On The First Day of Christmas…

Last year, I posted this financial redo of the classic 12 Days of Christmas. My daughter and I actually sang it in a video, which was fun. This year I’ll spare you that. If you’d like to see it, you can find it in last year’s post. Here’s wishing you love and joy and true financial security!


On the first day of Christmas my true love gave to me a fund for emergencies

On the second day of Christmas my true love gave to me a budget for expenses and a fund for emergencies

On the third day of Christmas my true love gave to me a maxed out retirement, a budget for expenses and a fund for emergencies

On the fourth day of Christmas my true love gave to me a pay-down on my visa, a maxed out retirement, a budget for expenses and a fund for emergencies

On the fifth day of Christmas my true love gave to me a Roth IRA, a pay-down on my visa, a maxed out retirement, a budget for expenses and a fund for emergencies

On the sixth day of Christmas my true love gave to me full estate planning, a Roth IRA, a pay-down on my visa, a maxed out retirement, a budget for expenses and a fund for emergencies

On the seventh day of Christmas my true love gave to me insurance for disabilities, full estate planning, a Roth IRA, a pay-down on my visa, a maxed out retirement, a budget for expenses and a fund for emergencies

On the eighth day of Christmas my true love gave to me a 529 for my kids, insurance for disabilities, full estate planning, a Roth IRA, a pay-down on my visa, a maxed out retirement, a budget for expenses and a fund for emergencies

On the ninth day of Christmas my true love gave to me a pay-down on my student loans, a 529 for my kids, insurance for disabilities, full estate planning, a Roth IRA, a pay-down on my visa, a maxed out retirement, a budget for expenses and a fund for emergencies

On the tenth day of Christmas my true love gave to me a sound investment strategy, a pay-down on my student loans, a 529 for my kids, insurance for disabilities, full estate planning, a Roth IRA, a pay-down on my visa, a maxed out retirement, a budget for expenses and a fund for emergencies.

On the eleventh day of Christmas my true love gave to me a long-term care policy, a sound investment strategy, a pay-down on my student loans, a 529 for my kids, insurance for disabilities, full estate planning, a Roth IRA, a pay-down on my visa, a maxed out retirement, a budget for expenses and a fund for emergencies.

On the twelfth day of Christmas my true love gave to me, a pledge to be mortgage free, a long-term care policy, a sound investment strategy, a pay-down on my student loans, a 529 for my kids, insurance for disabilities, full estate planning, a Roth IRA, a pay-down on my visa, a maxed out retirement, a budget for expenses and a fund for emergencies.

Merry Christmas everyone!

Photo by rawpixel on Unsplash

Three Tips to Save at the Grocery Store

The holiday season is a time for entertaining. Whether you’re having folks over to your house, or making a dish to take to someone else’s, this time of year your grocery bill can be eye popping. Here are a few tips to help you save some money at the grocery store.

Change Where You Shop

There can be a large disparity in the prices that grocery stores charge. There are the high-end stores like Whole Foods, there are discount grocers, and several in between. Our local news outlet here in Portland did a comparison of seven chains in the metro area on a list of five common grocery items. There was a difference of 30 percent between the highest-priced store and the lowest-priced store.

The prospect of saving almost a third on your grocery bill is an incentive to at least check out your alternatives. Even if you are shopping organic or have other specialty food requirements, you may be surprised at the selection offered by the lower-cost grocery stores.

Avoid Paying for Packaging

Another grocery store savings trick is to avoid paying for packaging. The more that goes into making food portable and presentable, the more it costs. If you can slice it, divide it, or put it in your own container, you will save. In many cases, just a few extra minutes of your time can give you all the advantages offered by the packaged products and save you lots of money. The following table compares a few packaged food items to their unpackaged alternatives.

PrepackagedUnpackaged
Bottled ice tea
(6 pack)
$9.89Home-brewed
ice tea (same volume)
$1.00
Steel-cut oatmeal
(24 oz package)
$3.00Bulk steel-cut oats 
(24 oz)
$0.60
GoGo squeeZ
applesauce (12 pack)
$8.79Applesauce
(Same volume)
$3.84
McCormick ground
cinnamon (2.4 oz)
$2.37Bulk cinnamon
(2.4 oz)
$0.58
Sliced apples
(multipack, 10 oz total)
$4.49Apples (10 oz)$2.18

Shopping the Sales

The final tool for squeezing every last penny out of your grocery store visit is couponing and shopping the sales. Carrie Rocha manages a website, www.pocketyourdollars.com, with a coupon database and currently running deals at a variety of national chain stores. She also wrote the book Pocket YourDollars: 5 Attitude Changes That Will Help You Pay Down Debt, Avoid FinancialStress, and Keep More of What You Make. She advocates shopping the sales and claims that you can shave 30 to 40 percent off your grocery bill if you buy what you use when it is on sale instead of when you need it.

This time of year, it’s easy for your grocery bill to get out of hand. But with a little planning and a rethink of how and where you buy your food, there are big savings to be had.


Photo by NeONBRAND on Unsplash

Gratitude Isn’t Just for Thanksgiving

This week of Thanksgiving is a good time to reflect on what we’re grateful for. But gratitude is something we should be practicing all year. Instead of “keep the spirit of Christmas in your hearts all year long”, maybe the saying should be “keep gratitude in your hearts all year long.”

In this age of steady information on social media about your friends’ vacations and constant advertising for the latest new gizmos, it’s easy to focus on the things you feel you’re missing out on. But for your mental and financial health, a focus on working toward your goals and all the good things you already have would be better.

In The Paradox of Choice, by Barry Schwartz, Dr. Schwartz talked about how rising incomes in the US have had little impact on our individual happiness. The reason is two-fold. Reason one is that we tend to adapt to new situations quickly. While buying something new gives us a dose of pleasure, we quickly come to take our new thing for granted.

The second reason is that our expectations rise. We have an idea of how someone in our income bracket should be living. We see how our Facebook friends and colleagues are living and believe we should have the same lifestyle.

Unfortunately, the lifestyle we think we should have may be based on inaccurate information. After all, we really don’t know much about anyone’s financial situation but our own, and assuming we should be living like someone else doesn’t factor in how that other person is making ends meet or whether they have the same financial goals.

If instead you focus your attention on meeting your own goals and appreciating what you already have, you can derive pleasure from your achievements and knowing how fortunate you are.

In the words of DavidSteindl-Rast, “Happiness doesn’t make us grateful. Gratitude makes us happy.”

The next time you pull on an old sweater, think of all the fun times you had while wearing it. Or when you sit in your car, think of all the trips you’ve taken in it, or the songs you sang with your kids in it. When you see your friend’s exotic vacation photos on Instagram, be happy for them, and remember all the things you loved about the last trip you took.

It’s human nature to seek out new things and to compare ourselves to those around us. Our culture seems to have let these instincts run amok. It’s easy to get caught up in the chase for more material possessions and ever escalating lifestyles. But if you pause for a moment, once in a while, and think about how good your life already is, you may find that you have all that you need, and for this you can be grateful.

Photo by Priscilla Du Preez on Unsplash

Five Tips to Keep the Holiday Buying Frenzy From Becoming Post Holiday Clutter

Our big spending season is looming just around the corner. According to the National Retail Federation, Americans are expected to spend more than $1,000 per household this holiday season. There are few that don’t love to give as well as get a gift. But before you head off to do your holiday shopping, consider what you and your loved ones will do with all the stuff you buy.

Americans have too much stuff. Evidence that we have too much stuff lies in data on the Self Storage industry. In 2017, there was seven square feet of storage space for every man, woman, and child in America, and 90 percent of it was in use.

The industry expects the need to store stuff to continue to rise. Spending to build more space in 2017 was almost double what was spent in 2016. In an article on InvestorManagementServices.com, there was little concern there would be a drop in demand any time soon.

A 2015 survey done by Gladiator Garage Works, a firm that makes organizational systems for garages, found that one in four households could not get a car into their garage due to all the stuff that’s in there. Not only are the garages full, but the closets, attics, and basements are too.

Holiday shopping has the ability to cloud our judgement. We get caught up in the festivity, the pressure, and even the competition of buying things. And we are the perfect consumers. We have a basic need for novelty and new experiences. That is one of the reasons we love Christmas so much. Unfortunately, many of the things we buy will wind up relegated to the closet, then the garage, and for too many, finally the storage unit.

When your gifts go unused, not only has your money been wasted, but you are also contributing to the stress of those who receive your gifts. Clutter has a negative impact on mental health. It has been linked to depression and fatigue, overeating, and isolation.

Here are a few tips to help avoid wasting money and contributing to your receivers pile of stuff this holiday season.

  • Don’t go shopping looking for inspiration. Know what you will buy before you go and have a budget for each person on your list.
  • Coordinate your gift giving with family members. Check in with others to get a good idea of what each person on your list needs or has really had their eye on.
  • Consider pairing at least adult family members, so each one is only buying and receiving one gift.
  • To cut down on children’s holiday overload, consider making a contribution to a college fund, instead of buying toys or clothes.
  • If you’re at a loss for what to give, make it consumable. Home baked goodies rarely go to waste and won’t be stored.

We look forward to the holidays every year. But the buying frenzy that comes with them can be a waste. Too much of what is bought will wind up as stuff that needs to be stored when the excitement wears off. So, this year, take a more thoughtful approach to gift buying. Buy fewer gifts and make them count. You’ll save money and your gifts will be truly valued.

Photo by Dieter de Vroomen on Unsplash

The Key to Following Through on Your Good Intentions

Do you find it hard to follow through with your intentions? Whether it’s sticking to a budget or signing up for your company retirement plan, it’s easy to get off track. Everyone is busy, and your good intentions may fall victim to life’s frenetic pace. The key to following through with all you want to accomplish is to have a plan.

Of course you need a plan to achieve the big goals in your life. But you also need a plan to just get through your day. Simply knowing what you will do will make your life easier.

Say that you intend to cut back on eating out so you will have some extra money to save for your emergency fund. After a long day at work, you’re tired and hungry. Instead of making something from the groceries you have at home, you head off to the local Thai restaurant. You weren’t planning to go out to dinner. But in the moment it just seemed easier.

Though you have groceries at home, if you don’t know specifically what you will do with them, you have to decide what to cook under stress. The decision making process takes energy you simply don’t have, so your good intentions go out the window.

Scientists have found that under stress an enzyme attacks a synaptic regulatory molecule in the brain. As a result, fewer neural connections are made, and we think less clearly. We are physically less able to make good decisions. Our judgment in these circumstances is literally impaired.

The key to sticking with your good intentions is to not have to make a decision when your synapses are under attack. Just knowing what you will do will help you follow through. If you know exactly what you will make for dinner, it’s easier to carry out that plan than it is to decide when you’re tired and hungry. The following example illustrates why a plan works.

Plan No Plan
Planned to make meat loaf, green beans and steamed potatoes for dinner Check refrigerator for options
All ingredients on hand and defrosted Nothing is thawed, so need to wait for meat to defrost in the microwave. Choose ground turkey
Mix ingredients for meat loaf and put in the oven Out of eggs, so meat loaf is out – opt for turkey burgers
Steam green beans and potatoes in microwave No buns. Burgers are out, maybe pasta
Serve dinner What else do I have?

It’s the figuring it out that drains you, not the doing. You could make that meat loaf in your sleep. But without a plan, it’s no wonder you would choose to go out for dinner.

Simply planning what you will do will help you carry out all of your good intentions. If you’ve been meaning to sign up for your retirement plan or even just call your mother, but you are always too busy, try putting it on your calendar on a specific time and day. It  will substantially increase the likelihood that you will actually do it.

If you are committed to following through on your intentions, make a plan.  If you know specifically what you will do and when you will do it, you are much more likely to follow through. Your plan eliminates the need to make a decision, which if made at the last moment, may not be a good one.

Which of your good intentions could use a plan? Leave me a comment.

Photo by The Journal Garden | Vera Bitterer on Unsplash

The #1 Obstacle to a Successful Budget

When I talk to people about setting aside savings or creating a budget, I often hear things like this:

“It’s pointless. Whatever I save gets used up by some unexpected expense.”

“Every time I try to live by a budget something comes up that throws the whole thing off.”

Unexpected expenses can throw a monkey wrench into anyone’s plans. They can be a big contributor to increasing debt.

What is the solution? Expecting more of your expenses.

If you sit down and think for a moment, you can likely predict the vast majority of your expenses. You won’t necessarily get a monthly bill for all of them, but you can manage them as if you did.

If you have a car or a home, you will have maintenance and repair expenses. If your health care plan has a deductible and copay, you’ll eventually pay something for a doctor’s visit. If you have family, you’ll buy gifts or travel to see them.

It’s a given. So you really can’t call these costs unexpected, though they may be untimely. Since they can reasonably be predicted you can set some money aside for them in your budget, even if none of these expenses are imminent. Here are a few tips for estimating what to include.

Car

To estimate how much you should save for maintenance costs, use the Total Cost of Ownership Calculator from Edmunds. There you can enter the make, model, and year your car was made to find out what you can expect to pay for maintenance and repairs for the next five years. If your car is expected to cost you $1,200 per year, set aside $100 per month in your budget.

Home

Typical home maintenance and repairs average about $1 per square foot per year. If your home has 1,500 square feet, you should be saving $1,500 per year, or $125 per month. You won’t necessarily pay that every year, but if you live in your home long enough, you eventually will. You should be saving at least that amount so you have the money available when a costly repair is required. You may need more if you know your furnace or roof is on its last legs.

Health Care

Health care expenses are a frequent cause of financial stress. In fact, medical bills are the leading cause of bankruptcies in the US. To minimize your risks, work toward accumulating at least your plan’s deductible in savings. If your annual deductible is $2,500, to accumulate that in a year, you would set aside $208 per month. Your stretch goal is to accumulate your maximum out-of-pocket expenses over time.

Family

Birthdays, holidays, celebrations, and family gatherings can all put a dent in your bank account. But you know when they’ll happen, so plan for them. Decide now how much you will spend for the family obligations in your future, and set a bit of money aside each month to cover those expenses.

These types of expenses are part of your cost of living. They need to be part of your budget. If they are not, they will inevitably cause to you to blow it. Making the effort to predict your future expenses is the key to successful budgeting. Setting money aside for them in advance will allow you to stick with your budget and allow your savings for other things, like emergencies, and retirement, to stay saved.

Photo by Gus Ruballo on Unsplash

How to Use a Check Register to Take Control of Your Money

I may be dating myself by discussing check registers. In this age of ubiquitous electronic payments, few use checks anymore. Today payments are posted to your account nearly immediately, so what you see online in your account really is what you have.

But it still may not be what you can spend. If you haven’t accounted for future expenses, it is easy to overspend, and that can result in an increasing credit card balance. With a simple check register you can create a plan for your money and avoid overspending.

Before electronic payments became so prevalent, it used to be you paid all your bills with a check, and it could take days, if not weeks, for the money to be withdrawn from your account. To avoid over drafting your account, you had to keep track of the checks you had already written but which hadn’t yet cleared. You did this in a check register.

Now days, I see people running into a different problem with their bank accounts. Because they aren’t keeping track, it’s easy to overspend. While you don’t have to worry that your account balance shows more money than you really have due to outstanding, un-cashed checks, you still can’t just go out and spend the money that’s there.

I recently helped a young woman, Kara, take control of her money by using a check register. Rather than using it to record money she had already spent, I encouraged her to use it to record money she expected to spend.

With each paycheck, Kara listed the deposit and then what would happen with every dollar of the money. She listed each bill she had to pay with the check. She also listed what she expected to spend on groceries, hair cuts, gas for the car, and other unavoidable expenses. Before she spent a dime, she knew exactly what it would be spent on.

In addition to the expenses that came up every month, she also allocated money for expenses that would come up in the future. Each paycheck, she set aside money for future car repairs and a trip she wanted to take. This way she knew how much money she really had to spend on non-essentials.

Back in the day, at the end of each month, good money management practice was to reconcile your bank balance with your check register. In this exercise, you accounted for all outstanding checks and made sure you corrected any errors. Similarly, Kara needed to reconcile the way she actually spent her money with how she had planned to spend it.

In addition to recording the deposit of her paycheck, Kara verified that the balance she predicted she would have was the balance she did have. In between paychecks,  if she had unavoidable unplanned expenses, she recorded those and adjusted her spending plans accordingly.

Sometimes things come up that you don’t foresee. You forget your lunch, so you have to buy it. You’re running late, so you have to drive, and pay for parking, rather than take the bus. Your electric bill is unusually high. By recording these kinds of unplanned expenses in her check register, Kara could see what needed to change before she spent more than she wanted.

It didn’t take long for Kara to get out of debt and begin to save money. She no longer needed to bridge the gap between her bills and her money with a credit card. She did it with a very old fashioned tool, the check register.

What she had actually done was create a budget. There are all kinds of high-tech tools for creating a budget. But when you boil it down, you still have to do the work of figuring out where your money is going to go. Sometimes it’s easier to see how things will play out if you build your plan by hand.

While you may no longer need to write checks, you do still need to keep track of where your money is going. A simple no-cost tool for doing that is a check register. It’s value today isn’t in recording the money that you’ve already spent. Instead, use it to record the money you plan to spend, and you will avoid spending more than you can afford.

Is Your Money Leaking Away?

The other day, I was putting the cushions for our patio furniture away when I realized we have had them for at least ten years. They’re nothing special. I bought them at Home Depot for less than $20 each. They’re definitely not something you’d expect to last so long. So what is the secret?

The secret to their longevity is in what I was doing when I had my revelation; putting them away. We put the cushions in a container when we’re not sitting on them. They don’t get left out in the sun or the rain. They stay nice and dry and ready for use every time we want them.

They’re still in perfect condition. If I had to replace them today, it would cost me around $140 for the four of them. There you go. $140 saved. If you assume I would have replaced them at least a couple of times in the last ten years, had they not been so well protected, that’s a few hundred dollars saved.

I’ve written before about the value of maintaining the big things, like your car and your home systems and appliances. But there are lot’s of little places where your money can leak away.

It turns out your Mom and Dad were right.

“Put the tools away!”

“Don’t leave the windows open while the heat is on!”

“Don’t stand with the refrigerator door open!”

The reason they said those things, wasn’t to annoy you. It was to save them money.

If you put the tools away instead of leaving them out in the elements they last longer. Leaving even one window open with the heat or AC on needlessly increases your utility bill, as does leaving the refrigerator door open any longer than necessary.

Now, admittedly, you’re not going to retire on the money you save by putting your patio furniture cushions away, or making sure all your windows are closed if the heat is on. But money is a precious resource representing your time and hard work. Letting it slip away needlessly means you simply have less for other things that are actually important to you.

Maybe you would find a bit of extra money to take your partner out for a nice dinner. Or maybe you’re able to save up for that weekend get away sooner than you thought. Or you might just be able to increase the contributions to your retirement account.

Everyone has little ways that money quietly leaks away from them. Simply being cognizant of the possibility will help you find yours. If you can plug as many of those leaks as possible, you may be surprised by how much extra money you have to do the things that are truly important to you.

Five Rules to Get Your Spending Under Control

Does your money simply disappear without you fully knowing what happened to it? It can be really frustrating, when you’re trying to save money, if you never seem to have anything left over at the end of the month.

When you don’t have a recollection of how you spent your money, you are spending it mindlessly. Essentially you have a habit, and when you have a habit you can do something without thinking about it.

It’s like when you drive home from work, but you can’t recall any of the details of your trip. You make all the right turns, avoid obstacles and securely arrive in your driveway without having to engage the decision making part of your brain.

Mindless spending can be a big road block to saving money. It can keep you living paycheck to paycheck even if you have a decent income. You pay your bills, go about your life and at the end of the month there isn’t anything left. You don’t really have anything to show for it. You just don’t have any money.

If this sounds like your life, you can change your spending habits by imposing a few rules on yourself. Rules are low barriers to spending, but they can be very effective. After following your rules consistently, you can change your spending habits.

Only you can decide what rules will work for you. But here are five that have worked well for others.

  1. Set your savings aside first. Put your savings goal in savings before you pay any bills, buy any groceries, go out to eat or do anything else. Use automatic deposits to savings to take the decision making off your plate.
  2. Give yourself an allowance. Aside from the bills you must pay, in other words, those you’ve agreed to pay by contract, allow yourself a specific amount of money to pay for everything else. Your groceries, gas, entertainment, essentially everything else must be paid from the allowance. The amount you choose should leave room in your monthly income to meet your savings goals.
  3. Only carry cash. Studies have shown that you are more conscious of your spending when you physically experience the cash leaving your hand than when you swipe a card to pay for your purchases. If any cash you carry disappears, carry only enough for purchases you plan ahead of time. If you don’t plan to buy something on a given day, don’t carry any cash or your cards. If you need to put gas in your car, only carry enough cash to fill the tank.
  4. Only go out if it’s an event. Skip the $10 sandwiches scarfed at your desk. Not only will you not remember you spent your money on them, you won’t remember eating them. Save your restaurant trips for experiences you’ll remember, like a date night, a celebration or catching up with a friend.
  5. Give yourself a cooling off period. If you are tempted to buy something that wasn’t in your plan, give yourself 24 hours to think it over. Chances are it won’t be quite as appealing once you’ve turned your back on it. If the day goes by, and you really think the object of your desire is your priority, you’ll have had time to figure out how to rearrange your spending plan.

Find something that works for you. If you are ready to prioritize saving over spending, giving yourself some rules can help you change your spending patterns. Once you get the hang of it, you won’t be able to stop being conscientious with your money. You will know too much.

 

 

Don’t Gloss Over the Cost of College

If you have a high school junior at home, you may have spent the week of spring break touring a few college campuses. It’s the perfect time to kick off the college selection process with your prospective college student.

You want the world to be your child’s oyster, and no one wants to talk about expenses when dreaming about the future. However, as you reflect upon the tours, it is a good time to bring a dose of reality into the equation.

College is expensive no matter where your child chooses to go, but some choices will set you back farther than others. The following chart shows the average cost of college for the 2017-2018 school year from the College Board.

Average Cost of College

While most parents want to send there children to college, only about 57 percent of them save for it. The average household savings for college was only $16,380, according to Sallie Mae. That means the money must come from somewhere else. The following chart shows how America pays for college, also from Sallie Mae.

How America Pays for College

A full 28 percent of the cost of college will be paid for with loans. The average student loan debt per borrower from the class of 2016 was $27,975. At the current Federal Direct student loan interest rate of 4.45% for undergraduates, over the standard 10 year repayment period, payments on loans of that amount will be about $289 per month.

That can be a significant piece of a new graduate’s entry level job income. It’s no wonder that 30 percent of college graduates with student debt move back in with their parents. With money like this on the line, it is important to sit down with your future college student and cover the facts.

Here are five things to discuss with your child before she chooses a school.

  • Tell your student how much you will be able to pay. This includes what you have saved and what you are willing to commit to out of your income. The converse of this is how much should she expect to pay. Only 70 percent of parents of teenagers have discussed their expectations with their child.
  • Outline options for raising the extra money. In addition to student loans and scholarships, your student may be able to raise some money through part-time or full-time work. Taking a gap year to work and save up for school is a reasonable approach.
  • Help your student understand the implications of their choices. Student loans may be hard to avoid, but they can certainly be minimized if you understand your trade-offs. You can calculate the monthly payments given different loan amounts on the Federal Student Aid web site.
  • Provide context for the information. Estimate the kind of monthly salary your student might earn given her career interests. Payscale’s College Salary Report is a good place to start. It wouldn’t hurt to also talk about average living expenses. Career Trends has a cost of living calculator. Don’t forget to show the impact of taxes. How much of her take home pay will be left after student loan payments?
  • Consider starting school at a community college. The average cost per year at public two year colleges is only $3,570 assuming your student can stay at home while she attends.

If you don’t have enough saved to pay for college, think carefully about the impact of paying for school out of your current income. If you are behind in saving for your own retirement, paying for college should not be your top priority. Your child has time to recover from the expenses of school. You do not.

A college education can substantially improve your child’s ability to earn a living. But taking on a lot of debt to pay for it can weaken her financial stability. Help her understand that her choices have implications for her lifestyle after school. Before she makes her final decision, she should know what she’s in for.

 

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