Month: April 2019

Budgeting

Meeting Financial Goals With Your Partner

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two person walking on the train rail

Have you noticed that your partner and you spend money differently? I think most couples do. What are the strengths of your money personality and how can you work with other money personalities to have a great budgeting outcome for your family?

  1. Carefree. A carefree personality can make goals and stick to them. Make goals and progress toward them slowly. Allow yourself or your partner flexibility. A very rigid budget will be hard to maintain.
  2. Big Spender. A big spender will want to focus on big purchases. Make goals to when you and your partner can make these big purchases. Make goals and stay focused on getting quality when you can afford these big-ticket items.
  3. Frugal. This person will want to reach money goals quickly. Add savings goals even when you’re paying off debt. A frugal person will want to see progress in saving money. Write it down to prove to both you and your partner how much progress you are making.
  4. Generous. Generosity is a wonderful quality. It can be frustrating when you’re trying to focus and get debt paid off or save money. But, you should allow the generous partner some flexibility to still do these things.
  5. Secure. The secure person will be focused on long-term security. If one of the partners has a secure personality, you need to have an emergency savings that is comfortable for both of you.

No matter your personality type, you need to be willing to work with your partner and find ways to meet both of your goals. You can do this at the same time or agree to work on one goal for some time and then move to the other goal. Agreeing on a plan to reach common goals is very important but you can reach them by working together.

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Budgeting

Good debt v bad debt

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The debt free community would tell you there’s no such thing as good debt. I agree that most debt should be avoided. But, you need tools to understand debt rather than shame about your debt. Let’s evaluate the different kinds of debt and talk about how you can make them work in your budget.until debt tear us apart brick wall vandal

1. Payday loans, title loans and credit cards. These are the worst debt to get yourself into. Bad debt is defined as debt for things that don’t bring value. These kinds of loans are usually for living day-To-day and do not add any value. They all generally have crazy high interest rates. So, you bought stuff and if you’re paying only the minimums you will pay forever. Paying off a credit card every month is the only one of these options that is okay. The payday and title loan companies make it very difficult to break free from them. But, do it today!

2. Leases. If you have a lease, get out as soon as possible. Sometimes, there is an early lease termination fee that is hefty but better then paying for this lease. Leases are a way to purchase a brand-new car with a lower payment. You don’t need a brand-new car. And, you don’t need the dealership telling you how many miles to drive. These are a trap and you will turn in a car at the end without getting anything for all of those payments.

3. Home Equity Lines and Reverse Mortgages. The only time to even consider a home equity line is to renovate or remodel your house. These mortgages are very dangerous because the collateral is your house. Don’t lose your house because you have these loans for small purchases and can’t even remember what you paid for them. Reverse mortgages involve when you have paid off your house but want more money to cover living expenses. So, the mortgage company sends you a check but then when you pass away or sell the house, the mortgage amount is owed to them in full. When you retire, you should be avoiding debt.

4. Car Loans. Cars lose value over time. So, you are paying interest on an item that is losing value. Sometimes, you can’t even keep up with the decline in value. That’s how you get yourself “upside-down” on your car loan. It is a good idea to purchase a used car for a little less money with a good down payment. This way you start with some value in the car. Even if you plan to drive the car for many years, sometimes, things will happen.

5. Student Loans. These are generally considered to be good debt. But, I will caution about too much. Living off of student loans is not a good idea. Why not try getting a part-time job to pay living expenses while you go to school? You could also save up money in the summer or from your high school job. People are racking up $50,000+ to get a bachelor’s degree. Really consider whether you can afford to pay back the payments. You don’t want to be a slave to these student loans for many years.

6. Mortgage. This is arguably the best debt to go into. But, remember, not that long ago, the housing market popped. The house prices in our city were growing so rapidly when suddenly, they dropped. People couldn’t sell anything and short sales became common. Make sure your mortgage is affordable for you, you have an emergency fund and you owe less on your house then it is worse. Don’t overpay or get excited about buying when prices are very high.

You really can do this. It’s called budgeting and getting your finances in order. Money stress is not healthy and there are ways to lessen your burden. Keep moving forward.

Budgeting

5 Tips for Making Better Money Decisions

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https://www.cnbc.com/2019/04/09/how-to-make-smarter-financial-decisions.html

According to a CNBC study, more than 75% of Americans manage their own money. But, consumer debt has risen to $4 Trillion. This means more and more people don’t know what they are doing and keep paying for things they don’t need or even really want in order to keep up with the neighbors.

Here are my 5 tips for making better money decisions.

  1. Sleep on it. Wait at least one day to make decisions. Being decisive with your money isn’t always a good thing. Many people in the #debtfreecommunity put things in their Amazon cart and then don’t checkout until a day or two later. That gives you time to think about purchases.
  2. Save for it. When making a big decision, you should always save for it. If you’re thinking of buying a car, start saving a big down payment. You should be paying at least 20% of it in cash. Or, you can even pay for it in full. If you can’t afford to put down 20% of it, can you really afford it?
  3. Plan for emergencies. This one comes up over and over. The survey says that most Americans can’t even afford a $1,000 emergency. But, especially if you own a home or have a big family, these happen all the time. You don’t want all your money decisions forced by emergencies.
  4. Plan for all expenses. Understand your true expenses and plan ahead for how to cover those expenses. If you keep having emergencies, build a fund each month. As you budget, this will get easier.
  5. Make it do. How much of your spending is for wants? The 50-30-20 principle, says 30% of your money should be for wants. This includes shopping, dining out and hobbies. You take your after-taxes paycheck and multiply it by .30 to calculate what 30% of your take-home money is. What could you cut out? What could you use again? What could you make do with?

It’s finally spring and it’s a great time to turn your finances around. I offer zoom appointments to help you get started on fixing your finances. E-mail me through my contact page.

Budgeting, taxes

Did you owe taxes this year?

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Many people in the U.S. were frustrated this year by the amount they owed to the IRS. The Tax Cuts & Jobs Act was supposed to save taxes not increase them. First of all, it will help to understand payroll withholding and then how your balance due or refund is calculated.

Payroll withholding is how much your employer holds out of each paycheck and sends to the government to help pay your taxes for the year. Your employer looks at your paycheck amount and calculates how much your tax liability will be if you make the same amount all year. They withhold that amount from the paycheck. That’s why when your paychecks are large, your withholding might be really high.

Balance due or refund is calculated by your actual tax liability minus your payroll withholding for the year. At the end of the year, we add up what you actually made for the year, and then calculate the taxes on that amount of income. This is your tax liability. We then subtract your withholding amount from your tax liability to calculate the balance or refund.

The Tax Cuts & Jobs Act changed the withholding tables. When the tax laws were changed, the employers were given new withholding tables to hold out more or less of each paycheck. So, the idea was to enjoy more of your money during the year. I actually agree that getting a big refund isn’t ideal. I would rather use my money during the year. The government doesn’t pay you any interest. So, they get to use your money all year without paying you for it. Here are two options:

  1. Leave your withholding as is, and save the money to pay your balance due. Divide your balance due from 2018 by how many paychecks you have left in the year, and save that money from each paycheck. Then, when you get your taxes done, you’ll be prepared to pay the money. Having the money planned and set aside empowers you to go get your taxes done early, and be able to say “I’m prepared.”
  2. Change your withholding. The IRS offers a paycheck checkup on their website. You can go here and enter your information to know what to tell your employer to withhold from your paychecks. You calculate the exemption amounts. If you don’t think it will fix your amounts enough, talk to your employer about other options. You can claim less exemptions, you can withhold at the higher single rate, and/or ask your employer to withhold an extra percentage or amount from each paycheck.

Give yourself the power to understand taxes and you will feel better at tax time. Nobody really likes taxes but it is so much easier when you are prepared. Without getting too political, our taxes do pay for many incredible things like education, roads, and safety.

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This guy says thank you.

Budgeting

9 Ways to Lower Cell Phone Bill

e3accountingsolutions

When you look at your budget, you might find that your cell phone bill is a major part of your monthly expenses. Yes, we all need one and most people need a reliable one with good service for various reasons. So, I won’t tell you to get rid of yours but here are some ways to cut back.

woman holding iPhone during daytime
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  1. Lower data usage. This is one of the easiest ways to cut back on your cell phone expense. Maybe you don’t need the unlimited plan. You can use Wi-Fi often. You can also go into your settings for each app and turn off background refresh when not using. This is a setting that is easy to click on when you add the app to your phone. But, it means that the app is constantly running and using some data. Even just your e-mail could be using a lot of data by refreshing constantly.
  2. Sign up for a family plan. A family plan paid by different individuals is generally much cheaper than an individual plan. Make sure you trust the person to pay the bill. Pay your part of the bill on time and be willing to help out when the plan goes over on data usage. This is also a great way to have enough people on there to justify the unlimited account.
  3. Sign up for paperless billing or automatic pay. With most carriers, signing up on automatic payment will save you a little money each month. My account is currently shared with my parents and my mom’s card is on the automatic payment. But, I go in before the due date every month and pay my portion of the bill. Then, she only gets charged for her portion. We save $5 a month by using autopay.
  4. Look for extra charges. Don’t pay for insurance on your phone. Invest in a good case and treat it like it’s $500 (it kind of is). If you are worried about something happening to your phone, pay yourself $20/month to have money set aside to buy a new phone. If nothing happens, then you can pay cash for your next phone.
  5. Don’t buy the newest phone. Really examine if you need a new phone. My mom recently got the new iPhone X. Her previous phone was not going to be supported anymore with Verizon. She had had an iPhone 5 for a few years but had had a flip phone before that. It makes sense for her to buy the best phone because she will keep it forever. But, if you want to upgrade just to upgrade all the time, maybe you don’t need the best phone.
  6. Pay cash. Most carriers don’t really charge a different rate if you pay installments or up front for the cell phone. But, if yours does, make sure to pay cash for your phone. Saving up before buying the phone, can lower your monthly expenses.
  7. Don’t pay late. I really hate late fees and avoid them at all costs. Get ahead of your expenses and have the money set aside at least one paycheck before the due date.
  8. No-contract phones. When my teens started, I put them on this great plan called Ting. They use T-Mobile and Sprint towers for service so the service was decent. But, we only paid for the number of calls, text and data used. We could cancel it at any time. But, they learned how to be careful with their usage. If they went over a certain amount, I had them pay the bill. We used it as a great way to teach them about money and paying their own bills.
  9. Change carriers. This one is hard. But, if your cell phone carrier if your cell phone bill is making it hard for you to reach your other goals, you might look into switching carriers. It’s not that painful, I promise. Look at reviews and ask around. My specific area doesn’t always have the best reception, so I have to be careful which carriers I use. Otherwise, I could have very spotty data coverage at my house.

“Add up all the long-term costs before you buy. If you’re shopping carriers, you should add up the cost of the phone plus the cost of the service for the year. That puts the total amount in your face instead of just the month-to-month payments.

Remember, your budget is all about the numbers! If you can lower your cell phone bill and make it a smaller part of your budget, you’ll have more money on hand to hit your goals each month—whether that’s throwing more at your debt or saving for your future.Cutting back on your cell phone bill is just one of the many things you can do to free up some extra cash in your budget.” Dave Ramsey

Comment below if you have other ideas to save your cell phone bill. If you need help getting started with your budget, just start somewhere. E-mail me at erin@e3accountingsolutions.com if you have questions.

Budgeting

5 Tips for lowering auto repair expenses.

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A friend recently called and needed my husband to tow his car to the car repair shop. He’s had his car for about a month when his mom handed it down to him. It had been a good car for her. But, the engine belt fell off because it should have been replaced some time ago. The car overheated and the engine was blown. It was a very expensive repair. Car repair and even car maintenance can hit your budget hard. Here are five ways to avoid causing expensive auto repairs.

  1. Follow maintenance schedule. Nobody wants to spend money on a car that is working fine. But, the maintenance schedule is very important. It can help you avoid costly emergency repairs.
  2. Warning lights and other problems you notice. When the warning lights turn on, look at your owner’s manual for a list of what it means. Some of these lights should be investigated immediately. If you have warning lights or are having problems, have it looked at immediately.
  3. Upgrade motor oil. I try to be frugal but I always use upgraded motor oil. It helps my car run better and helps the engine to last longer.
  4. Keep tires inflated and rotated. Uneven wear on tires usually means that something else is wrong. Tires are expensive and getting them rotated regularly will help them last longer.
  5. Look for a reputable company. Always get three estimates. Don’t always go with the lowest price. Sometimes, the lowest price will just go up once they start working on the car. And, avoid predatory financing companies. These companies will offer to let you pay over a period of time but you should shop around before signing for a loan. You don’t want the loan to outlast the car repair.

In December, we were going on a trip and taking both of our cars. We needed to buy new tires for both cars and brakes for my car before we went. We couldn’t afford to have something happen while we were gone. But, it was very expensive.

You should have an emergency or sinking fund for car repairs. The older your cars, the more you should have in this fund. If you don’t use it when you’re ready to buy a car, you could use it for a down payment. Just start this month. If car repairs keep happening now is a great time to start putting away money for that.

Set a budget. If you need help with how much you should or could be putting into this fund, please contact me.

Budgeting

Saving Money at the Warehouse Store.

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I really like going to the warehouse stores like Costco and Sam’s Club to buy some things. I mostly buy freezer stuff and paper goods. There are many ways to save money at these stores but you have to be careful or you are actually spending money.

  1. Don’t overspend. Only buy what you can use. Freeze some. Share with a friend. You spend all this money and then you also need to have room to store the purchases. I always have a very set budget when I go to these stores. I think of it as the $10 store. I round the price of each item to the nearest $10 and then add it in my head. You can also take a calculator and calculate the actual price. Then, I put things back if I don’t have that much money in my budget.
  2. Don’t waste food. It can be so tempting to buy the big bulk items but you should always carefully consider the needs of your family. My family drinks two different kinds of milk. So, at Costco where you are required to buy two gallons at a time, we don’t even always drink the two gallons before it goes bad.
  3. Check price per unit. On the internet, there are lists of prices per unit at other grocery stores. Make sure that you are buying at a lower price per unit. Just because it’s bulk doesn’t mean it’s cheaper. This is why I only buy a few things regularly. I know the price at the grocery store. Usually, there needs to be a good sale to beat this price. But, I watch the prices and make sure I’m getting a good price.
  4. Shop sales. Buy things when they are on sale or a coupon is offered a few times a year. If you shop the sales at the regular grocery store and stock up, you could save significant money over paying for the membership and purchasing in bulk.. Confession: I’ve never been a great coupon/sale shopper. I just try to buy things when they are on sale as much as possible. In regards to shopping at Costco, I just prefer to get a good price all the time. I do stock up when they have their coupon events, also.
  5. Evaluate your membership every year. Both places offer cash-back if you upgrade from the basic membership. But, you should be making sure that this option is saving you money. When I purchased diapers and gas, the upgraded membership almost paid for itself. The basic membership would have cost more at the time. Now, I don’t live that close to Costco or go very often. So, I don’t see as much savings and it’s just better to pay for the basic membership. You can also shop at Costco with a gift card and no membership. They will charge you an extra 5% on many items. But, if you have a friend that you could give money to give you a gift card, that could be an excellent option. Maybe they’d take you with them when they go, and you could just pay cash.
  6. Danger of impulse buys. These stores really love their samples, demo tables and special events. Watch out for these items. When I take my kids, for instance, I often leave with a bunch of these sampled items and then realize that I overspent on those things. They don’t generally sample items unless their margin is high. This means their profit on this item is a high percentage of the purchase price. I don’t even like to talk to the special event people because they pressure you to purchase when it’s really not that great of a deal. I usually come home and look it up online or even on Amazon if it’s something I am actually interested in.

Be very careful about your spending at the warehouse stores. At the regular grocery store, the profit margin is cents on most items. But, the warehouse stores can get away with several dollars because the items are in bulk. Don’t get sucked into paying for a yearly membership just so you can save a few cents here or there.