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How to Build an Emergency Fund By the End of Summer

Mikey Rox — Tue, 29 May 2018 08:00:19 +0000

Everyone needs an emergency fund to cover life's what-ifs. Without one, a sudden home repair, job loss, or health crisis could leave you facing debt and desperation.

It's often touted that a solid emergency fund should have at least six months' worth of daily living expenses in it — but the truth is that goal amount is relative to each individual's circumstances. If you have a mortgage and kids, you'll need a lot more in your emergency fund than, say, a 20-something entry-level professional who shares a rental with roommates.

If you don't yet have this safety fund, don't worry. You can build up the bucks in just 90 days.

Open a new savings account at a different bank

The problem with having your savings account attached to your checking account is that it's too easy to transfer money over when the latter runs low. This makes it hard to grow an emergency fund substantially. To avoid this temptation, open a new savings account at a bank different from the one where all your other accounts live (preferably while there's a promotion going on, like $XX free dollars when you open the account), so you can't easily access that money. Out of sight, out of mind works with very little effort in this case. (See also: 5-Minute Finance: Start an Emergency Fund)

Put away the plastic and cut out nonnecessities

One of the biggest deterrents to making progress on savings goals is having plastic in your pocket at all times. Nip the temptation in the bud by removing all credit cards from your wallet (except for maybe an emergency card — which should be used for emergencies only!), hiding them someplace secure in the house, and living on a cash-only budget for the summer months while you build your emergency fund.

While you're at it, cut the extra fat from your budget, including subscription services, excessive drinking and dining out, paid activities, and expensive travel. You can still do plenty of fun things in moderation, but you also should be looking for savings and discounts whenever you're indulging. This is an everyday habit I practice, and it'll start to come naturally to you as well once you see how much money you can save with very little effort. (See also: Are You Spending Too Much on "Normal" Expenses?)

Side hustle your way to big money

I'm a single, nearly-divorced guy with no dependents other than my dog. I own a media consulting business, which serves as my primary income, but I also work four separate side hustles regularly (plus a couple mini ones) because I want more for my life than to "just get by."

To make extra money for my emergency fund, I open my home up to vacationers via Airbnb, shop and deliver customers' grocery through Instacart, pick up and drop off passengers with Uber and Lyft, and sit people's pets with the help of Rover.com. Combined, the income I earn from these gigs — which fit perfectly into my schedule — averages out to about $60,000 annually, about half of which I make during the summer months due to travelers and vacationers. By itself, that's a decent full salary for anyone to live off, but if you manage your time and money well enough, it can exist solely as your savings. (See also: 9 Summer Side Gigs for Grown-Ups)

Search your insurance policies for savings

Whenever I'm searching for extra savings, one of the first places I look is my monthly bills. Maybe there's an error I missed, or maybe there's a way I can manipulate the service I'm paying for in a way that will keep more cash in my pocket. Like my insurance policies, for instance.

Dan Green of personal finance site Growella suggests examining these policies for deductibles, specifically your auto and renters' policies.

"If you have $1,000 saved, raise your deductibles to $1,000," he advises. "This will get you an immediate discount on your bills, which you can use to boost your savings."

Set aside any cash you receive

I often receive cash tips during my Instacart shifts and sometimes on Uber and Lyft runs, and every dollar of that goes into an envelope at the end of the day. In fact, since January I've saved over $600 in cash tips alone. But I also stash away any other cash I receive; like for my birthday or holidays; lottery winnings; store refunds; yard sales; friends paying me back; and competition winnings, like the end-of-year payout from my bowling league. It adds up pretty quickly if you're consistently sending all cash you receive to your emergency fund.

Set up an automatic monthly transfer

Building an emergency fund in just 90 days is a tall order, but you'll make bounds toward that goal by setting up automatic weekly or biweekly transfers — essentially a direct deposit from you to you — scheduled for the days you get paid.

"If you start with $25, that's $100 per month, or $300 by the end of the summer," says certified financial planner Tony Drake, CEO and founder of Drake & Associates in Waukesha, Wisconsin, but I recommend going bigger than that if you can reasonably afford it — maybe $50 a week — to hit the ground running on June 1.

Earmark your seasonal job paycheck for your emergency fund

If you're taking on a seasonal job for "extra" money, send most of it (at least 75 percent) to your emergency fund. Have fun with the rest; it is summer, after all.

Shop in-season foods while eating lighter and less

My grocery bills drop dramatically in the summer because I eat less — hot weather suppresses my appetite — but I also try to stick to the cheapest and healthiest in-season foods at the supermarket. I also take advantage of free food opportunities, like happy hours that offer free snacks; parties and get-togethers at friends' houses; art gallery receptions and other free food-available events; and my local garden, which offers free produce to residents. Whatever you would have spent that day by swapping in these alternatives, send that amount to your emergency fund. (See also: 5 Offseason Foods That Are Destroying Your Grocery Budget)

Turn saving into a competition with someone you know

I'm nothing if not competitive, and I'm always up for a challenge. If that sounds like you, raise the stakes by inviting someone to participate in a savings race with you. First one to $X, 000 wins.

Renegotiate your cellphone, cable, and internet contracts

I call my providers once a year to see if there are any new discounts or promotions for which I qualify. I generally have luck across the board since cell, cable, and internet plans are in constant flux. Most recently I took advantage of the partnership Uber has with AT&T, and I'm currently saving 22 percent off my monthly bill. Whatever you manage to shave off can go directly into your growing emergency fund.

Gather your junk and sell it

Spend a Saturday going through your house to identify anything you don't need anymore. Plan a yard sale or use online resources like Facebook Marketplace, eBay, Craigslist, and LetGo to get rid of what you don't need for extra money toward your fund. I do this at least twice a year and I routinely make a few hundred dollars on unwanted furniture, old electronics, and more. I've also started selling my used, good-condition clothing on Swap.com, which has so far netted me $483. (See also: 12 Garage Sale Items That Sell Like Hotcakes)

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This article is from Mikey Rox of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

9 Smart Financial Gifts to Give New Grads Besides Cash

Mikey Rox — Tue, 22 May 2018 08:30:42 +0000

Do new grads want cash? Yes — all day long. But you and I both know what new grads will do with it. Instead of setting them up for failure by handing over a hot wad of Benjis that'll burn holes in their pockets, steer them toward success with these financially valuable, money-inspired gifts.

1. Skill-based classes

I knew the basics of cooking and cleaning when I graduated college (I could scrub a toilet and do my own laundry, at least), but there were plenty of skills I lacked — like home improvements, vehicle maintenance, and, yes, money management. And while I had people around to help with many of those inconveniences, I was still kind of a disaster for the first few — OK, six — years on my own.

If someone had gifted me a help-yourself class or two, however, not only would I have been better prepared to enter the "real world" more confidently, but I could have capitalized on those skills to earn side income (because that's the real thing I'm great at). That would have come in handy when I was eating pizza bagels for every meal.

2. Starter emergency fund

New grads won't have the kind of emergencies that older adults do, but even the smallest crisis can turn into a major financial burden for someone just starting out. Lend a helping hand by setting up an emergency fund in their name at your bank (not theirs) so they're unlikely to drain it for early-20s nonsense.

Put aside $500 to $1,000 to start and add money as you see fit, or let the grad know that they can transfer money into the account when they have a little extra to spare. Their own contributions will provide even more padding when the going gets tough. (See also: 7 Easy Ways to Build an Emergency Fund From $0)

3. Website domain

Most college grads — heck, even high-schoolers — are tech savvy, but they may not have thought to secure their name as an internet domain for future use. I love this idea because while it's not a tangible gift, it is a gift that can spark inspiration. If someone handed me a website domain and told me to run with it, I'd at least ponder the possibilities, and that's all some people need to go full steam ahead. (See also: 8 Surprising Ways a Personal Website Can Improve Your Life)

4. Loyalty points

If you've racked up loyalty points and want to save money on grad gifts, look into gifting these transferable rewards.

"Loyalty points are a great money gift to give new grads instead of cash," says U.S. Travel Association spokesperson Laura Holmberg. "Loyalty points allow them to cash in for unique travel experiences at the time and destination of their choice — maybe for a post-grad getaway, or to put toward that first vacation once they're in the 'real world.'"

5. Big-idea books

New grads might not want to crack open a book right away, but gifting self-help books that lie in waiting until they're ready will be worth every penny once they pick them up and implement the actionable advice.

Some of my favorites include author-entrepreneur David Pike's The New Startup and The Startup Playbook by Rajat Bhargava and Will Herman (both are perfect for grads trying to figure out what they want to do with their work life), as well as David Carlson's Hustle Away Debt (because there will be a lot of debt to hustle away). (See also: The 8 Classic Personal Finance Books You Must Read)

6. Gift cards for life's necessities

Gift cards are a safe and popular gift to give, but when buying for new grads, think practical instead of frivolous. They might not appreciate $50 to a supermarket in the moment, but there will come a time they'll recognize that gift card as perhaps the most thoughtful and useful of the bunch. Other sensible gift card ideas include cards for gas, a new interview suit, work supplies, and home essentials.

7. Student loan payment

Many college grads start life with student debt looming over their heads, and you can help alleviate that burden somewhat by providing a few initial payments as a gift.

"Sit down with them and go through the process of helping them make a payment toward their student loans or contribute installments to their budget to help them on a monthly basis for a few months after they graduate," suggests Alayna Pehrson, financial blogger for BestCompany.com. "Overall, student loans can feel like a major weight to many fresh college graduates, so this gift could really go a long way for your grad." (See also: 15 Ways to Pay Back Student Loans Faster)

8. Investment starter capital

Broke college graduates don't think much about making investments right out of school when they're peering down a dark tunnel of 10 to 20 years of student loan payments. As such, this is a great opportunity for you to take the lead where investing is concerned.

"You can do this by giving them money to invest and starting them out with a well-known investing app like Acorns," Pehrson says. "Again, going through it with them step-by-step can ensure that they actually invest that money."

Take some time to explain how investing works, too. It's scary for a lot of people, but knowing what to do, why, and when will help new grads wrap their head around why it's important to keep this option open as a lifelong financial tactic.

9. Roth IRA

Retirement is the farthest thing from a new grad's mind, but you and I both know the earlier you start saving for that glorious day, the better. And in terms of the ROI, a Roth IRA is near the top of the list of best grad gifts.

Consider this: A max contribution of $5,500 in the starter account you set up for the grad at age 21 will mature to a staggering $71,000 by age 65, assuming 6 percent interest — and that's with no further contributions. Given that 13 percent of Americans have $0 saved for retirement, according to a 2018 GOBankingRates survey, your generous gift puts them well ahead of the curve before life even begins. (See also: 6 Reasons Every Millennial Needs a Roth IRA)

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This article is from Mikey Rox of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

6 Ways to Boost Your Partner's Bad Credit Without Risking Your Own

Mikey Rox — Tue, 08 May 2018 09:00:13 +0000

You can't help with whom you fall in love — and that's never more annoying than when the object of your affection has royally effed up their credit. Nobody's calling it quits over a few past financial mistakes, but the situation will need to improve if you two are planning a future together that includes buying a home, starting a business, or other major money-based life decisions.

Since you're now in this together, you have a responsibility to do what you can to make sure you start your joint life on the right foot credit-wise. Here's how.

1. Help your partner review their credit report to flag and report errors

If your partner has terrible credit, it's likely that they don't know how to pull their credit report, flag errors, and report them to the appropriate authority to have them removed or updated. That's where your expertise (or even elementary knowledge) of how credit reports work comes in. Flagging and reporting credit errors is the first step in getting their situation back on track and under control. Once that's squared away, you can move on to the bigger issues. (See also: How to Read a Credit Report)

2. Provide positive reinforcement instead of bailing them out

It's easy to throw money at a problem to make it go away — especially if you have extra cash to spare and the person you love will benefit immensely from your generosity (at least in the short term). But I urge you to avoid opening your wallet to deal with your partner's bad credit. Instead, provide encouragement that they can manage their debt on their own.

They created this situation, after all, and the only acceptable solution is that they work it out without your financial assistance. Help them in other areas, like navigating their credit report, but don't shill out dough to dig them out. The only thing they'll take away from that scenario is that you'll always be the sucker who pays for their poor judgment.

3. Establish a cash allowance that you'll both adhere to

You can't take your adult partner's credit cards from them (even though you might like to), so an easier-to-swallow solution is to jointly stop using credit and instead switch over to an all-cash budget. If they feel like you're both in this together, they'll be more willing to comply. You might have to make a few sacrifices along the way with your cards not available, sure. But if it helps condition your partner to spend and save smarter, forgoing the treat-yo'-self impulse buys you're used to will be worth it. (See also: How to Put Your Spouse on a Budget Without Ruining Your Marriage)

4. Brainstorm actionable ways they can start chipping away at their debt

Sit down together and come up with ideas about how your partner can start paying down their debt faster. That may involve asking for a raise at work; picking up a part-time job; working a few side gigs, like driving for a ride-sharing service and pet sitting; selling off unwanted or unused valuables; downsizing their lifestyle (maybe it's time to move in together so both of you can save?); and canceling all frivolous monthly expenses, like subscription services and memberships. (See also: 5-Day Debt Reduction Plan: Pay It Off)

5. Schedule autopays on pay days

Help your partner set up auto-payments that coincide with their paydays so the money goes straight from their checking account to their debt accounts, leaving them little time to start a spending spree before handling their financial responsibilities. (See also: 5 Ways to Automate Your Finances)

If your partner doesn't like the idea of auto-paying bills, maybe they could get on board with a regular money meeting where you both sit down each week or month to discuss your budget and bills and make payments in each other's presence. It's a way to keep each other accountable, build trust, and establish good money behaviors. Either of these options will make sure the bills are getting paid on time.

6. Discuss secured credit card options

If your partner's credit score is weak, you can help improve it by encouraging them to open a secured credit card. Secured cards are fairly easy for anyone to get because the risk to the bank is low. That's because the cardholder puts down a deposit that's typically the same size as the credit limit (which will be low to begin with). If the cardholder defaults on the payments, the bank keeps their deposit.

Secured cards are great for building credit because your payment activity is reported to the credit bureaus, just like any other credit card. "After demonstrating consistent payment history, your credit score will steadily improve," says certified financial adviser Lou Haverty. "You could consider applying for a regular credit card when your score is in the high 600 to low 700 range."

I took my boyfriend to the bank to get a secured card after he moved in with me because I wanted him to start rebuilding his weak (but not necessarily bad) credit. This was an important step for us to take early on because I want him to have decent credit if we decide to buy a house together a few years down the road. Sometimes that's how long it takes, so there's no time like the present to start working the system. (See also: The Best Secured Cards)

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This article is from Mikey Rox of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Interest Rates Are Rising: Here's Where to Keep Your Cash

Philip Brewer — Wed, 11 Apr 2018 08:30:05 +0000

These past 10 years, interest rates have been so low it just about didn't matter what you did with your cash. There was a certain convenience to that — you didn't have to move money back and forth between checking and higher-rate accounts, because they paid almost the same. As a bonus, you didn't have to track money market returns to be sure the rate your account paid was still competitive, because they all paid just a fraction over 0 percent.

That has changed. The Fed has already started raising interest rates, and will probably raise rates another three-quarters of a percentage point this year. Already, rates are high enough that it makes a difference where you hold your cash, and that difference is starting to get significant. (See also: How to Benefit From Rising Interest Rates)

Let's take a look at where you should be holding your money, as well as a few reasons why you need cash on hand.

What cash to hold

There are four main reasons to hold cash: liquidity balances, planned expenses, temporary holdings, and an emergency fund. The size of your temporary holdings may vary quite a bit from time to time, but the others have pretty specific parameters that it's worth being clear about.

Liquidity balances

Your income arrives in chunks that don't precisely match the due dates of your bills. Liquidity balances are the cash you keep on hand to smooth that out, so that you can pay each bill when it's due. Sizing the cash demands of your liquidity balances is easy: It's the total of all the bills that might come due between income payments. Once you know this amount, you can set it aside for when you need it.

Planned expenses

Everybody has some expenses that are not regular monthly bills, but are nevertheless known in advance. Some of these are regular, they're just not monthly: tax payments, insurance premiums, tuition payments, etc. Others are irregular, such as discretionary payments on things like home improvements, airfare for your vacation, buying a boat, etc. Regular or irregular, if there's a near-term payment to make, it's good money management to hold some cash to pay it.

Temporary investments

Sometimes you have cash that you've decided to invest, but that you aren't ready to invest yet. Maybe you don't know exactly where the money should go until the next time you rebalance your portfolio. Maybe you expect market conditions to improve. Maybe you're accumulating money to meet the minimum balance of some fund. Whatever the reason, until you're ready to invest, you're holding the money as cash. (See also: How the Risk Averse Can Get Into the Stock Market)

Emergencies

Your emergency fund is cash set aside to handle a financial crisis — a job loss, a medical bill, a home repair, etc. Having the money on hand means that you won't have to turn to credit cards or other forms of debt to get through your emergency. Experts often recommend an emergency cushion of three to six months' worth of daily living expenses. Your unique situation — such as an expensive medical condition or a high-paying job that would be difficult to replace — may call for a larger fund. (See also: 5-Minute Finance: Start an Emergency Fund)

Where to hold your cash

In the U.S., we have a complex history of rules related to ceilings on the rates banks can pay, special exceptions to those rules, and free-market efforts to get around those rules. There are a lot of different kinds of institutions that hold cash and a lot of different kinds of accounts available at one or another of those institutions.

Whatever sort of institution you choose, you still need to figure out what sorts of accounts to use for your cash. Here are the usual suspects.

Checking accounts

For most people, a checking account is their main gateway into the banking system. Their paycheck is direct deposited into their checking account, and most of their bills are paid out of their checking account.

Back in the 1980s and 1990s, banks had to pay reasonably competitive interest rates to pull in money to support their (highly profitable) lending. That became less and less true in the early 21st century, until the financial crisis put an end to it. At the moment, checking accounts pay so little interest that you might as well just ignore it.

That doesn't mean you shouldn't have a checking account — it's just no longer where you should hold your liquidity balances or your cash to cover planned expenses, until just a day or two before you need to make a payment. (See also: 9 Common Mistakes You're Making With Your Checking Account)

Reloadable debit cards

These are a relatively new invention, created for people who don't need (or can't manage) an ordinary checking account. As the name suggests, it functions as a debit card. There is usually some limited ATM access and some sort of bill-paying feature.

Once little more than fee-generating boondoggle for the banks, rule changes made them pretty fair for consumers a few years ago. Since these new rules went into effect, a reloadable debit card had been a reasonable place to hold your cash balances when rates were low, but now that interest rates are going up they're only reasonable for people whose circumstances make a bank account impractical.

Savings accounts

It used to be that you opened a savings account even before you opened a checking account. Now an ordinary savings account is almost pointless. At least at my bank, a savings account pays the same minuscule rate as a checking account, so I might just as well leave my excess cash in my checking account.

When you think about savings accounts nowadays, though, you're usually not thinking about a savings account at your local bank. You're thinking about an internet savings account. (See also: 6 Important Things to Look for in a Savings Account)

Internet savings accounts

These are just ordinary savings accounts, except they're at a bank that's willing to pay up to get your money, and that offers a convenient web interface for moving money to and from your checking account. The money moves by ACH transfer, typically in two or three days. This is quick enough to make these accounts very useful as a place to hold your cash.

Unlike a lot of other kinds of financial accounts (where the terms and conditions vary in complex ways), the terms and conditions of internet savings accounts tend to be relatively standard, making it easy for savers to compare one account to another and pick the one that offers the best deal. (See also: 5 Best Online Savings Accounts)

Money market funds

Money funds are a legacy of 1970s interest rate regulations. They pool money from shareholders, invest it in short-term securities, and share the return. Because they just share whatever return they get, returns go up quickly when interest rates rise. (Unlike savings and money market accounts, where banks that already have your money won't raise rates until they have to.)

Although very safe, investments in a money market fund are not guaranteed. In fact, one money market fund lost enough money during the financial crisis that it was unable to make investors whole. That prompted major players in the money market to simultaneously all try to get out of assets with even the slightest risk. Basically, that was the financial crisis.

Money market accounts

Created in the early 1980s as a carefully carved-out exception to interest rate regulations, money market accounts were created in a way that didn't cannibalize on checking or savings accounts (basically, they only allowed six withdrawals per month and only three of those could be by check). They had advantages over a money market fund: They paid an announced rate (instead of just whatever the fund could earn in the market), they were guaranteed to pay off at 100 cents on the dollar, and they had FDIC insurance. That's all still true. (See also: Money Market Accounts: Ideal for Emergency Funds)

Other possibilities

There are a lot of other places you might hold cash for the short term: Demand note accounts (basically an IOU from a major financial corporation packaged up like an internet savings account), cash management accounts (a money fund or money market account wrapped up inside a brokerage account), CDs, and Treasury bills.

Bottom line

It no longer makes good sense to just keep your money in your checking account — the simplest version of cash management. Now that you can earn a return that's more than a fraction above zero, the time has come to manage your cash more actively.

Simple, but not too simple

The easiest version of active management is just to shift most of your liquidity balances, near-term planned expenses, and temporary investments into some sort of higher-yield account.

Just do this: When your paycheck (or any other money) arrives in your checking account, transfer most of it to your higher-yield account. Two or three days before your bills need to be paid, transfer the necessary amount of money back to your checking account.

Not so simple

If you're into this sort of thing, you can get as fancy as you want.

If your finances are sufficiently under control, you can skip the step of having your income enter via your checking account only to be transferred to your higher-yield account. Instead, you can arrange to have your direct deposit go straight into your high-yield account. That gets you earning your higher yield a couple of days earlier, and potentially cuts the number of transfers you need to make in half.

Especially for expenses with due dates that are well-known but further off than this month, it may make sense to do something with CDs or Treasury bills.

It may be more convenient to keep your temporary investments closer to where the investments are going to be held — perhaps in a money market fund in the same family as the other mutual funds you hold, or one with your brokerage firm.

The possibilities are endless. But the time for just leaving your money idle in your checking account has ended.

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This article is from Philip Brewer of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

8 Sacrifices That Will Supercharge Your Debt Payoff

Denise Hill — Wed, 21 Feb 2018 09:00:06 +0000

In order to get and stay out of debt, you have to shake things up. You need to change your thought patterns, financial habits, routines, and in some cases, your circle of friends. It requires intentional effort, diligence, and sacrifice. If you seriously want to get out of debt, here are the sacrifices that will expedite the journey.

1. Live on less

The long-quoted financial rule of thumb is that your housing should be less than 30 percent of your net income. If you're above that threshold, downsizing and moving to a cheaper place is one of the easiest and most drastic ways to lower your expenses. (See also: 7 Reasons You Need to Downsize)

If your housing costs are already under 30 percent of your gross income, and you're still in debt, you'll need to find other ways to save money as best as you can. Don't just draw the line at a smaller living space. Look for ways to cut costs across the board for your standard day-to-day expenses. Find ways to reduce your grocery bill, utilities, and water bill. The lower the costs of your lifestyle, the easier it is to pay down debt and stash some cash for a rainy day. (See also: 34 Smart Ways to Cut Your Electric Bill)

2. Pay with cash

A 2016 study, "Paper or Plastic?" How We Pay Influences Post-Transaction Connection, showed that items purchased with cash are valued more than items purchased with plastic. According to the report, spending cash feels the most "painful." Therefore, cash purchases become more meaningful.

Paying with cash makes you feel more connected to the experience. Pay for all consumer goods — including groceries and gas — with cash. You will spend less and appreciate your purchase more.

3. Get a side gig

One of the biggest sacrifices you often have to make in order to get and stay out of debt is your time. A great way to aggressively tackle your debt is by sacrificing a bit of free time and getting a side gig.

You can work part-time for a company, drive for Uber or Lyft, or even deliver pizza. Or you can do your own thing and freelance as a writer, photographer, or caterer. The key here is to find a way to turn your free time into money. (See also: 14 Best Side Jobs For Fast Cash)

4. Get cheaper transportation

Transportation is a sneaky little budget buster. According to the Bureau of Labor Statistics, transportation is the second largest spending category for an American family. The average household spends $9,049 annually — which is around 17 percent of the total budget.

Reducing transportation costs doesn't mean just getting a cheaper vehicle; it means lowering fuel consumption by taking fewer trips, combining errands, and mapping out travel routes. It also means using public transportation, ride-sharing or carpooling, and walking or riding your bike whenever possible.

5. Plan your meals

Convenience comes at a cost. Grabbing meals and snacks on the go is one of the quickest ways to blow your budget and eat up your income — literally.

Planning your meals and keeping snacks on hand can save you hundreds of dollars per month. Meal planning is also a great way to help you stick to your grocery budget. Try creating a menu for a week — or even a month — and making your grocery list from the menu you created. This will keep you from impulse buying and help you make fewer trips to the grocery store.

6. DIY

In America, we pay someone else to do everything. We pay to have our clothes cleaned, our dogs walked, and our toenails painted. If you simply cut back on some of the things you are paying someone else to do and invest the time and energy it takes to do it yourself, you could save a whole lot of money.

Take a minute and think about all the services you outsource. Which of those could you possibly do yourself? Can you cut your own hair? Do your own Mani-Pedi? Can you cut your own grass and trim your own hedges? Clean your own carpet? How about simple car maintenance — can you change your own oil or perform other small repairs? Can you alter your own clothing?

YouTube is DIY heaven. Find an instructional video on how to do what needs to be done and get to it.

7. Limit screen time

Instructional videos aside, TV and the internet are often counterintuitive to your efforts to get out of debt. It's estimated that the average person is exposed to 10,000 brand messages per day. Let that sink in. You are being bombarded with images and subliminal messages encouraging you to spend money. You've got to occasionally unplug and allow yourself to mentally detox in order to have the focus, drive, and discipline it takes to get out of debt.

Limiting time spent watching television, engaging in social media, and surfing the web will help you avoid spending. And if you get rid of redundant, overlapping services, you can save even more money. Consider how much you are spending on cable, internet, and subscription services like Hulu or Netflix. Work to ensure that the time you do spend watching TV or browsing online is productive and supports your efforts to be fiscally responsible.

8. Find frugal friends

"Show me your friends and I'll show you your future," is a saying that is steeped in truth and wisdom. Who you associate with directly impacts who you'll become. Hanging around people who spend big, waste money, and have to have the finer things in life — despite the cost — will keep you broke and chained to debt forever. Your friends influence your life decisions, which is why it is critical you find people that are headed in the same direction as you and share your value system.

Befriend people from Facebook groups, websites, podcast communities, and other groups that promote getting out of debt and saving for retirement. Changing your social circle is one of the most critical and beneficial things you can do to get and stay on a path to financial freedom. (See also: 10 Types of Friends Who Are Costing You Money)

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This article is from Denise Hill of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

The ATM Just Ate Your Deposit. Now What?

Dan Rafter — Mon, 05 Feb 2018 09:30:05 +0000

The United States is filled with ATMs. According to Statistic Brain, there were 425,000 of these machines in the country as of March 29, 2017. Statistic Brain also reported that the average ATM in the United States saw 800 transactions every month.

With all of these machines and all of these transactions, it wouldn't be surprising if every once in a while an ATM ate a consumer's cash or check deposit without crediting their account or providing them a receipt. The question is, what should you do if this happens to you?

Contact your bank ASAP

Don't just ignore what happened. Contact your bank, and do it immediately.

If you are standing outside your own bank when this happens, using one of your financial institution's ATMs, simply go inside and explain what happened. Your bank can correct the situation on the spot, crediting the deposit to your account and issuing you a paper receipt verifying the funds.

That's the simplest solution. But what if you are using a stand-alone ATM that's not near your bank branch? What if you are using an ATM not even run by your bank and it swallows your deposit without recording it?

Again, this is frustrating, but don't panic. It's imperative to call your bank immediately. Use the number on the back of your debit card to contact your bank and explain the situation to the customer service representative. The bank will usually credit you for the deposit and perform an investigation. If it determines that you actually did deposit the amount you claimed, it will finally deposit that amount in your account, removing the credit. The time it takes for this to happen will vary depending on your bank.

Does this happen often? That's difficult to say. There are no statistics available on how often ATMs eat deposits without crediting consumers' accounts. But what isn't hard to determine is that consumers use ATMs often. A 2017 banking study said that 61 percent of consumers visited an ATM at least once a month. That leaves plenty of room for potential ATM grabs. (See also: 6 Big Ways ATMs Are Changing)

The alternatives

If you want to avoid the chance that your ATM will eat your deposit, you do have other options.

If you are depositing cash, your only real alternative is to visit a bank branch in person and make the deposit with a teller. This might be an inconvenience, depending on your bank's branch locations and their hours, but it's safer to hand your cash deposit to a teller than it is to stuff it in an envelope and deposit it in an ATM that could make a mistake.

If you are depositing a check, you have more options. Yes, you can deposit your check in person with a teller if you want to avoid the ATM. But you can also sign up with a bank that offers mobile deposit. Using your bank's smartphone app, you can take a photo of your check and deposit that check right into your account from anywhere.

Just be aware that mobile banking isn't foolproof, either. Hold onto your checks after you deposit them until you see the money appear in your account. Your bank might send you a message saying that it couldn't read the photo, or that there was an error. You'll have to snap another photo of your check to try again.

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This article is from Dan Rafter of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

How Just $5 a Day Can Improve Your Financial Future

Dr Penny Pincher — Fri, 19 Jan 2018 10:00:05 +0000

As a penny pincher, I sometimes get into debates with people about whether cutting back on small expenses really makes much difference in the grand scheme of things. For example, if you are trying to put away $1 million, is it worth the effort to save only a few dollars every day?

Let’s look at what investing $5 per day could do for your financial future. The easiest way to come up with an extra few bucks per day is to simply spend less — and that can be easy, since there are plenty of mindless ways you're probably wasting money. If your spending is already throttled back as far as you want to take it, you could find a side hustle for fast cash.

Stuffing $5 per day under your mattress

Now that you have identified a way to find $5 per day that you can save, let’s look at how your fund would grow if you put your cash under your mattress with no interest or growth:

After 10 years: $18,263.
After 20 years: $36,525.
After 30 years: $54,788.
After 40 years: $73,050.
After 50 years: $91,313.
After 60 years: $109,575.

As you can see, saving $5 per day does add up to real money over time if you do it long enough. But to really get the benefit of putting money away for the future, you need to put it to work so it can grow.

Due to inflation, your stash of cash will eventually lose value if you keep it under your mattress or in a low-interest savings account. Since prices tend to rise over time, your money will have less buying power in the future than it has now. If you invest your money instead, it will grow faster than inflation and your funds will have more buying power as time passes by.

Invest $5 per day

Here’s what would happen if you invested your $5 per day. Let's assume a return of 8 percent (instead of the 0 percent you would get by simply stuffing it under your mattress):

After 10 years: $27,843.
After 20 years: $89,643.
After 30 years: $226,818.
After 40 years: $531,296.
After 50 years: $1,207,130.
After 60 years: $2,707,236.

Investing $5 per day with a return of 8 percent can turn into $1 million after about 48 years. Clearly, this has a huge advantage over simply hoarding the cash. But how can you invest your money so that it grows at around 8 percent? No one knows how future investments will perform, but historical average returns from stock market and real estate investments have been around 8 percent.

How to invest small amounts of money

Can you really invest a small amount of money such as $5 at a time? I faced this situation when I wanted to start contributing $50 per month ($1.67 per day) to a Roth IRA. I found a great mid-cap growth fund with a low expense ratio, but a minimum initial investment of $2,500 was required to open an account. I corresponded with the fund manager, and he agreed to set up the account with automatic deposits of $50 per month from my checking account. The balance of this investment fund from my contributions of $1.67 per day has grown to over $4,000 so far. (See also: 5 Retirement Accounts You Don't Need a Ton of Money to Open)

A good way to manage investing small amounts is to accumulate your daily savings in your bank account and set up an automatic monthly contribution to an investment account.

If you have any high-interest credit card debt, making extra payments on that debt can have a bigger financial impact than investing the money. Set up an automatic payment to your highest interest credit card from your $5 per day funds. After your credit cards are paid off, you can switch to paying down other debts or start contributing to an investment account. (See also: 5 Ways to Pay Off High Interest Credit Card Debt)

Benefits of investing $5 per day

The small step of setting aside an extra $5 per day to invest can boost your fund balance down the road, but taking this action has other benefits. Establishing the habit of identifying extra money and investing it is the key to financial success. You don’t need to wait until someday when you have more money — you can start saving and investing today with whatever small amount you can scrape together. Even the process of finding “extra” money to invest can have benefits. You might find that cutting back spending on things you don’t really need makes life less stressful. (See also: 18 Times in Life When Less Is More)

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Why Some Economists Say You Should Give Cash Instead of Gifts

Toni Husbands — Mon, 11 Dec 2017 10:00:07 +0000

If Christmas shopping gives you the blues, and you labor over the thought of selecting the best gifts to no avail, you now have permission to stop. That's right. "Scroogenomics" may provide the peace of mind you seek during this festive, gift-giving season. In this retelling of Charles Dickens' classic tale, the lesson is to give generously, but not the type of stuff that typically ends up wrapped in paper and bows. Cash is king in this version, and other types of gifts are deemed a waste of time and money. (See also: 10 Fun Ways to Wrap the Gift of Cash)

The reality behind "Scroogenomics"

Economist and University of Minnesota professor Joel Waldfogel coined the term in his 2009 book, Scroogenomics: Why You Shouldn't Buy Presents for the Holidays. The reason behind Waldfogel's anti-gift stance isn't because he dislikes his friends and family. He simply believes giving gifts is a colossal waste of money. In fact, he calls gift giving an "orgy of wealth destruction."

Waldfogel suggests that we waste our money by buying the wrong gifts, completely underwhelming the recipient with stuff they don't even want. For the unimpressed giftees among us, the thought actually doesn't count.

According to Waldfogel's theory, we alone are the best judge of the products or services that bring us joy. Gift givers often miss the mark, thus gifts go underused and money is wasted. Waldfogel argues that gifts are best received when given to children or people that we know very well. "With everyone else, we might be better off giving cash or gift cards," he writes. (See also: How to Get Rid of Your Unwanted Gifts and Make Money Too)

The solution: Give cash

Before you dismiss Scroogenomics as a cynical case of bah humbug, consider this. Annie Leonard, co-writer of the short film The Story of Stuff, shares that only 1 percent of the materials we use to produce consumer goods (including the items themselves) are still in use six months after purchase. That doesn't mean that 99 percent of those goods end up in the landfill. It does mean that 99 percent of the planet's resources that were consumed in the making of those goods were. Not only is your unwanted and underappreciated gift a big waste of money — it's a colossal waste of the world's resources.

According to the National Retail Federation, American consumers will spend an average $967 on holiday gifts this year. If the vast majority of those gifts are just going to waste, wouldn't giving cash be a more appropriate use of your time, energy, and hard-earned resources? And considering the NRF found that 61 percent of recipients would actually prefer some type of gift card or certificate instead of an object, there's even less reason to believe that "stuff" is the ticket to a well-received present.

Cash as a gift tends to feel less exciting and tangible these days, since money transfers can be done with the click of a button or through a smartphone. But, giving cash also doesn't have to include forking over a manilla envelope stuffed with bills. Your thoughtful cash gift can take many forms. For example:

Donate to a charity on behalf of a loved one. Think about a cause near and dear to the recipient's heart and share the gift in their name. Your donation is also tax deductible, so this gift is a win-win-win (be sure to save the receipt!). The environment will thank you, too. (See also: 8 Charities You Can Trust With Your Holiday Donations)
Open a savings or investment account for the recipient and stock that full of cold hard cash. This is the gift that literally keeps on giving. Can you say compound interest?
Earmark the money for an outing or travel excursion that you and the recipient can plan together. These are memories that will last longer than the stuff destined for a landfill near you. Plus, who wouldn't love a free trip?

If your need to experience the warm fuzzies of gift giving won't allow you to simply give cash, compliment your cash gift with a craft. A money tree made of dollar bills or a folded-bill chain combine the joy of making something for your recipient, with the utility of giving cash. This way, everyone can enjoy the holidays and get exactly what brings them joy. (See also: 10 Reasons Why You Should Ask for Cash This Christmas)

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6 Smart Financial Gifts to Give Your Kids This Year

Damian Davila — Fri, 01 Dec 2017 09:00:06 +0000

American poet Maya Angelou said it best: "When you know better, you do better." The earlier that your kids develop good financial habits, the brighter their financial future will be.

With the holidays right around the corner, now is the perfect time to set your sights on one or more of these financial gifts that will help your kids learn about, respect, and appreciate money.

1. Monopoly

Since 1935, this classic board game has entertained millions of people around the world. Turns out that playing rounds with "Monopoly money" can actually help build real life financial skills, such as negotiation, money management, and diversification. Plus, a round of Monopoly is a good way to practice arithmetic and social skills. (See also: Holiday Gifts: TK Fun Games That Teach Money and Finance)

2. Custodial investment account

Most brokerage firms offer a custodial account that allows children to get a first taste of investing in the stock market under the supervision of a parent or guardian. With as little as $100, you could open a custodial account and let your kid make decisions about what stocks to hold or sell.

In 2017, you can contribute up to $14,000 to a custodial account and still avoid gift taxes. In 2018, the annual federal gift exclusion moves up to $15,000. Your kid's custodial account is under your control until your kid legally becomes an adult, which happens somewhere between age 18 and 21, depending on your state's rules.

A custodial investment account is a great way to get your child excited about investing and let them learn from firsthand experience how the stock market works. (See also: 5 Stocks Your Kids Would Love to Own).

3. Custodial Roth IRA

If your kid is already working a summer job or earning income from their own business, consider setting up a custodial Roth IRA for them. In 2017 and 2018, individuals may contribute up to $5,500 to a custodial Roth IRA. Here are a couple of reasons why this is a good idea:

Your child will have the same contribution limit as an adult, making it a real-life lesson in cultivating a good savings habit.
Your child can get close to a decade of extra compounding interest for their nest egg.
By taking the tax hit now, your child's retirement savings will grow tax-free forever.
Your child will have another "sandbox" in which to make real-life decisions with investments.

Just imagine if you knew how life-changing investing in equities could be at such a young age.

That alone may be the best financial gift for your kid this holiday season! (See also: 10 Investing Lessons You Must Teach Your Kids)

4. 529 savings plan

The average class of 2016 graduate left school with $37,172 in student loan debt. If you could do something now to help prevent your kid from having to take out such costly student loans, that would certainly be a gift worth giving. The good news is you can do this by starting a 529 college savings plan. Eligible education expenses under a 529 plan go beyond tuition and academic fees and include expenses for room and board, transportation, equipment, and accommodations for individuals with special needs.

Contributions to a 529 plan grow tax-free and the money is not taxed when it's withdrawn to pay for college expenses. In addition to federal tax savings, more than 30 states currently offer a full or partial tax deduction or credit for 529 plan contributions. (See also: The 9 Best State 529 College Savings Plans)

5. Cash

Yup, cash is still king. Regardless of their age, your kid will always love receiving a few bills as a gift. The main reason to gift cash during the holiday season is that it opens the door to have an ongoing conversation with your kids about budgeting. With a cash gift, you'll have plenty of chances to talk about what they're planning to buy, what they actually purchase, and how much money they have left. From there, you can start making it a habit to sit down with your son or daughter to talk about finances on a weekly or Bi-Weekly basis. It's a good time to catch up about other non-related finance topics as well. (See also: How to Help Your Kid Build Their First Budget)

6. Checking account with debit card and checkbook

Of course, this would be a great place for any cash gifts that your son or daughter receives from relatives and friends during the holidays (and throughout the year).

While a checking account may not be as exciting as a new Xbox or bike, you can be sure that this gift is the one that your child will be using for the longest time. It's important that your kids start to build experience managing a checking account so they understand how to pay for everyday expenses, build a monthly budget, and safely use debit cards. By covering the ins and outs of how a checking account works when they're young, your kid will have one less thing to stress about as they get a little older or go off to college.

No matter what your child's plans are, anyone can benefit from learning how to use a debit card, write checks, access an online account portal, and read a checking account statement.

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3 Easy Ways to Improve Your Credit Score During the Holidays

Damian Davila — Fri, 17 Nov 2017 10:00:06 +0000

Whether you're stuffing yourself with delicious turkey, putting up decorations, or just enjoying a well-deserved break, you're probably not thinking about your credit score much during the holidays. But even though it may not be fun, monitoring your credit score this time of year can help bring you closer to your financial New Year's resolutions or goals. Here are a few ways to give your credit score a much-needed boost during this holiday season.

Plan to make more purchases with cash

It's a myth that most people do their holiday shopping with credit cards. In 2016, Experian's Holiday Spending Survey found that 55 percent of respondents selected cash as their planned method of payment for holiday gifts. Spending with cash instead of credit cards is a smart move to prevent the potential debt cycle that the holidays can bring. Paying with cash instead of plastic will help keep your credit utilization ratio low. This ratio compares total credit available to you with the amount of credit you have used. A low ratio means you do not use very much of your credit. Remember that your credit utilization ratio accounts for 30 percent of your credit score.

Apply for a credit card with a low APR

While cash is king, 47 percent of respondents were still planning to use credit cards for their holiday shopping last year. If you're planning on pulling out plastic for this holiday shopping season, you may want to pay a visit to your local credit union before you start swiping.

According to data from the National Credit Union Administration, the average interest rate of a regular credit card from a credit union was 11.61 percent as of September 2017. At the same time, cards from banks came with an average rate of 12.96 percent. (See also: Best Low Interest Rate Credit Cards)

Let's assume that you were to spend $1,000 with a credit card and pay it all back in three months. With a 12.96 percent APR, you would have to make three monthly payments of $341. That's $23 in interest payments for that $1000. Another way to avoid interest charges on your holiday spending is to get a card that offers 0% APR on purchases for a promotional period.

By paying less interest, you're more likely to make payments on time (which accounts for 35 percent of your credit score) and owe less to credit card lenders overall (which accounts for 30 percent of your credit score).

However, the most important thing is you make a commit to pay off your holiday purchases, so that you're not still paying for it when the holidays roll around again.

Consolidate high-interest credit cards

Trying to reach the recommended 30 percent credit utilization ratio can feel like an overwhelming task when the majority of your monthly payment goes to cover high interest. One way to overcome this is to explore your options of consolidating balances of other cards with a personal line of credit or other type of financing.

Credit unions also beat national banks with lower rates for personal lines of credit. As of September 2017, a 36-month unsecured fixed rate loan came with an average interest rate of 9.20 percent at credit unions and 10.04 percent at banks. And during the holiday season, credit unions tend to offer even lower rates.

You could also do a balance transfer to consolidate high-interest credit card debt. To make this work, you'd need to open a new credit card offering a promotional introductory rate on balance transfers. You may have to pay a fee to transfer your balance (typically around 3 percent), and you'll want to repay your debt before the promotional APR window closes (typically between six and 21 months) and the rate increases. However, having a year or so to tackle credit card debt at a much lower interest rate can save you a great deal of money if you're diligent. (See also: The Best 0% Balance Transfer Credit Cards)

Being able to consolidate your balances allows you slay your debt monsters faster, which will certainly make your holidays a little brighter — and improve your credit score. Remember that the longer you carry a balance on high-interest credit cards and loans, the more interest you'll rack up on your debt, and the longer that your credit score will remain low. (See also: 5 Tricks to Consolidating Your Debt and Saving Money)

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10 Money Goals You Should Set for the Holidays

Mikey Rox — Wed, 15 Nov 2017 09:00:09 +0000

The holidays are here today, gone tomorrow — and it's easy to get caught up in a tinseled tornado of financial distress if you're not careful. Avoid that fate this season with these self-imposed goals on how to better manage your holiday budget. It'll help you start the New Year financially fresh and fancy-free.

1. Stop spending money on gifts people don't need

When planning out your holiday gift list, think long and hard about what those people on your list may want or need. Don't be afraid to ask them, either. I always ask friends and family if they have something specific in mind — and I staunchly believe in getting what they'll love and use, so long as it fits into my budget.

Sometimes they provide solid ideas, and other times I get the ol' "I don't need anything" routine, even though they know good and well I'm going to buy them something anyway. (Way to help, Dad.) If you're unsure about a gift, or you feel like you're buying something just to buy it, think again. There's no reason to spend your money on something that will go unused, or even worse, be regifted.

When in doubt, a gift card to a favorite store generally works well — and you should take advantage of the ubiquitous "Spend $X in gift cards and get a $X gift card for free" promotions that many retailers and restaurants offer during the holidays. Stretch that cash every way you can. (See also: Save on Christmas Shopping With This Clever Gift Card Strategy)

2. Stop spending money on people who don't need gifts

Does everyone you know need a gift? Will you even see the recipients this holiday season? Are you disproportionately spending money on the people you do buy for? If money is tight and you're stuck in a pattern of buying gifts because you feel obligated, stand up for yourself and put a stop to it.

Several years ago, my brother, cousin, and a few of my best friends started churning out children left and right. I had to make the tough decision to cut the adults off my list. I couldn't afford to buy for everyone, so I chose the kids instead. I've never looked back on that decision with any regrets. I get to be the cool uncle who always gives the best presents — all while being able to save money despite that distinction.

3. Select, make, and "buy" gifts from stuff you already have

There's only one rule to regifting, in my opinion: Make sure the regift doesn't end up anywhere near the person who gave it to you in the first place. Bad form. Otherwise, please, regift items that were given to you that you haven't used (so long as they're still unopened and/or haven't expired). The same goes for unused items that you bought for yourself throughout the year (like clothing with the tags still on). Gift them to someone you think will appreciate them to help keep more money in your pocket.

I'm also a big fan of making gifts by hand. For instance, I'm hosting a small dinner party in December, and I'm making my guests a little take-home gift consisting of a festive homemade body scrub, a hand-poured holiday candle, and a bottle of wine I've recently made from a kit.

Simple, inexpensive, thoughtful — that's the name of the game. (See also: 25 Gifts You Can Make Today)

4. Concentrate on eliminating existing debt before racking up more

One of your top money goals this time of year should be focusing on debt you already have instead of racking up more buying gifts. That's not always easy to do during the holidays, but the due diligence will pay off.

If you have existing credit card debt, try your best not to make only the minimum monthly payments. Instead, begin paying a bit extra toward the principal starting with the card with the highest interest rate. This repayment strategy (otherwise known as the debt avalanche) will save you the most money overall on interest payments. High interest rates are what's keeping you in debt, and the faster you reduce or pay these cards off, the better. (See also: The Fastest Way to Pay Off $10,000 in Credit Card Debt)

5. Make a list of gift recipients and assign a budget per person

I like to plan out my gift buying to the tee, because I know how bad I can be with impulse purchases around the holidays. You know what it's like: You plan to get your mom a nice perfume set, but then you see this great piece of jewelry on sale — and your entire budget unravels before your eyes.

To combat this habit, I make an itemized list of what I'd like to buy for each person and assign a top-line budget based on the advertised retail price. And then I get to work. Before I make the final purchases, I scour my apps for cash-back deals, search the internet for promo codes, cash in my retailer rewards, and try to plan my in-store shopping around major sales. It helps that I get just about every circular and marketing email known to man — so I'm always abreast of what deals are going down — but you'll find equal savings with your own resourcefulness and research.

The point of all this extra legwork is to drastically come in below the gifts' retail prices so you cannot only stay under budget but, in fact, walk away from the holidays a solid winner. (See also: Avoid These 5 Common Holiday Budget Pitfalls)

6. Pay for gifts strictly from your holiday-spending envelope

Once you've made your itemized list of gifts and determined the overall budget, take out the cash from the bank, stick it in an envelope, and use only that money to buy gifts. There is no other alternative; this is all the money you have to spend, and you need to stick to this plan. If what you want to buy is online, consult your budget to make sure you're on track, then use your debit card. Then, immediately replace the deduction by making a deposit into your checking account so everything balances out. Yeah, it's old school — but it works.

7. Put any cash gifts you receive into savings or toward bills

Plan to put any holiday cash you receive from family members straight into your savings account or toward bills. This savings tactic isn't any fun — I understand — but you'll likely receive plenty of gift cards that you can spend instead that will help quell your urge to blow everything before the holidays even come to a close.

8. Shop with a buddy to keep each other away from impulse buys

I like shopping alone for several reasons. For starters, I don't have to wait on my companions and they don't have to wait on me, which, when shopping together, can really zap the relaxation out of my leisurely pace. Furthermore, I don't like people's opinions of my purchases or their comments about whether I really need this or that. It's my money, and I'll buy what I want.

Except around holiday time.

This is the time of year I like to employ the buddy system when shopping for the sole purpose of keeping each other focused on our lists and away from impulse buys. Because if my bestie can't smack my hand in public and tell me no, who can? That's what friends are for.

9. Lay the groundwork for 2018 and the future of your finances

There are a million things happening during the holidays, but that doesn't mean you can't look ahead and prepare yourself financially for the New Year. In fact, you owe it to yourself.

Kevin Driscoll, VP of Advisory Services for Navy Federal Financial Group, agrees.

"If you're not already doing so, begin contributing to your 401(k)," he says. "Make 2018 the year of financial freedom in retirement by saving now. Check out the retirement plan your employer offers, and if they offer a match, be sure to take advantage of this."

Also worth considering is investing in an online investment platform.

"You'll find that there are many sites that allow you to make minimal contributions to buy a portion of a stock," Driscoll continues. "This is a great way to get your feet wet with investing and hopefully make some extra money, too. Additionally, these platforms are generally low maintenance, and don't require any prior knowledge of the market or investing."

10. Find ways to spend and save even smarter

Every year, one of your top resolutions should be to stay on top of your finances and to improve your own money management. How do you do that? That's really up to you, but it will require due diligence on your part. It could be as easy as subscribing to personal finance blogs so you'll receive the latest financial self-help articles in your inbox, or maybe you can enroll in a local course that will help you better understand your money and your relationship with it. Both of these tactics combined would be great, too.

The point is, you should continue to educate yourself about how to spend and save smarter so you can achieve your goals and live a life free from the burden of debt. Easier said than accomplished, but people just like you do it on a regular basis. Invest in yourself and it will pay off eventually. (See also: 10 Financial Resolutions You Can Conquer Before New Year's)

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8 Secrets to a Debt-Free Holiday Season

Kentin Waits — Mon, 13 Nov 2017 09:00:07 +0000

Remember when the holidays were all about simple pleasures like spending time with family and exchanging modest gifts? Neither do I. Holidays have taken on a life of their own, turning otherwise reasonable folks into consumer zombies and blowing up the budgets of too many Americans. This year, let's celebrate simplicity and financial solvency. Here are the secrets to a debt-free holiday season.

1. Push back against "holiday sprawl"

Ever feel like the holidays come earlier, last longer, and require more gifts, more elaborate decorations, more money, and more travel? Let's call this endless expansion what it is — holiday sprawl. Fight back by embracing the idea of enough. Suggest (and stick to) reasonable spending limits and keep ballooning expectations in check. Your budget will thank you. (See also: 9 Things You Can Do Right Now for a Frugal Holiday Season)

2. Shop early and shop around

Bright lights, big crowds, sales of the century — it's enough to make even the most levelheaded shopper lose control. Skip all the holiday madness by shopping early (I start in September and try to finish by Thanksgiving). You'll have more time to compare prices, shop for sales, and space out purchases so you won't have to rely on credit. (See also: 6 Reasons January Is the Right Time to Start Planning for Christmas)

3. Slow down

Holidays can be frantic. In the rush of activity, we often make bad decisions about what to buy and how much to spend. Slow. Things. Down. Break up your shopping excursions into several smaller trips and avoid shopping on days when you have a thousand other things to do. When shopping online, load your virtual cart, but don't commit to buy until you've thought about your choices overnight.

4. Avoid gimmicks

The holiday season can make or break retailers. To help us stretch our spending muscles, almost every store features blowout sales or deals that require the purchase of multiples (10 for $10). My advice? Be skeptical. That "biggest sale of the year" probably isn't. And what are you going to do with 10 bacon-scented candles, anyway?

5. Pay cash

Do you tend to spend more when you use credit? You're not alone. Paying by credit card — or worse yet, smartphone — blunts the conscious connection between spending more money and having less money. Make this holiday a cash-only affair. It'll keep your accounts in the black and make your first credit card bill of the new year a lot less frightening.

6. Make your gifts

Exchanging handmade gifts can be wonderful, even among adults. Buck the retail trend altogether and focus on your talents. Are you an expert baker? A gifted artist? An inspired brewmaster? Explore Pinterest for inexpensive homemade holiday gift ideas, then tap into your creative spirit. (See also: 10 Gift Ideas That Cost Almost Nothing)

7. Skip the greeting cards

I didn't get the memo: When did everyone decide that $14.99 is an acceptable price for a box of holiday cards? This year, save a few bucks by ditching the costly cards and postage. Instead, send a group email or catch up with a leisurely phone call.

8. Share experiences

If money's tight, swap traditional gifts for the gift of time together. Organize a holiday potluck, host a movie night with friends, or coordinate a charity event where everyone contributes a few hours of their time as a group. After all, what could be better than good food, good friends, and goodwill?

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7 Reasons to Invest in Stocks Past Age 50

Tim Lemke — Thu, 05 Oct 2017 09:00:06 +0000

Conventional investing wisdom says that as people age, they should put less of their money in stocks and more into stable investments such as bonds and cash. This is sound advice based on the idea that in retirement you want to protect your assets in case there is a major market downturn.

But there are still strong arguments to continue investing in stocks even as you get older. Few people recommend an all-stock portfolio, but reducing stock ownership down to zero doesn't make sense, either.

Consider that many mutual funds geared toward older investors still comprise hefty doses of stocks. The 2020 Retirement Fund from T. Rowe Price, for example, is made up of 70 percent stocks for retirees at age 65, and is still made up of 25 percent stocks when that same retiree is past 90 years of age.

Why does owning stocks make sense even for older investors? Let's examine these possible motivations.

1. You're going to live a lot longer

If you are thinking about retirement as you approach age 60, it's important to recognize that you still may have several decades of life remaining. People are routinely living into their 90s or even past 100 these days. Do you have enough savings to last 40 years or more? While it's important to protect the assets you have, you may find that higher returns from stocks will be needed in order to accrue the money you need.

2. You got a late start

If you started investing early and contributed regularly to your retirement accounts over the course of several decades, you may be able to take a conservative investing approach in retirement. But if you began investing late, your portfolio may not have had time to grow enough to fund a comfortable retirement. Continuing to invest in stocks will allow you to expand your savings and reach your target figure. It still makes sense to balance your stocks with more conservative investments, but taking on a little bit more risk in exchange for potentially higher returns may be worth it. (See also: 7 Retirement Planning Steps Late Starters Must Make)

3. Other investments don't yield as much as they used to

Moving away from stocks was good advice for older people back when you could get better returns on bonds and bank interest. The 30-year treasury yield right now is about 2.75 percent. That's about half what it was a decade ago and a third of the rate from 1990. Interest from cash in the bank or certificates of deposit will generate a measly 1.5 percent or less. The bottom line is that these returns will barely outpace the rate of inflation and won't bring you much in the way of useful income.

4. Some stocks are safer than others

Not all stocks move up and down in the same way. While stocks are generally more volatile than bonds and cash, there are many that have a strong track record of steady returns and relative immunity from market crashes. Take a look at mutual funds comprised of large-cap companies with diversified revenue streams. Consider dividend-producing stocks that don't move much in terms of share price, but can generate income. To find these investments, search for those that lost less than average during the Great Recession and have a history of low volatility.

5. Dividend stocks can bring you income

Dividend stocks are not only more stable than many other stock investments, but also they can generate cash flow at a time when you're not bringing in other income. A good dividend stock can produce a yield of more than 4 percent, which is more than what you'll get from many other non-stock investments right now. This will help ensure the growth of your portfolio is at least outpacing inflation.

If you are unsure about which dividend stocks to buy, take a look at a well-rated dividend mutual fund. The T. Rowe Price Dividend Growth Fund [NYSE: PRDGX], for example, has a three-year total return of more than 10 percent, outpacing the S&P 500. Its overall returns also dropped less than the S&P 500 during the Great Recession.

6. Busts are often followed by bigger booms

A person who retired 10 years ago would have stopped working right when the market crashed, and there's a good chance they may have lost a significant chunk of their savings. That's bad. But it's important to note that in the decade since, the S&P 500 has gone up every year at an average of more than 8.5 percent annually. In other words, someone who lost a lot from the crash of 2007–2008 will have gotten all of their money back and much more if they stayed invested in stocks.

This is not to suggest that older investors should be unreasonably aggressive, but they should be aware that a single bad year or two probably won't completely wipe you out financially. If your retirement is long, you may see some market busts, but you'll also see some long stretches of good returns.

7. You may still be helping out your kids

When you're retired, you're supposed to be done with child rearing and helping out your kids financially, right? Unfortunately, it seems that older Americans are continuing to lend a hand to their children even as they grow into adulthood and have children of their own.

A recent survey from TD Ameritrade said that millennial parents between the ages of 19 and 37 receive an average of more than $11,000 annually in the form of money or unpaid child care from their parents. With these additional costs on the horizon, those approaching retirement age may still want to invest in stocks to build their nest egg further. (See also: Are You Ruining Your Retirement by Spoiling Your Kids?)

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This article is from Tim Lemke of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

How to Budget When You Rely on Cash Tips

Mikey Rox — Wed, 13 Sep 2017 08:30:11 +0000

If you work in the service industry, the majority of your income likely comes from tips — and that can present difficulty when trying to budget your money responsibly. But just because it's not easy doesn't mean it's impossible. You can keep your cash flow in check if you have the right tools and systems in place.

Track every dollar you make

The first step to getting on track financially — even when your tips fluctuate from shift to shift — is to account for all of the cash you make over a period of time. You won't get a good idea of what to expect from month to month from just a couple weeks' worth of income, so it's best to monitor your tips over an extended period, ideally two to three months. This sampling should provide a decent basis on what you can expect to average throughout the year given that your place of employment is relatively consistent in terms of traffic. It may be a better idea to sample a slow period so you have a real bottom line as opposed to an inflated sense of income during a rush like the holidays.

Natasha Rachel Smith, personal finance expert at TopCashBack.com, offers a suggestion to put this plan in place.

"Write down how much you make in a journal or spreadsheet after every shift for 10 weeks to get an idea of your average weekly income," she says. "Although that amount will fluctuate depending on the economy, low or high seasons, and service quality, by averaging 10 weeks' worth of pay you can get a fairly reasonable and realistic idea of your typical earnings."

Create (and stick to) a budget based on goals

Once you have an idea of how much you can expect to bring home on average per month, it's time to budget your income so all your bills are paid on time — and so you're not stressed out and trying to scrounge up cash for a car payment at the last minute. To do this effectively, says finance expert Kevin Gallegos, vice president of Phoenix operations for Freedom Financial Network, create a budget based on goals.

"Whether your goal is to save on weekly grocery bills, have time to train for a marathon, save for retirement, or take a vacation to China, write down the goals and build your budget with the goals in mind."

In the budget, be sure to include a line item for savings in the "expenses" area, and treat it as a mandatory item to be paid. But, it can also be a variable expense — establish a percentage of your take-home pay that you'd like to put toward your goal after every shift.

"Ten percent or more is ideal," Gallegos says, "but if it's less than that, choose the number and stick to it."

Start a system for envelope budgeting

An easy way to delegate your funds to the bills you need to pay — especially if you don't want to make daily deposits to your checking account (which I don't recommend anyway because the only agency who will benefit from that paper trail is the IRS) — is to start a system of envelope budgeting. With this system, you add the regular cash you earn to envelopes designated for specific expenses, like rent, groceries, and student loans. By divvying up your cash after each shift, you can see in real-time how much you've saved and how much you still need to contribute to cover your general life expenses. This is also a good way to cut back on your "extra" expenses because live tracking will keep you informed on whether you can spare the money or not.

Separate your singles if you can afford it

If you can afford it, and provided you aren't only paid in this denomination, tuck away all one-dollar bills into a jar or container instead of spending them.

"Dollar bills will accumulate faster than change and it will give you a jar-fund to use when low on money or for the small, fun things in life," Smith says.

Look for patterns to keep your finances balanced

After a while, you'll be able to observe patterns in your income — a slump during the winter months or an uptick around a holiday, for instance — as well as determine a typical monthly minimum income level. By minding these patterns and building your budget around them, your finances should stay fairly balanced throughout the year so you're not stuck in the lurch because you were naive to expectation.

Gallegos suggests holding on to receipts and keeping a spending log.

"Many people find it eye-opening to see how much they spend each day," he says. "It's very similar to writing down everything you eat when trying to lose weight. Review carefully on a weekly basis to spot areas where you can cut back, and to become more familiar with your spending patterns."

Establish a "floating fund"

Another idea of Gallegos' that you may not have heard is the "floating fund," which establishes an absolute baseline of sufficient savings to cover expenses such as quarterly estimated self-employment taxes and an emergency fund.

"Common wisdom suggests keeping six to nine months' living expenses in an emergency fund at all times," he explains. "This fund then can also serve as a 'floating' fund to pull from during leaner times, for replenishment as income increases. It's key to think of the funds in this way — not just to pull from, but to replenish."

You will need to train yourself to pull from — and replenish (the hard part!) — these funds on a regular basis to make this work.

Send financial windfalls directly to savings

When you earn or receive extra money — from a large event you work, a gift, or even a yard sale that you host — get in the habit of saving rather than spending that extra money. If you make this standard protocol whenever you come into unexpected cash, your savings will increase quicker.

Don't make any major financial commitments

The last thing you want to do if your income fluctuates is overextend yourself unnecessarily. Business can decline unexpectedly or you could lose your job altogether. These unfortunate circumstances can put you in a precarious predicament financially — perhaps even driving you into a deep debt situation that could impair your life for many years into the future.

"Stay away from accruing debts or taking out loans if you're living on a tip-based income," Smith advises. "This is because your earnings are unpredictable and you could find one bad week creates a financial avalanche, simply because you didn't make enough money to cover a car payment or a credit card's minimum repayment."

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This article is from Mikey Rox of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

5 Money Moves That Will Ruin Your Mortgage Application

Mikey Rox — Wed, 16 Aug 2017 08:30:07 +0000

When applying for a mortgage, you shouldn't do anything that will cause a bank to question your ability to repay the loan. You don't need perfect finances to get a mortgage, but it's in your best interest to have a basic understanding of loan requirements. The more you know, the less likely you are to make mistakes that can ruin your application. (See also: Make These 5 Money Moves Before Applying for a Mortgage)

Here are a few missteps to avoid if you're thinking about buying a house.

1. Paying for everything with cash

Using cash for everyday purchases is one way to avoid debt. But just because cash is king in your world doesn't mean you should cast off credit cards.

Unless you're fortunate enough to pay cash for a house, you'll need to apply for financing, which requires a credit history. And the only way to build credit is to use credit. Without any type of credit profile, a mortgage underwriter can't assess whether you're capable of responsibly managing a home loan.

In the lending world, no credit can be just as damaging as bad credit. So before applying for a home loan, establish credit by getting a credit card or another type of loan. You don't have to drive yourself into debt with it, but you should demonstrate a pattern of timely payments and responsible borrowing. (See also: How to Use Credit Cards to Improve Your Credit Score)

2. Carrying too much debt

While it's in your best interest to have a responsible credit profile, if you start spending money on stuff you don't need and get in over your head, you could hurt your chances of a mortgage approval. Maxing out credit cards can raise your credit utilization ratio and lower your credit score. Credit utilization is the percentage of your credit card debt compared to your credit limit.

If you go overboard and accumulate too much debt, there's also the risk of falling behind on payments. Late payments are another credit score killer that can destroy any chance of qualifying for a mortgage.

To avoid problems with a mortgage approval, get into a habit of paying off credit card balances in full every month. If you carry a balance, keep it small — ideally below 30 percent of your credit line.

If you've already been approved for a mortgage, don't make any major purchases before closing on the home purchase. This includes buying furniture or financing a new car. New debt increases your debt-to-income ratio, which can affect your approval.

Since you won't know your actual mortgage costs until a few days before closing, hold off spending money on new furniture or appliances to ensure you have enough cash on hand.

3. Co-signing for someone else

Co-signing a loan for a friend or relative is a noble deed (one that I do not personally recommend), but it's imperative that you're fully aware of the consequences of this decision. Co-signers are not silent partners on loan documents. By signing your name, you become a joint debt holder; as such, a co-signed debt appears on your credit report and counts toward your debt-to-income ratio. This is because you're responsible for the loan if the primary signer stops paying. (And if this happens, you could be in big trouble financially!)

Once you are ready to apply for a mortgage, your lender takes a co-signed debt into consideration when calculating your debt-to-income ratio. Unfortunately, with a co-signed debt on your credit file, a lender might say you owe too much to take on additional debt and deny your mortgage application.

4. Not saving enough cash

You need cash for a home purchase — a lot of cash. Nowadays, many mortgage programs require borrowers to bring cash to the table. This includes a down payment between 3.5 percent to 5 percent or higher, as well as funds for closing (between 2 percent and 5 percent of the sale price). It doesn't matter how much you earn: If you can't show enough assets, you can't get a mortgage. Build up this cushion first before diving into the homebuying process. (See also: 4 Easy Ways to Start Saving for a Down Payment on a Home)

5. Quitting your day job

Don't quit your day job if you're planning to buy in the near future — at least, not yet.

Qualifying for a mortgage involves demonstrating long-term financial stability. This is why lenders require a borrower's most recent paycheck stubs and the previous year's tax returns. Self-employed people can purchase a home like anyone else, but they have to provide one to two years of profitable business tax returns, where their income either increases from year to year or remains roughly the same.

It doesn't matter how much you're making today as a self-employed borrower. If a lender has reason to believe that your income isn't consistent or stable, you might not get a loan. So if you're thinking about buying, stick with your job until closing, and then become your own boss. (See also: Denied a Mortgage? Here's How to Fix It Fast)

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This article is from Mikey Rox of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread: