saving money

How to Make Better Financial Decisions

Barbara O’Neill — Sun, 01 Nov 2020 17:32:44 +0000

A key financial decision people struggle to make is how to allocate savings for multiple financial goals. Do you save for several goals at the same time or fund them one-by-one in a series of steps? Basically, there are two ways to approach financial goal-setting:

Concurrently: Saving for two or more financial goals at the same time.

Sequentially: Saving for one financial goal at a time in a series of steps.

Each method has its pros and cons. Here's how to decide which method is best for you.

Sequential goal-setting

Pros

You can focus intensely on one goal at a time and feel a sense of completion when each goal is achieved. It's also simpler to set up and manage single-goal savings than plans for multiple goals. You only need to set up and manage one account.

Cons

Compound interest is not retroactive. If it takes up to a decade to get around to long-term savings goals (e.g., funding a retirement savings plan), that's time that interest is not earned.

Concurrent goal-setting

Pros

Compound interest is not delayed on savings for goals that come later in life. The earlier money is set aside, the longer it can grow. Based on the Rule of 72, you can double a sum of money in nine years with an 8 percent average return. The earliest years of savings toward long-term goals are the most powerful ones.

Cons

Funding multiple financial goals is more complex than single-tasking. Income needs to be earmarked separately for each goal and often placed in different accounts. In addition, it will probably take longer to complete any one goal because savings is being placed in multiple locations.

Research findings

Working with Wise Bread to recruit respondents, I conducted a study of financial goal-setting decisions with four colleagues that was recently published in the Journal of Personal Finance. The target audience was young adults with 69 percent of the sample under age 45. Four key financial decisions were explored: financial goals, homeownership, retirement planning, and student loans.

Results indicated that many respondents were sequencing financial priorities, instead of funding them simultaneously, and delaying homeownership and retirement savings. Three-word phrases like “once I have…,", “after I [action],” and “as soon as…,” were noted frequently, indicating a hesitancy to fund certain financial goals until achieving others.

The top three financial goals reported by 1,538 respondents were saving for something, buying something, and reducing debt. About a third (32 percent) of the sample had outstanding student loan balances at the time of data collection and student loan debt had a major impact on respondents’ financial decisions. About three-quarters of the sample said loan debt affected both housing choices and retirement savings.

Actionable steps

Based on the findings from the study mentioned above, here are five ways to make better financial decisions.

1. Consider concurrent financial planning

Rethink the practice of completing financial goals one at a time. Concurrent goal-setting will maximize the awesome power of compound interest and prevent the frequently-reported survey result of having the completion date for one goal determine the start date to save for others.

2. Increase positive financial actions

Do more of anything positive that you're already doing to better your personal finances. For example, if you're saving 3 percent of your income in a SEP-IRA (if self-employed) or 401(k) or 403(b) employer retirement savings plan, decide to increase savings to 4 percent or 5 percent.

3. Decrease negative financial habits

Decide to stop (or at least reduce) costly actions that are counterproductive to building financial security. Everyone has their own culprits. Key criteria for consideration are potential cost savings, health impacts, and personal enjoyment.

4. Save something for retirement

Almost 40 percent of the respondents were saving nothing for retirement, which is sobering. The actions that people take (or do not take) today affect their future selves. Any savings is better than no savings and even modest amounts like $100 a month add up over time.

5. Run some financial calculations

Use an online calculator to set financial goals and make plans to achieve them. Planning increases people’s sense of control over their finances and motivation to save. Useful tools are available from FINRA and Practical Money Skills.

What's the best way to save money for financial goals? It depends. In the end, the most important thing is that you're taking positive action. Weigh the pros and cons of concurrent and sequential goal-setting strategies and personal preferences, and follow a regular savings strategy that works for you. Every small step matters!

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

The Pros and Cons of Paying Off Your Debt Early

Tim Lemke — Sun, 11 Oct 2020 17:32:44 +0000

Debt stinks. We all know this. The sensible move here is to pay off any and all debts as soon as possible, right? Not so fast. In some cases, paying a debt off early doesn't save you all that much money. Let's take a look at the pros and cons of paying down debt before you have to.

Pro: You'll save thousands of dollars in interest

You can't take out a loan without paying interest. You also can't carry a credit card balance without paying interest. And the longer you owe money, the more interest you'll pay. Let’s say you buy a car for the price of $25,000, and you borrow $20,000 at an interest rate of 3 percent on a 60-month loan. That could mean more than $1,500 in interest payments over the course of five years. What a waste, right?

So whether it's a car loan or credit card debt, the sooner you wipe it out, the more money you'll save in interest payments, and depending on the balance, this could mean hundreds or even thousands of dollars. (See also: 15 Tips From People Who Paid Off an Incredible Amount of Debt)

Con: You may have paid off most of the loan interest already

Most loans have something called an "amortization schedule" that maps out how much you'll pay in interest and how much you'll pay in principal each month. With many loans — especially mortgages — you pay most of the interest in the early years and pay mostly principal later on.

For example, let's say you have a 30-year loan of $300,000 with a 5 percent interest rate. Using this handy amortization calculator, this means you'll pay $1,610 per month. (For simplicity purposes, I am not including taxes and insurance in this calculation.) A typical amortization schedule shows that you will pay $1,250 per month in interest payments at first. But toward the end of the lending period, your interest payments are much lower. By the time you have three years left on the loan, you'll pay a little over $200 in interest per month and it will continue to decline from there.

If you are fairly late in the loan term, there's not a major financial advantage to paying your loan off early. You're practically borrowing money interest-free at this point, so you might as well hold onto your cash or use it for something else. (See also: 5 Debt Management Questions You're Too Embarrassed to Ask)

Pro: You free up cash for other things

Your mortgage is $1,500 a month. Your car payment is $200 per month. Your student loan payment is $180. The minimum payment on your credit card balance is $250. If you're locked into these payments each month, you may not have a lot of money left over for other needs or wants. Debt prevents you from having true financial flexibility. Pay those debts off early, and breathe easier knowing you've freed up a significant amount of cash.

Con: You could deplete your emergency fund

Your drive to pay off debt early may be strong, but where is that money coming from? It's not easy for most people to pay off the $20,000 left on a mortgage in one fell swoop, for example. If you do have that much cash available, you need to make sure it's not coming out of your emergency fund. It may feel good to pay off a debt, but when you have no money left to cover a medical emergency or job loss, you're playing a dangerous game. It's best to keep at least three months worth of living expenses on hand in cash, and avoid the temptation to raid it just to pay off a debt early. (See also: 7 Easy Ways to Build an Emergency Fund From $0)

Pro: You'll sleep better

For many people, carrying debt from month to month is physically and mentally exhausting. It weighs on you. And that's totally understandable. Everyone has their own comfort level with debt, and if you simply can't stand the thought of even a small debt burden, pay those loans off in full if you can. In many cases, paying off a debt early offers a mental and financial freedom. (See also: How Getting More Sleep Helps Your Finances)

Con: You might stop building credit

Believe it or not, paying off debt early may actually hurt your credit. If you insist on always clearing debts in full long before they are due, you may cease to have enough credit history to get a favorable rating from credit agencies. As long as your debt burden is not too high, making consistent, regular payments on debts and paying bills on time is the best way to build strong credit.

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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:

5 Things Keeping You From a Life of Financial Independence

Toni Husbands — Sat, 10 Oct 2020 17:32:44 +0000

Financial independence can mean different things to everyone. A 2013 survey from Capital One 360 found that 44 percent of American adults feel that financial independence means not having any debt, 26 percent said it means having an emergency savings fund, and 10 percent link financial independence with being able to retire early.

I define financial independence as the time in life when my assets produce enough income to cover a comfortable lifestyle. At that point, working a day job will be optional.

But what about the rest of America? How would you define financial independence? If freedom from debt is what you're seeking, here are five areas that could be holding you back.

1. Not having clear, financial goals

If you're not planning for financial independence, chances are you won't reach it. The future is full of unknowns, but having an idea of when you'd like to achieve financial freedom should be your first step.

Do you want to retire before you turn 65? Do you want to travel the world with your spouse once you reach early retirement? Both goals will require a significant amount of cash stashed away, so it's important to start saving ASAP to make those dreams come true. (See also: 15 Secrets of People Who Retire Early)

2. Not saving enough

It's important to identify how much you're currently saving, and how much you need to save in order to retire when you want to, or reach another major financial goal. Using a calculator like Networthify can help you play with various money-saving scenarios and make realistic projections about retirement.

Another way to make saving money easier is to automate it. Setting up an automatic weekly or monthly transfer from your checking account into your savings account will take the extra task off your already full plate. Even if it's as little as $5 a week, it's enough to start building that nest egg. (See also: 5 MicroSaving Tools to Help You Start Saving Now)

3. Not paying off consumer debt

If you're carrying a credit card balance each month, financing cars, or just paying the minimum on your student loans, compound interest is working against you. Creating an aggressive plan to pay off debt quickly should be a number one priority for anyone who is serious about achieving financial independence. Otherwise, your money is working for your creditors, not you.

If you prefer to tackle credit card debt first, there are several debt management methods you can try, including the Debt Snowball Method and the Debt Avalanche Method. The Debt Snowball Method has you paying off the card with the smallest balance first, working your way up to the card with the largest balance. The Debt Avalanche Method is similar, but here you would pay more than the monthly minimum on the card with the highest interest rate first, working towards paying off the card with the lowest interest rate. Both are highly effective methods, and choosing one really just depends on your preference.

4. Giving into lifestyle creep

A high income does not automatically make you wealthy. As you move up in your career, the temptation to upgrade your lifestyle to match your income will be ever-present. After all, you work hard, so why not reward yourself with the latest gadgets and toys?

However, if you continue to spend and live modestly, you can put more money away for travel or retirement with every pay raise you earn. Financial freedom will be just around the corner if you resist that temptation to upgrade your home, car, and electronics to match your income bracket. (See also: 9 Ways to Reverse Lifestyle Creep)

5. Being driven by FOMO

Fear Of Missing Out, aka FOMO, is the modern version of keeping up with the Joneses. Except now you have access to the Joneses' social media platforms, and they go on all kinds of fun adventures. Social media is a great tool for keeping in touch, but it can also make you want to spend all your money on lavish vacations, clothes, spa treatments, and other extravagent things. Resist that urge. And block the Joneses on social media if needed. (See also: Are You Letting FOMO Ruin Your Finances?)

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

How a Credit Card Can Actually Help You Get Out of Debt

Holly Johnson — Thu, 08 Oct 2020 17:32:44 +0000

If you have high-interest credit card debt, you may believe another credit card is the last thing you need. Another card would only leave you with more open credit after all, and that just means more temptation to spend and rack up even more debt.

But a certain type of credit card debt could help your situation — if you use it the right way. This type of card is a balance transfer card.

How balance transfer cards work

Each balance transfer credit card has its own unique introductory offer you can use to your advantage. Most offer 0% APR from 12 to 21 months, meaning you won't pay interest on transferred balances during that time. However, some balance transfer cards charge a balance transfer fee that typically works out to 3% or 5% of the balance you transfer over.

To illustrate, let's imagine for a moment that you have $10,000 in credit card debt at 19% APR and you're currently making a payment of 5% of your balance, or $500 per month. At this rate, it would take 25 months to pay off your debt, and you would fork over $2,120 in interest over that time.

Now, let's say you apply for a balance transfer card that gives you 0% APR for 21 months in exchange for a 5% balance transfer fee. Once you transferred your entire balance over and added in the fee, you would start repayment owing $10,500 ($10,000 plus a $500 balance transfer fee).

However, the fact that you're not paying interest means you could continue paying $500 per month and pay off your entire balance with zero interest in 21 months. In other words, your balance transfer card could shave four months off your repayment timeline and save you $2,120 in interest. (See also: Here's What a Balance Transfer Does to Your Credit)

Tips for a successful balance transfer

The example above shows why balance transfer cards are so popular. Sure, some of them charge balance transfer fees, but having 0% APR for anywhere from 12 to 21 months can help you get out of debt faster, and lead to thousands of dollars in savings.

According to estimates from Experian, Americans conduct $35 to $40 billion in balance transfer activity each year. This is good news for consumers who are taking advantage, but it's also troublesome since many people get stuck in a situation where they're transferring the same debts to new balance transfer cards every few years.

If your goal is using a balance transfer credit card to get out of debt and stay out of debt, you'll want to set yourself up for success. Here's how you can do that.

Compare offers

Because balance transfer cards each have their own introductory offers, you need to check out more than one. Ideally, you'll settle on a balance transfer credit card that grants you 0% APR for as long as you need to pay down all (or most) of your debt.

Other factors to consider with balance transfer cards include any fees they charge, consumer perks and protections, and rewards programs. However, beware of signing up for balance transfer cards with rewards programs if you worry they'll entice you to spend. The goal with a balance transfer card is paying down debt — not racking up more.

Look for cards that don't charge a balance transfer fee

Keep your eye out for balance transfer cards that don't charge a fee. While most charge a fee to transfer balances upfront, there are several that skip over this fee for balances transferred in the first 60 days. Avoiding this fee will normally save you 3% to 5% of your balance amount, which can help you start paying down your balances right away.

Stop using credit cards

No matter what you do, stop using credit cards once you've transferred your balances to a card that offers zero interest for a limited time. You won't want to use your new balance transfer card for purchases since the goal is paying off your debt, but you should also steer clear of using other credit cards since you could easily rack up more debt and eliminate any progress you've made.

While you're in debt-repayment mode, you should stick to a cash budget or use your debit card instead of credit. That way, you won't "accidentally" rack up new credit card balances you can't afford to repay.

Create a debt repayment plan

Finally, don't forget to create some sort of debt payoff plan for how you'll pay down debt during your card's introductory offer. You should estimate how much you can afford to pay each month and figure out how much debt you'll ultimately pay off if you stay on track. If you can manage to pay off your entire debt over your card's 0% APR offer with a specific payment amount, you should determine if that figure is possible with your monthly income and expenses. And using a good debt repayment calculator can help a lot.

You may also want to look for ways to cut your spending and bills so you can throw more money toward your credit card's balance each month. Start with the low-hanging fruit in your budget — things like grocery spending and dining out, entertainment spending, or regular trips to your favorite department store. Also consider uninstalling any apps on your phone that regularly cause you to spend money, whether it's Instacart, DoorDash, or Amazon. Make spending money more difficult and you're more likely to save over time. And those savings can be allocated toward your debts until they're paid off.

The bottom line

Another credit card may seem like the last thing you could possibly need if you're in debt, but a balance transfer card could help you save money with the right mindset. Consider a 0% Intro APR credit card to pay down debt faster, but don't forget that you'll have to change your spending if you want to get out — and stay out — of debt.

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

5 Money Moves to Make Before You Turn 40

Holly Johnson — Thu, 01 Oct 2020 17:32:44 +0000

Turning the big 4-0 is a perfect time to reflect on how far you've come in life, the milestones you've surpassed, and the relationships you've built. But for some people — especially those who don't have their financial ducks in a row — it's a time when panic sets in.

After all, turning 40 can make you painfully aware that time is running out to fix any financial mistakes you've made in the past. At the same time, you need to get serious about your money if you want to enjoy your golden years without financial stress. That's why financial advisers suggest a handful of money moves everyone should make before their 40th birthday.

1. Deal with consumer debt

Ryan Inman, a financial planner for doctors, says it's crucial to create a plan to deal with consumer debt well before your 40th birthday. That's especially true when it comes to high interest credit card debt. With the average credit card interest rate now over 17%, this type of debt can be difficult to pay off — and a big drain on your budget each month.

If your goal is paying off debt, there are multiple approaches to consider. You can attack it the old-fashioned way and pay as much as you can each month, or even try the debt snowball or debt avalanche methods. You can even apply for a balance transfer credit card that lets you secure 0% APR for up to 21 months.

Ideally, you should strive to have no debt other than your mortgage at this point in your life, says Inman.

While this may seem like a lofty goal, not having to make interest payments toward consumer debt will make it a lot easier to save more for retirement and play catch up on your investments if you're already behind.

2. Maximize your retirement savings

It's easy to think maxing out your retirement savings isn't necessary when you're young, but when your 40s hit, you become keenly aware of just how much more your nest egg needs to grow.

Financial planner Benjamin Brandt, who hosts a retirement podcast called Retirement Starts Today Radio, says he suggests anyone approaching 40 start maxing out their retirement savings. Remember that you'll set your contributions up through payroll out of your pre-tax income, so it's not as costly as it may seem. Also note that contributing the max to retirement will reduce your taxable income, which could mean a smaller income tax bill this year.

If you can't contribute the max, Brandt says to try to contribute more than you are now and inch your goal up slightly every year until you get there.

Brandon Renfro, an assistant professor of finance and financial planner in Hallsville, Texas, says that, at the very least, you should make sure you're getting the full employer match on your retirement plan. An employer match is the amount of money your employer might match when you save for retirement yourself. For example, your employer might agree to contribute up to 6% of your income each year as a match, but you have to contribute 6% to get the full amount.

Remember that your employer match is free money for the taking, and you should take advantage of any help you can get toward retirement savings as you approach your 40s.

3. Automate your finances

Certified Public Accountant Riley Adams, who also writes at Young and the Invested, says that your 40s are a good time to try to automate your investments if you haven't already. With more automation and money moving on its own, you're less likely to spend money on stuff you don't need or end up in a situation where you're inflating your lifestyle as your income grows.

"To protect yourself from yourself, learn to establish automated financial transactions to handle your money moves each paycheck," he says. "Doing so takes the hassle out of your hands and also puts your money to better use."

For example, you could set up an automatic bank transfer so a specific amount of money is transferred to a high-yield savings account every month. Or, you can set up automatic deposits into a brokerage account. Boosting your retirement savings in a workplace account can also be considered automation since the money is taken out of your paycheck automatically and invested on your behalf. (See also: 5 Ways to Automate Your Finances)

4. Purchase insurance based on your future finances

Financial planner Brenton Harrison of Henderson Financial Group says that, by your 40th birthday, you should also have your insurance needs squared away. However, you should strive to think of your insurance needs in future tense.

"It's tempting to determine your needs based on your current income and net worth," he says. "But for many people, their 40s are their peak earning years, meaning that the insurance needs you have before 40 might not be enough as your career progresses."

Harrison suggests sitting down and thinking about where you'd like to go in your career and where you plan to be financially in 10 years. From there, buy insurance based on that financial picture.

"If you know you can and will achieve a certain level of success, don't wait until you've reached it to start planning," he says.

While the types of insurance you'll need vary depending on your situation, think beyond the basics like homeowner's and auto insurance. For example, you may want to buy an umbrella insurance policy that extends your coverage limits in certain cases.

Also, make sure to get proper life insurance coverage," says financial planner Luis Rosa.

"If you have a family or are planning on having one in the near future, it is crucial to make sure that they are protected," he says. And you're much more likely to qualify for the coverage you need at a price you can afford when you're in your 40s (or before) and still relatively healthy.

5. Build an emergency fund

If you've struggled with your finances over the years and dealt with credit card debt multiple times, chances are good it's because you don't have an emergency fund. While any amount saved is better than nothing, most experts suggest keeping a separate fund for emergency expenses or job loss that's stocked with three to six months of expenses or more.

You never know what kind of roadblocks life will throw your way, but you'll be prepared for almost anything if you have savings set aside. And if you can't save six months of expenses, it's still best to start somewhere — even if you can only squirrel away a few thousand dollars.

Put your savings in an interest-bearing account and keep adding to it, and you'll eventually get there.

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

How to Avoid These Common Hidden Fees

Emily Guy Birken — Tue, 03 Mar 2020 09:00:08 +0000

When I found out that my favorite comedian was coming to town, I couldn't wait to buy tickets. Each seat in my preferred section cost $84, which was a little high, but I figured it was worth it to see someone who consistently makes me laugh. But after adding in the service charge, taxes, and a fee to email the tickets to me, the two $84 tickets came to a total of just over $200.

Anyone who has recently bought tickets to a music, sporting, or comedy event has had a similar experience. Hidden fees increase the price of your seat, but you won't even realize until it's time to enter in your payment information. At that point, you're already excited about the event and don't want to back out because of an unexpected cost.

Buying tickets is not the only time you find yourself staring down a hidden fee. Here's what you need to know about the surprise extra charges on common purchases, and how you can either plan for them or fight them.

Events

Buying tickets to events has changed a lot in my lifetime. Back in high school, I actually had to visit a box office or local retailer to purchase tickets to an upcoming event. I even camped out to be among the first in line for a popular band that came to town. When buying them in person was the only way to get tickets, the face value of the ticket was much closer to the amount you would pay for it. In general, you'd only pay sales tax on top of the ticket price.

All of that changed when Ticketmaster became the primary method for buying tickets. The event sales giant started charging everything from service fees to delivery fees to processing fees to facility charges. These additional fees are revealed only after you have chosen your seats at the base ticket price, and while you're watching a clock tick down the amount of time before the tickets are released to another hopeful concert-goer.

These fees add 25% to 35% to the price of your ticket, and the use of the countdown clock and the belated reveal of the fees both work to make you grumble but ultimately fish out your credit card to pay anyway.

For a short time, Ticketmaster held an absolute monopoly on tickets, and it still represents more than 80% of the market share of the ticket-sales industry. However, that doesn't mean you have no choice.

Avoiding the fees

The savvy concert-goer and sports fan has several options available for reducing ticket fees. To start, you can purchase directly from the venue to reduce your fees. Even if you buy the tickets online through the venue's online portal, you can usually get a lower price than you would through the big ticket brokers. This is what I did to buy my comedy tickets. As unhappy as I was paying an additional $32 for them, it represented only a 19% markup. Had I gone through Ticketmaster, the markup was just over 34%.

If you have more time than money, rocking the old school method of buying tickets in person at the box office can save you even more money.

Airline tickets

Within the past 10 years, airlines figured out they could increase profit by reducing the freebies they used to offer. They started by levying a checked baggage fee, which ranges from $10 to $150 per bag, depending on which airline you fly and how many bags you're checking.

From there, travelers started seeing seat selection fees when booking online. While there are always a few "free" seats that are covered by the cost of the ticket, you'll often find they're sparsely spread throughout the cabin and often not next to each other. This means that you (and your traveling companions) will each have to pay a seat selection fee if you'd like to be seated together.

Additional fees may include charges to watch the onboard entertainment and for drinks and snacks. All of these fees can inflate the cost of your flight by as much as 50% or more.

Avoiding the fees

Within the airline industry, fees vary a great deal. That means it's still possible to shop around to avoid extra expenses on top of your airline ticket. Some low-cost airlines allow you to bring up to two checked bags for free, skip seat selection fees, and enjoy complimentary snacks, drinks, and entertainment onboard.

Even if you don't have many airline choices because you don't live near a major airport, you can still keep your fees lower by purchasing your tickets as far in advance as possible. The sooner you buy your tickets, the more likely it is you'll be able to pick your seats for free.

In addition, making sure you understand exactly what fees your airline charges can help you to avoid last-minute surprises. Knowing before you reach the airport that you'll have to pay for a checked bag gives you the option of packing light with just a carry-on. And you can come to your flight prepared with snacks and entertainment to avoid paying for them on the plane. (See also: How to Save Money on Flights Using Fare Alerts)

Hotels

Booking a hotel room online allows you to easily compare room rates so you can find the best deal. Unfortunately, the rates you see online don't necessarily match the amount you pay once it's time to check out. That's because of charges like resort or amenity fees, parking fees, online booking fees, and Wi-Fi.

These fees vary and can be difficult to determine ahead of time. For instance, the resort fee is a daily additional charge levied for your use of the hotel's amenities, from gym and pool access, to using the hotel's private beach or enjoying the breakfast spread. Even if you have no plans to use any of the amenities covered by the resort fee, you're still on the hook for the fee. Most hotels charge a flat daily rate for their resort fee, but some charge a percentage of your room rate or a per person rate per day.

Avoiding the fees

Parking fees and Wi-Fi charges tend to be the easiest fees to determine ahead of time. Calling around and asking what these fees will be can help you decide where to stay. You may also be able to ask for discounts on these fees based on membership to groups like AAA or AARP or a hotel loyalty program.

Many countries prohibit charging undisclosed fees like resort fees and online booking fees, but the United States has no specific prohibition — although deceptive pricing is against the law. This means you can find the information about resort and other fees by either looking on your preferred hotel's website or by calling and asking. However, the fees are not necessarily going to be easy to find or calculate ahead of time.

There are several options for opting out of resort fees. The first is to only book rooms at hotels that do not charge them. You can check if a hotel charges resort fees at ResortFeeChecker.com.

In addition, booking a room using travel rewards points often means that your resort fee and your booking fee are waived. Hotel loyalty programs can also potentially earn you fee-free stays. (See also: How Travel Rewards Cards Can Help You Score Luxury Travel Perks)

Finally, opting out of hotel stays altogether can be another method of avoiding fees. Finding a place to stay through a peer-to-peer homeshare like AirBnB or VRBO can offer you cheaper per-night costs that have no fees tacked on.

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

The 6 Best Ways to Invest Just $100 Per Month This Year

Holly Johnson — Fri, 07 Feb 2020 09:00:10 +0000

The new year is the perfect time to ditch poor financial habits and pick up some new ones. Maybe you decided that this is the year you'll finally pay off high interest credit card debt, or perhaps you're using a budget for the first time in your life. Whatever your goals are, you probably know that it will take time and perseverance to get there.

But how should you invest your money? If you have an extra $100 per month to spare, there's more than one way to build wealth and finally get ahead.

We reached out to financial advisors to find out how they would invest an extra $100 per month in the new year, and here's what they said.

1. Bump up your 401(k) contributions

Colorado financial planner Mitchell Bloom of Bloom Wealth says your workplace 401(k) is a good place to start if your employer offers one, and particularly if you can qualify for an employer match. After all, an employer match you can qualify for is the closest thing to "free money" you'll ever receive at work, so you might as well take advantage.

You can strive to boost the percentage of your 401(k) contributions in order to funnel approximately $100 more into your account each month, but you may also be able to set aside a flat $100 in funds monthly if your workplace plan allows.

Either way, money in a 401(k) plan can grow tax-free and compound over time, and you won't have to pay taxes on distributions until you reach retirement age.

Also note that if you don't have a workplace retirement plan, all isn't lost.

Instead, you may want to "consider using a low-cost advisory firm like Betterment, where they will build a fully diversified globally allocated portfolio model with fractional shares so you can achieve diversification with a small investment amount," says Bloom.

2. Save $100 per month in a Roth IRA

Jeff Rose of Good Financial Cents says that consumers can also consider saving money in a Roth IRA if they meet requirements to contribute. While this type of account requires you to invest money that has already been taxed, your contributions can grow tax-free and compound until you reach retirement age. Once you're 59 ½ or older, you can withdraw money from a Roth IRA without paying income taxes, which is pretty sweet.

In 2020, most people can contribute up to $6,000 to a Roth IRA and traditional IRA account. However, individuals ages 50 and older can contribute an additional $1,000 for the year for a total of $7,000.

Income limits do apply, however. Married couples who file taxes jointly can't contribute to a Roth IRA if they earn over $206,000, and their contributions are phased out for incomes between $196,000 and $205,999. Single filers with incomes over $139,000 cannot contribute, and their contributions will be phased out for incomes between $124,000 and $138,999. (See also: 401(k) or IRA? You Need Both)

3. Save for emergencies

Also, consider saving for emergencies if you haven't already. Financial advisor Jake Northrup of Experience Your Wealth says that your emergency fund should include at least three months of living expenses, but potentially more.

You'll likely want to keep your emergency fund in an account you can access such as a high-yield savings account. While this means your emergency cash won't bring in a huge return, this money can literally save your finances if you face a surprise medical bill you can't pay or experience a job loss.

Further, having a fully funded emergency fund can also help you avoid charging up credit card balances with exorbitant interest rates. (See also: 7 Easy Ways to Build an Emergency Fund From $0)

4. Save for future healthcare expenses in an HSA

Financial planner Taylor Schulte, who is also host of the Stay Wealthy Retirement Podcast, says that assuming an emergency savings fund is in place and high-interest debt is paid off, the best place to put extra cash is into a Health Savings Account (HSA).

"The HSA is the magical unicorn of tax-advantaged investment accounts," he says. "Unlike any other account, they are triple tax-advantaged."

Schulte says this because you can invest up to certain limits on a tax-advantaged basis each year, then your money grows tax-free. When you take distributions in order to pay for qualified healthcare expenses, you won't pay taxes then, either.

There are some requirements in order to use an HSA, however, including the requirement that you have a high deductible health plan. For 2020, the Internal Revenue Service (IRS) defines a high deductible health plan as any plan with a deductible of at least $1,400 for an individual or $2,800 for a family, notes Healthcare.gov. Also note that any high deductible health plan's total yearly out-of-pocket expenses must be less than $6,900 for an individual or $13,800 for a family.

Morgan Ranstrom, who works as a financial planner in Minneapolis, MN, says you should strive to keep enough cash in your HSA to pay your insurance's annual deductible in case of unexpected health costs, but beyond that you can invest the rest for long-term growth.

"With regular contributions, potential investment growth, and minimal withdrawals, you'll have an account that may be used to fund medical expenses in retirement without tax penalty," he says. "How great is that?"

5. Pay off high interest credit card debt

While you may not consider debt repayment as an investment, the financial return can work similarly. Note that any debt you pay off is no longer charging an outrageous interest rate, and that means more money in your pocket each month that you can save or invest for the future.

Debt expert Chris Peach, who teaches consumers how to pay off debt through his Awesome Money Course, says you should check to see the interest rate you're paying on your credit cards, keeping in mind that the average credit card APR is well over 17%.

"For most people, getting an 18% return on your investment every year is more like a dream come true than a reality," he says. Fortunately, you can achieve that return by paying off high interest debt and saving the money you would normally pay toward interest each month.

Let's say you have a credit card balance of $10,000 at 18% APR and you've been making minimum payments on this card for years. Making the minimum payment of $200 each month would take you another 94 months to pay off the balance, which also results in $8,622 more in total interest paid, notes Peach.

But what if you were able to invest $100 per month as an over payment on your credit card?

"Though it may not sound like a ton of money, $100 more per month will pay the balance off 47 months earlier and saves almost $4,000 in interest," says Peach. "Not bad for a $100 monthly investment if you ask me."

6. Invest in yourself

Fee-only financial advisor Russ Thornton, who focuses on providing retirement planning for women, says an investment in yourself can also pay off in a big way. "This could be used to buy books, audiobooks, online courses, offline courses, professional associations, personal training sessions, or something else," he says.

If you acquire new or deeper knowledge that could help you perform your job, it could help you get a bigger raise or even a promotion, whereas learning a new skill could help you create a side hustle that could ultimately help you bring in more income.

You could even get involved with a professional association or networking group to build your network, says Thornton. "This could help with your current career or might open doors to new opportunities — both personal or professional."

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

4 Steps to Simplify Car Shopping in the New Year

Rod Griffin — Sat, 11 Jan 2020 03:03:53 +0000

The new year can be an opportune time to start looking for a new, or new-to-you car, as dealerships look to clear out previous model years. But shopping for a car isn't always as simple as showing up on the lot. There are a lot of decisions to be made between now and walking into the dealership: make and model, new or used, preferred features, type of financing to use, and the list goes on.

Before making that type of significant purchase, it's best to have a plan. Here are four steps to keep you focused and protect your financial health as you prepare to make your next vehicle purchase.

Step 1: Set a budget

Before you even begin to browse cars, it's vital to set a budget. One of the best ways to do this is to create a list that differentiates between your wants and needs in a car. If you're a commuter, you likely need fuel-efficiency, and while you may want the latest technology, like Bluetooth, it's not a necessity. Outlining your "must haves" can give you more control as you begin looking at costs, as you already know which items you're willing to forgo if it saves money.

As you look at different models, stick to cars your budget can handle, even if there was a sudden change in your financial situation, such as a job loss. The average new vehicle loan amount was $32,480 in the third quarter of 2019, according to Experian, while the average new car payment was $550. These amounts can give you a baseline as you look at your own budget to identify the total amount you feel comfortable borrowing, as well as how much of a monthly payment you can handle. (See also: 7 Easy Ways to Calculate Your New Car Budget)

Step 2: Ensure your credit is in good shape

About three to six months before you start seriously shopping for cars, make sure your credit is in good shape. Continue to pay your bills on time, and request a free credit report through Experian or by visiting annualcreditreport.com to check for fraudulent activity and to ensure all information is accurate.

Additionally, use the tools available to improve your credit, like Experian Boost before you hit the car lots. Experian Boost can increase your credit score instantly, and it gives lenders a more complete picture of your financial history, and your ability to pay off debt by looking at your on-time utility and telecom payments. (See also: 6 Money Moves to Make the Moment You Decide to Buy a Car)

Step 3: Shop around for the best loan options

More than 85 percent of new vehicles and 55 percent of used vehicles are financed. But financing isn't limited to a single type of lender. In addition to loan options offered at a dealership, it's a good idea to shop around for loans to see who has the best terms and rates available. Just because you put in an inquiry at one bank doesn't mean you can't look at another, but also consider looking at credit unions and traditional finance companies to find the best deal for your situation.

This is one area where your credit score can make a significant difference in what rates you're offered — the average interest rate for new vehicles for consumers who are in the "prime" credit tier is 4.21 percent, whereas for consumers in the "subprime" credit tier, it is 14.06 percent.

You can shop for a car loan without worrying about your credit score. Inquiries for auto loans are either counted as only one inquiry when they occur within a 30-day period, or may be excluded entirely from the calculation.

Step 4: If shopping for a used vehicle, get a vehicle history report

It's not surprising that buying a used car can be a significant cost savings. In fact, at $20,446, the average used vehicle loan last quarter was about $12,000 less than financing a new vehicle. When financing, that can mean significant savings in the amount of interest you'll pay over the term of your loan.

However, it's important to go into a used car purchase fully informed, so be sure to request a vehicle history report, like an AutoCheck report, before committing to the purchase. These reports include how many previous owners the vehicle had, or if there were any reported accidents. This can help you avoid surprises and give you a better idea of the value of the car. (See also: 8 Questions to Ask When Buying a Used Car)

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

How to Protect Your Finances in Case of a Recession

Emily Guy Birken — Tue, 12 Nov 2019 08:00:07 +0000

According to the financial news sector, it seems probable that we're headed toward a recession. Grim-faced economists think our current historic economic expansion is headed for a fall, and the news of a looming recession couldn't feel scarier.

There's good news and bad news about these opinions. The good news is that no one has a crystal ball, which means even the savviest of economic forecasters can't possibly know what our economy will do in the future. However, we do know that certain financial trends cannot go on indefinitely. (Remember in 2007 when we all thought housing prices could only ever go up? We learned the hard way in 2008 that nothing keeps growing forever.)

So how can you prepare for a recession that may or may not happen in a time frame you can't predict? Thankfully, there are a number of actions you can take today to protect yourself, and your finances.

Bolster your emergency fund

Financial experts recommend that everyone build an emergency fund that could cover three to six months' worth of expenses. Your emergency fund can get you through a period of unemployment until you land your next job.

However, losing your job during a recession could be a little more dire than losing it at any other time. When the economy as a whole has taken a hit, it can be much more difficult to find another employer who is hiring. This is why the median unemployment length during the recession was more than 25 weeks (nearly six months), whereas the current median length of unemployment is just over 9 weeks.

Now is an excellent time to add to your emergency fund. Start an automatic transfer to your savings account with every paycheck, and look for other ways to beef up that fund.

If you don't have an emergency fund that could handle a lengthy unemployment, there's no need to panic. Remember: anything you can put away will be helpful if you do find yourself with a pink slip. (See also: 7 Easy Ways to Build an Emergency Fund From $0)

Create your Plan B budget

Another proactive step to take is to map out what would change about your spending habits if you were to lose your job or take a pay cut. Going through your current budget and identifying the items you could cut can help reassure you that your emergency fund will weather a loss of income.

You could even challenge yourself to make some small cuts now and see if you miss your former expenditures. That can free up some extra money (more for the emergency fund!) and help you feel more in control of your spending now and in the future.

Attack your credit card debt

If you're carrying a balance on your credit cards, now is a good time to get aggressive with your payoff plan. Carrying debt into a recession could make for an overwhelming burden if you experience a pay cut or a layoff. You'd hate to find yourself unable to pay your credit card bills — and have to deal with debt collectors — when you're already feeling financially stressed. (See also: The Fastest Way to Pay Off $10,000 in Credit Card Debt)

Go to the doctor

The cost of health care can be prohibitively expensive, even for Americans with health insurance. According to a recent Bank of America Workplace Benefits Report, 53 percent of American employees have skipped a medical appointment, a test or procedure, or purchasing medication in order to save money.

This is why it's a good idea to schedule a checkup with your doctor now. Health care is expensive even when you have insurance, but it's even more expensive if you're uninsured. Getting a checkup while you have employer-sponsored coverage in place may head off any potential health (and financial) problems.

Resist the urge to tinker with your investments

Watching your retirement portfolio take a dive during a recession can be heartburn-inducing. It's easy to listen to that voice inside that's screaming at you to take your money out of the market or lose it all. But liquidating your investment accounts means you've turned your temporary, on-paper losses into permanent losses.

If we do go into a recession, plan on only looking at your portfolio quarterly — or even less often. This is one situation where putting your head in the sand will help your sanity and your bottom line.

If you're close to retirement, make sure you have cash

The only caveat to leaving your investments alone is if you're on the verge of retirement. Retiring during a recession can take a serious bite out of your retirement portfolio if you're still entirely invested for the long term. In that situation, you may find yourself retiring, but unable to access your retirement income because it has taken a recessionary hit.

If, in the next few years, you'll need to live off the money that's currently invested, then make sure you transfer some of your investments into cash equivalents. These will remain stable and available for you even if a recession hits just as you're ending your career. (See also: 9 Creative Ways to Boost Your Retirement Savings)

Be prepared

While there's no way of knowing exactly what's around the corner, we can all improve our financial lives by taking simple precautions. Whether we're on the brink of a recession or the reports of the economic demise have been greatly exaggerated, you'll be glad you took these steps to protect your money.

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

How to Resist These 4 Rationalizations to Spend Money

Emily Guy Birken — Mon, 30 Sep 2019 08:00:08 +0000

When I turned 40 earlier this year, I decided to celebrate in style with a theme party at a local pub. When I went to a party store to buy decorations for the event, I went a little overboard with balloons, streamers, hats, and kitsch. I'm only going to turn 40 once, after all, and I wanted to enjoy myself and throw a fun party.

As I was cleaning up many of the unused decorations after the party, I realized I had fallen victim to one of the classic money blunders: using a special occasion as my rationale for overspending.

Humans are good at coming up with rationalizations for spending money. But the lies we tell ourselves to excuse our spending are remarkably consistent, and we can recognize these rationalizations while they're happening. The next time you find yourself using one of the following excuses, stop and ask yourself if you're rationalizing your spending. (See also: 5 Mental Biases That Are Keeping You Poor)

"It's a special occasion!"

The special occasion excuse is the very reason the staff at the party supply store were so happy to see me. It feels wonderful to spend money to celebrate, whether you're marking a milestone birthday, giving holiday gifts to your loved ones, or commemorating a major life change like marriage or graduation.

However, as good as it feels in the moment to spend money for these reasons, special occasion bills are just as painful to pay as any others. The boost you may feel for being the hostess with the mostest or the uncle who gives the best Christmas presents will have faded by the time your credit card payment is due. And that is hardly the way to ensure that you have happy memories of your special occasion.

If you find yourself excusing your overspending because it's for something special, stop and think about what it is you truly want to get out of the occasion. Take a moment to recognize what feeling you want to evoke. Once you've figured that out, you can then determine how to do so without overspending. (See also: 7 Effortless Ways to Prevent Budget-Busting Impulse Buys)

"This will save me money."

My stepfather once went to Sears to buy a single 5/16 inch wrench that he needed for a project. Buying the single wrench would've set him back about $15. But when he got to the store, he found a 44-piece wrench set with every possible size he could ever need. The set cost $200, but he proudly told the family that the 5/16 inch wrench in the set only cost him $4.50. By spending $185 more than he planned, he saved $10.50 on the particular wrench he needed.

We often rationalize a purchase with this kind of thinking. We tell ourselves that spending money we didn't intend to spend will somehow save us money in the future. And retailers are fully aware of our tendency to rationalize purchases as a way of saving money. (My stepfather's wrench set helpfully broadcast the fact that each wrench only cost $4.50 across the top.)

Asking yourself the following questions can be a good method of breaking through your rationalizations:

Do I need this item?
Would I buy it if it weren't on sale or if it couldn't save me money?
Can I afford it?

Had my stepfather asked himself these questions, he certainly would not have come home with a set of 44 wrenches that he didn't need. (See also: How to Use Financial Anchors to Make Better Money Decisions)

"I need this!"

Knowing the difference between needs and wants is the basis of personal finance literacy. Recognizing that you must prioritize your needs over your wants is the cornerstone of basic budgeting, and most people are well aware of the importance of doing this.

The problem with the needs-versus-wants education is that it provides us with another ready-made rationalization for spending. Anytime we can convince ourselves that we need an item, there is very little to stop us from overspending.

For instance, let's say your car is on its last legs. You need to get a new car because you have to have reliable transportation to get to work. But you convince yourself that you need a brand-new car rather than a reliable used one. You've tacked a want onto your legitimate need in order to justify your overspending to yourself.

To avoid this rationalization, ask yourself if your need could be fulfilled with a less expensive option.

"It's only $X."

Spending a little bit of unexpected money can feel like no big deal, since you're only parting with a five-spot or a tenner. If this only happens every once in a while, you might chalk it up to the cost of living.

However, there are problems with the "It's only $X" rationalization. The first is that small amounts add up quickly. You can rationalize your way into some pretty hefty spending a couple of dollars at a time.

In addition, what you consider a small amount of money changes with your budget. As you earn more money, you may go from thinking "It's only $5" to "It's only $50." While you may have the income to absorb such a change in your "It's only" thinking, you're still spending more than you planned and it will add up even quicker at a higher income level.

If you find yourself rationalizing a purchase with "It's only $X," ask yourself what else you could do with the money. Thinking through what the loss of that money actually means to you can help you overcome the rationalization. (See also: 4 Mindful Spending Habits That Will Save You Money)

From rationalizing to rational

Making excuses for our less-than-ideal choices may be human, but it's not the best way to manage your money. Taking the time to really ask yourself why you're making the choices you are can help to end your rationalizations and start looking at your finances more rationally.

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

6 Signs You Should Refinance Your Student Loans With a Private Lender

Holly Johnson — Mon, 16 Sep 2019 08:00:06 +0000

Student loan debt has become an absolute disaster for many Americans who chose higher education with the goal of improving their lives. In fact, over 43 million adults owe on their student loans today, with a cumulative debt that is well over $1.5 trillion.

Since it's nearly impossible to discharge student loan debt in bankruptcy, unlucky borrowers with crushing debt levels have few options when it comes to finding a way out. They can pay off their loans the hard way, and there are federal repayment programs that can help ease the burden for those with federal student loans.

Students can also choose a different repayment timeline with federal loans or apply for certain types of employment that can help them qualify for forgiveness programs like Public Service Loan Forgiveness (PSLF).

Some borrowers can also benefit from refinancing their student loans with a private lender, but there are some pitfalls with this strategy, too. You'll lose out on some federal protections when you refinance federal loans with a private lender, and there are steeper requirements to get approved.

If you are considering refinancing your loans with a private lender to get out of debt faster or make repayment easier, here are some signs you may be on the right track.

1. You have an excellent credit score

While anyone can qualify for most federal student loans regardless of their credit score, most private student loans have stricter requirements. In fact, you typically need very good or excellent credit to qualify for the best private student loans, which typically means you'll need to have a FICO score of 740 or higher.

Not all private lenders list a specific credit score requirement, however. SoFi, for example, requires you to meet citizenship requirements, have a job, and have graduated from school with your degree. In terms of their credit requirements, they simply state that "loan eligibility depends on a number of additional factors, including your financial history, credit score, career experience, and monthly income vs. expenses."

In most cases, however, you'll need to have good credit to refinance with a private loan, or have access to a cosigner willing to be on the hook for repayment along with you. (See also: 3 Private Lenders That Can Really Save You Money on Your Student Loans)

2. You have no plans to take advantage of federal student loan benefits

One major downside that comes with refinancing federal student loans with a private lender is that you'll be effectively "giving up" federal loan benefits like deferment and forbearance. You'll also give up your shot at qualifying for income-driven repayment plans, which can help you secure a lower monthly payment for 20-25 years before leading to ultimate student loan forgiveness.

For that reason, refinancing with a private lender is usually best for borrowers who have no intention of using these benefits or needing to extend repayment by a decade or more to afford their loans. (See also: Should You Refinance Your Student Loan?)

3. You want to consolidate your loans

If you have multiple student loans, you may want to consider consolidating them into a single new loan with one monthly payment. You can accomplish this goal with a federal Direct Consolidation Loan, but you can also consolidate multiple student loans — including both federal and private loans — with a private lender.

The benefit of consolidating loans with a private lender is the fact that you may be able to qualify for a lower interest rate. (See also: What’s the Difference Between Student Loan Refinancing and Consolidation?)

4. Your interest rate is high

Speaking of interest rates, this is one area where private student lenders can really shine — particularly if you have good credit. Federal student loan rates tend to be on the low side, but private student lenders still offer the better deal. (See also: This Is How Student Loan Interest Works)

5. You need a lower monthly payment

Refinancing your student loans can help you accomplish several different goals. You can save money on interest by securing a lower interest rate, for example, but you may also be able to pay down your debt faster.

In some cases, it can also make sense to score a lower rate but extend your repayment timeline. The lower interest rate and lengthier repayment period can leave you with a lower monthly payment amount, which can help immensely if you are working toward earning a higher income or you need to save money to fund a goal like starting your own business. (See also: How to Manage Student Loans On a Low Income)

6. You have a stable income

You do need a stable income to qualify for private student loan refinancing, which is vastly different from federal student loans that don't require an income at all. Private student loan refinancing is only available to people who have graduated with their degree in most cases, have a job (or a job lined up), and have provable income they can use to repay their loans.

If you don't have a big income, you may want to wait until you're in a better, higher-paying job before you apply for private student loan refinancing. (See also: Which Student Loan Repayment Plan Saves You the Most?)

The bottom line

Private student loan refinancing isn't for everyone, but it can be a boon for your finances if you're the right type of candidate. If you want to pay off your student loans faster, have good credit and a high income, and you have a solid credit history, you may want to explore private lenders to see how they stack up.

Just make sure to consider all the pitfalls, including the fact you'll no longer qualify for federal student loan benefits. This trade-off can be well worth it, but only if you have a plan.

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How to Use Budgeting Skills to Improve Your Time Management

Emily Guy Birken — Tue, 27 Aug 2019 08:00:06 +0000

Back when I was in college, a friend consistently asked for extensions on her essays. One evening, she mentioned the overwhelming relief she felt when she asked for a 24-hour extension, only to feel the exact same deadline anxiety and stress the following day as her new deadline approached.

While I had trouble relating at the time — I was a stickler for deadlines as a student — becoming a freelance writer has made me understand the alternating waves of dread/relief/dread that occurs when you put off a deadline.

What's interesting about this kind of poor time management cycle is that it's similar to the cycle of debt that occurs when you struggle with money management. In both cases, you're putting off thinking about future demands on your time or money because you're focused on the issues right in front of you. You put off your deadline, or borrow money to pay your rent, forgetting that there's another deadline or bill coming right behind the one you temporarily stalled.

The good news is that if you're actively tracking your spending and sticking to your budget, then you've already mastered time management skills — you just think of them as money management skills. But applying the following budgeting skills to time management will help you feel well-planned and stress free. (See also: 10 Time-Management Fails — and How to Fix Them)

Pay yourself first

We all know that planning to save whatever money is left at the end of the month is a good way to never save anything at all. That's why paying yourself first is one of the most important rules of good budgeting. Making sure that your financial plans are funded — before you let today's wants drain your savings — allows you to be a step ahead of future problems.

If you struggle with time management, you can also get ahead of future problems by paying yourself first. The trick is to take about 15 minutes each morning to review your calendar and make plans before you jump into your work for the day.

You might feel like you don't have enough time to take 15 minutes each morning for planning. After all, Sheryl in accounting needs that report ASAP and you still haven't prepared for the meeting with the boss.

But skipping your 15 minutes of planning is like forgoing your savings at the beginning of the month. It leaves you unprepared for things that you could've easily seen coming. Just like a transfer to savings at the beginning of every month means you won't be surprised by an emergency bill (or retirement, for that matter), committing to 15 minutes of planning each morning means you won't be caught blindsided by plans, meetings, deadlines, or other scheduling needs that you might otherwise overlook.

Automate

It's a lot easier to save money or pay bills if you don't have to think about it. Setting up an automatic withdrawal from your account every payday means you never have to think about transferring money to your emergency fund or 401(k), and automatic bill pay ensures you never miss a payment. You can simply let the automation do its magic without having to remember a thing.

Your time management will work better if it's similarly effortless.

Start by finding any recurring tasks you perform, and set up a way to make them occur automatically. For instance, if you receive a number of emails that require similar responses, creating email templates can help you automate your emails. Instead of crafting a new response each time, you can simply use your templates.

In addition, automatic reminders via your calendar app can help you to get your recurring tasks done. If you're consistently late turning in your receipts for reimbursement, an automatic reminder can help you remember the due date, give you a nudge a week before to start gathering your receipts, and remind you two days prior to organize your receipts before turning them in. (See also: How to Manage Your Money When You're Too Busy to Think About It)

Track your spending

It's difficult to know where your spending leaks are if you don't know where your money goes. This is why tracking your spending is such an important part of budgeting. You need to understand where you're being wasteful to know what expenses you can cut.

Time management requires the same understanding of how you spend. How many of us feel like we're terribly time crunched, only to realize we spend hours on social media. Until you know where you spend your time, you'll struggle to find more time to do the things most important to you.

Tracking your time can seem overwhelming, but it can help you pinpoint where your days are going. There are several apps that can help you track how and where you spend your time, including Toggl and RescueTime.

However, keeping an old school time tracker (i.e., on paper) may be even more helpful. As with financial tracking, remembering that you'll have to write down a wasteful decision (whether that's buying something you don't need or watching a YouTube video while you're supposed to be studying) can give you second thoughts about your choice.

Whether you use technology or paper to track your time, having a snapshot of how you use that time can help you avoid the big time-wasters. Spending hours going down a Twitter rabbit-hole does not help you reach your goals, and tracking helps you realize just how much of a time-suck it is to just "quickly check" your feed. (See also: 5-Minute Finance: Track Your Spending)

Your productivity budget

Just like handling your budget, staying on top of your time management is hard, but not impossible. Using the skills you've practiced on your finances can help you feel more in control of your time. And that feeling of control will always feel better than any extension on a deadline.

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Ask the Readers: What's the Most Extreme Thing You've Done to Save Money?

Ashley Jacobs — Tue, 13 Aug 2019 08:30:12 +0000

Tried-and-true tips for saving money, like meal planning and carpooling, really work. But when you've scrimped and saved in the obvious places and your budget is still coming up short, it's time to get creative.

What's the most extreme thing you've done to save money? How much money did you end up saving? Would you do it again if you had to?

Tell us about the most extreme thing you've done to save money and we'll enter you in a drawing to win a $20 Amazon Gift Card!

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4 Mindful Spending Habits That Will Save You Money

Emily Guy Birken — Mon, 12 Aug 2019 08:00:06 +0000

Spending money mindlessly is easy to do — not to mention fun! Between one-click purchases, instant downloads of new movies and music, quick stops for something to eat, and impulse purchases in stores, it's entirely possible to spend an entire paycheck in a day without even realizing.

But just because it's easy to spend money without thinking doesn't mean you have to fall victim to it. The following mindful spending strategies can help you resist impulse buys long enough to help you remember what you truly value.

Calculate costs in hours spent

While money is replaceable, time can only be spent, not earned. That's why it's helpful to start thinking of prices in terms of hours, rather than dollars. Remembering that you've already traded your time for the money you plan to spend on whatever has caught your fancy can be enough to help you keep your cash in your wallet.

Vicki Robin and Joe Dominguez popularized this strategy in their book Your Money or Your Life, where they make the case that your time is literally money, since you trade your time away in order to get money. When you calculate costs in hours spent, you determine the amount of money you net per hour, and compare that number to the cost of goods and services to buy. With your calculation in hand, you have a better sense of how much time any one purchase costs you.

To put this strategy into action, start with your monthly income. Check your pay stubs to see how much you make per month. Multiply your monthly net income by 12 to get your annual income, then divide it by 2,000 (the typical number of hours worked in a year) to get your hourly wage.

Let's say your monthly income is $3,100. If you multiply that by 12, you get $37,200. Divided by 2,000, you get an hourly wage of $18.60.

Having that number in your head can re-contextualize prices, because it gives you a concrete value of your hours. When you're tempted by a home assistant device that's on sale for $150, the price may seem like no big deal. But is it worth 8.06 hours of your work time?

You may ultimately decide that having a home assistant device is worth just over a day of work — and that's absolutely fine. Calculating prices in hours worked means that you're actually clear on what the true costs are.

Know why you're shopping

Eating and shopping can both feel very good in the moment, to the point where you ignore any signals that tell you that you've had enough. Like eating, we often spend money because we want to change our emotional state. And in both cases, there's a huge industry in place trying to keep us mindless, continuing to ignore signals and consume in order to avoid emotions.

To combat this, get several blank index cards. Place these where you'll see them anytime you might spend money. For instance, put one in front of your credit cards in your wallet, one on your laptop, and one taped to the back of your phone. On each card, write the following questions for yourself:

Why do I want to buy this?
What problem do I expect this purchase to solve?
How do I expect to feel after making this purchase?
How long do I expect to own this item/use this service?
Do I already own something similar?
Can I recreate the feeling of buying this without spending money?
Can I recreate the feeling of buying this by spending less money?

It's important to check in with yourself to understand why you're consuming so you can stop if it's not what you really want, or engage mindfully so you can truly enjoy the process if it is what you want. (See also: 8 Ways to Save Money When You Can't Really Afford To)

Create a purchase wish list

There is an excellent reason why "wait before making any purchases" is a classic personal finance tip. Forcing yourself to wait to decide if you actually want to spend money on an item can help mitigate the emotional element of spending decisions.

However, if you've ever tried to institute such a rule for yourself, you'll remember the "I don't wanna wait!" reaction that can derail the entire process. Even though you might be aware of these impulse-driven moments, it can still be tough to stand up to that foot-stomping part of yourself insisting on making the purchase right now.

One method of both calming and honoring the little Veruca Salt inside you is to keep a purchase wish list. When you find something you absolutely want to buy, quickly write down what it is, where and when you found it, and how much it costs. Once you've written it down, set a date anywhere from 24 hours to 30 days in the future when you may come back to make the purchase, if you still want it.

There are two benefits to this list:

You create self-awareness

You're recognizing the part of yourself that wants to give in to the impulse purchase. It does feel good to buy things on a whim. It would be fun to have whatever cool thingamajig you're pining for. Writing down all the details about the potential purchase is a way to honor the reality of your spending desires. You're not wrong for wanting the item, and making this list can help you feel more at peace with leaving it behind at the store or in your digital cart because you've honored your emotional reaction to it.

You train yourself to resist impulse buys

The second benefit is that by creating this list and letting it age, you learn to spend less on impulse buys, while still being open to making spending decisions that truly enrich your life. True impulse buys won't tempt you to return, since the inconvenience of going back will be stronger than the impulse to buy. The purchases you actually care about will be worth the wait, and allowing yourself to go back for such buys will ensure you don't feel deprived. (See also: How a Simple "Do Not Buy" List Keeps Money in Your Pocket)

Keep your mind on your money

Parting with money is incredibly easy, especially in our increasingly cashless society — which makes it very hard to resist the siren song of spending. But recognizing the time cost of purchases, asking yourself why you're buying, and honoring your impulses by creating a purchase wish list can all help you to pause between your desire and your purchase.

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

How to Decide If a Membership Is Worth the Price

Emily Guy Birken — Fri, 09 Aug 2019 08:00:05 +0000

Every summer, my family faces the same unanswerable dilemma: should we purchase a membership to our local pool?

This may not seem like an especially difficult question to answer, but it has us scratching our heads every year. The problem is that a membership for the summer costs $255, but daily admission is $8 per head, which comes to $32 per outing for the whole family.

Some summers, we knock out almost 10 visits before the 4th of July rolls around. On others, we're only just getting to the pool for the first or second time as of Labor Day. And it never fails that we pay-per-visit on the years we go all the time, and plunk down the full membership fee on the years we never manage to go.

So how do you decide if a membership will save you money or simply cost you more? Here are some things to consider.

Know your break-even point

The first consideration is one most people recognize as an easy way to compare apples to apples. In the case of our local pool, we know that we would need to visit the pool at least eight times over the summer to break even if we purchase the membership. Families in my neighborhood that spend two days a week at the pool every summer will see that they break even within a month of buying the membership.

When you're trying to determine if you want to pay the full membership price, doing this quick calculation of the break-even point can potentially help you make a decision. Having a break-even point in mind can also spur you to visit more often if you do purchase a membership. It removes one more barrier to entry for dropping by on a lazy Saturday. (See also: 28 Free Ways to Entertain Your Kids This Summer)

Base your decision on facts, not intentions

If you know for sure that you'll visit the pool, the science museum, or the zoo often enough that you'll reach that break-even point quickly, then your decision is easy to make. The problem is when you assume that you'll go all the time rather than know you will.

Your rosy assumptions about how often you'll schlep the whole family to the museum to take advantage of your membership is a form of the restraint bias. This cognitive bias is a universal mental quirk that makes us think we're far more likely to do something beneficial for ourselves in the future, forgetting how impulsive we are in the moment. When you're considering buying a membership to a pool or museum, you're not necessarily thinking about how much work it is to get your family out the door and how you may feel more inclined to just hang out in your backyard with the sprinkler on after a long week.

To make sure you're not basing your membership decision on unrealistic intentions, plan to visit as often as you like, paying per visit each time. If you actually visit the art museum or yoga studio often enough that you believe you'd break even if you bought the membership, then go for it. But if you don't visit again for six months after giving yourself permission to go as often as you like, then you know that a membership is probably not going to save you money.

Consider the perks

Even with the break-even point in mind, and knowing your actual visiting habits, it can still feel like a toss-up whether it will make more sense to pay-per-visit or invest in a membership. Something that can help you decide is assessing the perks of membership.

For instance, some pools, gyms, and community centers will offer members a discount on food. If your family doesn't visit the pool every weekend, but always enjoys concessions when you do go, calculating how much the food discount will save you can help you decide if the membership is worth it.

You might also enjoy free parking, a discount in the gift shop, or even access to members-only services or events by purchasing a membership. These perks can help you determine if the cost of membership is really a good deal.

Similarly, many museums, aquariums, and zoos offer reciprocity with other institutions across the country. Even if you don't expect to visit the local science museum more than once or twice in the next year, your membership can get you into other museums while you're on vacation or visiting friends or relatives. This can be especially worthwhile if your local institution's membership is relatively inexpensive, and the cost of the day pass at a reciprocal museum is particularly expensive.

Membership has its privileges

Membership-based businesses benefit when it's difficult to decide if buying a membership is the best financial choice. They make money whether you pay-per-visit and spend more than you would if you'd joined, or you purchase the membership and don't use it enough to break even.

That said, taking the time to do a little math, knowing your actual usage rather than your intentions for using your membership, and accounting for the money-saving perks that come with the membership can all help you make the best decision for your wallet.

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