Money – Page 7 – mardihumphreys.com

Hiding in Plain Sight

Like Donna Summer, we work hard for the money and we need to manage it. Otherwise, it will manage us. We want to get to a point in our financial lives where we can pay our credit card balances off every month, pay cash to replace a dead refrigerator, and take that spontaneous long weekend trip without feeling guilty about how much we spend on it. A budget is a useful tool for that. Here are some options. After choosing the right plan for us, we need to take into account expenses that may be hiding in plain sight.

Let’s begin by recalling the conspicuous items a budget should include (along with a few examples):

Food, clothing, and shelter for the entire family
Childcare
Utilities (electricity, gas, water, sewage, trash removal, recycling removal, cell phone (including data), internet, cable tv)
Transportation (gas, oil changes, car loan, repairs, insurance, registration, car wash, parking, tolls, roadside assistance, public transportation, ride-hailing)
Medical Copays for the entire family (office visits, dentist visits, prescriptions, dermatologist visits, eye exams, lab work, therapists, urgent care)
Minimum monthly debt payments (student loans, credit cards)
Savings both short term and long term (emergency fund, vacation, children’s college, retirement)

Whew! Okay. Breathe.

Now, here are some items that may not occur to us when we are budgeting, but should (along with a few examples):

Haircuts for the entire family
Pets (grooming, veterinarian visits, medication, accessories (leashes, waste bags, cat litter, sweaters), food, boarding, toys)
Subscriptions (Netflix, Box subscriptions, Spotify, Playstation Plus, Amazon Prime)
Self-care
Property taxes
HOA fees
Makeup
School (supplies, pictures, private school uniforms, sports (including uniforms, participation fees, and equipment), band (including uniforms, participation fees, and instruments), teacher gifts, fundraisers, field trips, enrollment fees)
Lawn care (mowing, weed killing, landscaping, pest control)
Coffee and/or Fast Food and/or happy hour
Out-of-town guests (if they are staying with you, you are using more water, electricity, food, transportation, entertainment)
Physical fitness (home equipment (weights, treadmill, stationary bike) memberships to gym, yoga studio, classes)
Bank account fees (overdrafts, transfers, low account balances) if this is a significant expense for you, you might consider taking your banking to a credit union
Gifts (holidays, birthdays, anniversaries, graduations, Mother’s Day, Father’s Day)
Dues (union, fraternity/sorority, professional organizations, licenses, certifications, continuing education credits)
Charitable contributions
Software/Apps

How much we spend on these items is very personal. We also have to take our spouse’s needs, wants, and opinions into consideration. No one wants to feel financially deprived. On the other hand, no one wants to lie awake at night worrying about how we’re going to pay the bills, either. This shutting down of the economy has gone on so long that we are now in the second wave of layoffs. Some companies who managed to avoid furloughing workers, now have to ask their employees to take pay cuts or be laid off or both. When so many have lost their jobs, and those who didn’t feel overworked from home, (or tense on the front lines) forgotten budget expenses are unpleasant surprises.

Are there items that should be on this list that I missed? Please share them in the comments section.

Ruling Your Budget

One of the bright spots in this Coronapocalypse is our daughter FaceTiming my husband and me more than usual. One conversation turned to people we knew who’d lost their jobs because of the pandemic and this lead to a discussion of money. She had big questions: Was our savings still intact? Should she keep investing in her 401(k)? If so, how much? How much money does a car cost? Budgeting is very personal. It can also be confusing, tedious, and overwhelming. My husband and I use an 80/10/10 rule (live on 80% of our income, save 10%, give 10%), but there are a ton of theories out there.

Before deciding on which plan was right for us, we needed to know what our income is and what our expenses are. I’ve never met a spreadsheet I didn’t like, so I populated one with all of our expenses. Since we mostly pay with a credit or debit card, they were easy to find; especially the monthly bills. I had to search the record for an entire year because there are expenses we pay annually (e.g., renter’s insurance), and those we pay twice a year (e.g., car insurance). The expenses we paid in cash (e.g., parking), I had to estimate. Then I categorized our expenses according to need (e.g., the utilities are a necessary expense, the Disney+ subscription is not). Having access to this big picture is important because every budgeting theory I’ve researched has a savings component. We usually have to divert money from non-essential expenses in order to save it. Budgeting rules are expressed in percentages instead of dollars so we can scale them as our incomes fluctuate. I’m defining income as the amount on our paychecks, not the amount on our W-2s. After some research, here are the top three budgeting rules I found.

The 70/30 Rule

Invented by Jim Rohn, this plan suggests dividing personal net income into four buckets: 70% to pay living expenses; and 10% each going toward active investing (e.g., a savings account), passive investing (e.g., a 401(k)), and giving (charitable contributions). Pros: It’s easy to remember. Cons: It’s hard to do. Here is a good explanation.

The 70/20/10 Rule

This strategy proposes spending 70% of income on expenses, and setting aside 20% for savings (or debt), and 10% for giving. We should be realistic about paying off debt. I wouldn’t deprive myself of vacations for 30 years to pay off my mortgage, but I did take a part-time job (in addition to my full-time job) to pay off my car. Pros: This works if we have an emergency fund and little debt. Cons: 20% is a lot of income to save. Here is a good explanation.

The 50/20/30 Rule

This approach allocates 50% of income to paying expenses, 20% to debt, savings, or investments; and 30% to things we want (e.g., these can be anything from fast food every Friday to a Nintendo Switch). Pros: It’s a good plan for people new to budgeting. Cons: It’s hard to do when budgeting for a family. Here is a good explanation.

Do you follow a budgeting rule I didn’t highlight? Please share in the comments section.

Stimulus Reality Check

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Many of us received money from the US government through the CARES Act. What should we do with it? For those who lost their jobs, it’s obvious. But for those still working, not so much. Just because we have a job now, doesn’t mean we’ll have it tomorrow. The longer physical distancing is imposed, the more of us could lose our jobs (the forecast for April was 20%). Then there are those whose jobs are considered essential and the paychecks come as usual. With all this uncertainty, what is the wisest thing to do the money?

The Obvious

If we’ve lost our jobs or been furloughed thanks to COVID-19, the stimulus money can go for what the government intended it to buy. Necessities like paying bills (mortgage (or rent), utilities, medical, etc.), buying food, diapers, cleaning supplies, face masks, gloves, cat litter, or dog toys (Our fur babies are in quarantine too, ya know!) is the reason the U.S. Senate released these funds. Let’s use them to buy time to find an alternate (hopefully temporary) income.

The Not-so Obvious

If our jobs are in jeopardy thanks to COVID-19, the stimulus money can go for things that will give us peace of mind. If we owe federal, state, and/or local taxes, we can send the money back by July 15 (that’s when our 2019 taxes are now due). If we have debt like student loans, car loans, or credit card debt, the stimulus money can make a dent in these bills. If we aren’t carrying debt, stimulus money would make a good emergency fund or seed money for an I-lost-my-job fund (3-6 months of expenses).

The Not-at-all Obvious

If our jobs are essential and our income hasn’t decreased thanks to COVID-19, the stimulus money can go for buying our futures. We can add it to (or start up) an IRA. If we’re comfortable with a bit of gambling, this is a good time to invest in the stock market. It would be wise to engage a financial advisor (ask friends for recommendations) or at least read this. Or, we can choose to be generous with the extra money. Here is a resource to search for reputable charities to support. Also, we can use the money to support local small businesses. The big chains like Domino’s, Dunkin’, and Don Pedro’s will survive, but our favorite Mom and Pop owned pizzerias, doughnut shops, and Mexican restaurants may not. We can order take out or buy gift cards. Know a local home improvement company still open because they are an essential business? Now may be a good time to add that deck (or something else on the house’s exterior). Here is a resource for the Dayton, OH area.

If we choose to save the money now, we’ll spend it eventually, so there’s no wrong way to use our stimulus checks. Please share how you’re using yours in the comments section.

Battered Budgets

The COVID-19 pandemic has the world at HPCON C. It’s assaulting every aspect of our lives especially our finances. Do NOT panic. Since the pandemic has blown up our budgets, we’re forced to take a long hard look at our expenses and ruthlessly cut out what isn’t necessary for survival. We’ll feel better if we take control and devise a plan. Let’s start by figuring out what our resources are and what we can do to bring in cash fast.

Do Something

Did we lose our jobs? Apply for unemployment ASAP. Benefits vary by state, most states have increased them for job loss due to COVID-19, and now they provide for the self-employed.
The good news is companies are hiring. The bad news is probably not for the positions we want. When this is over our willingness to pitch in during a crisis can help us stand out to hiring managers and get us promoted faster.
Our inboxes are overflowing with emails from our banks, utilities, and services offering safety nets. Are our banks deferring mortgages and loan payments? Are utilities assuring us they won’t cut off our electricity? Is satellite radio offering free entertainment? Let’s take advantage of the relief so we can temporarily divert funds to basics like diapers and formula.

Don’t do Anything

Let’s not turn to Amazon for retail therapy. We don’t need new clothes to couch surf.
It’s tempting to withdraw money from our 401ks in this emergency, but let’s resist the temptation. We’d not only have to play catch up paying it back, but there’s a 10% penalty for early withdrawal and we’d have to pay taxes on it. That’s three strikes.

Remember the Accounts we Usually Forget

Need healthcare? Let’s be sure to pay for it with our HSAs. Here’s a list of acceptable things on which to spend HSA funds.
The due date to file our tax returns is now July 15, but if we’re getting money back, let’s file now.
Do you have a cash back credit card? We have one that gives us a percentage back when we use it to purchase gas, groceries, or at restaurants. So we do because those are all things we’re still using during the Coronapocalypse.

Live Simply

How many streaming services (Netflix, Hulu, Disney +) do we really need?
While in place, we can clean our own shelters (cancel the cleaning service), cook our own meals (stop DoorDashing), and use the library’s online app for entertainment (no buying books, music, movies, etc.)
Let’s look at our monthly subscriptions (e.g., Stitch Fix, Blue Apron, Pickles Every Month Club). We probably don’t need most of them (or maybe any of them) right now.

Be Kind

Does someone owe us money? Now is not the time to collect.
Do we know someone who lost his job? Hyping him on our social media platforms and reaching out to people in our networks who are hiring doesn’t cost us money.

What are some adjustments you’ve made to your budget to get through COVID-19?

Financial Fidelity

Before we marry we discuss money: Am I a saver? Are you a spender? How much income do we need to live comfortably? But after a year or so, we conveniently forget these well intended discussions because life happens. We discussed what we’d do in a perfect world, but we live in an imperfect one. We can’t predict the future and we change our minds. Since opposites attract, it’s much more likely we have very different attitudes toward money; mostly thanks to the way we were raised and how our parents managed it. We can’t agree to terms at the beginning of the marriage and not ever talk about money again. Finances are a recurring conversation.

Listen

We need to set a limit we both consider large and not spend over that amount without discussing it with our spouses. When our partner comes to us wanting to make an expensive purchase, we shouldn’t immediately say no. We should listen to why they want to buy. It’s rarely about the purchase. It’s about how the purchase will make them feel.

Boundaries

Pinching pennies too hard is as harmful to our relationships as spending too much on luxury items. Whether it’s: living debt free, having an emergency fund, tuition saved, and building retirement funds, or two vacations per year, luxury car, designer clothes, eating out every week, and monthly concert tickets; compromise is key. You want a Jaguar, but a Honda will get you to work. He wants a $2000 emergency fund, but $1000 will suffice. It helps to quantify both spending and saving. No one wants to feel deprived.

Transparency

Speaking of not feeling deprived, we need to agree to set aside a bit of disposable income we’re free to spend on ourselves without obtaining permission from our mates. These are not secret accounts. We should not hide what we do with money. It’s lying and will cause us to break our spouse’s trust. It’s cheating, much like being sexually unfaithful is cheating, and is easily revealed. Our transactions are all tracked and available online (but that’s a whole ‘nuther post). Each partner should keep an eye on the joint finances. If we have separate accounts, we should make information on those accounts available to our spouses (e.g. ask if they want to see the monthly statement; not necessarily give them access to the funds).

The whole two-becoming-one thing is a push and pull of give and take to make a whole new third identity out of two people. Sometimes we want to do what we want to do and we don’t want our spouse to have a vote in the decision. But since the traditional wedding vows say, “for richer or for poorer,” when our behavior impacts that status, we have to inform our mate. It’s no longer a matter of money, it’s a matter of trust.

How do you and your spouse compromise on money decisions? Please share in the comments section.

Come Together

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Spendthrift loves Cheapskate

When couples argue over finances, money is almost never the real problem. It’s a symptom of the real problem. We learn about money as children. We didn’t analyze our parents’ bank statements when we were 10 years old, but we did experience where their money went. Did we live paycheck to paycheck? Did we go to Disney World every year? Did we donate to charitable organizations? If we got a bike for Christmas, we knew we had money. If the heat got turned off at Christmas, we knew we didn’t. These experiences influence our relationship with money. It’s common for couples to have vastly different opinions regarding money, while simultaneously assuming everyone else’s attitude toward it is the same as ours. Saver marries Spender oblivious our spouse’s financial philosophy will quickly drive us crazy, but couples overcome financial differences every day. As with most things in life, it’s all in the approach.

We Need to Talk

Saver and Spender should talk about money priorities at a time that is good for both and in a relaxed setting. We come to this date with a list of what is important to us to both spend money on and save money for. First, we figure out how much money we each make every month. Next, we go through the monthly bills (e.g., mortgage/rent, utilities, internet, phone, gas, groceries, etc.) and see how much we have to spend on these fixed expenses. Ideally, what we have to spend is less than what we make (If not, that’s a whole ‘nuther blog post).

The difference in those two figures is disposable income. This is the money we have to talk about. Does Saver like putting money in a savings account? Does Spender like to eat out? Agree on monthly limits for both. We also need to agree on an amount each can spend without the other’s blessing and we should set parameters on what qualifies as a big purchase (e.g., a car). The goal is for Saver to feel secure and Spender to not feel confined.

For additional comfort and freedom, we can open separate accounts in addition to our joint account. The joint account is for bill paying and each spouse can contribute proportional to our income. We define what purchases qualify as household expenses (e.g., child care) and pay those out of the joint account. Discretionary spending comes from the individual accounts.

We consider debt. How much are we comfortable with (e.g., credit card debt)? What are we willing to go in debt for (e.g., our children’s education)?

We ought to discuss saving and investment goals. Do we want to buy a house? Go on a month-long vacation? Retire early?

The more couples talk about money (how we spend it and why), the easier it gets. We aren’t just building our finances, we’re building our trust in each other.

How do you and your spouse deal with money issues? Please share in the comments section.

Refresh for the Roaring 20’s

So here we are in a brand new decade. Are our old financial habits still serving us? Here are five ways we can spend less, save more, and live better.

Save it for a Rainy Day

Life happens. Sock some money away for unexpected events like car trouble, a dead refrigerator, or your child’s emergency room visit. I use Dave Ramsey’s advice on how much to set aside, but you may want to save more.

Goals are Good

We set S.M.A.R.T. goals for work, why not for our money? It’s good to have three: a long term goal for which it will take years to save like retirement (you may want to research IRA’s ), a medium term goal like a four week vacation driving the length of Route 66 (which could take a couple of years of saving), and a short term goal like purchasing a new laptop (which may only take a couple of months). It may be a good idea to arrange to have a percentage of our paychecks directly deposited to our savings accounts. We’re less tempted to spend money that’s a bit inaccessible. If we received a Christmas bonus, we should consider saving it toward our long or medium term goals. We won’t miss money we weren’t counting on.

Take a Picture, It Lasts Longer

Let’s get a snapshot of what our finances currently look like. Gather records like statements for investments, checking and savings accounts, and credit cards from last month. Where is all the money going? There are fixed expenses like the mortgage (or rent), loans (e.g., car, student), and utilities (e.g., gas, electricity) we have to pay every month. But to reach our savings goals, we may need to cut back on non-essentials. For example, do we use a food delivery service (Uber Eats, Grubhub, etc) a lot? Maybe it’s time to start cooking and food prepping instead. If we have debt that charges high interest (typically credit cards) we can use the money we save from not spending it on non-essentials and pay off the high-interest debt as fast as we can to save on finance charges.

I’m on the Hunt, I’m After You

Shopping online saves time, but when I’m trying to save money and the sweater I decided not to purchase keeps following me around from website to website as I check my social media (creepy, isn’t it?) begging me to buy it, it’s really hard to resist. So, I get offline and promise myself I won’t purchase the sweater (or whatever) until 48 hours have passed. If I can live without it for two days, I can probably live without it period.

Just do it

We shouldn’t wait to begin saving until we think we can afford to put some money aside. It’s likely that day will never come. Begin saving money immediately; even if it’s just $20 a week in a savings account. By the end of a year, we’ll have $1040, a nice emergency fund.

Have you updated your savings plan for 2020? Please share it in the comments section below.

Spending the Holidays

We interrupt your regularly scheduled budget to bring you…the holidays. We want to buy lavish gifts for our persons, but struggling to pay student loans, spending half our paychecks on diapers, or saving aggressively for retirement, reminds us to be frugal. Here are some ways to save money on buying presents.

You Better Watch Out

The closer we get to the holiday, the farther the prices drop. The catch? Selection drops too. If there’s something specific you want to purchase, shop Black Friday or Cyber Monday. If not, wait until six days before the holiday. This rule of thumb doesn’t apply to shopping online. If you wait too long, shipping could cost more than the gift.

Making a List and Checking it Twice

As a note in my phone, I make a list of people I’m buying for. Then I ask myself, “Do I really have to buy gifts for all these people?” My husband? Yes. My coworker? Probably not; a hand written note of gratitude is best for some (e.g., coworker, boss, neighbor). If I’m concerned about hurting someone’s feelings, I communicate either directly or with a blanket social media post. (E.g., “I’m limiting gift buying this year and please don’t feel obligated to buy me anything.”) Next to each name, I write a dollar amount. This is my budget. Then I write in gift ideas. While I’m out and about shopping or online, I may find items on sale for one person that gives me wiggle room for someone else, but generally my budget is law and I stick to it. I resist the urge to impulse buy, which is easier while shopping online. When I’m at a mall, all the pretty lights, decorations, and music tempt me to go off list and over budget. As I mentioned in an earlier post, I try to pay in cash because the pain of physically handing over my hard earned money helps me stick to my budget.

Naughty or Nice?

Regifting is an option, but I’m kinda against it. Especially since I saw this.

Be Good for Goodness Sake

If I have a large gathering to attend, I enlist the help of the attendees. I initiate an email thread discussing options: Can we give group gifts (e.g., buy one gift for my sister-in-law, her husband, and their kids; like a streaming subscription, zoo membership, or a donation to their favorite cause)? How about setting a dollar limit and doing white elephant, Secret Santa, or just stocking stuffers?

Rooty Toot Toots

Time together is a gift when spent on intentional experiences: dinner out, a holiday performance followed by coffee, driving through light displays. Are you crafty? I’ve received some fabulous homemade gifts like from-scratch chocolate chip cookies and a hand-knitted Angora scarf that matched my winter coat.

Even someone who’s a responsible spender all year long can lose her mind at holiday time. If we bend to the pressure of spending more than we can afford, we buy ourselves guilt when the credit card bill arrives in January. If our recipient won’t remember in May what we gave her in December, let’s not spend a bunch of money on it.

Please share your tips for saving money on buying holiday gifts in the comments section.

Common Cents

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This is the time of year we think about buying decorations, fancy food, party clothes, and gifts. So it’s also a good time to think about some financial fundamentals to keep our long-term savings goals on track.

1. Allowance

Treat yo’ self is real, but if it puts us in debt we aren’t doing it right. We can set money aside from every paycheck for splurging. When the mood strikes, we only spend the money we saved for the binge. We can also keep a change jar or piggy bank. Since we pay for most purchases with a card these days this style of saving takes a long time, but delayed gratification is not always a bad thing.

2. Pay with cash

I know this sounds archaic and inconvenient, but that’s kinda the point. If we have to literally pull bills out of our wallets, count them, then hand them over to the cashier at Bath and Body Works, we see and feel how much those buy-three-get-three-free body care items REALLY cost us. There’s just something about handing our hard earned money over to someone else that makes us feel the loss more intensely.

3. Write it down

The point isn’t to change our habits, but to identify them. If we use our debit or credit cards to purchase everything we buy and pay bills online through our banks, we can just look at our queues for a month and see where all our money goes. From this data, we can make decisions regarding what changes we want to make. Too many trips to Starbucks? Maybe it’s time to take coffee from home with us to the office. If Starbucks is a priority, where else could we cut back?

4. Strategic direct deposit

We can usually assign percentages of our paycheck to different accounts. If we have an interest bearing savings account, we can divert a percentage of our wages to it every pay period. We don’t miss that money if we don’t have easy access to it.

5. Be generous

If we’re generous with our time, talent, and treasure, that generosity comes back to us and usually not in the way we expect. Paying for our friend’s lunch doesn’t mean she will pay the next time. It could be that your daughter buys you the sweater you had your eye on at Target. Now is a good time to ask friends and family if they’d like us to donate to their favorite charity as their present this year. If so, we may want to do a little research to ensure our financial gifts go to the group the organization says they’re helping. (E.g., if we donate to an organization that helps people, will our money go to the people or to administrative fees?)

With a little common sense and a bit of self-control, we can reach our savings goals without feeling deprived.

Do you trick yourself into being frugal? Please share some tips in the comments section below.

Funding Your Financial Future

Investing. Just typing the word overwhelms me. I don’t begin to understand the process of how to buy stocks, which bonds to purchase, or what it means to my financial future when the Dow dips. Do you feel the same? I’ve done some research and found a few things you can do to supplement your retirement savings.

Pay loans off quickly

The faster you pay off debt, the sooner you can stash money into a retirement plan. Student loans, car payments, mortgage, credit cards, etc. all keep your money tied up. When you get “free” money: a cash bonus, cash gift for you birthday, tax refund, etc. use it to make an additional payment on your loan. Since you weren’t counting on that money, you won’t miss it.

Invest in your company’s 401k

If your company offers matching contributions, contribute the maximum amount you can afford. It’s free money. Take full advantage of that benefit. Start as early in your employment as possible. If you’re concentrating on paying off debt, make the minimum contribution. When you are debt free, increase your 401k contributions by the monthly amount you were paying your creditor.

Open an Individual Retirement Account (IRA): If you are eligible, this is the traditional route. I thought an IRA was an investment, but it’s actually a savings account with tax breaks attached. It’s unwise to rely solely on a pension and Social Security to fund your retirement. Every day people are celebrating their 100th birthdays. Plan accordingly.

Invest in real estate

If you’re a gambler, you may enjoy real estate crowdfunding. Which is essentially pooling your money with other people’s money to purchase properties that someone else manages and or sells. It’s not a huge return on your investment, but you may like it better than stock trading.

Use a micro-investment app

The concept of rounding up the amount of a purchase to the nearest dollar, then diverting that difference into an investment account is brilliant. Acorns, Stash, Robinhood, and WiseBanyan have figured out how to do it. Using this method of investment won’t provide huge returns, but if you keep spare change in a jar on the kitchen counter, it’s not working for you. You may as well have a little bit of money making you a little bit more money.

Get a side gig

This can be as intense as working retail or as laid back as dog walking. You can work for someone else, like a big box store. You can work for someone else while setting your own schedule, like being a ride share driver. Maybe it’s time to launch your own business, like online guitar lessons. If you have a skill you can monetize, you can put that money in your retirement fund. As an additional benefit, you set yourself up for having a stream of revenue when you retire from full time employment. Exploring your options while working full time sets you up for life beyond the daily grind.

There are numerous ways you can save for retirement. Investing can be as complicated or as easy as you want to make it. The important thing is to do something to financially provide for your future.

What kind of investing do you do? Please share in the comments section.