All Articles Tagged "Personal Finance"
As much as we do our best to budget, there’s always one or two things missing from our count. It can be very frustrating when you think you’re on the right track only to have less in your account than you calculated. Most of us know those repeat expenses we need pay, but what about the things that can pop up at random times? Here’s a look at some items you need to add to your budget. Hopefully you won’t get caught off guard.
Ladies, the time has come for us to step up our game in the finance department. Even though we’re more likely to enroll in a retirement program, we just aren’t saving up what we should for our days out of the office. Now we can think of tons of reasons why we are lagging behind when it comes to building up a nest egg. Women earn less than men. Most single parents tend to be mothers. The list goes on and on. Rather than go through all the excuses, let’s focus on how we can save more for retirement.
Not having money to support your family can be a horrible feeling. It can make you feel inadequate or as if you aren’t doing what’s necessary to provide for your household. If only passion and ambition came with an automatic paycheck–many of us would be loaded!
The lack of funds can make the most optimistic person feel low, so please try your best not to beat yourself up if you’re doing what you can. Rather than focus on what isn’t working, try to find positive moments that will keep your spirits lifted. Here are some ways being broke can work to your advantage.
No one ever wants to be in a situation where they lose money. What good can come from struggling and living from paycheck to paycheck? If you happen to find yourself strapped for cash, life might be tight right now, but it isn’t over. Here are some tips on ways to deal with income loss.
Oftentimes when we talk about success, we include money in the equation. And it’s not necessarily about being on the Forbes list. Just being able to live comfortably, take a nice vacation (or two) every year, get the kids in college… live a nice middle class life.
There are a number of people who’ve got the nice job with the six-figure salary, yet they still don’t have that life. In fact, they’re living paycheck to paycheck just like people who are making much less. Some are very close to full-on bankruptcy.
Charles Bullock, a bankruptcy attorney in Southfield, MI tells The Wall Street Journal that he’s seen an increase in the number of people with seemingly solid financial backgrounds filing for bankruptcy. It’s “a trend he expects will continue as it becomes easier for consumers to borrow again and investors grow more confident about the stock market.”
Case in point: one woman included in that article, 40-year-old Sylvia Flores, was making $200,000 per year, took family vacations to Hawaii and had a personal chef. Three years ago, she made the decision to get her money situation sorted after she racked up $300,000 in credit card debt. In 2005, she declared bankruptcy after tallying $500,000 in debt.
After taking some cost-cutting measures — getting rid of the personal chef (duh) and getting a smaller condo — she’s managed to get her debt down to $40,000 with that same amount saved for retirement.
The Journal takes a closer look at how exactly a family pulling in hundreds of thousands of dollars can fall into so much debt. The first thing is housing. For many people, the first thing they upgrade when their salary increases is their home. Which means a higher mortgage and expenses for maintaining that home. That’s all fine and well if that’s your big expenditure. But oftentimes, people feel entitled to a more extravagant lifestyle as well. The Subaru gets traded in for an Audi. Date night goes from the local restaurant to the reservations-only fine dining spot. Who wants to work out with the regular folks when you can hire a personal trainer? And charities? Yes, folks start to feel more charitable.
“Karol Ward, a New York psychotherapist who helps clients try to control spending, says some people overspend to fit in with peers or a social circle they aspire to join,” the article says. “One client picked up restaurant tabs for friends and associates because it made him feel important.”
The steps to reaching financial security are the same for these people as for everyone else. Create a budget. Downsize where you can. Re-evaluate your spending habits. Start dedicating more money to saving and less to indulgences. In the case of these high earners, there also needs to be a realization that the salary you have today might not be the one you have tomorrow. Even if your means are higher, you still have to live within them.
If you are working, living, loving, and doing grown woman things, then you need an emergency fund to help you through the times when life (at its worst) happens. Think: a leaky roof, a layoff, a blown gasket, a medical emergency. For the record, an emergency fund is an account that’s earmarked for spending on urgent, unplanned situations only. Finding a freak ‘um dress for a last minute date with the Idris look-alike in Accounting does not an emergency make.
It is best practice to keep your emergency funds in savings accounts or money market accounts so that you have easy access. Emergency funds can also be warehoused in checking accounts. If, however, you have problems with self-control, opt for opening an emergency fund in a bank across town or via an online bank that disburses funds after two or three days. It will keep you honest.
How Big Should My Emergency Fund Be?
There is no consensus in the personal finance world about this topic. Some say that you should save anywhere between six months and 12 months of living expenses. Other pundits believe that you should have between six and twelve months of your net income.
With the former, you just need to calculate your cost of living, which—in theory— should total less than your monthly income. On the other hand, the latter means that you have to stash away more because you are fully replacing your monthly take-home, not your monthly expenses.
Both make sense. Here are some factors to help you consider how big your emergency fund should be.
Six months of living expenses or net income: If you are living in an expensive city, this is a bare minimum to hold you over in the event of a job loss, a medical expense, or any other unforeseen emergency. Keeping this amount of money will keep you from relying on credit cards, which could transform a financial emergency into a financial disaster. In other words, this emergency fund saves you from going into debt.
Nine to twelve months of living expenses or net income: It would be wise to save this amount of cushion if you you’re self-employed, if your income fluctuates (i.e. if you rely heavily commissioned-based) or if you work in a declining industry with lots of layoffs.
Twelve months of living expenses or net income: Save this amount of money if you earn $100,000 or more. There are fewer jobs offering this salary, so your job hunt may be longer than the typical candidate that is seeking positions for more modest salaries. You also want to save this amount if your job is highly specialized. It may take more time to find a job in your field. Independent of job replacement, it would be ideal for you to save this amount in your emergency fund if you have dependents and children.
These rules of thumb provide an ideal and normative framework for personal finance and money management. When it comes to creating an emergency fund, though, the most important thing is that you start building your emergency as soon as possible and keep your hands off the cash until you need it.
So, even if you can’t reach the six-month benchmark right now, don’t use that as an excuse not to start. Every little bit helps.
Connect with Kara @frugalfeminista. Learn more about The Frugal Feminista at www.thefrugalfeminista.com Download her free ebook The 5-Day Financial Reset Plan: Eliminate Debt, Know Your Worth, and Heal Your Relationship with Money in Just 5 Days.
We talk about budgeting on this site all the time: ways to save money, things you might be wasting money on. One sacred thing we don’t talk about: the wine budget. Oh how we love to have a nice glass of wine at the end of the day.
Turns out that habit could be eating — or drinking — away at your bank account.
The Bureau of Labor Statistics finds that we spend on average $445 per year on beer, wine and spirits. And to be honest, that sounds low. If you consider that some portion of people don’t drink, or drink PBRs, box wine or a couple of less expensive half pints per week and that could be driving down the number. Still, even at $445, it’s one percent of household spending.
The latest Gallup poll shows that 64 percent of Americans drink occasionally. Beer is consumed the most. And the average person drinks four alcoholic beverages per week. Nine percent of people drink more than eight alcoholic beverages.
“It is not always the case that we can’t squeeze any more savings out of our budgets,” says Reuters. “It is that we choose not to, because we just don’t want to give up the booze.” The author points to a dietitian who calculated that her wine and gin habit was costing “$180 a month, or over $2,000 a year,” not counting drinks out with friends.
She stopped drinking all together (for a variety of reasons) and found that she saved a lot of money. Perhaps, if some of us thought about it, we could cut back some and save some cash.
But I once had a conversation with a friend about a similar indulgence: coffee. I’m one of those people who enjoys a large cup every morning. (Media people love their coffee.) This friend, also a member of the media, argued that the spend on coffee was a minor indulgence that helps us steer clear of larger ones. Spending $3 on coffee in the morning is a deterrent against spending, say, $12 at lunch to make up for the “deprivation.” We suggest often that people make coffee at home to save money. If you do that, or take some other belt-tightening measure, aren’t you entitled to do something special for yourself elsewhere?
For many, that’s what that glass of wine, pint of beer, or mixed cocktail is. Certainly, you shouldn’t go overboard; if you indulge all the time, it becomes a lifestyle. But a $15 bottle of wine like our dietitian friend describes doesn’t seem like the worst thing, does it? What do we work for if not to enjoy the fruits of our labor both big and small?
What’s your take?
We think we know, but sometimes we have no clue when it comes to personal finances. Sure you are doing things to get by, but is it really enough? You don’t have to work on Wall Street to understand money and how to use it. Common sense is a powerful thing. Here are some of the money lies we tell ourselves. Are you guilty?
There is no greater joy you will ever experience in life quite like having a child. It’s amazing — and yet pricey given the average cost of raising a child these days is over $245,000. It’s funny how much we spend in life without realizing we had that much to spend in the first place. Parents know too well that our little bundles of joy can set us back some serious dollars. Should you be new to the parenting club, here are some tips on ways you can reduce child care costs.
From the Cradle
Over the course of a lifetime, we forge an array of relationships through a combination of choice, circumstance, and fate. The primary relationship — the bond between parents and child — is clinically considered to be one of the most important and influential in our lives. This is because we enter it without choice or preparation, and at the most vulnerable and impressionable stages of our human development: infancy and childhood.
As adults, we are cognizant of how our childhood experiences molded our sexual, racial, and spiritual identities. We may even be able to trace the foundation of our political leanings and political outlooks to certain experiences in our youth. But what about our financial selves? How much do we think about the impact of our primary relationships on the development of our financial identities?
Baby See, Baby Do
During infancy, the principal role of parents is to create a world that is safe and predictable for a baby, providing for basic caretaking needs (i.e. feeding, changing, caressing). The role of parents changes, however, as a baby grows. Once children begin to walk and talk, they not only look to parents for care, but they also look to parents for direction. They look to parents for social clues— how to be, how to think, and how to behave, transmitting values to this younger generation through actions and instructions. That includes their parents’ financial identity.
She Gets It From Her Mama
I serve as the quintessential example of this phenomenon. I make a decent living, hold a number of degrees, and live (way) below my means. Nonetheless, I have this fear of being as broke as a joke. Also, I find it difficult to lend money to family members and to accept money from strangers and loved ones. Moreover, I just do not feel right if I do not have multiple streams of income. I shop wholesale and when I can, I buy it used. Finally, I love using my creativity to make money.
My financial identity as both a disciplined, diligent saver and creative income-generator in my adulthood largely come from both the mistakes and genius that my mother exhibited in handling money as I was coming up.
Many members of our family borrowed money from my mother and never repaid her. As a consequence, she often complained about not having money for what she needed.
- Lesson Learned #1: Money is scarce, (since everyone was asking for it and could not repay it), so hold on to it.
- Lesson Learned #2: Giving money to family can make you sad, so try to avoid it.
- Lesson Learned #3: People do not like to repay money, so don’t expect it back.
We spent Sunday afternoons shopping in wholesale districts and outlets.
- Lesson Learned #1: Bargain-hunting is fun and recreational.
- Lesson Learned#2: You can always pay less for an item.
- Lesson Learned #3: Retail stores price gouge and should be avoided.
I was cashier in my mother’s home-based boutique and worked in my uncle’s grocery stores.
- Lesson Learned #1: Have an entrepreneurial spirit.
- Lesson Learned #2: Learn the consumer interests of those around you and cater to them.
- Lesson Learned #3: Pay your bills on time and keep a great history of credit so you can expand your business easily.
Go Back to Your Financial Roots
Understanding your financial identity is the cornerstone to financial recovery and financial self-awareness. Knowing who you are and why you are the way you are is key to self-acceptance and change. The things that we learned as childhood should be reevaluated and modified if they are not working to our benefit. Through conscious planning, reflection, and the help of others, we have the power to restructure, rebuild, and redefine the influence of the past.