Tag: Automation

 

6 Things You Should Know About Financial Freedom: A Proven Path to all the Money You’ll Ever Need

When you think of financial independence, you probably think about people who got rich starting a business, or saved every dime and never had any fun.

Truth be told: There is a way to enjoy your pumpkin spice latte and avocado toast – and still retire early. Take Grant Sabatier. A practicing Buddhist and millennial, Sabatier had a paltry $2.26 in his bank account (plus $20,000 in credit card debt) when he was 24. Yet, in only five years, he grew his pennies to more than $1.25 million. Through his website, Millennial Money, and recent book, Financial Freedom: A Proven Path to All the Money You’ll Ever Need, he now shares his wisdom with the universe. 

While Sabatier’s book is primarily focused on how to achieve FIRE (Financial Independence, Retire Early), he also offers up tips for growing your money. 

Whether you’re aspiring to be part of the work optional set, or want to bulk up your savings account, here are 6 ways you can build your wealth:  

It’s about your daily habits

Your daily habits are key to building wealth. The average person spends 2,000 hours a year working and earning money. Yet, all it takes, according to Sabatier, is about five minutes a day to manage your money. 

And, when this becomes a part of your daily routine, it’s much easier to control your emotions and get comfortable with risk. This, in turn, will help you make better money decisions.

“While it might take some time to build a new habit, the lifetime impact of small daily decisions and habits can be massive,” says Sabatier.

For instance, something as small as checking the balance of your bank account through a bank app each day can help keep your finances in good shape. 

Other quick and easy things you can do each day? You can see how much you spent yesterday and how much you’ve spent this month. You can also keep tabs on how much you’ve earned from all your income streams to determine if you’re on track with your savings goals. You can also check your credit card and bank accounts to make sure you aren’t dinged with fees and there’s no suspicious activity. (If you’re a Chime Bank member, you’ll never be hit with fees. Never ever.) 

Maximize the potential of income, savings, and expenses 

If you want to grow your money quickly, you should consider maximizing your three “levers:” income, savings, and expenses. 

For example, if you cut back on your living expenses and earn more at the same time, you’ll have more money to save and invest. 

Skip the budget

Most people find budgeting to be tedious, time-consuming, and hard to maintain. To this end, Sabatier says budgets that make you feel deprived and guilty about your spending habits can backfire. Instead, he recommends focusing on lowering your top three major expenses instead — housing, food, and transportation. 

You can reasonably boost your savings rate by 25% (savings rate equals the percentage of your income you’re saving) by finding a cheaper place to live, getting roommates, or saving on transportation by buying a used car. You can also save money on food by growing your own veggies, bartering with your neighbors, or bulking grocery staples in bulk.  

Focus on the future value of a purchase 

That $20,000 you spent on a new car will cost you more than just $20,000. As Sabatier explains, if your hourly wage at your day job breaks down to $20 an hour, that car not only costs you 1,000 hours of your time, but also the future value of that money should you invest it. Using this calculator, if you earn an average of a seven percent return (compounded daily) on that $20,000, in 10 years you’ll have $40,272.35. In 20 years you’ll have a cool $81,093.11. 

Combine and maximize ways to make money

Sabatier lists four major ways to earn a buck: working for someone else at a full-time job; side hustling; entrepreneurship; and investing. And, if you combine different ways to make money, you’ll earn money faster while you have a fall-back income stream. 

For instance, if you have a day job and also a side hustle, and you get laid off, you still can depend on your side hustle. If you have a day job, you can also  “hack the 9 to 5” by making the most of your benefits, such as getting the full employer match on your 401(k) or asking for what you are truly worth. 

Here’s another example: If own your own business but also invest in real estate, you’ll have your investments to fall back on if your business has a few slow months. 

Automation is just the beginning

While “setting it and forgetting it” doesn’t take a lot of effort, automating your savings is just the beginning. Sabatier points out that in order to boost the amount you save to fast-track your wealth, you’ll need to put in the work to bump that savings amount from five percent to 10 percent, or from $100 to $200 a month. This takes serious work and dedication. 

If you don’t have a ton to start with, start small and go from there. It’s helpful to break up your savings goals to see how much you’ll need to save monthly, weekly, or daily. For instance, if you want to save $5,000 in six months, you’ll need to save about $834 a month, $195 per week, or $28 a day. 

Make the most of your time

As you learned from Sabatier’s tips here, we all have the potential to make more money. And, by adopting an enterprise mindset, you can build wealth even faster than you thought possible. Ready to jump in? 

 

Here’s What a Documentary About FIRE Taught Me About Money

What do you think of when you think of retirement? Sleeping in? Sipping drinks on the beach? 

Until recently, almost every retired person I knew was over 65 years old. I’ve met a few people who managed to retire early – in their late 50’s or early 60’s – but they are the rare exception. The rule I had learned from an early age was that if you work hard, save money, and spend 40 years in the workforce, you can retire. 

That’s why, when I first heard about the FIRE movement, I was confused. FIRE, which is short for Financial Independence Retire Early, continues to gain momentum. In fact, there’s even a new documentary called Playing with FIRE, which chronicles one family’s quest to reach early retirement. 

Playing with FIRE follows 35-year-old Scott Rieckens, his wife Taylor, and their toddler Jovie. I watched this movie as a skeptic (I mean, how can they really retire?) But, by the end, I was re-thinking some of my own financial decisions.  

Here is what this movie taught me about money:

Question your biggest three expenses

Americans spend the majority of their income on housing, transportation, and food. That’s really not surprising — we need somewhere to sleep, we have to eat, and we need a way to get to work. But, I’ve always considered these expenses to be out of my control. I thought I needed to spend money on housing, food and transportation. That meant I’d have to save money on the less impactful areas of my life – things like cutting out that latte and avoiding excessive shopping.

Yet, Playing with FIRE showcases people who have reached financial independence by deciding to live differently than the norm. The highlighted family, in fact, ditched buying a home to travel the world instead. They proved that changing one of your major fixed costs can make a huge impact on your financial situation. 

Are you spending on what makes you happy?

Early in the movie, Scott and Taylor had just discovered the idea of FIRE, and they were decades away from retiring. Their monthly expenses in the big three were high: They lived in a beach community, spent $2,000 per month on food, and each drove a nice car. 

Before they changed any of their spending, they did a simple exercise. They each separately made a list of the things that made them happy on a weekly basis. 

This was Scott and Taylor’s first epiphany: Most of the things on their list didn’t cost any money. Neither of them mentioned the beach, driving their cars, or going out to pricey sushi dinners on their happiness list. Why were they spending so much each month on things that didn’t really make them happy? 

Viewing your money choices through the lens of what makes you happiest makes perfect sense. A quote from The Minimalists in this movie really drove this idea home: “We spend money we don’t have to buy things we don’t need to impress people we don’t like.”

Small changes can buy back years of your life

Understanding how current spending choices can impact your future financial situation is difficult. How often do you weigh the cost of going out to dinner, buying a new jacket, or driving a certain car against how much longer you need to work? 

Like many people, Scott and Taylor struggled to see how the choices they were making now could impact their future life. At one point, they sit down with a financial calculator and determine what would happen if they ditched one of their luxury car payments. Technically, they could afford the monthly car payments. However, by forgoing that cost, they could shave five years off their working lives.

Your savings rate holds the key to financial independence

The movie lays out some startling facts: 34% of Americans have no savings and 78% live paycheck to paycheck. It’s clear we could all use a lesson in saving more money.

But how to do this? The folks in the FIRE community focus on your savings rate as a simple way to understand how many years you’ll need to work before you retire. 

To calculate your savings rate, take the amount you save and divide it by your income. For example, if you earn $4,000 per month and save $300, your savings rate is 7.5%. 

According to calculations in the movie:

If you save five percent of your income, it will take you 62 years of work to reach retirement

If you save 10% of your income, it will take you 51 years to reach retirement

If you save 20% of your income, it will take you 37 years to reach retirement

If you save 50% of your income, it will take you 17 years to reach retirement

For your savings rate to change, you either need to earn more, spend less, or do both. In Scott and Taylor’s case, they start out with an eight percent savings rate. By the time the movie ends, they’ve made enough changes to their spending to achieve a 50% (or more) savings rate.

This isn’t about money

FIRE isn’t really about money. It’s not even really about retirement. What I failed to understand before watching the movie is that FIRE is about having the ability to make choices in your life. 

The movie asks you to imagine what it would feel like if you didn’t live paycheck to paycheck. Imagine if you were debt-free, or if you had a full year’s worth of expenses saved. How would that financial freedom change the decisions you make?

Even if you don’t want to retire early, you can probably get behind the idea of financial freedom. Wouldn’t it be nice to breathe just a little easier between paychecks, change careers if you want, and not panic if lost your job? That’s the freedom that FIRE creates. 

Perhaps the thing that struck me most about the movie was this piece of wisdom: “It’s not about having all the money in the world. It’s about doing the best that you can with the money that you do have.”

This inspired me to think about how the financial choices I make today can impact my freedom tomorrow. 

 

7 Ways to Build Wealth in 10 Minutes or Less

What would you give up so that you’d never have to worry about your finances? Pumpkin spice lattes for life? Instagram for a month? 

Many of us hate thinking of money, let alone managing it. Yet, neglecting to make your finances a priority can lead to dire circumstances down the line. 

But, guess what? Quick, no-brainer ways to build your wealth do exist. Here are seven ways you can grow your money in 10 minutes or less: 

1. Check Your Bank Balance

This seems like a no-brainer. But, if you don’t know how much you have in the bank, you run the risk of spending more than you have. 

Just doing a quick check through a banking app each morning makes a big difference. This will help you figure out how much you can reasonably spend in a given day, whether you can afford to go out with friends, or if you’ve got enough available in cash to splurge on that pair of on-sale sneakers. 

2. Create a Money To-Do List

Perhaps you keep a to-do list for your daily tasks. Why not create one for your money? I have a running to-do list of financial housekeeping that I need to tend to. This sometimes includes: figuring out my “going out” budget for the week, making sure my bills will be paid on time, or determining if I need to close an account.

Because I freelance, I also need to take care of gig economy-related tasks, such as sending invoices, balancing the books in my accounting software, and setting aside money for taxes. I make a point to check off a few items at least once a week. If I don’t make the time to do this, things will just pile up. 

I know, it seems like a major snoozefest. But you could set a date with yourself, or see if any pals would be up for a short session – either in real life or virtual. It’s nerdy fun and keeps away the boredom. 

3. Work on Your Passive Income Project

Have a killer idea for selling shirts? Or maybe you’d like to launch a digital product, such as a course or series of books? Spend 10 minutes a day on your passive income project to figure out how you can turn your idea into cash.

I’m currently working on the first of a series of books, and I try to crank out a certain number of words each day.

If you’re having trouble giving some love to a passion project, consider incentivizing yourself. For each checkpoint you pass, treat yourself to something small. And once you’ve completed the project – besides giving yourself a high-five – offer yourself something that’s meaningful and rewarding to you. 

4. Negotiate Your Bills

Negotiating for a lower monthly bill, annual fee or subscription can net big wins over time. Let’s say you nix a $90 annual fee on a credit card. If you keep that card for five years, that’s a $450 savings. Or, if you shave $10 off your Internet bill each month, that’s $120 after 12 months. 

This usually takes 30 minutes max, and at the very least, the customer service rep will check to see what she can offer you. For instance, your current cell phone plan may offer up a promo you can hop on or existing discounts that you’re unaware of. 

If you get tripped up on what exactly to say to a customer service rep, start with the following script: 

Hello. I am calling today to see what deals or promotions you might have for X. I did some research and [competitor X] is offering Y, while competitor Y is offering Z. I’ve been a loyal customer in good standing for X years. Will you be able to match it? 

5. Pay Yourself First

You may have monthly bills and debt to pay off. But what about your own financial goals? Perhaps you want to save up to buy a house or fund a sabbatical to focus on a passion project. The immediate obligations that are screaming “me first” get in the way of longer-term stuff. 

So, try paying yourself first, which means putting aside some cash toward these important, meaningful goals. 

6. Automate Your Savings

Automating your savings and bills will make your financial life easier.

And, when it comes to automating your savings, try to start small. It doesn’t have to be a ginormous amount. Can you swing one dollar a day? Or maybe $10 a week? That adds up over time. Just think: You can put that extra cash toward an emergency fund or into another savings account.  

If you’re afraid that an overcharge will slide past you, set alerts. For example, I set email and text alerts each time a bill gets paid.

7. Round Up Your Transactions

For every purchase you make on your card, you can round up the transaction to the nearest dollar. Spend $3.50 on a latte? Round it up to four dollars, and save fifty cents. If you make 30 transactions over a week, that spare change can add up quickly. 

You can do this manually at days’ end, which should take a few minutes. Or if you’re a Chime Bank member, check out the Save When You Spend feature. 

Greater Wins In Less Time

The name of the game is to try to net larger wins with your money in short chunks of time. 

Making it a priority to build your wealth, and doing a little bit each day will organically lead to more money in the bank for you. Are you ready to grow your wealth in just 10 minutes a day?

 

How to Stop Spending Based on Your Financial Triggers

Financial triggers: We all have them, and just like any issue having to do with money and emotions, they typically won’t go away forever. 

If not addressed proactively, financial triggers can become serious obstacles to making progress on your money goals. For starters, these triggers often result in bad habits like credit card binge spending or overspending in general, which can rack up hundreds (or thousands) of dollars in debt.

Studies show that almost half of Americans (49%) cite emotions as the reasons they spend more than they can afford. Stress, excitement, and sadness are the most common emotions arising out of overspending. When you’re in need of retail therapy, nothing feels better than splurging on new scented candles or a pair of shoes. However, the emotional high fades once you realize you’ve accrued more debt or depleted your savings

Here’s the good news: You can identify your personal financial triggers and manage them so that they don’t derail your future goals. Take a look at how you can more effectively handle your financial triggers and thus stop overspending.  

Be Aware of Your Triggers

The first step to manage financial triggers is to admit they even exist. It’s easy to write off

overspending as something that everybody does. Still, if you notice a pattern in how you spend money when you feel a certain way, you should be mindful of this.

Most financial missteps happen when we unknowingly slip into everyday habits. You might be

bored over the weekend and decide to go “browse” at your favorite store. And while this may seem innocent enough, you may soon realize that you just walked out with bags full of merchandise you never planned on buying.

Or, perhaps your trigger is the result of peer pressure. How many times have you gone out for drinks with friends to celebrate a birthday or promotion, or maybe simply to blow off some steam after work? Maybe you promised yourself you’d only get one or two cocktails, but you ended up with a $100 bar tab. 

Unplanned spending happens to the best of us. If it happens regularly, however, it’s a problem that can quickly spin out of control.

So, don’t feel ashamed about your financial triggers. Once you’re aware of them, you can take steps to manage them. This way they won’t throw your bank account off track.

Find Ways to “Trick” Yourself

The thought of tricking yourself to avoid overspending sounds silly at first, but it actually makes sense due to the emotional nature of financial triggers. It takes time to unlearn old behaviors, and a few personalized techniques can help as you build self-discipline.

For example, maybe you’re prone to splurge on going out to eat after a long day. To help resist the urge, you can instead create a meal plan or stock up on prepared dinners. If weekend boredom is your Achilles heel, make room in your budget for “fun money.” (It’s best to use cash so you’re not tempted to swipe a credit card.) Once you run out of cash, keep a notebook or whiteboard handy, with a list of free things to do when you’re bored.

You might even have to resort to extreme measures to curb your financial triggers. This could

include literally freezing your credit cards or moving money to a bank account that you don’t allow yourself to use. It won’t be fun when the impulse to spend arises, but the bright side is that you’re making a smart financial choice for your future self.

Find an Accountability Partner

Working to change old habits is a daunting task, but you don’t have to do it alone. Talk to a

family member, friend, or partner about your financial triggers. You might not be comfortable

sharing all the details about your finances, and that’s okay. It can be as simple as asking someone to join you in free activities or check in weekly about your spending.

There are other options if you don’t have anyone close to talk to or feel ashamed of sharing

such personal information with loved ones. If this sounds like you, you might want to consider joining an online group with like-minded individuals. There are tons of online personal finance communities available to answer any questions you might have and include you in challenges to help you meet your money goals.

Final Takeaway

Financial triggers can be tricky and frustrating to navigate, but they don’t have to take over your life. Once you’re aware of them and have tools in place to better manage your money, you’ll know what you need to do to spend less on stuff and keep your hard-earned money in your bank account.

 

What is a 401(k) Plan?

When planning for your future, it’s important to determine when you think you’ll retire. More importantly, how will you be able to afford retirement?

In order to retire, you need to save enough money to fund your lifestyle without needing to work. Experts say your retirement income should be 80% of your pre-retirement income. This means that if you’re earning $50,000 per year, you’ll likely need to live on around $40,000 per year during your retirement.

One of the best ways to save for retirement and build wealth over time is with a 401(k) plan. Read on to learn more about this type of retirement account.

What is a 401(k) Plan?

You might have heard the term 401(k) before, especially if you landed a job and your new employer offers this as part of the benefits package.

Backing up a bit, a 401(k) is basically a retirement savings plan sponsored by an employer. It allows you to save and invest a portion of your income before taxes are deducted from your paycheck.

This option can only be offered by your employer and it’s not a savings account. The money you put into your 401(k) is not easily accessible as it’s set up to grow over time.

Since 401(k) contributions are tax-deferred, you can deduct the amount you contribute from your income each year, thus lowering your taxable income. However, you will have to pay taxes on the money once you retire and start withdrawing it.

How Does a 401(k) Plan Work?

Contributing to a 401(k) plan is easy. You simply opt-in if your employer offers a 401(k) option. This may involve filling out some initial paperwork.

From there, you can choose how much of your paycheck you want to contribute. Some employers even offer to match your contributions and this is great because it’s just like getting free money.

For example, your employer may offer to match every dollar you contribute to your 401(k) up to five percent of your gross pay for the year. If your salary is $60,000, this means your employer can contribute up to $3,000 to your 401(k).

How Much Can You Contribute To a 401(k)?

This year, the maximum 401(k) contribution limit for anyone under 50 is $19,000. This is subject to change in any given year.

Be sure to research each year’s contribution limits at the beginning of the calendar year to see if there are any changes. This will help you plan your contributions.

What Are Roth 401(k)s and IRAs?

A 401(k) plan isn’t the only type of retirement plan available to you. A Roth 401(k) is similar to a 401(k) – except that your account is funded with after-tax dollars.

This means that you pay taxes on your income before you contribute to your retirement plan, yet you make tax-free withdrawals during your retirement years.

An IRA, on the other hand, is an individual retirement account. There are two main types: traditional IRA and Roth IRA. A traditional IRA is funded with pre-tax dollars while a Roth IRA is funded with taxed dollars. The main difference is whether you’ll pay taxes when you contribute (Roth IRA) or when you retire (traditional IRA).

Regardless of which option you choose, an IRA can be used as a separate, alternative retirement savings tool or it can be used in addition to your 401(k) plan.

The annual contribution limit for an IRA is $6,000 if you’re under 50 and $7,000 if you’re over 50. There are also income limits to be eligible to contribute to an IRA.

How Much Should You Contribute To Your 401(k)?

After recognizing the importance of 401(k) plan, your next question may be: How much should I contribute year after year.

The amount you put into your account depends on your retirement goals. So, think about when you want to retire and how much you’ll need to live on each year.

Fidelity recommends saving ten times your income by the time you hit 67. To do this, you’ll need to save around 25% of your income each year starting in your mid-20s. This 25% savings rate may sound high, but it includes 401(k) contributions, an employer match, cash savings, and debt repayment. Remember: You can always adjust your 401(k) contributions depending on your age and current situation.

If you can’t afford to max out your retirement account each year, you can still aim to contribute enough to get your employer match if it’s offered. This is (practically) free money that you don’t want to leave on the table. So, assess your situation every six to 12 months to see if you can increase your contributions over time.

The great thing about a 401(k) plan is that you don’t see the money you contribute so you won’t miss it much.

What Does It Mean to Be Vested in Your 401(k) Retirement Plan?

The term ‘vesting’ means ownership.

Being 100% vested means that you own your entire 401(k) balance and it can’t be forfeited or taken back by your employer for any reason.

Some employers, however, don’t give you full ownership of your 401(k) match dollars right away. For example, your employer may require you to be on the job for at least three years before you can be 100% vested in your 401(k) balance.

This means that if you leave your employer before that three year mark, you could lose some of the match contributions.

When Can You Get Your Retirement Money?

Generally, you’ll want to wait until you’re 59 ½ to start withdrawing money from your 401(k). Why? Because if you withdraw money before that age, you may face a 10% early withdrawal penalty from the IRS. This means you may have to pay taxes on any amounts you cash out (since you contributed pre-tax dollars).

However, there are some cases where you can avoid the penalty fee. Here are some of these situations:

  • Withdrawing funds as a down payment on your first home purchase
  • Unreimbursed medical expenses that exceed 7.5% of your adjusted gross income
  • Education expenses that fall under a ‘hardship withdrawal

If possible, it’s best to avoid early withdrawals to avoid any chance of receiving a penalty.

The Wrap-Up

A 401(k) plan is a great retirement tool that can help you save money to retire comfortably.

When it comes to deciding how much to contribute, look at your budget and determine how much money you can save. If you can get an employer match, try to contribute enough to get the full match and be mindful of vesting rules.

And remember: It’s important to start somewhere and set goals to contribute more over time.

 

How to Fight Summer FOMO and Fatten Up Your Savings Account

Summertime brings warm weather — and a major temptation to spend money. From hitting the concert circuit to shopping for new clothes to taking a dream group vacation, the opportunities to spend money are endless.

Blowing through your cash may be fun but it can also put a major dent in your bank account.

The good news is: You don’t have to shut down your social calendar when the lazy days of summer set in. By following these five tips, you can keep the summer FOMO at bay – and potentially boost your savings by fall.

1. Unplug from social media

Imposing a ban on checking your social feeds can be one of your best defenses against FOMO spending.

“It’s very easy to feel like you’re missing out when scrolling through countless summer posts showing your friends enjoying themselves,” says Matt Edstrom, CMO of GoodLife Home Loans.

He says the pressure to spend only gets worse if you’re receiving invites to go out via social. The solution? Take a time out from Insta, Facebook and all the rest. If you can’t do that, be ready to make a frugal counter-offer if a friend suggests some pricey fun.

“If someone is posting about wanting to go to a particularly swanky place for happy hour, you could propose an alternate location that’s still trendy but also affordable,” says Edstrom.

Or even better, suggest a BYOB get-together at home. You could even make it a regular thing, with a different member of your circle playing host each week.

And, let your friends know from the start that you’re trying to curb your spending for summer and step up your savings. That way, if you have to say no to an outing, they’ll understand why.

2. Set up a “just for summer” savings fund

The next best thing you can do to avoid summer FOMO is to be prepared for it. That means having a special savings account just for summer fun, says Rebecca Gramuglia, personal finance expert at cash back site TopCashback.com.

“Summertime means longer days and more time for activities and sometimes those summer adventures come with a price-tag, which is why starting a summer fund is so important,” Gramuglia says.

The simplest way to create a summer fund? Set up a direct deposit from your paycheck into a separate savings account each payday. Pick a target amount you want to budget for your summer spending each month, then break that down by the number of paychecks you receive monthly. Commit to having that amount sent straight to savings, then transfer it to your checking to use as activities with friends come up.

Gramuglia says that ideally, if you start building this fund a few months before summer kicks off, you’ll have a cushion ready to go. But if you’re getting a late start, take advantage of small windfalls to build it up.

“Any time you have leftover change, bonuses or (get) cash back, add it into your summer fund,” she says.

3. Don’t spend without looking for deals and discounts first

With so many coupon apps, deal sites and money-saving apps to choose from, there’s no reason to pay full price for summer spending, whether it involves travel, dining, shopping or entertainment.

If you’re planning a trip with friends, for example, try doing it backwards, says Meghan Fox, a money-saving expert at gift card marketplace Raise.

“Find the best deals on sites like Kayak, Travelocity and Expedia, then pick a destination where you’ll get more bang for your buck.”

Sites like Skyscanner and Hopper are also good for comparing prices on airfare. Purchasing discounted gift cards is another option for saving on flights, hotels and other purchases. At Raise, for instance, you can find discounted gift cards from Hotels.com, Airbnb and Southwest Airlines.

For summer spending other than travel, visit deal and coupon sites like Groupon, LivingSocial or RetailMeNot to see what’s on tap for promo codes and coupons. You can find discounts on spa packages, restaurants, and movie tickets.

4. Plan some solo activities

If you’re worried that hanging out with friends over the summer will push your budget to the limit, schedule in some alone time. Then, fill that time with things that don’t cost a dime.

That’s something Julia Askin, a marketing coordinator with mobile app development firm Fueled does. After moving to New York City six months ago, she’s feeling the pressure on her budget to “do it all”.

“To combat FOMO and protect my budget, I commit much less to social engagements and focus instead on growing my areas of interest and passion,” Askin says.

In the summer months, this includes spending time outdoors and taking free online classes to learn new skills, both of which leave her bank account intact.

If you’re looking for free or low-cost things to do, check your local recreation center. Or, head to your library or a museum for an afternoon. Volunteer your time for a good cause. Challenge yourself to come up with as many free ideas as you can. To make it really interesting, consider doing a no-spend week over the summer to see how much you can save.

5. Create money goals to keep you motivated

It’s tough not spending money, especially if you feel a little left out of the fun. Giving yourself some clear goals can help you maintain a positive mindset.

For example, your goals might include:

  • Paying an extra $2,000 off your student loans by the end of August
  • Saving $1,500 in a baby emergency fund in a month
  • Starting your savings cushion for a down payment on a first home
  • Finally getting around to opening up an IRA to save for retirement

Your goals can be big or small, but make sure they’re S.M.A.R.T. – specific, measurable, achievable, realistic and time-bound. Any time your friends are tempting you to spend, remind yourself of your goals. This could be all you need to dodge the FOMO bullet.

Summer FOMO doesn’t have to wreck your budget

The fear of missing out on fun with friends can only sabotage your spending if you let it. Planning ahead and setting some ground rules for spending over the summer can make it easier to avoid giving into temptation.

As a bonus, you may end up with a padded savings account!

 

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.

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