Financial Spring Cleaning

Spring is finally here, regardless of whether it feels like it outside or not.  Around this time of year, many see it as their obligation to go through their homes and rid themselves of unnecessary items that clutter the place up.  The idea that a clean and happy dwelling is a rebirth and a new start.  Why not take this same approach to your finances?

At the start of every calendar year, I always suggest creating a new budget for the upcoming year.  Mapping out your income and expenses presents saving opportunities and fiscal responsibility.  We are now almost three months into the new year and expenses sometimes change.  That is why I always do a financial spring cleaning.  Below are my favorite three ways to do a financial spring cleaning:

Financial Spring Cleaning Tip 1:  This first tip is directly related to a normal spring cleaning of the house people already do.  Go through your closet and determine which clothes you don’t need anymore.  Maybe you have shoes you don’t wear, pants you’ve outgrown, DVD’s you no longer watch because of a Netflix subscription.  Or a lot of cravats and bow ties that are now out of style, or men’s bracelets that you aren’t using any more.

Gather up these items and donate them to a local shelter like The Salvation Army.  Not only will you eliminate these useless items from your place, but you will be giving to those who could benefit from such items.  The best part about all of this is most of the times you can receive a tax deduction for your donations.  This can lead to a higher income tax return for the 2017 year.

Financial Spring Cleaning Tip 2:  Clean out unnecessary clutter in your budget.  For example, maybe at the beginning of the year you signed up for a gym membership you no longer use.  Cancel it.  Go through the various categories in your budget and see if they are relevant to the remainder of the year going forward.  Perhaps you dedicated a portion of your budget to pay off debt, but now you no longer have that debt.  Eliminate that category.  Eliminating categories in your budget makes it simpler and much easier to read and track.

Financial Spring Cleaning Tip 3:  Review the dollar allocations in your budget.  Say at the beginning of the year you were eating out lunch every day, but now you realize the many health benefits and cost savings of bringing your lunch to work.  See if you can slash $30-$50 a month off your food budget.  Shop around for car insurance.  Perhaps you find the same coverage with a different company for $15 less a month.  Eliminating a little bit of money from a few categories adds up and helps boost your savings potential.

Financial spring cleaning allows you to revamp your finances for the remainder of the year.  Even if you haven’t done a good job of sticking to your budget, it is never too late.  A financial spring cleaning can allow you to set up your financial priorities for the remainder of the year and gives you a clear financial conscious heading into the spring and summer months.

How to Pay Off Student Debt

Nearly three out of every four students graduating from a four-year college or university will have some sort of debt.  Despite the fact that college is supposed to be some of the best years of your life, paying off your student debt after you have graduated can seem like a mountain too big to climb for many.

How to Pay Off Student Debt

According to a recent Forbes article, the average student graduating from college has over $37,000 in student loan debt.  This number is expected to continue increasing due to the constant hikes in college tuition throughout the United States.  Whether you have graduated or are about to graduate from college with debt, there are ways to help you manage the financial burden.




Example 1 on How to Pay Off Student Debt:

Susie went to a four-year state school.  Fortunately, she had academic scholarships to help pay for schooling, and she also lived at home during the four years.  She graduated with $10,000 in student debt.  Susie was able to get a job right after school in the town where she went to school and where her family lived.  She continued to live at home and made a budget.  Susie focused on keeping her expenses low and used every bit of extra money she had left over in her budget to pay towards her loans.  Most importantly though was that she included a category in her budget for paying off her student loans each month.  She devoted $500 per month towards her student loans.  Because of her frugal living and her devotion to get out of debt, she was able to pay off the entire balance of her loans in less than two years!

Example 2 on How to Pay Off Student Debt:

After graduating high school, Chris decided to attend a private university to continue his studies.  The tuition at his university was expensive, but with the help of aid and an alumni scholarship he was able to limit the costs.  Regardless, Chris graduated with $45,000 of student debt after it was all over.  Chris accepted a job with a non-profit after graduation.  Even though he wouldn’t be making much money, he felt a calling to do something he passionately cared about.  Because of his situation, a high amount of student debt and a low salary, he enrolled in an Income Based Repayment Program.  This allowed Chris to avoid the high monthly payments his loans would typically have required him to pay and instead allowed him to pay a small percent of his income every month.  Even with this program, Chris still had to create a budget, but the repayment of his student loans was not as high of a priority as it was for Susie.  Nonetheless, Chris was able to still live comfortably, doing what he loved, while also meeting his student loan obligations.

The examples above illustrate a couple of real-life situations that people face when paying off student debt.  To some, paying off the debt is a very high priority.  To others, not so much.  Only you can decide how quickly you would like to pay off student loans.  The commonality that both Susie and Chris shared in both examples was that they created a budget.  Susie created a budget that allowed her to aggressively pay off her debt.  Chris created a budget that allowed him to live within his means but also meet his payment every month.  Regardless of which category you fall in, creating a budget is a great foundation to tackling any debt, especially student loans.

How To Trim Your Budget

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With the new year in full swing, people are doing their best to stick to the freshly made New Year’s Resolution’s they mapped out for themselves.  The most common resolution always seems to be losing weight.  Instead of going with the status quo resolution this year, why not try to trim something else?  Your budget perhaps?




How to cut my expenses? Is a question often asked by many in order to free up funds in their daily lives.  Maybe they are living paycheck to paycheck, maybe they are trying to save up money for a special purchase, either way trimming your budget is the best way to go about doing this.

For starters, you need to have a budget.  You can download a free budget template and simply put in your income and expenses.  The best part about budgeting is you get to see where your hard-earned money is going every month.  Perhaps you are spending a large portion on eating out, can you bring your lunch instead of going out to eat?  If so, you might be able to not only cut some expenses but trim your waistline also.

The free downloadable budget allows you to choose the expense categories you have for a given month.  Say for example you spend $100 a month on your cellphone bill, can you change service providers and possibly get the monthly expense down to $80 per month?  If so, you have freed up $20 per month or $240 for the entire year.  Can you trim $10 a month off your grocery bill by purchasing generic products versus name brand?  This can be an additional $120 in savings for the year.  Attempting to save as little as $10 to $20 per category for a few of your monthly expenses can add up to some awesome end of the year savings.

Below is a quick easy way to trim your budget:

  • Create a budget: If you don’t already have one, now is the best time to start budgeting. This will determine where you are spending your money every month.
  • Track all of your expenses: See just how much you are spending in the various categories every month. Some may surprise you.
  • Pick 2-4 categories: By selecting a few categories where you think you can cut some expenses you will maximize your yearly savings.
  • See how much you can cut: It can be $5, $10, $20 or maybe even more per category per month. Living on a little less each month won’t change your quality of life for the worse.  Instead, you can use the money saved to enhance it by saving up for a vacation or a future purchase.
  • Don’t incur new expenses: While trimming your budget to save up money is the ultimate goal, don’t incur new expenses during the process. A car payment or a gym membership will quickly eat away at the money you are trying to save.

Stick to it: Trimming your budget will only be beneficial to your wallet if you stick to it.  Developing discipline for sticking to a budget can be tough but also very rewarding.

 

The Benefits of a Budget

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Budgeting is an essential part to taking control of one’s financial life.  You would be surprised to know that nearly two out of every three Americans do not budget their income.

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.

  1. 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.
  2. 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.
  3. 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.
  4. 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.

 

Budget Smart, Invest Wise

Gobbling Up with Thanksgiving Savings

Tis’ the season!

Of deals that is.

Now is the time where we are bombarded with fantastic deals for the holiday season.  Black Friday, Cyber Monday, we have already been getting emails about these fantastic prices to be for over a month now. Amazon, Wal-Mart, and Best Buy are just a few of the companies vying for your holiday shopping business.

Whether it’s a good deal on a new TV or the latest gadget, companies want you to think that it is now or never when it comes to getting the best deal on a product for the gift-giving season.  While this may or may not be true, creating a budget for these seasonal expenses is critical to keeping credit card debt to a minimum.

It isn’t only the season for savings, but people feel the need to spend more than they can afford and charge it to their credit cards.  This equates to not being able to afford the full payment when your cycle comes around, thus leading to the high interest rates that credit cards charge.  Avoid the high interest rate and keep your holiday spending in check with these 3 tips.

  1. Pay Cash: Don’t be so quick to put every purchase on a credit card.  If you can pay in cash then do it.  This will prevent you from mindless spending.
  2. Create Gift Allowances: Put a limit on the amount you will spend on someone for the holiday season.  This will allow you to appropriately budget out your funds for all of the individuals you need to buy for.
  3. Time Over Money: Remember that the holiday season isn’t truly about who gets the best gifts, it is about spending time with the people you care most about.  Objects and money can be easily replaced, but moments spent with loved ones will have a greater lifetime value.

Budget Smart, Invest Wise

 

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Student Loans: Grace Period, Waste Period

I spoke with my sister who just recently graduated with student loan debt.  She asked me, “How do I start paying back my loans?”  I told her, I don’t know.

If you have recently graduated from college then chance are you have student loans to pay back.  There is student loan exiting counselling you must go through and then it seems like you’re all finished.

This is exactly what I did.  After I graduated I went through loan counselling sometime during the late summer of 2012.  And then… Nothing.  I don’t even believe I received an email until almost six months later when it was time to start paying back my loans.  My grace period was coming to an end.

If you take out a student loan through your college or university you will most likely have a grace period of six months.  This is so you can have time to “Get your finances in order”.  I assume these loan company figure if you were this easy to get into debt it was the least they could do.

The bad part about this “Grace Period” is that interest is accruing during the six months you aren’t paying back your loans.  The loan companies try their best to hide this from you and make it as difficult as possible to figure out how to pay back your loans before the period is over.

Step 1: Log on to https://studentaid.ed.gov/sa/?login=true and find out who your student loan provider is.

Step 2: Create an online account with your provider(s) and set up your account information.

Step 3: Begin paying back your loans before the grace period ends to limit the amount of interest you will pay over the life of the loan.

 

Budget Smart, Invest Wise

Video: Step by Step Guide to Creating a Monthly Budget

I have discussed the importance of creating a monthly budget on many previous posts.  This post is for all of you visual learners out there who have not yet created your own personal monthly budget.  Rachel’s video illustrates just how easy it is to create your very own budget.

http://www.youtube.com/watch?v=Rs8P0Eh7Zbc

Budget Smart, Invest Wise

Having a Portable Budget

A number of months ago I made a switch.  I used to keep track of my budget using a Microsoft Excel spreadsheet that was saved to my computer.  It was easy for all intensive purposes except that I could only do updates on the computer I saved my budget on.  So I made a switch.




Now I use Google’s Spreadsheet for all of my budget updating.  Here are 3 reasons why.

  1. I can update my budget from any computer where internet is available.  No need to ever save it as it is done automatically.  Whether it is my work computer or personal computer it doesn’t matter.
  2. You can make budget updates with your PHONE!  This is probably the best part about using the Google platform for your budget.  Just simply download the app, login to your Google account and you are ready to make budget updates on the go.
  3. Your budget will never crash.  Computer’s can crash, but having a budget on Google Spreadsheets makes it virtually uncrashable.  As long as you have access to internet you can have access to your budget and unless you decide to wipe it out (which again can still be undone) it is always accessible.

There are numerous advantages to having a portable budget.  The first key is to have a budget, but if you are going to have one do it right the first time and use Google Spreadsheets.

For more on this topic, consider reading my articles on:

Mid Year Budget Analyisis

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We are approaching month 8 of our 12 month calendar.  How does your budget look so far this year?  Are you keeping track of all of your spending?

It is always a good idea to look at your budget a few times a year and see how it is going.  As always you should ensure that you are spending less than you make, and have a portion of your income that you can invest.

Why do you need to analyze your budget throughout the year?  Costs change, income can also possibly change.  My rent just increased for my apartment.  I had to make extra funds available.  If you get a raise or a promotion, your income can increase.  If you have a sales role or job in the oil and gas industry, then your income has most likely decreased.  There are a lot of scenarios.

Spending habits change.  Say when you started the year you assumed you would spend $200 a month in eating out; however, you now realize that the amount is closer to $300 a month.  You need to find out where else you can cut $100 worth of expenses from another category.

Follow these 3 points for your mid-year budget review:

1) Make sure you are making more than you spend and aren’t incurring a deficit every month

2) Analyze each category and make sure that your allotted amount is close to your actual spend amount

3) See if there are any new categories you need to add, or one that you might need to delete.  I paid off my student loans, so that category isn’t needed for the remainder of the year.

Follow these steps and find budgeting success.

Budget Smart, Invest Wise

 

Video Series: How to Invest

We’ve heard it time and time again from arguably the best investor of all time.  Warren Buffett has simple advice on how Americans should invest.  You can try to beat the market, and some of your investments might do just that.  Most, probably not.  Heed Warren’s advice.

From one king (of investing) to another king (of the court) the way to build wealth is simple.  Own America, invest in a low-cost index fund, invest regularly, and give it time.

Budget Smart, Invest Wise