In addition to the “Creating Your Monthly Budget” page, I have added a new page to the site, titled “Investing Wisely”.
There are many investment products out there and many places to turn to to do your investing. How do you know which one is right for you?
Each person develops their own specific investment habits through a number of different avenues. I prefer investing in a low-cost mutual fund. However, others have a knack for picking the right stocks at the right time. To each his own. To help you decide which investment avenue is right for you, check out The Simple Dollar. They weigh the pros and cons of various investment strategies along with the right investment company for each individual.
Budgeting is only the first part of building lifelong wealth, the second part, investing wisely, is ultimately what will help build and maintain that wealth.
With today being the first official day of summer, we are now officially into the warmer months of the year. While some prefer a ski trip during the winter season, many use these summer months as an opportunity for a beach getaway, or a family vacation. No matter what your financial situation is, planning a summer trip might be just the reward you need to reset and relax.
Step 1: Set a limit to how much you will spend on your trip. Plan for food, entertainment, lodging and transportation. Stick to the limit. It is best to estimate on the high side of costs.
Step 2: Research the best places to stay and the best way to get there. I recently traveled to a place where a hotel room would have cost me more than twice what a condo I found on Airbnb ended up costing me. I still got my own room and split the cost of the condo with friends I was travelling with. Also if you have to fly, sometimes a drive to another airport can mean a lower flight cost to your destination. The point is, explore your options.
Step 3: Find out how you are going to fund the vacation. Did you just receive an unexpected bonus? Have you been putting aside a few hundred dollars a month for the past year? Vacationing is much less stressful when you know how exactly the trip is being paid for.
So whether you’ve already enjoyed your vacation, it’s right around the corner, or you are trying to find the best way to plan for your next one, budgeting for your travel is simply the best way to travel.
Some have called compound interest the unofficial 8th wonder of the world. It is definitely a wonder when it is applied to your financial life. The best part about compound interest is that it allows for exponential growth of a portfolio. The concept is simple. When you earn interest/dividends/capital gains, you reinvest them into your portfolio instead of withdrawing the funds. The video shows just how powerful compound interest can be in increasing your wealth over time.
No matter your income level, everyone and I repeat everyone has the opportunity to create wealth over $1,000,000.
Most if not all of these individuals valued relationships over possessions and money. It was who they could impact with their wealth that was much more important than the amount of earthly items they could collect.
Every single one of the stories ends with a person(s) creating a lasting legacy in their community. When your time on earth is finished what do you want to be remembered for? I’m sure the people in these stories asked themselves this question, and the legacies they created was beyond comprehension.
Reduce your taxes and increase your savings. Sounds almost a little too good to be true right?
It’s possible, it’s easy, and I just did it and so can you.
Today is the final day for you to file your taxes for this year. Did you pay more in taxes than you would have liked? Do you want to lower your tax bill for next year? If so, then here is how to do it:
Increase your 401k contribution to your company’s plan. What percentage of your salary are you contributing to your 401k currently? Bump it up. By increasing your pre-tax 401k contribution to your plan you are in effect reducing the amount of income you take home, thus reducing your tax burden.
I recently increased my pre-tax contribution percentage by 8%, and found that I will save roughly $1700 this year on my taxes. It’s that simple. Increase your savings, reduce your tax burden. This offers 3 key benefits.
You lower the amount of taxes you will be paying for the year.
You increase the amount of savings you will have at retirement. The more you save now, the more you will have later.
Because you don’t see the additional money you put into your 401k plan on your paycheck, you won’t spend it, and most likely you won’t miss it.
Most of us are familiar with famed investor Warren Buffett. He has amassed a fortune of over $60 billion in his lifetime. He is known for picking great investments and sticking with them for the long run. In a world where it is easier than ever to buy and sell stocks in the blink of an eye, day-trading has become more and more popular. However, Buffett has always been outspoken about the negative effects of buying and selling equities over the short period.
So what does Warren think people should do to create wealth for themselves? The link below tells you just that. While creating a net worth equal to that of Buffett’s is highly unlikely, it is very easy to take just a few steps in the right direction to follow Buffett’s advice.
Yesterday was the first day of spring. Most of us are familiar with the term “spring cleaning”. You go through your belongings and get rid of items you no longer use or need. Don’t just view spring cleaning as a time for renewal in your home, also view it as a time of renewal for your finances.
Look at your retirement accounts and see if you can add an extra bit. Push up your 401k savings contribution by 1%, you won’t miss the 1% in take-home pay I promise. Do you not contribute the maximum you can to an IRA? If not, see if you can contribute an additional $10 a month towards the account. Again you won’t miss the money and it will go a long way in the future by compounding with itself.
Clean Your Expenses:
Do you have a gym membership you don’t use or other unnecessary expense eating away at your budget? Well now is the time to cancel that unused membership or eliminate that frivolous purchase to free up more money in your budget to allow you to do something you truly enjoy. Finding a way to clear an additional $20 every month can help pay for a weekend getaway during the summer months.
Less is More:
We often here about this in terms of possessions, the less things you own, the clearer your mind can be to focus on your passions. The same goes for your finances. The less expenses you have, the more time you can spend enjoying the money you do have. Do you have an outstanding loan you are only paying the minimum balance on? Focus on getting it paid off and that will be one less item eating away at your budget.
There is a retirement crisis currently underway. Why is this? Because people don’t save during their working years to fund their golden years. The Economic Policy Institute recently released are startling report about American’s retirement savings.
The graph above shows the median account values of retirement savings for a given age group. The overall median among all age groups is a meager $5,000 while the median value for those closest to retirement, 56-61 age group, have only $17,000 saved up.
To put this in perspective, I am 26 years old, and have been employed full time for less than 4 years. In my retirement accounts, which include a company 401k, a rollover IRA and a Roth IRA, I have $47,589 saved.
Retirees are relying on Social Security by larger percentages these days. Nearly 2 out of every 3 retirees relies on Social Security for at least 90% of their retirement income. No matter your current age, there are ways to insure that you are setting yourself up for success in your later years. Here are the steps I followed to have my current retirement savings:
Fund a Company 401k and get full employer match. This should be a no brainer. Fund your company’s 401k plan at least to the amount that will maximize your employer’s match. It’s FREE MONEY.
Start an IRA. I prefer a Roth IRA because it is money you will never be taxed on again, and is a good complement to a 401k (which you will pay income tax on in the future). Go to Vanguard’s website and get one started in a matter of minutes.
Maximize out your 401k. If you are under 50, you can contribute up to $18,000 of your pre-tax pay to a 401k. If you are over 50, you can contribute an additional $6,000. See if you can contribute an additional 1 or 2 percent each year until you reach the maximum.
Planning for retirement is now more important than ever. Many don’t have pensions to rely on anymore, so the responsibility is now on YOU to determine your retirement destiny.
Whether you save or invest your money really depends on the financial objectives you are trying to accomplish. Saving, usually refers to putting money away where it can be accessed quickly and easily for an impending purchase. On the other hand, investing should tie up your money for a length of time, but it will also produce better returns.
TIAA-CREF’s video below breaks down the difference between the two. After watching, decide what financial goals you are trying to achieve in both the short term and long term.
With today’s technology, it is now easier than ever to track your income and spending. Personally, I use Google Sheets to budget. I have the ability to access my budget on any computer with internet access along with my smartphone. Another great way to budget is through Mint.com. Signing up is free, and they have an app so you can update your budget on the go.
Now that you can see just how easy it is to start your budget, I will quickly lay out why you want to budget and the benefits.
You know how much you make: Ask someone how much take home income they have in a given month, you would be surprised the number of people who can’t give you a specific dollar amount. Knowing how much you make is vital to determining how much you can save and spend.
Plan Purchases: Saving up for a vacation? By budgeting you will be able to determine how much you need to set aside each month so you and your family can enjoy a getaway.
Eliminating Debt: This can have a two fold benefit. Firstly, if you know how much you make, then you know how much you are able to spend, thus you can avoid spending more than you make. Secondly, budgeting can help you set aside income every month to tackle debt, be it student loans, a car note, etc.
Enjoying your money: Budgeting allows you to feel confident about your spending habits. It allows you to plan for purchases and should limit financial stress on your life by worry about how you are going to pay for something.
This is not a comprehensive list of the benefits, but a few of the major ones. If you are curious of the benefits you can receive from budgeting then give it a shot if you haven’t already.