The ABCs of Financial Empowerment

A quick Google search of ‘financial literacy’ will yield thousands of results, listing an infinite amount of do’s and don’ts that should (and shouldn’t) be followed to guide you along on your financial journey.

However, when you think of financial empowerment – what comes to mind? As defined by Merriam-Webster, empowerment is “the act or action of empowering someone or something: the granting of the power, right, or authority to perform various acts or duties.” No matter what your current sentiments are related to your finances, we will explore three key areas to not only embrace; but to help you prepare for a strong financial future.

Awareness

Now more than ever, we all have a laser-sharp focus on our money and where it’s being spent. The pandemic has generated a hypersensitivity to how we treat our finances while also determining what essential expenses look like and where they fit into our budget.

Before life as we knew it to be shifted, many of us don’t have to look too far back to remember a time where we didn’t check our accounts as often, our savings plan would fluctuate month-over-month or our emergency fund was used to bail us out of some impulsive spending.

To make sure those days are forever of the past, make it a habit to take inventory and audit all of your accounts. Take at least 15 – 30 minutes to review over any transactions and deposits across all active accounts. Not only does this help improve your self-accountability, but you are also able to make any disputes if anything appears incorrect and resolve quickly.

Another small but impactful tip is to acknowledge your financial health. What top three areas will be your main point of focus? If this is something you don’t know offhand, review your transactions from the last three months and categorize them. How much of your money went to impulsive buys or things that could have been purchased at a later date? Are you seeing an influx in overhead expenses or credit card payments? Are there any spending patterns you can explicitly see? Allow this exercise to serve as an eye-opening experience.

In order to determine where you want to be, you must first truthfully acknowledge where you are. This sets the blueprint and overall expectations with your personal finance journey. Knowing where you are may not feel pleasant but avoidance will lead to bigger consequences.

Betterment

Even though we don’t like to admit it, there’s always room for improvement and our finances are no exception. The first thing that guarantees mastery is actually following the budget that’s created. This serves as a guardrail – it’s used to keep us on track so we can greet our financial destination with open and inviting arms.

Once that’s in motion, explore ways to enhance your financial experience. Begin by automating recurring expenses, such as cellphone service or utility bills. That’s why it’s so important to be as honest and accurate as possible when setting a budget. Nothing should come to you as a surprise outside of any emergencies. When you trust yourself and the financial work you’ve put in, your finances have no choice but to follow suit.

If you haven’t already (or need to get back on track), work to beef up your emergency fund and savings account. Emergency expenses have a tendency to appear out of nowhere, so you want to dedicate a set dollar amount or a percentage every pay period. Setting up an automatic transfer to these accounts establish a routine while putting your mind at ease in the process.

Is there a hobby or skill you’d like to put to use and monetize? No matter how grandiose or small, this can definitely expedite achieving your financial goals. The money earned from a passion project can go toward savings, paying off debt or simply getting back to a place of comfort financially. Vacation funds or prepping for large purchases such as a car or home can also fall within this category. If you want to seek the assistance of a professional, search for financial advisors or coaches that could help you with reaching your goals. Preparation is key and your future depends on it!

Confidence

The foundation has been laid and you’ve been committed to crushing your financial goals. The budget and savings goals are in motion; so what’s next? It’s time to celebrate! Walk into your financial future with your best foot forward. When times seem bleak, remind yourself of your goals early and often.

Reinforcement such as daily reminders on your phone, having goals posted somewhere in your home you can see daily or reciting positive financial affirmations will serve as a second wind when you want to throw in the towel. Be sure to celebrate wins along the way such as debt payoff, reduction or hitting a new savings goal. Never been able to invest before and now you have the additional income to get in the game? Celebrate that!

The best way to generate excitement is to rally your family and get them involved. Create family challenges to get your children excited about saving funds and reallocating money. Come up with creative ways you all can commemorate knocking out a goal by ordering from your favorite restaurant or saving for a family staycation.

In order to walk in confidence, you have to build up the courage to begin no matter where you are or how many times you’ve had to start over. Each step counts – each successful budget, savings goal and consistent reduction of overall expenses. Be sure to keep in mind, financial freedom looks different for everyone and has the ability to pivot over time. While some may want to vacation throughout the year, save for their children’s college fund or wipe debt out completely, all are significant and take sacrifice. What is the key to achieving such a pinnacle level of confidence? Time.

 

Be kind to yourself and understand mistakes should never be equated to failures. Your commitment to this financial journey will always be rewarded.

The post The ABCs of Financial Empowerment appeared first on MintLife Blog.

Source: mint.intuit.com

6 Reasons You Will Fail at Getting Out of Debt

The post 6 Reasons You Will Fail at Getting Out of Debt appeared first on Penny Pinchin' Mom.

Whenever you make decisions to improve your life, it can be scary. For instance, when you first start out with your debt plan, you are excited and ready to go.  Sadly, many will fail at getting out of debt.  And, it may happen to you too.

making a debt plan

You might look at your debt plan and think that this time will be different.  You will start out thinking that this time you WILL do it.  Then, something happens, and you find that you are once again right back at where you started.  Before you know it, you’ve failed so many times that you just don’t think it is worth it.

I’m here to say – it is.  Please.  Don’t give up.

If you are struggling  with paying off your debt, these folks may be able to help:
Call 866-948-5666.

Believe it or not, there may be actual reasons as to why you fail.  Of course, there are the issues such as unexpected financial setbacks. However, it is more often out of a failure to have the right debt free plan in place.

Here are six reasons why you will fail at getting out of debt — and what you can do to make sure that this time really IS different.

WHY YOU ARE NOT GETTING OUT OF DEBT

1. You are not mentally ready.

Before you can ever make any change to your life be it healthy eating, exercise or even getting out of debt, you need to make sure your mentally ready. You need to look at your debt plan with a positive mind.

Instead of looking at the amount you owe and feeling like you will never do it, look at it as I can do this.  It is important to me, so I am willing to put in the work to get the reward.  Consider yourself strong and tell yourself that it is worth it and you know you can and WILL be successful this time.

 

2. You have no plan at all.

It seems that this should go without say.  However, it is the #1 reason why you will fail when it comes to getting out of debt.

If you tried to go to a town you had never visited but did not have a plan including a map or directions, how would you get there?  You probably wouldn’t.  At least, not without getting lost and off track several times.  You may even end up back at home having to try it again.

The same is true with debt.  You need to create an action plan including your debts to pay, budget and then a plan of action to attack them.  Once you have a plan, post it where you can see it (every day), so you don’t forget what you need to do to reach your goal.

Read more: How to Get Out of Debt (Even on a Lower Income)

 

3. You don’t have a budget.

I know, I know.  You hear this one every time you turn around.  There is a reason for that.  Any successful debt plan absolutely must have a budget.  You just can’t do it without a budget.

The reason is you need to see where your money goes.  Then, and only then, can you see how much money is available for your debts so help you do what you can to pay them off as quickly as possible.

Read more: How to Create a Budget (Even if you don’t know where to start)

 

4. You are easily distracted.

If you turn on the TV, go online or even pick up a magazine you are constantly being shown ads.  Retailers are trying to sell you on their item and telling you why you can’t live without it.  Sadly, many allow these influencers to affect their spending, forcing them further in debt.

You must find contentment with what you have.  You might also want to be like your neighbors, but how do you know that they are not as deeply (if not further) into debt than you are.  Find a way to be happy with your life and don’t fall into the trap that “things” will make you happy and leave you feeling fulfilled.

 

5. Your plan is not realistic.

As much as we’d all love to pay off hundreds (if not thousands) towards our debts each month, that is just not possible.

You need to be completely honest with yourself when it comes to your plan.  You might think that you can eliminate clothes from your budget and just not buy anything new, but is that really going to work?  Can you truly not spend anything on clothing  — ever?

 

6. You don’t have an emergency fund.

Your emergency fund is mandatory when it comes to getting out of debt.  Why do you ask? Well, if you do not have an emergency fund, what happens when the air conditioner needs to be repaired?  Chance are you will go further into debt to get it fixed.

Make sure you have a minimum of $1,000 in the bank before you even think about trying to tackle your debt.  That way, when the unexpected happens (and trust me, it will), you can pay for it without having to rack up more debt and end up throwing your debt plan out of the window.

Read more:  How to Create an Emergency Fund

 

Once you change your attitude, outlook and spending habits, you will be on the path to financial freedom and quickly be on the road to getting out of debt.

 

The post 6 Reasons You Will Fail at Getting Out of Debt appeared first on Penny Pinchin' Mom.

Source: pennypinchinmom.com

Why It’s Harder to Get Credit When You’re Self-Employed

Around 6.1% of employed Americans worked for themselves in 2019, yet the ranks of the self-employed might increase among certain professions more than others. By 2026, the U.S. Bureau of Labor Statistics projects that self-employment will rise by nearly 8%. 

Some self-employed professionals experience high pay in addition to increased flexibility. Dentists, for example, are commonly self-employed, yet they earned a median annual wage of $159,200 in 2019. Conversely, appraisers and assessors of real estate, another career where self-employment is common, earned a median annual wage of $57,010 in 2019.

Despite high pay and job security in some industries, there’s one area where self-employed workers can struggle — qualifying for credit. When you work for yourself, you might have to jump through additional hoops and provide a longer work history to get approved for a mortgage, take out a car loan, or qualify for another line of credit you need.

Why Being Self-Employed Matters to Creditors

Here’s the good news: Being self-employed doesn’t directly affect your credit score. Some lenders, however, might be leery about extending credit to self-employed applicants, particularly if you’ve been self-employed for a short time. 

When applying for a mortgage or another type of loan, lenders consider the following criteria:

  • Your income
  • Debt-to-income ratio
  • Credit score
  • Assets
  • Employment status

Generally speaking, lenders will confirm your income by looking at pay stubs and tax returns you submit. They can check your credit score with the credit bureaus by placing a hard inquiry on your credit report, and can confirm your debt-to-income ratio by comparing your income to the debt you currently owe. Lenders can also check to see what assets you have, either by receiving copies of your bank statements or other proof of assets. 

The final factor — your employment status — can be more difficult for lenders to gauge if you’re self-employed, and managing multiple clients or jobs. After all, bringing in unpredictable streams of income from multiple sources is considerably different than earning a single paycheck from one employer who pays you a salary or a set hourly rate. If your income fluctuates or your self-employment income is seasonal, this might be considered less stable and slightly risky for lenders.

That said, being honest about your employment and other information when you apply for a loan will work out better for you overall. Most lenders will ask the status of your employment in your loan application; however, your self-employed status could already be listed with the credit bureaus. Either way, being dishonest on a credit application is a surefire way to make sure you’re denied.

Extra Steps to Get Approved for Self-Employed Workers

When you apply for a mortgage and you’re self-employed, you typically have to provide more proof of a reliable income source than the average person. Lenders are looking for proof of income stability, the location and nature of your work, the strength of your business, and the long-term viability of your business. 

To prove your self-employed status won’t hurt your ability to repay your loan, you’ll have to supply the following additional information: 

  • Two years of personal tax returns
  • Two years of business tax returns
  • Documentation of your self-employed status, including a client list if asked
  • Documentation of your business status, including business insurance or a business license

Applying for another line of credit, like a credit card or a car loan, is considerably less intensive than applying for a mortgage — this is true whether you’re self-employed or not. 

Most other types of credit require you to fill out a loan application that includes your personal information, your Social Security number, information on other debt you have like a housing payment, and details on your employment status. If your credit score and income is high enough, you might get approved for other types of credit without jumping through any additional hoops.

10 Ways the Self-Employed Can Get Credit

If you work for yourself and want to make sure you qualify for the credit you need, there are plenty of steps you can take to set yourself up for success. Consider making the following moves right away.

1. Know Where Your Credit Stands

You can’t work on your credit if you don’t even know where you stand. To start the process, you should absolutely check your credit score to see whether it needs work. Fortunately, there are a few ways to check your FICO credit score online and for free

2. Apply With a Cosigner

If your credit score or income are insufficient to qualify for credit on your own, you can also apply for a loan with a cosigner. With a cosigner, you get the benefit of relying on their strong credit score and positive credit history to boost your chances of approval. If you choose this option, however, keep in mind that your cosigner is jointly responsible for repaying the loan, if you default. 

3. Go Straight to Your Local Bank or Credit Union

If you have a long-standing relationship with a credit union or a local bank, it already has a general understanding of how you manage money. With this trust established, it might be willing to extend you a line of credit when other lenders won’t. 

This is especially true if you’ve had a deposit account relationship with the institution for several years at minimum. Either way, it’s always a good idea to check with your existing bank or credit union when applying for a mortgage, a car loan, or another line of credit. 

4. Lower Your Debt-to-Income Ratio

Debt-to-income (DTI) ratio is an important factor lenders consider when you apply for a mortgage or another type of loan. This factor represents the amount of debt you have compared to your income, and it’s represented as a percentage.

If you have a gross income of $6,000 per month and you have fixed expenses of $3,000 per month, for example, then your DTI ratio is 50%.

A DTI ratio that’s too high might make it difficult to qualify for a mortgage or another line of credit when you’re self-employed. For mortgage qualifications, most lenders prefer to loan money to consumers with a DTI ratio of 43% or lower. 

5. Check Your Credit Report for Errors

To keep your credit in the best shape possible, check your credit reports, regularly. You can request your credit reports from all three credit bureaus once every 12 months, for free, at AnnualCreditReport.com

If you find errors on your credit report, take steps to dispute them right away. Correcting errors on your report can give your score the noticeable boost it needs. 

6. Wait Until You’ve Built Self-Employed Income

You typically need two years of tax returns as a self-employed person to qualify for a mortgage, and you might not be able to qualify at all until you reach this threshold. For other types of credit, it can definitely help to wait until you’ve earned self-employment income for at least six months before you apply. 

7. Separate Business and Personal Funds

Keeping personal and business funds separate is helpful when filing your taxes, but it can also help you lessen your liability for certain debt. 

For example, let’s say that you have a large amount of personal debt. If your business is structured as a corporation or LLC and you need a business loan, separating your business funds from your personal funds might make your loan application look more favorable to lenders.

As a separate issue, start building your business credit score, which is separate from your personal credit score, early on. Setting up business bank accounts and signing up for a business credit card can help you manage both buckets of your money, separately. 

8. Grow Your Savings Fund

Having more liquid assets is a good sign from a lender’s perspective, so strive to build up your savings account and your investments. For example, open a high-yield savings account and save three to six months of expenses as an emergency fund. 

You can also open a brokerage account and start investing on a regular basis. Either strategy will help you build up your assets, which shows lenders you have a better chance of repaying your loan despite an irregular income. 

9. Provide a Larger Down Payment

Some lenders have tightened up mortgage qualification requirements, and some are even requiring a 20% down payment for home loans. You’ll also have a better chance to secure an auto loan with the best rates and terms with more money down, especially for new cars that depreciate rapidly.

Aim for 20% down on a home or a car that you’re buying. As a bonus, having a 20% down payment for your home purchase helps you avoid paying private mortgage insurance.

10. Get a Secured Loan or Credit Card

Don’t forget the steps you can take to build credit now, if your credit profile is thin or you’ve made mistakes in the past. One way to do this is applying for a secured credit card or a secured loan, both of which require collateral for you to get started.

The point of a secured credit card or loan is getting the chance to build your credit score and prove your creditworthiness as a self-employed worker, when you can’t get approved for unsecured credit. After making sufficient on-time payments toward the secured card or loan, your credit score will increase, you can upgrade to an unsecured alternative and get your deposit or collateral back.

The Bottom Line

If you’re self-employed and worried that your work status will hurt your chances at qualifying for credit, you shouldn’t be. Instead, focus your time and energy on creating a reliable self-employment income stream and building your credit score.

Once your business is established and you’ve been self-employed for several years, your work status won’t matter as heavily. Keep your income high, your DTI low, and a positive credit record, you’ll have a better chance of getting approved for credit. 

The post Why It’s Harder to Get Credit When You’re Self-Employed appeared first on Good Financial Cents®.

Source: goodfinancialcents.com

The Magical Third Paycheck: 5 Budgeting Hacks If You’re Paid Biweekly

If you get paid every two weeks, you’ve probably noticed extra money coming your way certain months. Maybe you even thought your company’s payroll made a mistake! But it’s no mistake. You get two magical months like this a year: when you suddenly have a third paycheck and—the best part is—your monthly bills stay the same. Yes, it’s appropriate to jump for joy—provided you have a plan for that extra income.

Why does this happen in the first place? If you’re paid biweekly, you get 26 paychecks throughout the 52-week year. That means two months out of the year, you end up getting three paychecks instead of your regular two.

Those two extra paychecks can go a long way. But without a plan in mind, they can also disappear. Fast. The first budgeting trick to saving two paychecks is to find out when they will hit your account. Grab a calendar and write down your paydays for every month in a given year and highlight the two extras. Maybe even put calendar reminders in your phone so you can track when the additional funds will hit your account. The extra paychecks will fall on different days every year, so tracking them in advance is key.

Samuel Deane, a founding partner of New York City-based wealth management firm Deane Financial, says there isn’t one correct way to budget with an extra paycheck, but that it should depend on your personal situation and financial goals. You could decide to give yourself some extra room in your budget throughout the year, for example, or use the extra money for something specific.

There are a few different ways to budget with an extra paycheck.

How can I budget for an extra paycheck? Consider these 5 budgeting hacks if you’re paid biweekly:

1. Pay down (mainly) high-interest debt

Once you’re done jumping for joy at the realization of the third paycheck, consider how your budget with an extra paycheck could help you pay down debt. “The first thing I usually tell my clients is to get rid of high-rate debt, which is usually credit card debt,” Deane says.

Before paying off debt with your new budget with an extra paycheck, make a list of all of your debts organized by balance and annual percentage rate (APR). Paying off the debt with the highest APR could save you the most money because you’re paying the most to carry a balance. Paying down a few low-APR, low-balance debts can also help you gain momentum and bring other financial benefits. For instance, if you owe close to your credit limit on a credit card, the high credit utilization—or card balance to credit limit ratio—could negatively impact your credit score.

If your budget with an extra paycheck includes debt repayment, you’ll start to owe less and have less interest accruing each month, freeing up even more cash from subsequent paychecks.

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“The first thing I usually tell my clients is to get rid of high-rate debt, which is usually credit card debt.”

– Samuel Deane, a founding partner of wealth management firm Deane Financial

2. Build an emergency fund

Paying down debt isn’t the only way to budget with an extra paycheck. “Taking a look at whether you have a sufficient emergency fund is pretty important,” says Dan Stous, director of financial planning at Flagstone Financial Management.

An emergency fund of three to six months of your regular expenses can help you weather financial setbacks, such as a lost job or medical emergency, without having to take on new debt. Keeping these funds separate from your regular checking and savings accounts can help you keep them earmarked for the unexpected (and reduce the temptation to dip into them for non-emergency expenses). Places to keep your emergency fund include a high-yield savings account, certificate of deposit or money market account.

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If creating an emergency fund or adding to an existing one is on your to-do list, a budgeting trick to save two paychecks is to automatically transfer your extra paychecks into your emergency fund account.

3. Save for a big goal

If you want to save for a goal like a new car or home, or contribute to tax-advantaged retirement accounts, contributing two full paychecks out of 26 can be a good start. “If a client is debt-free and doing well, they might be able to focus on other goals,” Deane says. If you’ve got a financial goal in mind, a budgeting hack if you’re paid biweekly is to transfer your two extra paychecks from your checking account to a savings or retirement account right away.

Using your extra paycheck to save for a goal, like a new home or new car, is a smart budgeting hack if you're paid biweekly.

If you have a 401(k) through an employer and already contribute enough to get your maximum annual match, Deane says you may want to consider a Roth IRA. A Roth IRA is for retirement, but it also allows first-time homebuyers who have held their account for at least five years to withdraw up to $10,000 to buy a home, Deane says. Your budget with an extra paycheck could then go to either major goal.

Even loftier, “you could put aside money to start a business,” Deane says. If you plan on starting a business someday you could put away the paychecks annually and let those savings build as start-up capital.

4. Get ahead on bills

If you already have an emergency fund, are currently debt-free and are making good progress on your savings goals, try this budgeting hack if you’re paid biweekly and get a third paycheck: Pay certain monthly bills ahead of time.

“If you have the ability to prepay some of your bills, it can ease anxiety in the coming months,” Deane says.

Before using this budgeting hack if you’re paid biweekly, check with your providers to confirm that you will not be met with a prepayment penalty, and get up to speed on any prepayment limitations. Some providers may even offer a discount or incentive if you pay something like a car insurance bill all at once. You could also explore whether or not prepaying your bills makes sense for utilities, your cellphone or rent.

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5. Fund much-needed rewards

If you’re looking for budgeting hacks if you’re paid biweekly, consider that managing money isn’t only about dollars and cents. Emotions often play an important part in personal finance, and they’re often the root cause of people’s decisions. Accepting this fact could be an important part of successfully managing your money.

“From an emotional and behavioral standpoint, people should reward themselves for being responsible,” Stous says. “Basically, treat yourself.”

Perhaps you need a vacation from the daily grind, want to enrich or educate yourself or your family or simply want to get a date night at your favorite restaurant on the calendar. A budgeting trick to save two paychecks could be supplemented with some spending on yourself.

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“If you have an extra paycheck and a debt reduction goal, then maybe you apply the whole thing toward that goal. On the other hand, maybe you have a goal to retire in 10 years and you’re off track. Then, it’d be wise to put that money, or at least a portion of it, toward that goal.”

– Dan Stous, director of financial planning at Flagstone Financial Management

There’s no one-size-fits-all budgeting trick to save two paychecks

When you’re deciding how to budget with an extra paycheck, you might find yourself going back and forth between options.

“If you have an extra paycheck and a debt-reduction goal, then maybe you apply the whole thing toward that goal,” Stous says. “On the other hand, maybe you have a goal to retire in 10 years and you’re off track. Then, it’d be wise to put that money, or at least a portion of it, toward that goal.”

Even though budgeting solutions are not the same for everyone, being disciplined and proactive about the savings opportunity of a third paycheck can help you form a strong foundation for your financial future.

The post The Magical Third Paycheck: 5 Budgeting Hacks If You’re Paid Biweekly appeared first on Discover Bank – Banking Topics Blog.

Source: discover.com

10 Financial Steps to Take Before Having Kids

According to the U.S. Department of Agriculture (USDA), raising a child to the age of 18 sets families back an average of $233,610, and that’s for each child. This figure doesn’t even include the cost of college, which is growing faster than inflation. 

CollegeBoard data found that for the 2019-2020 school year, the average in-state, four-year school costs $21,950 per year including tuition, fees, and room and board. 

Kids can add meaning to your life, and most parents would say they’re well worth the cost. But having your financial ducks in a row — before having kids — can help you spend more time with your new family instead of worrying about paying the bills.

10 Financial Moves to Make Before Having Kids

If you want to have kids and reach your long-term financial goals, you’ll need to make some strategic moves early on. There are plenty of ways to set yourself up for success, but here are the most important ones. 

1. Start Using a Monthly Budget

When you’re young and child-free, it’s easy to spend more than you planned on fun activities and nonessentials. But having kids has a way of ruining your carefree spending habits, and that’s especially true if you’ve spent most of your adult life buying whatever catches your eye.

That’s why it’s smart to start using a monthly budget before having kids. It helps you prioritize each dollar you earn every month so you’re tracking your family’s short- and long-term goals.

You can create a simple budget with a pen and paper. Each month, list your income and recurring monthly expenses in separate columns, and then log your purchases throughout the month. This gives you a high-level perspective about money going in and out of your budget. You can also use a digital budgeting tool, like Mint, Qube Money, or You Need a Budget (YNAB) to get a handle on your finances. 

Regardless of which budgeting tool you choose, create categories for savings (e.g. an emergency fund, vacation fund, etc.) and investments. Treat these expense categories just like regular bills as a way to commit to your family’s money goals. Your budget should provide a rough guide that helps you cover household expenses and save for the future while leaving some money for fun.

2. Build an Emergency Fund

Most experts suggest keeping three- to six-months of expenses in an emergency fund. Having an emergency fund is even more crucial when you have kids. You never know when you’ll face a broken arm, requiring you to cover your entire health care deductible in one fell swoop. 

It’s also possible your child could be born with a critical medical condition that requires you to take time away from work. And don’t forget about the other emergencies you can face, from a roof that needs replacing to a job loss or income reduction. 

Your best bet is opening a high-yield savings account and saving up at least three months of expenses before becoming a parent. You’ll never regret having this money set aside, but you’ll easily regret not having savings in an emergency.

3. Boost Your Retirement Savings Percentage

Your retirement might be decades away, but making retirement savings a priority is a lot easier when you don’t have kids. And with the magic of compound interest that lets your money grow exponentially over time, you’ll want to get started ASAP. 

By boosting your retirement savings percentage before having kids, you’ll also learn how to live on a lower amount of take-home pay. Try boosting your retirement savings percentage a little each year until you have kids. 

Go from 6% to 7%, then from 8% to 9%, for example. Ideally, you’ll get to the point where you’re saving 15% of your income or more before becoming a parent. If you’re already enrolled in an employer-sponsored retirement plan, this change can be done with a simple form. Ask your employer or your HR department for more information.

If you’re self-employed, you can still open a retirement account like a SEP IRA or Solo 401(k) and begin saving on your own. You can also consider a traditional IRA or a Roth IRA, both of which let you contribute up to $6,000 per year, or $7,000 if you’re ages 50 or older. 

4. Start a Parental Leave Fund

Since the U.S. doesn’t mandate paid leave for new parents, check with your employer to find out how much paid time off you might receive. The average amount of paid leave in the U.S. is 4.1 weeks, according to a study by WorldatWork, which means you might face partial pay or no pay for some weeks of your parental leave period. It all depends on your employer’s policy and how flexible it is.

Your best bet is figuring out how much time you can take off with pay, and then creating a plan to save up the income you’ll need to cover the rest of your leave. Let’s say you have four weeks of paid time off, but plan on taking 10 weeks of parental leave, for example. Open a new savings account and save weekly or monthly until you have six weeks of pay saved up. 

If you have six months to wait for the baby to arrive and you need $6,000 saved for parental leave, you could strive to set aside $1,000 per month for those ten weeks off. If you’re able to plan earlier, up to 12 months before the baby arrives, then you can cut your monthly savings amount and set aside just $500 per month.

5. Open a Health Savings Account (HSA)

A health savings account (HSA) is a tax-advantaged way to save up for health care expenses, including the cost of a hospital stay. This type of account is available to Americans who have a designated high-deductible health insurance plan (HDHP), meaning a deductible of at least $1,400 for individuals and at least $2,800 for families. HDHPs must also have maximum out-of-pocket limits below $6,900 for individuals and $13,800 for families. 

In 2020, individuals can contribute up to $3,550 to an HSA while families can save up to $7,100. This money is tax-advantaged in that it grows tax-free until you’re ready to use it. Moreover, you’ll never pay taxes or a penalty on your HSA funds if you use your distributions for qualified health care expenses. At the age of 65, you can even deduct money from your HSA and use it however you want without a penalty. 

6. Start Saving for College

The price of college will only get worse over time. To get a handle on it early and plan for your future child’s college tuition, start saving for their education in a separate account.  Once your child is born, you can open a 529 college savings account and list your child as its beneficiary. 

Some states offer tax benefits for those who contribute to a 529 account. For example, Indiana offers a 20% tax credit on up to $5,000 in 529 contributions each year, which gets you up to $1,000 back from the state at tax time. Many plans also let you invest in underlying investments to help your money grow faster than a traditional savings account. 

7. Pay Off Unsecured Debt

If you have credit card debt, pay it off before having kids. You’re not helping yourself by spending years lugging high-interest debt around. Paying off debt can free-up cash and save you thousands of dollars in interest every year. 

If you’re struggling to pay off your unsecured debt, there are several strategies to consider. Here are a few approaches:

Debt Snowball

This debt repayment approach requires you to make a large payment on your smallest account balance and only the minimum amount that’s due on other debt. As the months tick by, you’ll focus on paying off your smallest debt first, only to “snowball” the payments from fully paid accounts toward the next smallest debt. Eventually, the debt snowball should leave you with only your largest debts, then one debt, and then none.

Debt Avalanche

The debt avalanche is the opposite of the debt snowball, asking you to pay off the debt with the highest interest rate first, while paying the minimum payment on other debt. Once that account is fully paid, you’ll “avalanche” those payments to the next highest-rate debt. Eventually, you’ll only be left with your lowest-interest account until you’ve paid off all of your debt. 

Balance Transfer Credit Card

Another popular strategy involves transferring high-interest balances to a balance transfer credit card that offers 0% APR for a limited time. You might have to pay a balance transfer fee (often 3% to 5%), but the interest savings can make this strategy worth it.

If you try this strategy, make sure you have a plan to pay off your debt before your introductory offer ends. If you have 15 months at 0% APR, for example, calculate how much you need to pay each month for 15 months to repay your entire balance during that time. Any debt remaining after your introductory APR period ends will start accruing interest at the regular, variable interest rate. 

8. Consider Refinancing Other Debt

Ditching credit card debt is a no-brainer, but debt like student loans or your home mortgage can also weigh on your future family’s budget.

If you have student loan debt, look into refinancing your student loans with a private lender. A student loan refinance can help you lower the interest rate on your loans, find a manageable monthly payment, and simplify your repayment into one loan.

Private student loan rates are often considerably lower than rates you can get with federal loans — sometimes by half. The caveat with refinancing federal loans is that you’ll lose out on government protections, like deferment and forbearance, and loan forgiveness programs. Before refinancing your student loans, make sure you won’t need these benefits in the future. 

Also look into the prospect of refinancing your mortgage to secure a shorter repayment timeline, a lower monthly payment, or both. Today’s low interest rates have made mortgage refinancing a good deal for anyone who took out a mortgage several years ago. Compare today’s mortgage refinancing rates to see how much you can save. 

9. Buy Life Insurance

You should also buy life insurance before having kids. Don’t worry about picking up an expensive whole life policy. All you need is a term life insurance policy that covers at least 10 years of your salary, and hopefully more.

Term life insurance is extremely affordable and easy to buy. Many providers don’t even require a medical exam if you’re young and healthy. 

Once you start comparing life insurance quotes, you’ll be shocked at how affordable term coverage can be. With Bestow, for example, a thirty-year-old woman in good health can buy a 20-year term policy for $500,000 for as little as $20.41 per month. 

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10. Create a Will

A last will and testament lets you write down what should happen to your major assets upon your death. You can also state personal requests in writing, like whether you want to be kept on life support, and how you want your final arrangements handled.

A will can also formally define who you’d like to take over custody of your kids, if both parents die. If you don’t formally make this decision ahead of time, these deeply personal decisions might be left to the courts.

Fortunately, it’s not overly expensive to create a last will and testament. You can meet with a lawyer who can draw one up, or you can create your own using a platform like LegalZoom.

The Bottom Line

Having kids can be the most rewarding part of your life, but parenthood is far from cheap. You’ll need money for expenses you might’ve never considered before — and the cost of raising a family only goes up over time.

That’s why getting your money straightened out is essential before kids enter the picture. With a financial plan and savings built up, you can experience the joys of parenthood without financial stress.

The post 10 Financial Steps to Take Before Having Kids appeared first on Good Financial Cents®.

Source: goodfinancialcents.com

Meet the Man Who Makes $600 a Month Selling Crickets

When Jeff Neal’s wife told him she wanted to quit her job to stay at home with their kids, he had to think about how to make one income work.

When Jeff Neal’s wife told him she wanted to quit her job to stay at home with their kids, he had to think about how to make one income work. With over $21,000 in student loans, there wasn’t much extra money lying around. Losing another income stream would be difficult.

But rather than give up hope, Neal did something no one expected. He launched a side business that helped bring in extra money: selling crickets online.

Yes, you heard that right. Crickets.

Now, Neal makes $600 a month selling bugs online at The Critter Depot, which helps him pay off his debt. Read on to learn more about this odd side hustle and how Neal has turned it into a steady income stream.

Searching for a Side Hustle

Neal graduated from Temple University and got a job as a project manager. While he made a good salary, he had student loan debt and a growing family. When his wife decided she wanted to stay home with the kids, Neal knew he had to make changes.

“My wife wanted to stay home, so I had to take full responsibility as the sole provider,” he says.

Since his full-time job involves e-commerce, he focused his side-hustle search on online jobs. After doing extensive research, he decided to put all of his efforts on one specific niche.

The area that he identified was in the pet industry; reptile and exotic animal owners need live crickets to feed their pets, but getting them can be difficult — and expensive. So, Neal’s site caters to pet owners, selling crickets of various sizes in bulk.

But before you rush out and buy tanks and crickets to replicate Neal’s success, you should know his approach is even more interesting. He actually doesn’t deal with the crickets at all. Instead, his business is a drop shipping company.

What Is Drop Shipping?

Drop shipping is a business model where the store doesn’t stock any of the items it sells. Instead, when a customer purchases a product, the drop shipper works with a manufacturer — or in this case, a cricket supplier — to fulfill the order. The drop shipper never comes into contact with the product, so wrangling crickets isn’t part of Neal’s day.

“I don’t know anything about raising crickets,” he admits. “They have short life spans and unique nutritional and environmental needs. It’s a lot of work that takes a lot of knowledge. When I set up my business, I found someone who breeds crickets. He takes care of them and ships them; I just handle the orders.”

For customers, drop shipping is a seamless process, whether it’s through Amazon or a private site. Most of the time, you don’t know when you’re buying from a drop shipper. Once your order is placed, the drop shipper works with the supplier to place the order, and you receive the item like you normally would.

Drop shipping can be a mutually beneficial relationship between the seller and supplier. In Neal’s case, he has the marketing expertise and skills to build a successful website and business. That gets the cricket farmer more exposure and more orders than he would get on his own. Neal estimates that he generates about $3,000 in sales each month from The Critter Depot and his cut is $600.

Previously, Neal primarily sold crickets on Amazon. But meeting Amazon’s strict standards is hard when you’re shipping live insects. He ended up taking his sales to just his website, which requires more work for him each day to build traffic.

His new income stream allows him to take advantage of other opportunities, too. He recently purchased the site Jason Coupon King, which generates another $700 a month in revenue.

Balancing a Side Gig With Life & Work

While Neal’s side hustle is successful, he has to balance his work with his full-time job and his family. But that’s why he says drop shipping is a great option. It gives him the flexibility he needs while still allowing him to earn extra money.

“I don’t have a television, so when I come home from work, I just spend time playing with the kids and catching up with my wife,” says Neal. “Once they’re in bed, I work on optimizing my websites, contributing to forums and building links to my sites.”

Neal says he spends an hour or two a day after work on his side hustle and that his business is still growing. The extra income is substantial enough to help him pay off his student loans early and give his family more wiggle room in their monthly budget. (You can keep tabs on your own finances by viewing two of your credit scores for free on Credit.com.)

Making Extra Money

While selling crickets might not be for you, Neal’s story is just another example of the many ways you can make money on the side. If you’re struggling to make ends meet, or need more income to pay down debt or boost your emergency fund, launching a side hustle can be the right approach.

Photo courtesy of Jeff Neal 

The post Meet the Man Who Makes $600 a Month Selling Crickets appeared first on Credit.com.

Source: credit.com