Category Archives: Set up for Success

How to Get Ahead when your Monthly Income = Monthly Expenses

The main goal of earning an income is equaling (and exceeding) your monthly expenses. When your income and your expenses are equal, it ensures that you can pay all of your bills but leaves you little to no additional money leftover for other activities or things that require payment. But what if your income is less than your monthly expenses? How do you get out of that mess and start enjoying life a little bit more? The chart below lists some quick and easy ways to cut expenses to give yourself a bigger cash cushion at the end of each month.

Expenses to Cut

1. Cable. Cutting cable is the fastest and easiest way to decrease your monthly expenses. On average, you can save $30-$75 PER MONTH when you say goodbye to cable. That’s an impressive $360-$900 per year that you can put toward debt or other smart investments. The compromise is to cut cable but keep internet and order a subscription to Netflix or HuluPlus.

2. Internet. Internet may be hard to cut because it’s so versatile, but you may live near a coffee shop or restaurant that offers free Wi-Fi. Maybe you can even start reading a new book instead or thinking about what you can do with that extra $30 per month.

3. Spending Money. Decreasing spending money is an easy but painful way to save money. Cut out two happy hours, two nights of eating out, and 3 fast food runs to save $60-$75 per month. I’m sure you’ll see your scale decrease a few lbs too J

4. Utilities. Start being mindful of how much energy you’re using. Keep the lights off when it’s light outside, suffer a little in those warm or cold months by keeping your house a few degrees warmer, and take showers that are 3 minutes shorter than normal. Simple changes in your everyday routines can help save you hundreds per year.

5. Grocery Money. “Beans and rice and rice and beans” is Dave Ramsey’s motto for your grocery fund when you’re paying off debt. I don’t know about you but I love food and couldn’t live on a few staple ingredients for a few years. Try cutting your grocery money envelope by $30 initially. After a few months, cut it by another $30. When you have less money to spend, it’s incredible how you find ways to save or “go without”.

6. Avoid overdraft fees/late fees. Pay attention to when your bills are coming out. Put your bills in your phone calendar with the amount being taken out and an alarm that alerts you 2 days before that bill is due. When you know what is coming out and when, you’ll make sure to have money in your account to pay those bills. If you don’t have enough money in your account to pay all of your bills when they’re due, prioritize. Which bills have penalties for being late? Which bills don’t apply penalties initially? Use these tips to help you decrease your monthly expenses or find a way to increase your income.

7. Get a Roommate. If you live alone, you may want to consider finding a roommate. Living alone can cost $300 more per month than living with someone else. Chances are you can find a nicer space to live if you split the bill with a roommate. Not only does having a roommate impact your rent, but it cuts all of your utilities in half as well!

8. 1-payment plans. If you budget correctly, you can save money and eliminate a continuous monthly expense when you choose a 1-payment plan for bills like auto insurance. I like only having to pay twice a year toward my insurance. If you’re not able to do that, try to pay in as few payments as possible to avoid processing fees.

Expenses to Cut Picture

Picture is a courtesy of blog.hirevelocity.com.

For more information on starting a personal budget, check out our Getting Started tab at the top of the page.

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Saving for Retirement? What’s your Style?

What is your Saver Style, and more importantly how will that affect your future?

Take this short quiz to find out–Write your answers on a piece of paper and add up your total at the end to find out if you are a Super Saver or if you’re a Super Spender!

1. I have a 401k through my job and an IRA.
a. I have no idea what you’re talking about.
b. I put 1% in my 401k.
c. I am working to allot 4% of my annual income (my company matches) and put my annual allowance into my IRA.

2. I have long term and short term goals that tell me exactly how much I need to put into savings per month and how much I’d like to have saved in 10 years.
a. I’m too young to need a savings account.
b. I’ll start worrying about that in 5 years.
c. Millionaire by retirement!

3. When I have leftover money at the end of the month, I put a portion of it in my savings account.
a. What money leftover?
b. If there’s money left at the end of the month, I’ll put some of it in my savings account.
c. 10-15% of my annual income goes toward retirement!

4. When I hear people talk about savings, I feel…
a. Bored.
b. Interested but clueless.
c. Like I’m on track.

5. When I think about a savings account, I want to drink…
a. A magic potion that will create a savings account for me when I retire.
b. A bottle of wine (or two).
c. A pot of coffee – let’s start this thing now!

If you answered mostly A’s: Don’t worry…you’re not alone! So many young, single women are just starting jobs and trying to stand on their own two feet. No matter what your current income, you’ll eventually need to start saving for the future. What better time to learn than now?! Once you increase your knowledge about savings plans, it may be more attainable than you think! Congratulations for getting out of debt or never having debt at this point in your life!

Crippled Chart
If you answered mostly B’s: It’s crossed your mind but you’re not sure where to go from here. Do some research about pre-tax retirement investments to get knowledgeable and excited about your financial future! Congratulations for getting out of debt or never having debt at this point in your life! All you have to focus on now is saving to be a millionaire in your 80’s!

Motivated without a Map chart

If you answered mostly C’s: You’re totally on track to having the most amazing and care-free retirement of all time! Continue reading up on ways to invest and stay strong on your current path. Congratulations for getting out of debt or never having debt at this point in your life!

Super Saver Chart*These are ONLY amounts saved from your 401k and does not include other possible investments. The recommended percentage of your income to contribute toward retirement is 15%. These amounts are calculated based on the average household income in the US ($50,000) and a typical percentage contributed annually (4% that you contribute and 4% that your employer matches). What to do with the other 11% that you should contribute toward retirement? Look for our “Retirement Investment Options” post coming soon.

What it all means: Notice that starting 10 years earlier can earn you $436,483 more! I am aware that there are SEVERAL factors to contribute to starting your savings plan later in life and contributing less than 4% of your annual income. The main point of this post is to show you that, if you have the capability of beginning a savings account sooner rather than later, it will pay off BIG in the end!

Tax Tip: The amount of money taken out for taxes from your lump sum depend on the tax bracket you’re in when you need that money for retirement. For example, when you retire and no longer have an income from a job, your tax bracket may be significantly lower than when you are working and contributing toward your 401k.

Definitions:
401k: A contribution plan where an employee can make contributions from his or her paycheck either before or after-tax, depending on the options offered in the plan.

Roth IRA: An individual retirement account allowing a person to set aside after-tax income up to a specified amount each year (currently $5,500 annually). Both earnings on the account and withdrawals after age 59½ are tax-free.
*There are other types of IRA’s that allow a variety of annual contribution levels and options.

Retirement Meme

 

For more information on starting a personal budget, check out our Getting Started tab at the top of the page.

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Sam

Life Happens…Goals Change.

Throughout the course of a year, your short term plans may change drastically. You may lose your job, move, get married, have a baby, etc. Life happens and your budget and long term goals should change with it. Below are some options to keep in mind when life happens and goals change.

My plans changed when I found out I was moving halfway across the country this summer. I had to re-evaluate my debt repayment plan. Here are some of the options I considered:

Plans Change Chart 1

Plans Change Pic

Plans Change Chart 2

Plans Change Pic 2

Plans Change Chart 3

Plans Change Pic 3 Plans Change Chart 4

My decision: Option #1: Continue putting some (a set amount) extra toward debt/savings while saving for the move.

I am able to continue paying a little extra toward my student loan, making me feel like I’m making some sort of progress toward debt. I also am able to save more than enough for our move and may have some leftover to throw toward debt as well!

Don’t be afraid to change your financial goals but don’t forget to make new ones that fulfill your needs!

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Sam

The Difference Between “Emergencies” and “Extras”

What constitutes an emergency? What does “extras” mean? These can be tricky questions to answer, so let’s look at the definition of each.

 Emergency: An emergency is an unexpected expense that could not possibly have ever been planned.

Examples: Car breakdown, house repair, medical bills, vet bills, etc. Real, true, unexpected emergencies.

Car Breakdown PhotoEtsy Border1

Extras: These are expenses that don’t fall into a specific category in your budget, don’t recur monthly, and can be somewhat planned.

Examples: Gifts, bridesmaid expenses, travel expenses, etc. Random, somewhat predictable, non-repeat monthly expenses.

Bridesmaids

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There are two different ways that I can see someone dealing with these “extras”. You have to be either a person who:

1. Has money left over to pay toward debt or put toward savings at the end of the month.

Or

2. Only has enough to pay for their budgeted expenses with very little to nothing left at the end of the month.

 If you’re person #1: You can pay for your “extras” with the leftover money at the end of the month that you would normally put toward savings or debt. REMEMBER: Don’t live outside of your means. Your “extras” MUST be able to be covered by CASH aka the money in your bank account. If you’re really trying to pay off debt or save, try to minimize spending in your “extras” column.

 If you’re person #2: You most likely cannot pay for “extras” as they arrive. I recommend increasing your “emergency fund” to $2,000 or $3,000. This means $1,000 is ONLY FOR EMERGENCIES. $1,000-$2,000 are for the “extras” that arrive throughout the year.

TIP: Even better, sit down and calculate how many weddings you’re going to, places you’re visiting, and gifts you may be buying over the entire year to get an idea of how much you should have in your “extras” fund. #1 type people can also use this method, but I prefer to minimize my “extras” spending and pay for them as I go. I find that I actually spend less knowing I don’t really have the money for it (because it’s all accounted for in my monthly goal of a minimum of $900 toward debt per month).

Etsy Border1

How to save for “extras”:This is totally up to you.

1. If you want to pour every extra cent into your emergency/extras fund until you’ve saved up your desired amount, go for it.

2. You can also stagger your payments toward your emergency/extras fund so that the money is there when you need it, but it doesn’t take you most of the year to get there.

ExtrasPhotos

Over the past year, I’ve been to a few weddings, New Years with grad school friends, and a Canadian vacation with college friends. When you plan ahead, you CAN have everything…just not all at once.

Hopefully you’re all avoiding emergencies and minimizing “extras”, but if not, you have a plan and you’re moving toward success!

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Sam

6 Fun Ways to Reward Yourself for Reaching your Financial Goals

Victories are a little bit better when they are followed by a party. Here are 6 fun ways to reward yourself for reaching financial goals without falling off the savvy-spending bandwagon.

1. Tell your Mom – When you accomplish something you are proud of or excited about, it is fun to tell people, but excessive bragging is really unattractive and friends can only handle so much before they start having second thoughts about being your friend. Luckily, there’s a good chance that good ole mom will not only continue to love you unconditionally after your boastful moment has passed, but she won’t hold back on letting you know how proud she is, how amazing you are, how pretty you are, how smart you are…Mom’s are pretty great, aren’t they?

Momma's got your back, no matter how big or small you are...and every accomplishment is worth praising double time in mom's eyes.

Momma’s got your back, no matter how big or small you are…and every accomplishment is worth praising double time in mom’s eyes.

2. Give yourself a Mental Break—You know that place/activity that brings you peace and inner calm? Reaching your financial goal is a wonderful reason to let yourself go there. People who meet the financial goals they set for themselves usually work hard and make sacrifices on a daily basis in order to get there.  And these same people often have a hard time relaxing and giving themselves a little mental R&R. Whatever the activity—running,  swimming, girl time, phone calls with family, baking, reading, painting your nails, walking the dog, sketching, writing, biking, window shopping, break dancing—make like Happy Gilmore and find your happy place.

Mental breaks come in all shapes and sizes. My favorites come on yoga mats, with lots of pages, and in wine bottles.

Mental breaks come in all shapes and sizes. My favorites come on yoga mats, with lots of pages, and in wine bottles. All three choices cost me $3.00 or less!!

3. Spice up your Typical Dinner – Having a dinner that is a bit more extravagant than your usual is a nice way to reward yourself without overspending to the point that it defeats your financially fit purpose. For example, I rocked my grocery hunting—er, I mean shopping— budget over the last two weeks and had about $50 of cash left over. Normally, I just cash flow that leftover money into next pay period’s fund and withdraw less from my account, but this time my boyfriend and I “splurged” on steaks to grill for a scrumptious Saturday night dinner.  Even better, I still came out ahead with my grocery money…Triumph of the financially-oppressed carnivores—we splurged AND saved!

When you are grocery shopping on a budget, steak night really is worth a yabba dabba doooooooo!!!

When you are grocery shopping on a budget, steak night really is worth a yabba dabba doooooooo!!!

4. Create a Shrine and Admire it —If you can actually see or feel your accomplishments, it will be much easier to congratulate yourself. It’s why we take pictures of ourselves holding our medals after a race, children display trophies on their bedroom shelves, and diplomas hang on our office walls. Shrine is a pretty dramatic term, but I’m using it loosely. The main point is that simply reflecting on your accomplishment(s) can be extremely rewarding, and it’s much easier to reflect on something that you can see.  Post a checklist on your wall and cross out each goal as you reach it, or if your financial goal is saving money for a large expense, create a chart that lets you visualize how far you have come and how much further you have to go. The image below is an awesome example of an easy way to visually see how much money you are saving/cash flowing as well as see how far you have to go to reach the end. You can use already-created goal charts like this one from Frugal Mama and personalize it to make it fit into your financial lifestyle and reward system!

This simple thermometer goal chart  that I found on www.frugal-mama.com is a great way to track savings.

This simple thermometer goal chart that I found on www.frugal-mama.com is a great way to track savings and progress.

5. Let Someone Else Brew your Coffee Today —I am a firm believer in brewing my own coffee each morning and taking it to work in my trusty travel mug. It saves me time AND money. Therefore a stop at my favorite coffee shop, following the achievement of reaching a lofty financial goal turns into a midweek reward that costs less than $5. Plus, coffee always seems to taste so much better when someone else is brewing it 😉

It's all relative. Perspective keeps even the smallest and simplest of rewards feeling like special treats!

It’s all relative. Perspective keeps even the smallest and simplest of rewards feeling like special treats!

6. Take your Bestie out to Lunch—When your main financial focus is to spend less money, your social life will be affected. If your friends are as much into spending cash together as they are into spending time together, you will have to pass on some of their adventures.  A good way to stay in the loop and keep your circle from calling you “cheap” is to celebrate the achievement of your financial milestones with them. Instead of buying yourself a small reward, buy your buddy lunch or dinner.  Fifty dollars spent on taking your BFF out is not going to slow you down on achieving your financial goals, if anything, it might make you want to reach those milestones more quickly because doing something nice for your favorite peeps feels good. And if you have really good friends, they will probably want to return the favor 😉

Once upon a time, I lived in the same town as my best friends, and I could treat them to dinner or a  Lush and Brush class courtesy of Groupon.

Once upon a time, I lived in the same town as my best friends, and I could treat them to dinner or a Lush and Brush class courtesy of Groupon.

We want to know: what kind of reward system do you use to keep yourself motivated and accomplished without spiraling into a spending frenzy?

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 Brittany

 

How to Make a Budget: Step by Step

Step 1: Make a List.

List out every monthly payment you have.

Example:

  • Rent $500
  • Electricity $75
  • Cable $75
  • Grocery $300
  • Car Gas $100
  • Car Insurance $75
  • Student Loan $300 (Debt)
  • Car Payment $250 (Debt)

 Step 2: Add it up.

Add up the monthly payments and compare it to your income.

A. If your income in more than your monthly payments…CONGRATULATIONS! See Step 3.

B. If your income is less than your monthly payments, you need to find ways to cut some    monthly costs.

  • Get rid of extra cable. Enjoy Netflix or Hulu Plus instead.
  • Big car payment? Sell it and by something inexpensive but will be reliable for a year or two while you bail yourself out.
  • Big rent/mortgage payment? Move!

Other ways to increase your income:

Step 3: Spending Money

This depends on how much extra you have leftover and how much you’re looking to put toward debt or in savings. Personally, I contribute $240/month ($120 per pay period) toward extra spending money.

Things that you buy with “Spending Money”:

  • Restaurants
  • Bars
  • Trips to target
  • Clothes shopping
  • Anything you buy that doesn’t fall into a budgeted category

If your income doesn’t add up to more than your living expenses AFTER you cut out some extras, you’ll need to find a way to make more income. Of course, you can’t live life without having some spending money, so put something small, like $60-$100/month toward your spending.

Step 4: Get Organized.

Mark your monthly payments in your phone and/or written calendar. I get paid on the 15th and the last day of the month. Make sure that your expenses that fall under each pay period can be covered by that pay period. For example, if rent, utilities, and your loan payments are to be paid in the first half of the month and your paycheck doesn’t cover those expenses, make sure that you save some extra from your second half of the month’s paycheck.

Step 5: Don’t Forget!

Those extra expenses need to be accounted for somewhere in your budget. For example, flea meds for pets, vet visits, oil changes, new tires, work clothes. I have a column in my budget for vet and flea meds. That means, I know when those expenses are going to come and I’m sure to save for it over the months leading up to it.

Step 6: Debt and Savings

Debt: If you’re paying off debt, every extra penny that’s not needed for your living expenses should be thrown at your target debt.

Savings: If you’re saving, decide how much money you want to put away every month and stick to it.

*Emergency Fund: If you don’t already have one, be sure that your initial excess monthly income goes toward building a small $1,000 emergency fund. This fund covers emergencies ONLY! An emergency is anything that happens unexpectedly such as your car breaking down. New tires or an oil change is not an emergency and should be accounted for in your budget since these are expenses that you KNOW are coming at some point.

Visit our Getting Started tab and Materials tab on the toolbar for a FREE budget spreadsheet!

Make it Rain Pic

Good luck! Being on a budget helps you feel FREE from financial stress instead of causing financial stress.

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Sam

The Importance of Short-Term Financial Goals

Dream big, Shoot for the stars, yada-yada-yada—the New Year’s Resolution Effect (NYRE) is in full swing, and with that comes over-the-top goals that sometimes leave us resolutioners (yes, I think I just made that word up) feeling more like losers than the winners we dreamt of becoming as the ball was dropping from the sky. If your thought process during the final countdown of 2013 sounded something like this…

“10…I am going to pay of ALL my debt this year…9…I’m going to do it, everyone watch me…87…Okay, I’m paying off at least half of my debt this year 6 5…I’m not sure that is even possible …43…Okay, I’m going to pay off a little bit extra…2…Wait, what was that HUGE ambitious goal I originally had in mind…1…Oh, screw it, I don’t even know how to start to solve my gigantic debt problem…Plus it’s not really a problem. Everyone has debt….HAPPY NEW YEAR!!”

You are not alone.

I’m not writing this post to bash long-term financial goals. I am writing this post to promote the necessity of the short-term financial goals that make achieving awesome long-term financial goals possible. Short-term financial goals keep you motivated to push forward by providing you with reasons to celebrate mini-victories while on your journey towards achieving a much bigger goal. Short-term financial goals also help you create the road map that will lead you to that ultimate and final financial goal that is very hard to see at the beginning of your journey. The-long term financial goal is the destination. The short-term financial goals are the steps you take to get there.

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1. Short-Term Financial Goals are ACHIEVABLE – One major difference between a short-term financial goal and a long-term financial goal is how far away you are from achieving it. Short-time financial goals should be within your mental reach. Let’s pretend for a moment that your long-term financial goal is one (metaphorical) foot away from you. If you need frequent check-ins to stay on track then it’s a good idea to have a short-term financial goal set up for every inch (that’s 12 short-term financial goals before you reach that long-term goal that is one foot away from you) along the way. If you are the type of person who enjoys traveling a little bit further to reach a bigger reward, then your mental reach might expand to every 2 or 3 inches (that’s 4-6 short-term financial goals to act as check-ins on your way to reaching your long term, currently hard-to-picture, financial goal). There is no right and no wrong distance. The best way to set a short-term financial goal that is achievable is to find your own personal balance between getting yourself moving and avoiding the tragedy of burning your hard-working arse out before you finish the race.

2. Short-Term Financial Goals are your GUIDE—Make sure that you set your short-term financial goals, not only to keep you chugging along, but also to keep you going in the right direction. I like to compare financial lifestyle goals to healthy lifestyle goals. You can’t change EVERYTHING at once…you would be setting yourself up for certain failure. Instead make small changes that—when added together, have a big impact on your life.  Try to focus on one positive short-term financial change each week or month, and when its time frame has passed, direct your attention to a new positive short-term financial change. This is an excellent and underwhelming way to turn your short-term financial goals into long-term financially fit habits.

3. Short-Term Financial Goals will PUMP YOU UP—If you only have one long-term financial goal, there is a good chance you will spend months—or even years—being reminded that you haven’t quite accomplished what you set out to do yet. Well…that’s no fun, and I’ve found that “fun stuff” makes life a whole lot better. Reaching short-term financial goals that keep on the path to your final long-term fabulous financial destination is ABSOLUTELY a reason to celebrate, congratulate yourself, and get motivated to keep going. You might even be surprised to learn that the happy dance you do (when you are home alone, with the blinds down of course) and the feelings of accomplishment and pride you experience upon crossing those short-term financial goals off your to-do list are significantly more motivating than any reward you could buy with all that money you’ve been saving 😉 Funny the way that works out, isn’t it?

In a perfect world, we could all be this cute as we celebrate reaching our goals..this little guy is on to something.

In a perfect world, we could all be this cute as we celebrate reaching our goals..this little guy is on to something.

What long-term financial goals have you set for yourself and how do short-term financial goals help you go the distance?

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 Brittany