Personal Finance Archives - Budget and Invest

What Should a Millennial Spend on Rent

April 17, 2018April 15, 2018Budget and InvestLeave a comment

Rents have been steadily increasing throughout the United States over the past decade. Ever since the financial crisis, people have somewhat shied away from home ownership and opted to rent. With the demand for rentals on the rise, a sharp increase in monthly rents has been a clear side effect. The old rule of thumb used to be 30% of one’s income should be spent on rent; however, we are now seeing a burden like never before. What should a millennial spend on rent? The simple answer is as little as possible.

Millennial’s are those born from the late 1980’s to the early 2000’s depending on who you ask. These individuals tend to have a high burden of student loan debt, which makes it all the more concerning that they are spending high amounts on their monthly rent. A recent report came out showing that millennial’s will spend close to six figures, yes, $100,000 on rent before they turn 30. That is a staggering amount considering that most are also in the process of trying to pay off student loan debt.

3 WAYS TO NOT SPEND 6 FIGURES ON RENT BEFORE 30

Get a roommate. Sharing a two bedroom with a friend is a simple and easy way to save money every month. Sure two bedrooms cost more than a one bedroom, but when you split it two ways, it comes out to about a 30% savings versus living on your own. This isn’t a long term solution, but it is a good way to free up additional income every month.
Move in with a significant other. While some will shy away from this advice, there are many benefits to doing so. I knew a couple who had to live apart until the day they were married for various reasons. They chose to do this in order to respect the wishes of others. However, they were basically spending an extra $1000 a month on an additional apartment that got little to no use, all to please a few. They could have used that money to build up an emergency fund or increase their down payment on a future house.
Buy a house. While buying a house requires more responsibility and obligations than renting, it is also a good choice to lower your monthly expenses and build equity. For example, a $200,000 loan on a property with 20% down will give someone a monthly payment of approximately $1250 a month. Depending on the area of the country you live in, it will almost certainly be cheaper than paying someone else to rent.

CONCLUSION

While some see a benefit to renting, there are also many drawbacks financially. Although we can’t exactly put into numbers what should a millennial spend on rent, there are ways to reduce your monthly expenses. Whether you are able to implement one of the solutions above into your situation or not, living costs will be your largest expense every month.

Budget Smart, Invest Wise

Ibotta App Review

March 26, 2018March 23, 2018Budget and InvestLeave a comment

I was recently on vacation in Denver, Colorado, when a friend of mine who lives out there told me about this cashback app called Ibotta. He was head over heels for the app which happened to be created out in Denver. I downloaded the app and immediately saw how one could benefit. In the following Ibotta app review, I will go over just how simple it is to start getting cash back on purchases you already make.

Ibotta App Review

IBOTTA HAS MANY TOP STORES

Most Americans find themselves shopping at the big box stores for everyday items. Stores such as Target, Walmart, Best Buy and others are some of the top stores in the Ibotta app. Many of these stores offer cash back for just simply taking a picture of your receipt. They also have coupons for many items you purchase including Gatorade, salsa and even beer!

THE APP IS EASY TO NAVIGATE AND USE

Unlike some apps that take a while to figure out, Ibotta is pretty straightforward. From the home page you can select your favorite stores, choose any coupons you might be interested in using, and start earning cash back. The picture to the left illustrates what one will see if they click on Target as a store of their choice. You are presented with a list of coupons available. Towards the top, you are able to segment the products based on the category you want to search for. In this example, if you wanted to get $1.00 back on Gatorade G2, simply click on the red plus sign and it is added to you offer list. It’s that simple!

RETRIEVING YOUR CASH BACK IS EASY

The whole point of a cash back app is to actually get cash back. In this Ibotta app review I am here to tell you that is exactly what you get. Withdrawing your cash is a super simple process. The only requirement is that you have at least $20 in your account to withdraw. You can withdraw the cash via PayPal, Venmo, or for one of the many gift cards they offer. Never have I had such a hassle free experience withdrawing earnings from an app.

HOW TO GET STARTED WITH IBOTTA

Download the app using the following link (Receive a welcome bonus of $10): https://ibotta.com/r/ycvfdfl
Search through the list of selected stores you shop at and even ones you don’t.
Find coupons you can use and add them to your “My Offers” section.
Once you shop at a store, you can use your camera to make sure the item qualifies for the cash back by simply scanning the barcode.
Take a picture of your receipt and confirm you purchases.
Watch the cash add up. There is no limit to how much you can have.

Budget Smart, Invest Wise

15 Year Mortgage Pros

March 12, 2018March 6, 2018Budget and Invest1 Comment

A little over five years ago I made a financial mistake that I’m not proud of. I purchased my first home. No the purchasing of the home isn’t the financial mistake, the mistake was going with a 30 year mortgage instead of a 15 year one. Many times throughout the year I often wonder why I didn’t even consider a 15 year mortgage. Don’t make the same mistake. If you have the financial ability to do a 15 year mortgage then by all means go for it. I will discuss a few of the 15 year mortgage pros and why I wish I could go back in time and do it all over again.

15 Year Mortgage Pros #1

The easiest difference to distinguish between a 15 year and a 30 year mortgage is the interest rate. 15 year mortgages have a significantly lower rate than their counterparts. The shorter the amount of months a company has to lend you money, the more likely they are to recoop their costs. A 15 year mortgage tends to have an interest rate of 0.5% to 0.75% lower than that of a 30 year. Although that might not seem like a significant number, it will ultimately equal many thousands of dollars in savings over the life of the loan.

15 Year Mortgage Pros #2

Simply put, you build equity faster. Because you are having to pay the full amount of the loan in half the time, your monthly payment will be more; however, that also means you will become the full owner of your home in a shorter period of time. Many people, myself included, choose a 30 year mortgage because the payments are less on a monthly basis. Had I chosen a 15 year mortgage, my payment wouldn’t have been much more a month and I’d own the home outright in half the time.

15 Year Mortgage Pros #3

The final pro is that you have the opportunity to eliminate your largest monthly expense. This is especially important as one approaches retirement. People sometimes talk themselves out of a shorter mortgage because the higher monthly payments mean they have to forgo savings for other things such as retirement. Can you imagine owning a house free and clear in retirement and not having the stress or monthly expense of a mortgage payment? Plus you can also free up more capital if you decide one day to do a reverse mortgage.

Conclusion

The majority of housing loans issued are in the form of 30 year mortgages. This has been the case for a while. I messed up when I bought my first home, but I can assure you I won’t make the same mistake for my next. A 15 year mortgage is ideal for individuals or couples who have stable jobs, and are good at budgeting their monthly expenses. The opportunity to save money on paid interest and build equity fast will be too much for me to pass up again. That is why the 15 year mortgage pros strongly outweigh any cons.

Budget Smart, Invest Wise

Ways to Save

February 28, 2018JW Steinert1 Comment

When it comes to our personal finances, it’s safe to say we’ve all done our fair share of worrying. With bills to pay and mouths to feed, it can seem like saving any of your money is a pipe dream. An impossibility. And, yet, we must. We have the unenviable task of doing the impossible. Or, at least, that’s how it seems. In truth, savings money can be easier than you think. With a healthy does of will power and the right know how, you can secure your financial future. Here are some tips to get you started.

First and Foremost, let’s talk where and when to spend your hard earned money. For starters, consider eliminated or reducing luxury spending. For example, you don’t really need that new video game, so it can wait until it’s one sale, or until you’re in a better financial position. Meanwhile, we all need things like Winter coats and shoes, so these are items worth spending money on. In fact, it might even be worth spending a little extra on these items to ensure quality. After all, you don’t want to end up spending even more from having to replace these items frequently. However, even in this situation, there’s room to save. Here’s a Mackage coupon to help you find a good quality coat and save. Which brings me to my next point…

Coupons and sales are another great way to save. Retailers employ these cost cutting measures frequently in order to entice customers new and old and generally drum up some extra business. That’s why an eagle eyed shopper stands to be able to take home most, if not all, of their shopping at a heavily reduced price. You may have to do your shopping piecemeal in order to maximize savings, but it’s well worth it to save that much money. You’ll also have to remain diligent in order to find thee special offers, so keep your eyes peeled like a jaguar ready to pounce on its unsuspecting prey.

4 Ways to Save on Valentine’s Day

February 14, 2018February 13, 2018Budget and Invest1 Comment

February 14th, a day of love that comes around once a year. It’s a time to celebrate the love of your life, or in your life, but the celebration of that person can sometimes get quite expensive. There’s flowers, chocolates, stuffed animals, dinner, gifts, etc. Add them all up and a random Wednesday can easily turn into a $250 event. Listed below are 4 ways to save on Valentine’s Day.

4 Ways to Save on Valentine’s Day

Go To Dinner A Day Other Than Valentine’s Day

Many couples prefer to go out to eat for Valentine’s Day, but most of your nicer restaurants tend to have set menus that often carry a high price tag. Try celebrating at your favorite restaurant the day before or after. You can usually order from the regular menu and avoid the preset and inflated Valentine’s menu. Valentine’s Day this year happens to fall on Ash Wednesday. Many couples will decide to celebrate the day after due to the start of Lent.

Bring Your Own Bottle of Wine to Dinner

A cheap bottle of wine at a nice restaurant will easily be anywhere from $28 to $35. See if you can bring your own bottle and pay a corkage fee instead. Corkage fees tend to be much cheaper than purchasing a bottle from the restaurant, and you can bring the bottle that will go perfectly with your meal. A nicer $80 bottle at the restaurant will typically sell at a local store for half that. So in essence, you can drink an $80 bottle with your meal for $40 + corkage fee (~$10).

Send Flowers Differently

Waiting until the last minute to order flowers can be a costly mistake. Local and national flower company’s often raise the price of delivery the closer it gets to the date you want it to deliver. They also charge additional money to get them not only delivered on Valentine’s Day, but early during the day. Instead, opt to have the flowers delivered to the office of a loved one a day early. By doing that, the flowers can be present for the entirety of Valentine’s Day and you will avoid additional charges.

Order Gifts Ahead of Time

As like any other holiday, planning can be the key to saving money. Ordering gifts early can help you not only save on shipping but also gives you time to find the best deal. Some companies will offer free two day shipping just before major holidays, but often times won’t accept other promotional codes. Additional charges on shipping can also add to your Valentine’s cost. For example, a friend recently had to pay an extra $9 for two day shipping where it could have been for free had he planned a week earlier.

Conclusion

Whether you are celebrating Valentine’s Day or not, the holiday is one that many people love, or dread, each year. If you are celebrating, then I hope you are able to use these 4 ways to save on Valentine’s day to put a little extra money in your pocket at the end of it.

Budget Smart, Invest Wise

3 Easy Post New Year’s Financial Resolutions

January 3, 2018January 5, 2018Budget and Invest1 Comment

A new year signals a new start for many people. Whether it is with your health, your relationships, or your finances, it is as good a time as any for a re-birthing. When it comes to one’s finances, there are some relatively easy New Year’s financial resolutions you can do to exit 2018 in a better financial position than when you started. Listed below are 3 easy post New Year’s financial resolutions you can make.

Financial Resolution 1: Build an Emergency Fund

It is estimated that roughly one out of every three American adults has no money stashed away in an emergency fund. This often means that they will have to take on high-interest credit card debt in order to pay for an unexpected expense. No matter your age, any amount of money in an emergency fund will be of benefit. Focus on saving $100 a month into an emergency fund. By the end of 2018, you will have $1200 stashed away for those unexpected expenses.

Financial Resolution 2: Create a Budget

Earning money is important, but also of high importance is tracking your spending. I love the following example:

A teacher making $40,000 in annual post-tax salary, but spending $35,000 of it, has more savings at the end of the year than a doctor earning $120,000 in post-tax salary but spending $130,000.

The point of this example is that if you can make a lot, but if you spend a lot you will never get rich. Budgeting allows you to monitor you income while also keeping track of your expenses. We offer a free monthly budget on our website to help you get this resolution underway.

Financial Resolution 3: Open an IRA

Recent tax reform has lessened the financial burden of taxes on many individuals and families, but another way to reduce taxes while funding retirement is through an IRA. Traditional and Roth IRA’s are both good options to help save for those late years in life. I prefer a Roth IRA; you put in after-tax money now, and it grows tax-free and has tax-free withdrawals. Most people qualify for IRA’s, and the best part is that they are easy to open. Many IRA’s can be started with as little as $100.

Not everyone is a fan of New Year’s resolutions, but that is part of the reason why people make them. They have goals they want to achieve. Those goals may be monetary, personal or health, either way they hope to be in a better place at the end of the year than they were at the beginning. If you haven’t made a New Year’s resolution, it isn’t too late. We aren’t even a week into the new year. I challenge you to try at least one of these 3 easy post New Year’s financial resolutions and make your finances great again.

Budget Smart, Invest Wise

Annual Costs of Owning a Dog

December 6, 2017December 6, 2017Budget and InvestLeave a comment

They are often referred to as man’s best friend. As a dog owner, I can assure you this statement is quite true. Each day when I come home from work, I look forward to seeing the wagging tail and the kisses that come upon my arrival. Owning a dog is great, some would even say fantastic; however, despite the kisses and tail wags, one’s wallet can take a hit. The size of the dog does play in to a lot of these factors. My dog weighs 35 lbs and is considered by most to be a medium sized dog. The numbers that follow for annual costs of owning a dog are based on a medium sized dog. Smaller dogs tend to be cheaper, while larger dogs tend to be more expensive, so please bear that in mind. A budget is the easiest way to track your expenses when it comes to your pet.

image results for annual cost of owning a dog — My dog Vera

Dog Food & Treats

The most common and never-ending expense of owning a dog comes down to the dog food one has to purchase. The price of that food can vary depending on the brand and type. For instance, I feed my dog Purina Dog Chow, which is by no way the most expensive, but also isn’t the cheapest. I usually am able to purchase a 36 lb bag for $25. I estimate I go through 4 of these bags a year for my dog so $100 in annual cost for food. When it comes to treats, I like to reward my puppy with a rawhide, various snacks, peanut butter and Dentastix (or similar). I estimate that my yearly cost spent on treats comes out to $75.

Total Annual Cost: $175

Medication/Shots:

It is moral and also the law to give your dog the necessary vaccinations that they require in a given year. I’ll first begin with medication. My dog requires heart worm and flea protection just like any other dog. For this, I use an all in one preventative treatment called Sentinel. A year’s prescription of this treatment costs $100 for my dog. Dog’s are also required by law to get a list of shots to maintain good health for the dog and other’s around it. These can include the rabies vaccine among others. The shots typically run me $150 a year when it is all said and done.

Total Annual Cost: $250

Boarding/Daycare/etc.

Every person’s situation is different. If you like to travel and you have a dog then be prepared to spend around $25/night for boarding. I tend to use friends and family to watch my pooch and usually pay them back with beer, a meal or an IOU. Daycare is also another popular cost among dog owners. Many view their dogs as an extension of their family and thus like for them to be well-cared for and interact with other dogs. Daycare for dogs can run anywhere from $12-$25 a day on upwards.

Total Annual Cost: $250

Annual Cost of Owning a Dog: Final Results

If you total up my three previous sections, the total annual costs of owning a dog for me comes out to $675. Again, this can vary depending on the lifestyle of the dog, what type of food you buy, and a number of other factors. This example is only meant to give potential dog owners an idea of what to expect. At the end of the day, my dog is priceless and whatever I can give her to make her happy and see her tail wag is worth it’s weight in gold.

Budget Smart, Invest Wise

Is a $250K Net Worth at 28 Possible?

November 20, 2017March 27, 2018Budget and InvestLeave a comment

I often write a number of net worth pieces on athletes, coaches and other famous individuals, but what about the rest of us who aren’t worth millions? Your age and net worth should have a positive correlation, the older you get the better the opportunity to build your net worth. That is why I pose the question, is a $250,000 net worth before you are 30 even possible? The answer is yes!

Image result for how to build my net worth — Net Worth Formula

We are familiar with young stars such as Justin Bieber, Rihanna, and Andrew Wiggins having a net worth in the high millions, but what about the rest of us? Let’s first talk about what net worth actually means. As is illustrated in the image above, net worth is calculated with a simple equation. You take all of your assets (house, retirement accounts, cars, etc.) and from that you subtract all of your liabilities (mortgage, debts). The resulting equation will equal one’s net worth.

As previously stated, net worth tends to increase the older you get. That is why I am looking forward to my future net worth. At 28 years of age, my net worth already exceeds a quarter of a million dollars.

How have I been able to build a $250k net worth?

There were a number of smart financial decisions I made in order to build my wealth in such a short period of time. When I began my first job at the age of 23 (just five years ago), I had a negative net worth. There were student loans I had to pay back, and after being in college for four years I didn’t have a chance to save much money. I focused on paying off my debts, in this case my student loans. Getting out of debt is crucial to building one’s net worth.

The next thing I focused on to build my net worth was by budgeting and investing. The focus of this blog today is still the same as it was when I began it three years ago, budget and invest. You can still download a free monthly budget template on this site. Budgeting allowed me to focus on paying off my debts while also helping me determine how much money I could save in a given month. This process helped me towards my $250k net worth that I am seeing today.

The final step was focusing on my earning potential. I switched jobs a couple times, each time to a position that paid me more than the previous. I also, turned my house purchase into a cash flow positive rental property. By increasing my earning power and paying off my debts I have now been able to save more than ever before.

Each person’s financial situation is different. There are plenty of individual’s in their twenties who are worth a lot more than me and there are also plenty that are worth a lot less. I was once told long ago that you cannot focus on someone else’s earnings and net worth, you have to focus on your own. After all, only you can control your financial decisions.

Budget Smart, Invest Wise

2018 401(k) Contribution Limit Unveiled

October 23, 2017November 10, 2017Budget and InvestLeave a comment

Death and taxes. The two things that most say are certain in life. Well now at least when it comes to taxes you might be able to avoid some because of a recent decision by the Internal Revenue Service (IRS). The IRS recently came out with the guidelines for 2018 when it comes to tax-advantaged retirement accounts. Although none of the changes were dramatic, they made a few tweaks that will allow individuals to boost retirement savings in certain tax friendly accounts.

The 2018 401(k) contribution limit is being pushed slightly upward to $18,500 per year. This is a $500 increase on what it used to be. Individuals who are 50 and over can still save an additional $6,000 meaning some can contribute as much as $24,500 into a company 401(k) plan. While an increase in the 2018 401(k) contribution limit came about for the upcoming year, other retirement plans such as IRA’s and Roth IRA’s remain unchanged. You are still only able to contribute $5,500 per year to both traditional or Roth IRA.

IS CONTRIBUTING TO A 401(k) A GOOD IDEA?

The short answer is absolutely! While not all companies offer 401(k) plans for employees, a lot do. It is highly recommend that you put in at least the minimum amount required to get the full match your company offers. Once you have done this, see if you can contribute a little bit more and further increase your retirement savings. At my first job, I began contributing 6% which was what I needed to do to get the entirety of my company’s match; however, I began to increase it over time. Get a 3% raise? Try increasing your 401(k) contribution by 2%. This was a simple and easy method I did each time I’d receive one, and the best part was I never missed the money at all.

IS IT EVEN POSSIBLE TO CONTRIBUTE $18,500 OR $24,500 TO A 401(k)?

Yes again. Is it hard? Sure it can be, but is it doable? Absolutely. How do I know it’s possible? Because I myself max out my retirement account for my 401(k). I never see the money. It’s taken directly out of my paycheck, so I never miss out on spending it. The recent increase of the 2018 401(k) contribution limit is something that I will take advantage of. A small percentage bump can make a lasting impact during one’s retirement.

In closing, the increase of the 2018 401(k) contribution limit won’t have much of an impact on most people. Very few actually max out their retirement accounts. But if you’re like myself, then you welcome the news with open arms. While 2018 saw an increase to the 401(k) contribution limit, 2019 has a very good chance to see an increase for contribution limits to both traditional and Roth IRA’s. Only time will tell.

Budget Smart, Invest Wise

Easiest Way to Become Landlord (From a Guy Who Knows)

October 16, 2017November 1, 2017Budget and InvestLeave a comment

Passive income is a term we hear about but might not truly understand. What is passive income? It’s the ability to generate a source of income where one is not directly involved. One example can be dividends from stock and bond investments, but a more common passive income is rental income.

Becoming a landlord and generating income might seem like a big task, but it can actually be done with a relatively simple process. In the steps that follow, I will discuss the easiest way to become a landlord. These steps are easy because I have done it, and it wasn’t very difficult.

Easiest Way to Become a Landlord (3 Steps)

Step 1:

The first step in becoming a landlord is to own a property, and thus purchasing one. Right after school, I moved to a brand new city I had never lived in before. I lived with an old friend for six months before I purchased my first home. Whenever you begin thinking about purchasing a residence, always make sure you know the area. For example, the home I purchased was near a local college and had many long-term residents as neighbors. To complete this step requires a little bit of research, an understanding of the area you reside, and the ability to make the purchase.

Step 2:

Live in the place you purchase. Many people get caught up in buying a rental property and renting it out immediately. While this may work for some people, it can be a stressful situation. You have to make sure the house is in livable condition, you have to market the place, then you have to meet potential tenants at the place throughout the week to show them the property. All of this adds up and makes finding a tenant a long and complicated process. By living in the place you purchase for say a year or two, you become comfortable with the property. You won’t have to travel to show it to potential tenants, you can create your own date the property will become available, and you give yourself time to find another living situation while you look to create income. I lived in my house for 18 months before I began renting it out. The best part was that it was right at the beginning of summer which meant… No yard work! If you catch yourself needing to do some work around the house and you’re on a budget, you can get great vouchers and discounts online to save on these expenses.

Step 3:

Find a good tenant and pronounce yourself “Landlord”. Although finding a good tenant isn’t always the easiest part, you can use your best judgement and various tools in order to ensure you are getting yourself into a good situation. I made all of my applicants run a credit report on themselves and provide me with the results. Bad credit can sometimes mean a bad tenant. I also required the tenant to provide an additional month’s rent to ensure payments were never behind.

While there might be many easy ways to become a landlord, for me the easiest way to become a landlord was through the process I outlined above. I have now been a landlord going on four years and having someone else pay my mortgage feels like quite the accomplishment.

Budget Smart, Invest Wise