Build an Emergency Fund with this 52 Week Money Challenge Printable Version

As the end of 2016 approaches and a new year is on the horizon, it is time for a new year of financial goals.  According to a recent USA Today article, nearly 70% of all Americans have less than $1,000 in their savings accounts. That means when someone has an unexpected expense they must turn to high interest pay day loans, or credit cards that can’t be paid off at the end of the month. The interest paid on these will cost way more than the original amount in the long run. Even something as simple as $1,000 in an emergency fund can help offset these costs. So if you’re interested in avoiding the pain of credit card borrowing, it pays to have some financial security.

What does financial security mean? It is different for every person.  It could mean paying down student loans if you are a recent college graduate.  It might be tackling credit card debt that has plagued you for months or even years.  Maybe it is saving for a home.  Each person’s financial goals are different. Today’s focus will be on building an emergency fund for you to have in case you encounter any unexpected expenses.  The best part about an emergency fund is it can be done with little effort on your part and in just one year’s time.

Now if building a $1,000 emergency fund sounds good, building a $1,378 emergency fund will sound even better.  The best part is that there is a simple and easy way for almost anyone with an income stream to accomplish this.

Beginning in 2017, set a goal to accomplish the 52 Week Money Challenge printable version.  The challenge takes minimal effort and the downloadable sheet allows you to easily track your progress.  January 1, 2016 falls on a Sunday, so for simplicity reasons we will begin the challenge on Friday, January 6, 2017.  On the first Friday in the new year, simply put one dollar into your savings account or in a piggy bank if that is easier.  On the second Friday of the new year, put two dollars into your account.  Each of the Friday’s that follow, you will increase the amount you deposit by only one dollar.  It would look something like this for the month of January.

52 Week Money Challenge Printable Version Example:

Date Deposit Amount Total Amount Saved
1/6/2017 $1 $1
1/13/2017 $2 $3
1/20/2017 $3 $6
1/27/2017 $4 $10

52 Week Money Challenge Printable Version

By the end of January, you will have already saved ten dollars into your account and will be well on your way to establishing an emergency fund. Pretty much you just do the same thing for the rest of the weeks in the year, just for each week add one dollar to your weekly savings total.

Can you live on one less dollar each week?  That is how you need to look at this challenge.  Each week you train yourself to live on one less dollar than the previous week.  In the final week you will live on $52 less than you did the first week of the new year.  The total amount you will have saved up in just one year will be $1,378, which is more than what 70% of Americans have currently in their savings accounts.

Challenge yourself, a friend or a family member.  Take on and print out the 52 Week Money Challenge printable version sheet and get your new year off to a great financial start.

Budget Smart, Invest Wise

Budgeting With Credit Card Debt

I recently spoke with an individual who was excited to begin his budget.  He downloaded the spreadsheet available on my site and asked me to look over it.  Everything looked good except for one thing I noted.  This individual had a category as follows:

Credit Card Payment (minimum)

Image result for credit card

This shocked me for a number of reasons.  First and foremost, the minimum part that was included.  Secondly, paying off your credit cards is not an expense.  For example, if you go to the grocery store and spend $50.00 on groceries but apply the charge to your credit card, then your budget should reflect a $50.00 purchase on groceries.  The credit card is simply a means to pay for it.  Finally, I recognized that this individual had credit card debt, and he assumed paying off in minimum installments would eliminate it.  Yes, theoretically, as long as no further debt was incurred, but it would take a while.

This ultimately led me to the following conclusion.  This individual had a significant amount of money remaining in their budget every month.  I advised him that if I was in his situation I would do the following:

  1. Make sure I am able to cover all of my necessary expenses in the budget.  This would include rent, gas, food, student loans, etc.
  2. See where some expenses can be cut.  Bringing his lunch to work versus going out to eat might be the smartest financial decision until he gets his credit card debt under control.
  3. Use any extra money at the end of the month to pay off the remaining balance on the credit card.  Credit cards are notorious for having extremely high interest rates.  The quicker you tackle this type of debt, the more you save.
  4. Set a goal for paying off the credit card debt.  We agreed by the end of the calendar year.  Once the debt is paid off we could redo the budget and include categories for savings, retirement, and other financial goals.

Credit card debt can be a nasty thing, but a budgeting approach to handling it can make your financial life much better.  Use a budget to pay off your debt if you have any, then you will be able to create additional space to begin planning for your financial future more aggressively.

 

Budget Smart, Invest Wise

New “Investing Wisely” Page

So the purpose of this blog is twofold:

Budget Smart, and Invest Wise.

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.

 

Budget Smart, Invest Wise

Compound Interest

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.

 

Budget Smart, Invest Wise

Book Review: The Surprise Millionaires

SupMilBookCover

I recently finished ready The Surprise Millionaires by Keith McDowell.  A great read indeed.  It is packed with amazing stories of ordinary people who passed along extraordinary wealth.  Keith did a wonderful job of including stories from all over the country that date back to the beginning of the 20th century.  You can purchase the Kindle version of the book for just 99 cents!  You can also follow his blog here: https://thesurprisemillionaires.com/

Here are my 3 main takeaways from his book:

  1. No matter your income level, everyone and I repeat everyone has the opportunity to create wealth over $1,000,000.
  2. 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.
  3. 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.

Budget Smart, Invest Wise

One Easy Way to Slash Taxes

Image result for lower taxes

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.

Benefit 1:

You lower the amount of taxes you will be paying for the year.

Benefit 2:

You increase the amount of savings you will have at retirement.  The more you save now, the more you will have later.

Benefit 3:

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.

 

Budget Smart, Invest Wise

 

Buffett’s 7 Investment Tips

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.

http://finance.yahoo.com/news/warren-buffett-best-investing-advice-201019702.html

The Retirement Crisis and How to Avoid It

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 Retirement Revolution That Failed: Why the 401(k) Isn’t Working

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:

  1. 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.
  2. 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.
  3. 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.

Budget Smart, Invest Wise

Should I Save or Invest?

Why not do both?

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.

https://www.youtube.com/watch?v=PvKXr_mkF5s

 

Budget Smart, Invest Wise

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