So You Want to Buy Life Insurance for Your Parents...

September 28, 2020

View Article
Jonathan Brutto

Jonathan Brutto

Financial Professional

15150 Preston Rd Suite 300

Dallas, TX 75248

Subscribe to get my Email Newsletter

September 28, 2020

So You Want to Buy Life Insurance for Your Parents...

So You Want to Buy Life Insurance for Your Parents...

Playing Monopoly as a young kid might have given you some strange ideas about money.

Take the life insurance card in the Community Chest for instance. That might give the impression that life insurance is free money to burn on whatever the next roll of the dice calls for.

In grown-up reality, life insurance proceeds are often committed long before a policy holder or beneficiary receives the check they’re waiting for. Final expenses, estate taxes, loan balances, and medical bills all compete for whatever money is paid out on the policy.

If your parents don’t have a policy or if you think their coverage won’t be enough, you can plan ahead and buy a life insurance policy for them. Your parents would be the insured, but you would be the policy owner and beneficiary.

A few extra considerations when buying a life insurance policy for your parents:

  • Insurable interest still applies. If your parents already have a significant amount of life insurance coverage, you may find that some insurers are reluctant to issue more coverage. Insurable interest requires that the amount of coverage doesn’t exceed the potential financial loss. (In other words, if your parents already have enough coverage, a company may not want to insure them for more.)
  • Age can limit coverage amounts. Assuming that your parents are older and no longer generating income, coverage amounts will be limited. If your parents are younger and still have 20 or more years ahead of them before they retire, they can qualify for a higher amount of coverage.
  • Age can limit policy types. Certain types of life insurance aren’t available when we get older, or will be limited in regard to length of coverage. Term life insurance is a good example. Your options for term life insurance will be fewer once your parents are into their sixties. The available term lengths will also be shorter. Policies with a 30-year term aren’t commonly available over the age of 50.

How Can I Use The Life Insurance For My Parents?

Depending on the amount of coverage you buy – or can buy (remember, it may be limited), you could use the policy to plan for any of the following:

  • Final expenses: You can expect funeral costs to run from $10,000 to $15,000, maybe more.
  • Estate taxes: Estate taxes and so-called death taxes can be an unpleasant surprise in many states. A life insurance policy can help you plan for this expense which could come at a time when you’re not flush with cash.

Can Life Insurance Pay The Mortgage Or Car Loans?

It isn’t uncommon for parents to pass away with some remaining debt. This might be in the form of a mortgage, car loans, or even credit card debt. These loan balances can be covered in whole or in part with a life insurance policy.

In fact, outstanding loan balances are a very big consideration. Often, people who inherit a house or a car may also inherit an additional mortgage payment or car payment. It might be wonderful to receive such a generous and sentimental gift, but if you’re like many families, you might not have the extra money for the payments in your budget.

Even if the policy doesn’t provide sufficient coverage to retire the debt completely, a life insurance policy can give you some breathing room until you can make other arrangements – like selling your parents’ house, for example.

You Control The Premium Payments.

If you buy a life insurance policy for your parents, you’ll know if the premiums are being paid because you’re the one paying them. You probably wouldn’t want your parents to be burdened with a life insurance premium obligation if they’re living on a fixed income.

Buying insurance for your parents is a great idea, but many people don’t consider it until it’s too late. That’s when you might wish you’d had the idea years ago. It’s one of the wisest things you can do, particularly if your parents are underinsured or have no life insurance at all.

  • Share:

September 23, 2020

Who Needs Life Insurance?

Who Needs Life Insurance?

Life insurance is important… or so you’ve been told.

But do you really need it? And how can you know? Let’s take a look at who does and doesn’t need the family and legacy protecting power of life insurance and some specific examples of both.

Protecting your dependants
Is there anyone in your life who would suffer financially if your income were to vanish? If so, then you have dependents. And anyone with financial dependents should buy life insurance. Those are the people you’re aiming to protect with a life insurance policy.

On the other hand, if you live alone, aren’t helping anyone pay bills, and no one relies on you financially to pursue their dreams, then you still might need coverage. Let’s look at some specific examples below.

Young singles
Let’s say you’ve just graduated from college, you’ve started your first job, and you’re living in a new city. Your parents don’t need you to help support them, and you’re on your own financially. Should you get life insurance? If you have serious amounts of student or credit card debt that would get moved to your parents in the event of your passing, then it’s a consideration. You also might think about if you have saved enough in emergency funds to cover potential funeral expenses. Now would also potentially be a better time to buy a policy early while rates are low, especially if you’re considering starting a family in the near future.

Married without children
What if your family is just you and your spouse? Do either of you need life insurance? Remember, your goal is to protect the people who depend on your income. You and your spouse have built a life together that’s probably supported by both of your incomes. A life insurance policy could protect your loved one’s lifestyle if something were to happen to you. It would also help them meet lingering financial obligations like car payments, credit card debt, and a mortgage, even if they still have their income.

Single or married parents
Anyone with children must consider life insurance. No one relies on your income quite like your kids. It’s what clothes them and feeds them. Later on, it can empower them to pursue their educational dreams. Life insurance can help give you peace of mind that all of those needs will be protected. Even a stay-at-home parent should consider a policy. They often provide for needs like childcare and education that would be costly to replace. Life insurance is an essential line of defense for your family’s dreams and lifestyle.

Business owners
No one wants to think about what would happen to their business without them. But entrepreneurs and small business owners can use life insurance to protect their hard work. A policy can help protect your family if you took out loans to start your business and are still paying down debt. More importantly, it can help offset the losses if your family can’t operate the business without you and has to sell in poor market conditions.

Not everyone needs life insurance right now. But it’s a vital line of defense for the people you care about most and should be on everyone’s radar. The need might not be as urgent for a young, debt-free single person, but it’s still worth it to start making plans to protect your future family. Contact a financial professional today to begin the process of preparing!

  • Share:

September 16, 2020

A Life Insurance Deep Dive

A Life Insurance Deep Dive

We’ve explored the basics of life insurance, how it works, and what it’s for.

Today we’ll be fleshing out some concepts you might encounter as you look at your options for protecting your family. Let’s start with the different kinds of life insurance.

Different types of life insurance
Life insurance will almost always have a few basic parts—the death benefit (the amount paid to your loved ones upon your passing), the policy itself (the actual insurance contract), and the premium (how much you pay for the life insurance policy).

There’s a wide range of life insurance policies, each with their own strengths and weaknesses.

  • Term life insurance is the most straightforward form. It lasts for a set amount of time (the term), during which you pay a premium. You and your beneficiaries won’t receive any benefits if you don’t pass away during the term. This type of policy typically doesn’t feature other benefits on its own (you may be able to add other benefits with what is called a rider).
  • Whole life insurance is exactly what it sounds like. It never expires and is guaranteed to pay a benefit whenever you pass away. But it often comes with other benefits. For instance, it can include a saving component called a cash value. It usually builds with interest and you can take money from it any time.
  • Indexed Universal Life Insurance is similar to whole life insurance, but the cash value is tied to the market. The market is up? Your cash value goes up. The market goes down? Your cash value is actually shielded from loss.

Each of these types of life insurance have different strengths and weaknesses. A term policy might be right for you while a whole life policy might be better for your neighbor. Talk with a financial professional to see which one fits your needs and budget!

The right amount of life insurance
But can you have too little life insurance? How about too much? The answer to both of those questions is yes. In general, the purpose of life insurance is to replace your income in case of your passing for your loved ones and family. That should be your guidestone when deciding how substantial a policy to purchase. Typically, you’re looking at about 10 times your annual income. That’s enough to replace your yearly earnings, pay-off potential debts, and guard against inflation. That means someone earning $35,000 would want to shop around for about $350,000 worth of coverage.

Employer life insurance
This means that most employer-provided life insurance isn’t enough to fully protect you and your family. There’s no doubt that a free policy from your workplace is great. But they typically only cover about a year of wages. That’s not nearly what you need to provide peace of mind to your beneficiaries! Don’t necessarily refuse your employer-provided life insurance, but make sure that it supplements a more substantial policy.

Still have questions? Reach out to a licensed financial professional and ask for guidance! And stay tuned for next week’s article where we’ll debunk some common life insurance myths!

  • Share:


This article is for informational purposes only and is not intended to promote any certain products, plans, or strategies that may be available to you. Before enacting a life insurance policy, seek the advice of a licensed financial professional to discuss your options.

August 31, 2020

How to Avoid Financial Infidelity

How to Avoid Financial Infidelity

If you or your partner have ever spent (a lot of) money without telling the other, you’re not alone.

This has become such a widespread problem for couples that there’s even a term for it: Financial Infidelity.

Calling it infidelity might seem a bit dramatic, but it makes sense when you consider that finances are the leading cause of relationship stress. Each couple has their own definition of “a lot of money,” but as you can imagine, or may have even experienced yourself, making assumptions or hiding purchases from your partner can be damaging to both your finances AND your relationship.

Here’s a strategy to help avoid financial infidelity, and hopefully lessen some stress in your household:

Set up “Fun Funds” accounts.

A “Fun Fund” is a personal bank account for each partner which is separate from your main savings or checking account (which may be shared).

Here’s how it works: Each time you pay your bills or review your whole budget together, set aside an equal amount of any leftover money for each partner. That goes in your Fun Fund.

The agreement is that the money in this account can be spent on anything without having to consult your significant other. For instance, you may immediately take some of your Fun Funds and buy that low-budget, made-for-tv movie that you love but your partner hates. And they can’t be upset that you spent the money! It was yours to spend! (They might be a little upset when you suggest watching that movie they hate on a quiet night at home, but you’re on your own for that one!)

Your partner on the other hand may wait and save up the money in their Fun Fund to buy $1,000 worth of those “Add water and watch them grow to 400x their size!” dinosaurs. You may see it as a total waste, but it was their money to spend! Plus, this isn’t $1,000 taken away from paying your bills, buying food, or putting your kids through school. (And it’ll give them something to do while you’re watching your movie.)

It might be a little easier to set up Fun Funds for the both of you when you have a strategy for financial independence. Contact me today, and we can work together to get you and your loved one closer to those beloved B movies and magic growing dinosaurs.

  • Share:


August 17, 2020

Dig yourself out of debt

Dig yourself out of debt

I hate to break it to you, but no matter what generation you are – Baby Boomer, Generation X, or Millennial – you’re probably in debt.

If you’re not – good on you! Keep doing what you’re doing.

But if you are in debt, you’re not alone. A study[i] by the financial organization, Comet, found:

  • 80.9 percent of Baby Boomers are in debt
  • 79.9 percent of Generation X is in debt
  • 81.5 percent of Millennials are in debt

There are some folks whose goal is to eliminate all debt – and if that’s yours, great! But one thing to keep in mind while you’re working towards that finish line is that not all debt is created equal. Carrying a mortgage, for example, may be considered a “healthy” debt. Student loan debt may feel like an encumbrance, but hopefully, your education has given you more earning power in the workforce. A car loan may even be considered a healthy debt. So, there are some types of debt that may offer you advantages.

Any credit card debt you have, however, should be dealt with asap. Credit card debt can cost money every month in the form of interest, and it gives you nothing in return – no equity, no education, no increase in earning potential. It’s like throwing money down the drain.

So, let’s get to work and look at some of the best tips for paying down credit card debt.

1. Get to know your debt
Make a commitment to be honest with yourself. If you’re in denial, it’s going to be hard to make positive changes. So take a good, hard look at your debt. Examine your credit card statements and note balances, interest rates, minimum monthly payment amounts, and due dates. Once you have this information down in black and white you can start to create a repayment strategy.

2. Get motivated
Taking on your debt isn’t easy. Most of us would rather not confront it. We may make half-hearted attempts to pay it off but never truly get anywhere. Need a little motivation? Getting rid of your credit card debt may make you happier. The Comet study asked respondents to rate their happiness on a scale of one to seven.[ii] It turns out that those who selected the lowest rating also carried the highest amounts of credit card debt. Want to be happier? It seems like paying off your credit card debt may help!

3. Develop your strategy
There are many strategies for paying off your credit card debt. Once you understand all your debt and have found your motivation, it’s time to pick a strategy. There are two main strategies for debt repayment. One focuses on knocking out the highest interest debt first, and the other method begins with tackling the smallest principal balances first. Here’s how they work:

  • Start with the highest interest rate: One of the items you should have noted when you did your debt overview is the interest rate for each account. With this method, you’ll throw the largest payment you can at your highest interest rate debt every month, while paying the minimum payments on your other debts. Utilizing this method may help you pay less interest over time.

  • Start with the smallest balance: As opposed to comparing interest rates, this method requires you to look at your balances. With this strategy, you’ll begin paying the smallest balance off first. Continue to make the minimum payments on your other accounts and put as much money as you can towards the smallest balance. Once you have that one paid off, combine the amount you were paying on that balance with the minimum you were paying on your next smallest balance, and so on. This strategy can help keep you motivated and encouraged since you should start to see some results right away.

Either strategy can work well. Pick the one that seems best for you, execute, and most importantly – don’t give up!

4. Live by a budget
As you begin chipping away at your credit card debt, it’s important to watch your spending. If you continue to charge purchases, you won’t see the progress you’re making, so watch your spending closely. If you don’t have a budget already, now would be a good time to create one.

5. Think extra payments
Once you are committed to paying off your debt and have developed your strategy, keep it top of mind. Make it your number one financial priority. So when you come across “found” money – like work bonuses or gifts – see it as an opportunity to make an extra credit card payment. The more of those little extra payments you make, the better. Make them while the cash is in hand, so you aren’t tempted to spend it on something else.

6. Celebrate your victories
Living on a budget and paying off debt can feel tedious. Paying off debt takes time. Don’t forget to take pride in what you’re trying to accomplish. Celebrate your milestones. Do something special when you get that first small balance paid off, but try to make the occasion free or at least cheap! The point is to reward yourself for your hard financial work. (Hint: Try putting up a chart or calendar in your kitchen and marking off your progress as you go!)

Reward yourself with a debt-free life Getting out of debt is a great reward in and of itself. It takes discipline, persistence, and patience, but it can be done. Come to terms with your debt, formulate a strategy, and stick to it. Your financial future will thank you!

  • Share:

August 5, 2020

Savings accounts vs. CDs – which is better?

Savings accounts vs. CDs – which is better?

Interest rates are on the rise, which might not be great news if you carry revolving debt.

But savings accounts and certificates of deposit (CDs) might start looking more attractive as places to put your money. Currently, both savings accounts and CDs might be good options, so which is better? In large part, whether a savings account or a CD is the better tool for saving depends on your savings goal.

Access to funds Savings accounts offer more flexibility than CDs if you need to withdraw your money. However, be aware that many banks charge a fee if your balance falls below a certain threshold. Some banks don’t have a minimum balance requirement, and some credit unions have minimum balance requirements as low as a penny. It could be worth it to shop around if you think you might need to draw down the account at any moment.

CDs, on the other hand, have a maturity date. If you need access to your funds before the maturity date, which might range from six months to up to five years depending on which CD you choose, expect to sacrifice some interest or pay a penalty. Accessing funds held in a standard CD before its maturity date is called “breaking the CD”.

“Liquid CDs” allow you to withdraw without penalty, but typically pay a lower interest rate than standard CDs.

Interest rates CDs are historically known for paying higher interest rates than savings accounts, but this isn’t always the case. Interest rates for both types of accounts are still hovering near their lows. Depending on your situation, it might be better to choose an account type based on convenience. If interest rates continue upward, CDs may become more attractive.

In a higher interest rate environment, CDs might be a great tool for saving if you know when you’ll need the money. Let’s say you have a bill for college that will be due in thirteen months. If you won’t need the money for anything else in the meantime, a twelve-month CD might be a fit because the CD will mature before the bill is due, so the money can be withdrawn without penalty.

If your goal is to establish an emergency fund, however, a CD might not be the best option because you don’t know when you’re going to need the money. If an emergency comes your way, you won’t want to pay a penalty to access your savings. Keep an eye on current rates, and if CD interest rates start to increase, then you might consider them for longer-term savings if you won’t need the funds until a fixed date in the future. For emergency savings, consider a savings account that keeps your money separate from your checking account but still provides easy access if you need it.

Depending on your situation, a CD or a savings account may be the better fit. Shop around for the best rates you can find, and make sure you understand any penalties or fees you might incur for withdrawing funds.

  • Share:


This article is for informational purposes only and is not intended to promote any certain products, plans, or strategies for saving and/or investing that may be available to you. Market performance is based on many factors and cannot be predicted. Before investing or enacting a savings or retirement strategy, seek the advice of a financial professional, accountant, and/or tax expert to discuss your options.

July 15, 2020

The Stock Market Crash of 1929

The Stock Market Crash of 1929

What comes to mind when you think of The Great Depression?

Maybe images of long unemployment lines and dusty farmers.

But it all started with a massive stock market crash. Here’s a quick history of the Stock Market Crash of 1929.

The Roaring Twenties
The decade leading up to the Great Depression is referred to as the Roaring Twenties. The First World War had just ended and Europe was in shambles. But the United States was poised to become an economic powerhouse. The U.S. economy was exploding in the years before the war and, unlike Europe, had escaped the conflict relatively unscathed. It didn’t take long for the U.S. economy and culture to kick into overdrive.

During the 1920s was the birth of consumer and mass culture. Women now had access to white collar jobs. That meant more money for the family and more freedom to live and dress how they wanted. Affordable cars, courtesy of Henry Ford, meant families could travel and vacation in places that were never before possible. Radios and phonographs meant that popular music (a.k.a., jazz) could reach a wider audience and make big money for artists.

The Big Bubble
But people weren’t content to just spend their money on Model-Ts and the latest Louis Armstrong record. They were buying stocks. And when they ran out of money to invest, they borrowed more. Banks were eager to lend out money to a new generation of investors with stable incomes. One of those things that seemed like a good idea at the time.

By the end of the decade, the American economy was booming. But underneath the surface was a tangle of high debt and wild speculation that the economy would keep on expanding. In reality, the only direction things could go was down.

The Stock Market Crash of 1929
The stock market set a record high in August 1929. Then it began to moderately decline in September. But by the middle of October, a modest slump became a total free fall. Spooked by the cooling market, investors started selling their shares in the millions. The technology of the time was overwhelmed trying to calculate how much was being sold. The massive bubble that had expanded during the roaring twenties was collapsing.

But the catastrophe didn’t end in the stock market. The public panicked. Droves of people started withdrawing money from banks as quickly as they could. But those banks had used that capital to invest in the market. Huge amounts of wealth were wiped out.

Aftermath
This upheaval caused the U.S. economy to take a nosedive. By 1932, stocks were worth only 20% of their 1929 peak.(1) Half of America’s banks were belly up, and nearly 30% of the population was unemployed.(2) Economies around the world were deeply shaken by the collapse of the U.S. market, making the Great Depression a global phenomenon. It would take the massive economic mobilization of World War II to resurrect the U.S. economy.

  • Share:

July 6, 2020

Should You Only Use Cash?

Should You Only Use Cash?

Bills and coins are outdated.

Who actually forks over cash when they’re out and about anymore? Paper money and copper coins are a relic of the past that are useless in a world of credit cards and tap-to-pay…

Except when they’re not.

Using cards and digital payment systems actually comes with some pretty serious drawbacks. Here’s a case for considering going cash only, at least for a little while!

The card convenience (and curse)
Plastic cards can make spending (a little too) easy. See an awesome pair of shoes in the store? No problem! Just swipe at the counter and you’re good to go. Online shopping is even more frictionless. Everything from new clothes to lawn chairs is a few clicks away from delivery right to your front door.

And that’s the problem.

You might not notice the effect of swiping your card until it’s too late. Those shoes were a breeze to buy until you check your bank account and see you’re in the red, or you get your credit card bill. It’s easy to find yourself in a hopeless cycle of overspending when buying things just feels so easy.

The pain of spending cash
Handing over cash can be a different phenomenon. Paying with actual dollars and cents helps you connect your hard-earned money with what you’re buying. It makes you more likely to question if you really need those shoes or clothes or lawn chairs. Studies show that people who pay with cash spend less, buy healthier foods, and have better relationships with their purchases than those who use credit cards.(1) That’s why going with cash only might be a winning strategy if you find yourself constantly in credit card debt or just buying too much unnecessary stuff every month.

Security
To be fair, cash does have some safety concerns. It can be much more useful to a criminal than a credit card. You can’t call your bank to lock down that $20 bill someone picked out of your pocket on the subway! That being said, cards expose you to the threat of identity theft. A criminal could potentially have access to all of your money. There are potential dangers either way, and it really comes down to what you feel comfortable with.

In the end, going cash only is a personal decision. Maybe you rock at only buying what you need and you can dodge the dangers of overspending with your cards. But if you feel like your budget isn’t working like it should, or you have difficulty resisting busting out the plastic when you’re shopping, you may want to consider a cash solution. Try it for a few weeks and see if it makes a difference!

  • Share:

July 1, 2020

Considering a home equity loan?

Considering a home equity loan?

Home prices may be leveling off in some areas but they’ve had a healthy recovery nationwide, leading to massive amounts of untapped equity.

According to a recent report, the average homeowner gained nearly $15,000 in equity in the past year and has nearly $115,000 available to draw.[i]

This can be good news if you need to increase your cash flow to pay for a special project or unusual expense.

Home equity risks
It might be obvious, but a home equity loan is secured by your home, based on the equity you’ve built. Your eligibility for a home equity loan involves several factors, but a primary consideration is going to be the difference between your home’s market value and the remaining balance on the mortgage. Keep in mind that missed payments due to a job loss, illness, or another financial setback may put your home at risk from two loans – the original mortgage and the home equity loan. Before you take out this type of loan, make sure you have a solid strategy in place for repayment.

Home equity loan costs
Funds acquired through a home equity loan can feel like found money, but keep in mind that a home equity loan takes an asset and converts it to debt – often for up to 30 years. As such, you’ll be paying certain fees to use the money.

Home equity loans often have closing costs of 2% to 5% of the loan amount.[ii] It might be worth it to shop around, however, to see if you can find a lender who won’t bury you in fees and loan charges. Interest rates may vary depending on your credit rating and other factors, but you can expect to pay about 6% or higher. If you were to borrow $100,000 of the $115,000 the average homeowner now has in equity, the interest costs over 30 years would be $115,000 – $15,000 more than you borrowed. If you can manage a 15-year term instead, this would drop the interest costs down to about $52,000.[iii] Carefully consider what you’ll use the funds to purchase. A new patio addition to your home or a pool with a deck may not add enough value to your home to offset the interest costs.

Tax benefits
Once upon a time, the interest for a home equity loan was tax deductible, much like the interest on a primary mortgage. Now, there are some rules attached to the tax benefit. If you use the loan funds to make improvements to the home you’re borrowing against, you can usually deduct the interest. In the past, the tax benefit didn’t consider how the funds were used.[iv]

Home equity loans can be a powerful financial tool. But as with many tools, it’s important to exercise caution. Before signing on the dotted line, be sure you understand the long-term cost of the loan. With interest rates climbing, a home equity loan isn’t as attractive a source of funding as it once was.

Depending on how the funds are used, a home equity loan can make sense. If you’re buried in high-interest debt, like credit cards, the math might work to your favor. However, if the money is spent on a shiny, red sports car and a trip to Vegas, it might be tough to make a financial argument for that – unless you win big.

  • Share:

This article is for informational purposes only and is not intended to promote any certain products, plans, or strategies that may be available to you. Before taking out any loan or enacting a funding strategy, seek the advice of a financial professional, accountant, and/or tax expert to discuss your options.

[i] https://www.cnbc.com/2018/07/09/homeowners-sitting-on-record-amount-of-cash-and-not-tapping-it.html
[ii] https://www.lendingtree.com/home/home-equity/home-equity-loan-closing-costs/
[iii] https://www.mortgageloan.com/calculator/loan-line-payment-calculator
[iv] https://www.cnbc.com/2018/05/21/5-things-to-know-before-taking-out-a-home-equity-loan.html

June 24, 2020

Read this before you walk down the aisle

Read this before you walk down the aisle

Don’t let financial trouble ruin your future wedded bliss.

Most newlyweds have a lot to get used to. You may be living together for the first time, spending a lot of time with your new in-laws, and dealing with dual finances. Financial troubles can plague even the most compatible pairs, so read on for some tips on how to get your newlywed finances off to the best possible start.

Talk it out If you haven’t done this already, the time is ripe for a heart to heart talk about what your financial picture is going to look like. This is the time to lay it all out. Not only should you and your fiancé discuss your upcoming combined financial situation, but it can be beneficial to take a deep dive into your past too. Our financial histories and backgrounds can influence current spending and saving habits. Take some time to get to know one another’s history and perspective when it comes to how they think about money, debt, budgeting, etc.

Newlyweds need a budget Everyone needs a budget, but a budget can be particularly helpful for newlyweds. A reasonable, working household budget can go a long way in helping ease financial stress and overcoming challenges. Money differences can be a big cause of marital strife, but a solid, mutually-agreed-upon budget can help avoid potential arguments. A budget will help you manage student loans or new household expenses that must be dealt with. Come up with a budget together and make sure it’s something you both can stick with.

Create financial goals Financial goal setting can actually be fun. True, some goals may not seem all that exciting – like paying off credit cards or student loans. But formulating financial goals is important.

Financial goal setting should start with a conversation with your new fiancé. This is the time to think about your future as a married couple and work out a financial strategy to help make your financial dreams a reality. For example, if you want to buy a house, you’ll need to prepare for that. A good start is to minimize debt and start saving for a down payment.

Maybe you two want to start a business. In that case, your financial goals may include raising capital, establishing business credit, or qualifying for a small business loan.

Face your debt head on It’s not unusual for individuals to start married life facing new debt that came along with their partner – possibly student loans or personal credit card debt. You may also have combined debt if you’re planning on financing your wedding. Maybe you’re going to take your dream honeymoon and put it on a credit card.

Create a strategy to pay off your debt and stick to it. There are two common ways to tackle it – begin with the highest interest rate debt, or begin with the smallest balance. There are many good strategies – the key is to develop one and put it into action.

Invest for the future Part of your financial strategy should include preparing for retirement, even though it might seem light years away now. Make sure you work a retirement strategy into your other financial goals. Take advantage of employer-sponsored retirement accounts and earmark savings for retirement.

Purchase life insurance Life insurance is essential to help ensure your new spouse will be taken care of should you die prematurely. Even though many married couples today are dual earners, there is still a need for life insurance. Ask yourself if your new spouse could afford to pay their living expenses if something happened to you. Consider purchasing a life insurance policy to help cover things like funeral costs, medical expenses, or replacement income for your spouse.

Newlywed finances can be fun Newlywed life is fun and exciting, and finances can be too. Talk deeply and often about finances with your fiancé. Share your dreams and goals so you can create financial habits together that will help you realize them. Here’s to you and many years of wedded bliss!

  • Share:

June 15, 2020

Should I pay off my car or my credit cards?

Should I pay off my car or my credit cards?

Credit card statements and auto loan statements are often among the bigger bills the mail carrier brings.

Wouldn’t it be great to just pay them off and then use those monthly payments for something else, like building your savings and giving yourself a bit of breathing room for a treat now and then?

Paying extra money on your credit card bills and your car loan at the same time may not be an option, so which is better to pay off first?

In most cases, paying down credit cards might be a better strategy. But the reasons for paying off your credit cards first are numerous. Let’s look at why that usually may make more sense.

  • Credit cards have high interest rates. When you look at the balances for your auto loan vs. your credit card, the larger amount may often be the auto loan. Big balances can be unnerving, so your inclination may be to pay that down first. However, auto loans usually have a relatively low interest rate, so if you have an extra $100 or $200 per month to put toward debt, credit cards make a better choice. The average credit card interest rate is about 15%, whereas the average auto loan rate is usually under 7%, if you have good credit.[i]

  • Credit cards charge compound interest. Most auto loans are simple-interest loans, which means you only pay interest on the principal. Credit cards, however, charge compound interest, which means any interest that accrues on your account can generate interest of its own. Yikes!

  • You’ll lower your credit utilization. Part of your credit score is based on your credit utilization, which specifically refers to how much of your revolving credit you use. As you pay down your balance, you’ll not only pay less in interest, you may also give your credit score a boost by reducing your credit utilization.

The numbers don’t lie
Let’s say you have a 5-year auto loan for $30,000 at 7% interest. You also have an extra $100 per month you’d like to use to pay down debt. By adding that 100 bucks to your car payments, over the course of the loan you can cut your loan length by 10 months and save $972.32.[ii] Impressive.

Let’s look at a credit card balance. Maybe the credit card interest rate is higher than the car loan, but hopefully the balance is lower. Let’s assume a balance of only $10,000 and an interest rate of 15%. With your minimum payment, you’d probably pay about $225 monthly. Putting the extra $100 per month toward the credit card balance and paying $325 shortens the payment length for the card balance by 26 months and saves $1,986 in interest expense.[iii] Wow!

The math tells the truth. In the above hypothetical scenarios, even though the balance on the credit card is one-third that of the total owed for the car, you would save more money by paying off the credit card balance first.

Financial strategy isn’t just about paying down debt though. As you go, be sure you’re saving as well. You’ll need an emergency fund and you’ll need to invest for your retirement. Let’s talk. I have some ideas that can help you build toward your goals for your future.

  • Share:

June 8, 2020

What Happens When You Don't Pay Your Debts

What Happens When You Don't Pay Your Debts

Movies make defaulting on debt look scary.

Broken glass, bloody noses, and shouts of “Where’s my money!” come flooding to mind when we think of those poor souls in films who can’t pay back the down-and-dirty street lender. But what happens if we’re late on a mortgage payment or our credit card bill? It turns out there are several steps that creditors typically go through to get their money (and none of them involve baseball bats!).

Debt collectors
Debt that doesn’t get paid within 60 days typically gets handed over to a debt collection agency. These companies will attempt to entice you into coughing up what you owe. They’ll then hand that cash over to whoever hired them, keeping a portion for themselves. Remember, debt collectors can’t drain your account directly. Instead, you’ll receive calls and notifications and reminders to pay up. This can occur until up to 180 days after you fail to make a payment.

Credit score hit
Lenders want to know if you’ll be able to pay back money that they loan you. They look at your credit report (a history of your debt payments) to determine if they can trust you. The information in that report gets crunched by an algorithm to produce a credit score. It’s a shorthand way for lenders to evaluate your creditworthiness and decide if they want to loan you money.

Failure to pay your debts can end up on your credit report. Consistently missing payments and not paying for days and months can seriously affect your credit score. That means creditors can deny you loans or crank up your interest rate. Yikes.

Lawsuits
But what happens if you don’t pay when the debt collectors come around? After about 180 days your debt will be considered charged-off, meaning it’s not likely to be paid.(1) This presents creditors with a few different options. Sometimes, they’ll decide that the debt just isn’t worth it, cancel the collection effort, and move on. Collectors could also negotiate, settle for a smaller portion of the debt, and call it done. But creditors could also take the debtor to court and legally attempt to recover the money they’re owed.

A great practice is to not rack up debt at all. A good practice is to take on debt only in rare circumstances. But the best practice is to make sure you pay off any debt you owe on time!

  • Share:

June 1, 2020

What Are the Effects of Closing a Credit Card?

What Are the Effects of Closing a Credit Card?

Americans owe over $900 billion in credit card debt, and credit card interest rates are on the rise again – now over 15%.

If you’re on a mission to reduce or eliminate your credit card debt, you may decide to just close all your credit cards. However, some of the consequences may not be what you’d expect.

Lingering Effects: The Good and the Bad
Many of us have heard that credit card information stays on your credit report for 7 years. That’s true for negative information, including events as large as a foreclosure. Positive events, however, stay for 10 years. In either case, canceling your credit card now will reduce the credit you have available, but the history – good or bad – will remain on your credit report for years to come.

Times when cancelling a card may be your best bet:

  • A card charges an annual fee. If you’re being charged an annual fee for the privilege of having a credit card, it may be better to cancel the card, particularly if you don’t use the card often or have other options available.
  • Uncontrolled spending. If “retail therapy” is impeding your financial future by creating an ever-growing mountain of debt, it may be best to eliminate the temptation of buying with credit by cutting up those cards.

When You Might Want to Hang Onto a Credit Card:
You may not have known that one aspect your credit score is the age of your accounts. Canceling a much older account in favor of a newer account can leave a dent in your credit score. And canceling the card won’t erase any negative history, so it may be best to hang on to the older credit account as long as there are no costs to the card. Also, the effects of canceling an older account may be larger when you’re younger than if you have a long credit history.

Credit Utilization Affects Your Credit Score
Lenders and credit bureaus also look at credit utilization, which refers to how much of your available credit you’re using. Lower percentages help your credit score, but high utilization can work against you.

For example, if you have $20,000 in credit available and $10,000 in credit card balances, your credit utilization is 50 percent. If you close a credit card that has a credit limit of $5,000, your available credit drops to $15,000, but your credit utilization jumps to 67 percent (if the credit card balances remain unchanged). If you’re carrying high balances, going on a credit card cancelling rampage can have negative effects because your credit utilization can skyrocket.

To sum it all up, if unnecessary spending is out of control or there is a cost to having a particular credit card, it may be best to cancel the card. In other cases, however, it’s often better to just use credit cards occasionally, or if you have an emergency.

  • Share:

May 25, 2020

Preparing to buy your first home

Preparing to buy your first home

Home buying can be both very exciting and very stressful.

Picking out your dream home is thrilling, but credit scores, applications, and mortgage underwriting requirements? Well, not so much. Don’t let yourself be deterred. Here are a few moves to make before you amp up your home buying search that will help increase the fun and decrease the stress.

Know what you can afford
One of the first steps to home buying is knowing how much you can afford. Some experts advise that a monthly mortgage payment should be no more than 30% of your monthly take-home pay. Some say no more than 25%. If you stretch past that you could become “mortgage poor”. Consider this carefully. You might not want to be in your dream house and struggling to pay the utility bills, grocery bills, etc., or find yourself in a financial jam if an emergency comes up.

Get your finances ready for home buying
If you’re scouring listings, hunting for your dream home, but you’re not sure what your credit score is – stop. There are few things more disappointing than finally finding your dream home and then not having the financial chops to purchase it. You’ll need to get your finances in order and then start shopping. Focus on these areas:

Credit score: Your credit score is something you should know regardless of whether you’re home shopping. Usually, to get the best mortgage rates, you’ll want a score in the good to excellent range. If you’re not quite there, don’t despair. If you make payments toward your other obligations on time and pay off any debt you’re carrying, your credit score should respond accordingly.

Down payment: A conventional mortgage usually requires a 20 percent down payment. That may seem like a lot of money to come up with, but in turn, you may get the best interest rates, which can save you a significant amount over the life of the mortgage. Also, anything less than 20 percent down and you may have to purchase Private Mortgage Insurance – it’s a type of insurance that protects the lender if you default. Try to avoid it if you can.

Get pre-qualified before you shop for a home
Once you have your credit score and down payment in order, it’s time to get pre-qualified for a mortgage. A prequalification presents you as a serious buyer when you make offers on houses. Mortgage pre-approval doesn’t cost you anything, and it doesn’t make you obligated to any one house or mortgage. It’s just a piece of paper that says a bank trusts you to pay back the loan.

If you go shopping without a pre-approval, expect to get overlooked if there are other bidders. A seller will likely go with the buyer who has been pre-approved for a mortgage.

Prepare your paperwork
Getting approved for a mortgage is going to require you to do a little legwork. The bank will want to see documentation to substantiate your income and lifestyle expenses. Be prepared to cough up income tax documents such as W-2’s, paystubs, and bank statements. The sooner you get the paperwork together, the easier it will be to complete the mortgage application.

Shop for the best mortgage
Mortgage rates differ slightly depending on the lender, so shop for the lowest possible rate you can get. You may wish to use a mortgage broker to help. Also, get familiar with mortgage terms. The most common household mortgages are a 30-year term with a fixed rate, but there are 15-year terms, and mortgages with variable interest rates too.

Do your pre-home-buying homework
With a little legwork early on, home buying can be fun and exciting. Get your finances in order and educate yourself about mortgage options and you’ll be decorating your dream home in no time.

  • Share:


This article is for informational purposes only and is not intended to promote any certain products, plans, or strategies that may be available to you. Before taking out any loan or enacting a funding strategy, seek the advice of a financial professional, accountant, and/or tax expert to discuss your options.

May 6, 2020

How Much Should You Save Each Month?

How Much Should You Save Each Month?

How much are you saving?

That might be an uncomfortable question to answer. 45% of Americans have $0 saved. Almost 70% have under $1,000 saved (1). That means most Americans don’t have enough to replace the transmission in their car, much less retire (2)!

But how much of your income should you send towards your savings account? And how do you even start? Keep reading for some useful strategies on saving!

10 percent rule
A common strategy for saving is the 50/30/20 method. It calls for 50% of your budget to go towards essentials like food and rent, 30% toward fun and entertainment, and the final 20% is saved. That’s a good standard, but it can seem like a faraway fantasy if you’re weighed down by bills or debt. A more achievable goal might be to save around 10% of your income and start working up from there. For reference, that means a family making $60,000 a year should try to stash away around $6,000 annually.

A budget is your friend
But where do you find the money to save? The easiest way is with a budget. It’s the best method to keep track of where your money is going and see where you need to cut back. It’s not always fun. It can be difficult or even embarrassing to see how you’ve been spending. But it’s a powerful reality check that can motivate you to change your habits and take control of your finances.

Save for more than your retirement
Something else to consider is that you need to save for more than just your retirement. Maintaining an emergency fund for unexpected expenses can provide a cushion (and some peace of mind) in case you need to replace your washing machine or if your kid needs stitches. And it’s always better to save up for big purchases like a vacation or Christmas gifts than it is to use credit.

Saving isn’t always easy. Quitting your spending habit cold turkey can be overwhelming and make you feel like you’re missing out. However, getting your finances under control so you can begin a savings strategy is one of the best long-term decisions you can make. Start budgeting, find out how much you spend, and start making a plan to save. And don’t hesitate to reach out to a financial professional if you feel stuck or need help!

  • Share:

March 16, 2020

Can You Buy Happiness?

Can You Buy Happiness?

Let’s face it: There’s a relationship between money and happiness.

Anyone who’s looked at their savings account during a market correction or has lived paycheck to paycheck knows that not having enough money can be incredibly stressful. But there’s also a fair chance that you know of someone who’s wealthy (i.e., seems to have plenty of money) but is often miserable. So what exactly is the relationship between money and happiness? Let’s start by looking a little closer at happiness.

Happiness is really complicated
There is no single key to happiness. Close relationships, exercise, and stress management all may play a role in increasing emotional well-being. Little things like journaling, going on a walk, and listening to upbeat music can also help lift your mood. But none of those factors alone makes you happy—most of them actually turn out to be interrelated. It’s hard to maintain strong personal relationships if you take out your work stress on your friends! Assuming that money alone will outweigh a bad relationship, high stress, and an unhealthy lifestyle is a skewed mindset.

Money contributes to happiness
That being said, money can certainly contribute to happiness. For one, It’s a metric we use to figure out how much we’ve accomplished in our lives. It helps to boost confidence in our achievements if we’ve been handsomely rewarded. But more importantly, the absence of money can be a huge cause of dismay. It’s easy to see why; constantly wondering if you can pay your bills, fending off debt collectors, and worrying about retirement can take a serious emotional toll. In fact, having more money essentially only supports greater emotional well-being until you reach an income of about $75,000 (1). People felt better about how much they had accomplished past that point, but their day-to-day emotional lives pretty much stayed the same.

What’s the takeaway?
In short, you can’t technically buy happiness. However, taking control of your financial life definitely has emotional benefits. You may increase your feeling of wellbeing if your income gets boosted to a point, but it’s not a silver bullet that will solve all of your problems. Instead, try to think of your finances as one of the many factors in your life that has to be balanced with things like friendship, adventure, and generosity.

  • Share:

March 4, 2020

A Brief History of Credit Cards

A Brief History of Credit Cards

We’re all familiar with credit cards.

You probably have a few in your wallet! But did you know that they’re actually fairly modern inventions with an interesting, and surprisingly controversial, backstory. This is a brief history of credit cards!

Credit before cards
The concept of credit is actually thousands of years old. It dates back to the time of the first recorded laws, if not further. But the practice of credit fell on hard times following the fall of the Roman Empire; the Church opposed lending someone money and then adding on interest when they pay it back. But the Renaissance, coupled with the discovery of a huge resource filled continent, saw a revolution in Western banking and investing. Businesses started collaborating to find out which borrowers were reliable and which ones couldn’t pay their debts.

The birth of charge cards
It wasn’t uncommon for businesses to loan money to customers. General Motors, for instance, started offering credit in 1919 to car buyers who couldn’t pay up front with cash (1). Merchants with more regular customers, like department stores, started handing out credit tokens that would allow purchases to be made on credit.

But things changed in 1949 when New York businessman Frank McNamara realized he didn’t have his wallet at a restaurant when it came time to pay the check. Luckily his wife was there to rescue him. He and his business partner, Ralph Schneider, then came up with the idea of a card that would allow users to dine around New York on credit. It wasn’t a full-blown credit card; it had to be paid off in full at the end of each month, making it a “charge” card. But it was a hit. By 1951, the Diners Club Card was being used by 10,000 people (2)!

“Giving sugar to diabetics”
Big banks were quick to realize that they could make a pretty penny if they started offering easily accessible credit to the masses. In 1958, Bank of America released its own credit cards. Debt from one month was carried over to the next month, meaning consumers could carry revolving credit card debt for as long as they pleased. Magnetic strips—invented in the early 60s—were added to the plastic cards and used to store transaction information at special payment terminals.

But banks had a problem; they had to make sure that the cards were actually accepted by stores. Otherwise, why bother using your brand new credit card? But stores would only accept the cards if enough people actually had them. A mass mailing campaign began, with banks sending out millions of cards to families across the nation. It worked, and soon credit cards became increasingly normalized.

Not everyone was pleased. There were huge issues with cards being stolen out of mailboxes and used to rack up debt. Furthermore, some were uncomfortable with popular access to massive amounts of credit. The President’s assistant at the time described it as “giving sugar to diabetics (3).” Regulations were introduced throughout the 70s to reduce some of the excesses of credit card distribution and protect consumers.

Conclusion
But despite the backlash, credit cards had arrived on the scene for good. Banks united to strengthen their network in 1970, forming the group that would eventually become Visa. Interbank Card Association (i.e., MasterCard) formed in 1966 and then introduced a vast computer network in 1973, connecting consumers with merchants in unprecedented ways.

Today, credit cards are everywhere. In 2017, 40.8 billion credit transactions were made, totalling 3.6 trillion dollars (4). The technology of consumer credit has continued to evolve too. The magnetic strips of the 60s and 70s have given way to chips, and now cards are slowly being replaced by phones and digital watches. What started as a way of paying for dinner if you forgot your wallet has become an international and digital phenomenon that’s changed the lives of millions of consumers.

  • Share:

February 5, 2020

Student Loans: avoid them or use them the smart way?

Student Loans: avoid them or use them the smart way?

Going to college can be a great way to invest in your future and get the training and education you need to thrive in the modern job market.

But we’ve all heard the horror stories of students saddled with thousands in loans that they struggle to pay back, sometimes for years. Student loan debt is often the most pressing financial issue for college students and recent grads.

So how do you take advantage of the benefits of a college education without burdening your future with years of debt? Here are some tips to help you avoid high student loan payments and pay your student debt off more quickly after graduation.

Work through school
The days of working a minimum wage job to put yourself through school seem to be over. However, working enough to cover at least some of your books and living expenses may make a huge dent in the amount of money you’ll have to borrow to graduate.

Work-study programs on campus are often good options, as they are willing to work around your class schedules. Off-campus part-time jobs can be a good option as well, and may offer better pay.

Live as cheaply as possible
Everyone knows the cliché of the broke college student existing on nothing but ramen noodles. While not many people would recommend trying to live on nutritionless soup every day, you should be able to find ways to cut your cost of living to reduce the amount of money you need to borrow to sustain your lifestyle.

Try living off campus with family or roommates and packing sandwiches instead of paying expensive meal tickets and dorm fees. Bike, walk, or take public transportation to avoid parking. Take advantage of free on-campus healthcare, counseling, free food events, free entertainment, and more so you can spend as little as possible on living campus life.

It’s okay to go out and have fun sometimes, but don’t borrow from your future in order to live beyond your means now.

Try to avoid unsubsidized loans
Subsidized loans are offered by the Department of Education at lower interest than many private bank loans, and they do not begin accruing interest until after you graduate. Take advantage of these loans first and try to avoid the unsubsidized private loans which begin accruing interest immediately and often have a higher rate. (1)

Be mindful of your future payments
It can be tempting to expect that you’ll have a great job earning plenty of money and time to pay back the student loans you’ve accumulated. But each time you take out a loan, you make your future payments higher and your payback time longer. Be sure to look at the numbers of how much your payment will be every time you up your loan amounts. Can you realistically envision yourself being able to pay that amount every month in just a few years? If not, it may be time to rethink the student loans you’re racking up, and possibly even reconsider your degree or career plan.

Go to trade school, earn an apprenticeship, or work in your chosen field before you commit to a college degree in that field
It’s not a popular topic with many high school guidance counselors, but learning a trade and finding a well-paying job without a degree is not only possible but a great option. Try finding an internship or trade school where you could get training for much less money than a university.

Consider community colleges and state schools
It’s a common misconception that private, ivy league, “big name” colleges are far superior to state schools and automatically the better option. However, state schools can often have great programs for far less money. Also, if you choose a local school, you can live close to your family support system while working through college. It’s possible to have a very successful career with a college degree from a state school, and be more financially stable in your future than someone struggling to pay off loans from an expensive private college.

Likewise, an associate’s degree from a community college can save money toward your bachelor’s degree, allowing you to pay far less than you would even to a state school. Just make sure your degree and credits will transfer to the university of your choice.

Find a graduate program that pays YOU
If you choose to pursue a Masters or Doctorate degree, try to find a program with a teaching assistant position, fellowship, or some other option for getting reduced tuition or getting paid to get the work experience you need.

Resist the urge to move up in lifestyle when you graduate
When you scrimp your way through school, it’s tempting when you get your first degree-related job to celebrate by loosening the reins on your frugal ways and start living it up as a young professional.

It’s great to reward yourself, and you need to adapt to your new financial situation (you may need a new wardrobe or a better car), but resist going too crazy with all the “extra” money a new job in your field can make you feel like you have. You should still live on a budget and manage your money carefully to pay off your student loans as soon as possible so you’re better prepared to move into the next phase of life unencumbered by a mountain of debt. Make paying back debt a priority, and pay extra when you’re able.

Education can be expensive and in some cases impossible to get without loans. But with frugality and an eye toward the future, you’ll be better prepared to get the education you need to succeed in life without being encumbered by debt for years. The high cost of education combined with the high cost of living can make a college education more of a financial burden for today’s students than ever before. By thinking outside the box and carefully prioritizing your educational goals—balanced with your finances—you can pursue your dream degree and have a better chance at a stable financial future.

  • Share:

February 3, 2020

Begin Your Budget With 5 Easy Steps

Begin Your Budget With 5 Easy Steps

A budget is a powerful tool.

No matter how big or small, it gives you the insight to track your money and plan your future. So here’s a beginner’s guide to kick-start your budget and help take control of your paycheck!

Establish simple objectives
Come up with at least one simple goal for your budget. It could be anything from saving for retirement to buying a car to paying down student debt. Establishing an objective gives you a goal to shoot for, and helps motivate you to stick to the plan.

Figure out how much you make
Now it’s time to figure out how much money you actually make. This might be as easy as looking at your past few paychecks. However, don’t forget to include things like your side hustle, rent from properties, or cash from your online store. Try averaging your total income from the past six months and use that as your starting point for your budget.

Figure out how much you spend
Start by splitting your spending into essential (non-discretionary) and unessential (discretionary) spending categories. The first category should cover things like rent, groceries, utilities, and debt payments. Unessential spending would be eating at restaurants, seeing a movie, hobbies, and sporting events.

How much is leftover?
Now subtract your total spending from your income. A positive number means you’re making more than you’re spending, giving you a foundation for saving and eventually building wealth. You still might need to cut back in a few areas to meet your goals, but it’s at least a good start.

If you come up negative, you’ll need to slash your spending. Start with your unessential spending and see where you can dial back. If things aren’t looking good, you may need to consider looking for a lower rent apartment, renegotiating loans, or picking up a side hustle.

Be consistent!
The worst thing you can do is start a budget and then abandon it. Make no mistake, seeing some out-of-whack numbers on a spreadsheet can be discouraging. But sticking to a budget is key to achieving your goals. Make a habit of reviewing your budget regularly and checking your progress. That alone might be enough motivation to keep it up!

  • Share:

January 27, 2020

7 Money-Saving Tips for Budgeting Beginners

7 Money-Saving Tips for Budgeting Beginners

Starting a budget from scratch can seem like a huge hassle.

You have to track down all of your expenses, organize them into a list or spreadsheet, figure out how much you want to save, etc., etc.

But budgeting doesn’t have to be difficult or overwhelming. Here are 7 easy and fun tips to help keep your budget in check and jump-start some new financial habits!

Take stock
Laying out all of your expenses at once can be a scary thought for many of us. One key is to keep your budget simple—figure out what expenses you do and don’t really need and see how much you have left over. This method will help you figure out how much spending money you actually have, how much your essential bills are, and where the rest of your money is going.

Start a spending diary
Writing down everything you spend for just a couple of weeks is an easy way of finding out where your spending issues lie. You might be surprised by how quickly those little purchases add up! It will also give you a clue about what you’re actually spending money on and places that you can cut back.

Don’t cut out all your luxuries. Don’t get so carried away with your budgeting that you cut out everything that brings you happiness. Remember, the point of a budget is to make your life less stressful, not miserable! There might be cheap or free alternatives for entertainment in your town, or some great restaurant coupons in those weekly mailers you usually toss out.

That being said, you might decide to eliminate some practices in order to save even more. Things like packing sandwiches for work instead of eating out every day, making coffee at home instead of purchasing it from a coffee shop, and checking out a consignment shop or thrift store for new outfits can really stretch those dollars.

Plan for emergencies
Emergency funds are critical for solid budgeting. It’s always better to get ahead of a car repair or unexpected doctor visit than letting one sneak up on you![i] Anticipating emergencies before they happen and planning accordingly is a budgeting essential that can save you stress (and maybe money) in the long run.

Have a goal in mind
Write down a budgeting goal, like getting debt free by a certain time or saving a specific amount for retirement. This will help you determine how much you want to save each week or month and what to cut. Most importantly, it will give you something concrete to work towards and a sense of accomplishment as you reach milestones. It’s a great way of motivating yourself to start budgeting and pushing through any temptations to stray off the plan!

Stay away from temptation
Unsubscribe from catalogs and sales emails. Unfollow your favorite brands on social media and install an ad blocker. Stop going to stores that tempt you, especially if you’re just “running in for one thing.” Your willpower may not be stronger than the “Christmas in July” mega sales, so just avoid temptation altogether.

Keep yourself inspired and connected
Communities make almost everything easier. Fortunately, there’s a whole virtual world of communities on social media dedicated to budgeting, getting out of debt, saving for early retirement, showing household savings hacks, and anything else you would ever want to know about managing money. They’re great places for picking up ideas and sharing your progress with others.

Budgeting and saving money don’t have to be tedious or hard. The rewards of having a comfortable bank account and being in control of your spending are sweet, so stay engaged in the process and keep learning!

  • Share:

Subscribe to get my Email Newsletter