions per month on certain transfers and withdrawals from your savings account. The reason? To encourage you to use your savings to actually save money – and not spend it.

Some Chime members use this rule to their advantage to cut out the temptation to dip into their savings. How? They initiate six one-cent transfers at the beginning of the month from their Savings Account to their Spending Account. After the six transfers, they can only transfer money to their savings, but they cannot withdraw it.

Every savings account has this same rule, so you can use this hack at any bank. However, it’s important for you to understand your bank’s rules to ensure you don’t get dinged with unnecessary fees if you try to make a seventh withdrawal for the month. Along these lines, Chime will never charge you fees, so you may want to consider switching to a bank that will actually help you get ahead financially.

You Can Do It

Breaking bad money habits takes time and effort.

But, as you can see, there are many ways you can develop healthy money habits to save more money. Why not start right now by setting yourself up to get paid early?

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