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The One Thing Your Budget Must Have

It may seem obvious but savings is actually one of the most ignored aspects of a budget, even with those who follow one religiously. People tend to think they will save whatever is “leftover” after expenses have been covered, but what do you know, there’s never any!

That’s why it’s much better to treat savings itself as an expense. Add it as a line item into your budget and the put the money away at the beginning of the month so you wouldn’t end up flaking. Savings should not be an afterthought, but something you consciously do to build yourself a better future.

Saving Isn’t Optional

Just like you wouldn’t treat the electricity fee or the house help as optional, savings shouldn’t be either. Any retired person will tell you how much they value the savings they made in their younger days (or bemoan the regret for not doing so). At the very least, saving can help you get out of an emergency without bankrupting yourself.

Unfortunately, most of us tend to focus on spending rather than saving when it comes to managing our finances. Savings are treated like a stray cat that wanders over to your backyard. Maybe if you had a fishbone leftover after your meals, you might feed it. But instead, it should be treated like a beloved house cat who is fed only the most premium of cat foods – or at least something from the discount pile at the pet store (hey, at least it’s getting fed!).

“Most individuals, if they don’t line-item savings in, they just spend whatever money they have at the end of the month, and most aren’t disciplined enough to actually put that [remaining money] into a retirement account,” says Jeff Weber, a certified financial planner with Titus Wealth Management in San Mateo, California.

A 401k is the exception to this reality, and that’s only because you are literally forced to save as the money is taken out of your paycheck and put away somewhere else. It’s like a firewall for impulse spending.

But a lot of people do not have an employer-mandated savings plan. In that case, you can set up short term savings accounts for goals like buying a new car or house, or long-term goals like a retirement account, and of course, the all-important rainy-day fund.

Make Saving a Line Item

Tracking spending is one of the first and most important steps of setting up and following a budget. You may use apps, spreadsheets, or sheer memory power to do this. While you’re ticking off things like rent, power, childcare fees, etc., savings should be in that list of non-negotiable payments as well.

Transfer the designated amount into your savings account even before you take care of expenses to ensure you don’t go overboard with your other expenses. This will condition your mind to treat
savings as a fixed expense like the others.

“It’s easy to talk about budgeting your money, but it takes discipline to follow through on those plans,” says Dara Luber, senior manager of retirement at TD Ameritrade.

Weber Says automatic transfers are a great way to do this. When it is made automatic, with little to no effort on your part, you don’t have to think about it and are less likely to change your mind on impulse. “I have my clients set up a separate account at a bank or brokerage — it is less likely that they’re going to spend that money.”

How Much Should You Save & Where to Put It

This is one of the biggest questions facing you once you decide to make saving a line item in your budget. Obviously, the percentage will vary depending on your income and lifestyle but 15% is a good place to start when it comes to your retirement fund. This is from your pre-tax income and would include things like 401(k) and IRA.

Employer contributions don’t need to be factored in, but Weber recommends counting the amount that is taken out of your paycheck, like your 401(k), as it helps you see the bigger picture. Other than this, you can section your savings into different categories like your children’s college fund or saving for a vacation later in the year.

As for where your money should go, it will depend on when you expect to make use of it. You can contribute to an IRA in addition to your 401k to make that next egg just a little bit bigger. Savings that you intend to make use of it’s the short term (5 years or less), can be held in a high-yield online savings account, but long-term savings could be better off invested in a taxable brokerage account.

Things That Some Of Our Favorite Millionaires Refuse To Spend Money On

Most of us tend to think of the extremely rich in cartoon-like scenarios where they are rolling around in pools of gold or sleeping in beds made of money bills. In reality, most millionaires have managed to become so wealthy because they are wise about what they spend their money on.

No matter how much you earn, you’ll never “make it” if you’re not smart about your finances. You won’t see a rich person buying $2 coffee every day twice a day or buying things that they don’t need just because it’s on sale.

If you don’t believe me, take it from the actual millionaires themselves. When it comes to TV host Jay Leno, Shark Tank veteran Barbara Corcoran, and Youtuber Graham Stephen – these guys have specific things that they have vowed to never splurge on. Read on to find out what they are:

1. Jay Leno – Clothes

With a net worth of over $400 million, Jay Leno can afford to buy as many clothes as he wants but he’s never had much interest in fashion. In fact, the former Tonight Show host says he only buys enough clothes to “cover all parts of the body that are legally required to be clothed”. Obviously, that’s an exaggeration since he wears more than just underwear, but it’s no exaggeration that he finds buying too many clothes a “complete waste of money”.

Sources say Jay Leno’s thriftiness is a result of his childhood when his parents, who’d faced hardship during the Great Depression, ingrained in him the importance of saving every penny he could.

Of course, millionaire Jay Leno has come a long way since then. He may not spend money on clothes, but he’s more than made up for it with his collection of expensive cars. After retiring from the Tonight Show, he had his own series called Jay Leno’s Garage where he showcased his amazing collection.

2. Graham Stephan – Shop Coffee

YouTube has been a goldmine of opportunity for young stars and content creators to reach wide audiences and, of course, make money. While there are several YouTubers who manage to make quite a decent living out of their channels, only a few have reached the millionaire status. Graham Stephen, a real estate agent turned YouTuber is one of them. His annual earnings, including YouTube and several other sources, comes up to around $1.6 million.

Stephens uses his background in finance to give his followers helpful advice on all things related to money. One of his most famous pieces of advice, and one that he follows himself, is to ditch the habit of buying coffee from places like Starbucks and Coffee Bean. His criticisms on these places overcharging is well known. He’s right since a cuppa can cost you anywhere from $1.5-$5 depending on where you’re buying it.

Compared to the measly 20 cents it’ll cost you to make one at home, this is a ridiculous price to pay.

3. Barbara Corcoran’s Travel Preferences

Businesswoman Barbara Corcoran has always been open about how difficult she had it starting out in the world of real estate. Although she’s made herself into a successful entrepreneur today, we think the lessons she’d learned during her struggles are what prevents her from splurging on things simply for the sake of showing off.

When it comes to travel, the uber-rich prefer to fly in private planes and luxury jets, or at the very least, in business class. But Corcoran finds these a waste of money.

The Shark Tank investor always flies coach, although she does make an effort to ensure that she has a “high-class experience” while doing so. This includes ordering a gourmet meal complete with fancy cheese and fresh fruit, and she even brings her own utensils and oversized napkin. She even buys a small bottle of wine at the airport to enjoy in the air. Sounds like the lady knows how to enjoy herself without wasting a bunch of money!

How Online Auto Insurance Quotes Can Help You

From 2006 to 2007, the number of car insurance policies bought online increased to nearly 40 percent, with almost two million auto insurance policies sold during that period. In 2010, requests for online auto insurance quotes reached 20.2 million. The number of requests still swells in the succeeding years. That’s how relevant the online environment has become for people who want to insure their vehicles.

So how do online quotes help you land cheap auto insurance that meets your needs? Consider these three points.

One, you can get decent quotes and shop for the most suitable car insurance policy without traveling. With the help of websites that offer auto insurance quotes, you save gas money. An added bonus: the quotes are free!

Two, online quotes are generated instantly. Websites that offer auto insurance quotes save you time and allow you to compare different insurance providers simultaneously. It makes shopping for car insurance an easy task because you can compare rates right away. You can shop at your own pace. Fill out the online form accurately, select the appropriate dropdowns, and get your quote.

And three, gathering online auto insurance quotes gives you an overall picture of how much you should shell out to get the coverage you need. Have the make, model, VIN, and year of your car handy. Input your yearly mileage and distance traveled to work, as well as any security features installed in your vehicle. Then generate quotes and compare the policies offered by different car insurance companies.

When you consult with an agent associated with a particular insurance company, you could be missing out on the details from other insurance companies that may be offering a similar coverage for a much lower price. But with free online quotes and with the least time spent scouring different insurance companies, you can zero in on specific policies that meet your insurance needs.

Childcare Costs Around $250,000 Per Child, But Here Are 7 Ways to Cut Back

The first lesson of Parenting 101 is that having a child is expensive! As the decades roll by, the cost of raising a child has been increasing steadily. Your grandma will be surprised to hear just how much you spend on your child, and no, it’s not all unnecessary luxuries like most older people seem to think. Although inflation has a major role to play in the increasing of childcare costs (like all other costs, in general), that’s not all it is.

Families are struggling to support themselves and their children under the weight of all the expenses. Another thing that has changed in the passing decades is that more women are focused on their careers, compared to their ancestors who would see childrearing as their main purpose in life. But for some working mothers, it’s not just about growing a career because most just cannot afford to live on a single income.

Either way, this means that they have to put a lot of money into services like daycare or getting a nanny. Even these are not available 24/7, so it’s not like there’s a one-size-fits-all solution to childcare. Of course, parents always want the best for their children, but there are several ways in which you can look to minimize costs while also ensuring that your precious little ones get the best facilities and caregivers.

1. Nanny Sharing

Hiring a nanny/au pair or putting the child in a nursery/daycare is the most common solution to childcare when the parents are working. Choosing which option is best will depend on family to family. While things like the particular child’s interest and personality as well as the trustworthiness and reliability of the facilities available are the main criteria for selection, your budget is also a big thing to consider.

If you’ve considered all the pros and cons of daycare and are satisfied, by all means, go for it. Or if you can afford it, you can get a nanny or au pair who lives with you full-time. But if you’re looking for a more budget-friendly option, consider nanny sharing with a trusted friend or neighbor. This will save you a ton of money in the long run, and your kid gets to socialize with other children of their age!

2. Babysitting Circle

Many communities have babysitting circles or babysitting co-ops where participating parents trade babysitting hours with each other. They take turns throughout the week and get paid in child-free time! Every time you babysit, the number of hours you did get credited to your account. When someone else does the same for your kids, it gets deducted. This may even make your life easier when you do have the kids because they can play together and socialize.

If your community doesn’t have a babysitting co-op, you can be the first to start one! If you joined a new mom group when your baby was born, you may already know several moms with similar-aged children who you’ve gotten to know pretty well. You can start by doing a few group activities with the mothers and children so that everyone involved is comfortable with each other.

3. Flexible Work Opportunities

In today’s job environment, there are more jobs than ever that lend themselves to work-from-home opportunities. Flexible work hours, part-time jobs, freelance, remote work, etc. are all becoming more popular. Consider switching jobs or talking to your boss so you can work from home at least some of the time. Or you can consider taking up a night shift job so your spouse can be at home when you’re not. This way, you’ll only need to pay for daycare on the days when either of you won’t be at home with the kids.

4. Government Concessions for Childcare

Many countries around the world make an effort to make the job of the parent easier, so if you live in one of them, make use of it! In fact, you may not even know all the concessions your government has for parents, so educate yourself first.

For instance, Tax-Free Childcare is a program in the UK where the government contributes to a portion of a family’s childcare expenditure. In the US, the Child and Dependent Care Credit is a tax deduction available to those paying childcare expenses. Sweden offers paid parental leave and tax-subsidized daycare, along with Child Allowance and even Large Family Allowance for families with more than 2 children.

5. Free or Cheap Activities

Kids of today seem to need loads and loads of activities from sports camps to piano lessons. Unfortunately, this can all prove to be quite expensive, especially during summer or winter holidays when school-age children are bored and need to be occupied constantly.

Short of shipping them off to grandma’s house for a few days, you can try to find cheaper activities that are fun and educational at the same time. Spend time at places that cost you very little or nothing at all, like the beach, park, or a library during storytime. Kids can even get a kick out of visiting places like the museum or fire station (most will give you a tour) which can be fun and educational. Volunteer work or community clean-up days can teach them loads as well. Another good way to keep costs down is to get together with your parenting community to organize events for your kids. You can do movie nights, sports days, scavenger hunts, art competitions, etc.

6. Ask for Help

While we realize that this may not be a viable option for everyone, especially those who do not have family around, it is still something that is available to many. You can even consider asking close friends who already spend time with your kids. Even if you think your parents or siblings won’t like to look after your children, it wouldn’t hurt to ask, would it? You may be surprised at how willing they are, especially the child’s grandparents. After all, they say it takes a village to raise a child.

Being away from you can help your child bond with their grandparents, aunties, uncles, etc. as they share some alone time. Just be aware that this may not be a full-time solution or that they may expect you to compensate for the expenses they incur on your kids’ behalf.

7. Move Houses

This may sound like quite a drastic solution, but there are several areas (even in your own city) where childcare costs such as daycare and even the general cost of living are lower than others. This can help reduce your overall expenses as a family. Or you could consider moving closer to family members who are willing to help out for free.

Preparing Your Children For Financial Success

Take a moment to reflect on all of the poor financial decisions you have made. Now, imagine your children making similar (or worse) mistakes. Scary picture, isn’t it? Even if you have managed your money wisely, there is always room for improvement with the next generation.

A parent’s responsibilities seem to be never ending. Understandably, smaller issues sometimes fall through the cracks during the fast pace of everyday life — preparing your children for financial success should not be one of those issues. Providing your kids with a solid financial education is one of the most important things you can do in preparing them to leave the nest.

Why Is It so Important?

It is easy to spot a young adult that has no clue how to manage their money. They will typically engage in reckless spending, rely on loans from others to pay bills, and eventually wind up with poor credit and substantial debt. Even young adults who live frugally during college can face hard times after graduation when their student loans become due.

According to a recent study conducted by The Institute for College Access and Success, nearly 70 percent of graduating college seniors will have some amount of student loan debt. The average amount of student loan debt per person was near $29,000. While you can never guarantee anything in your children’s lives, you can make a significant difference in many areas by engaging them in honest and transparent conversations.

The Early Years: Ages 3-7

For children in this age group, it may be difficult to grasp some of the most complex concepts of money. Nevertheless, it is still important to begin teaching them as soon as possible. Research shows that many life-long money habits are formed by age seven. The most important principle you should communicate during these formative years is that saving money is a natural thing to do.

An attractive approach to teaching young children about money is the “Spend/Save/Give” project. Take three jars and label each one appropriately. Whenever your child receives money, either as an allowance or a gift, have them divide it up between the three jars. The Spend Jar can frequently be accessed, and the funds within are free to use on small and inexpensive items. The Save Jar should only be opened when it is time to purchase something your child has been specifically saving up for. Finally, the Give Jar should be reserved to buy gifts for others or give to charity.

Another important strategy to use during this period is discouraging instant gratification – it is also one of the most difficult. Be persistent. Eventually, your young one will begin to understand that every trip to the store does not entitle them to a treat or toy. Denying instant gratification will build a strong defense against impulse spending when they grow older.

The Preteen Years: Ages 8-13

By the time your kids reach this age range, they will most likely be ready to learn a few of the most complicated factors involved in financial decision-making. It is okay to use still the Spend/Save/Gift example though it is recommended to increase the threshold to empty the Save Jar. Remember only to set achievable goals – setting goals that will take several months to achieve may cause your child to lose interest.

This is a good age to get your kids involved in the household finances. Enlist your kids to help clip coupons or make minor adjustments to the budget. Bring them shopping with you, and encourage them to take notice of how much everything costs. When you checkout, translate the total price into something more tangible, such as how many hours you had to work to make that purchase.

A similar tactic can be used for larger purchases: How many months must you work to pay off your vehicle? How many weeks to buy a new television? How many days to pay the phone bill? These are the years to get them fired up about saving money. Let them go online and experiment with an online compound interest calculator. Introduce them to the idea of saving for retirement and staying out of debt.

The Teenage Years: Ages 14-18

Life after graduation is something that all high students routinely fantasize about. While they may be thinking about all the fantastic college parties they will attend, it is your duty to make them think about the financial milestones they are about to experience. According to a 2014 study by the University of Michigan Institute for Social Research, “most students devote about one-half or more of their earnings to discretionary spending on relatively short-term wants and needs.”

Aside from reckless and impulsive spending, the main danger your young adult will face during their college years is aggressive marketing from credit card companies. It is no secret that many major credit card companies deliberately target the young and financially inexperienced. If your teenager is planning to apply for a credit card, teach them to avoid debt by never charging what you can’t pay back within a month.

During this age range, escalate the monetary value of their savings goal. Have them draw up a budget for any recurring funds they may receive. Prepaid debit cards are an excellent way to prepare teens for the “real world” – overdrafts are typically not allowed, you can add funds electronically, and many companies provide online budgeting resources to help track spending.

Your Children Will Thank You

Once your kids turn 18, you will lose a great deal of control over their spending habits. By planting the seeds of smart money management early in their lives, you are directly influencing the success of their future. Even if you have subpar financial skills, it is never too late to learn and pass the knowledge on to your offspring.

The key concept to remember is that you must spend less than you earn to avoid financial hardships. Everything else will eventually fall under that umbrella. Teaching your children about saving, avoiding debt, and planning for contingencies will set them well on their way to a life of financial happiness.

Can a Short Sale be Profitable for You?

With the foreclosure rate high, pressure is on lenders to avoid foreclosure whenever possible. One strategy is for the lender to approve the home to be sold for less than the mortgage amount. This strategy, called a short sale, requires the bank to discount the loan, but it also has benefits to the lender. It allows the lender to convert a non-performing loan into a smaller advantageous loan and avoids having the property sitting in inventory for months, possibly even years.

The Advantages of Short Sales

Short sales are good for real estate investors because they allow them to pay less for the property during the pre-foreclosure stage. While the homeowner may owe $250,000 on the mortgage, you could purchase the property for less, possibly in the $180,000 to $200,000 range. This new loan allows both the homeowner and the bank to avoid the foreclosure process while still recovering most of the loan value.

How to Find Potential Short Sales

With foreclosures at an all-time high, banks are motivated to make short sales. This creates many buying opportunities for an alert real estate investor. These opportunities may not be advertised, so you may have to work to find deals.

The best time to purchase a property in a short sale is during the pre-foreclosure period. At this point, the bank knows that the property is likely to be a loser on their books. They are motivated to make the deal work. Once the major expenses of the foreclosure have been paid, the bank will need to get more money for the property to recover their losses and expenses.

Look for homeowners who are currently in default on their mortgage and are motivated to sell to avoid foreclosure. You can purchase a list of these homeowners or you can find them at the county courthouse. Court records will list homeowners who have been served with a notice of default. This information is public record, but requires some work to find and compile the list. Foreclosure list services send experienced people to the courthouse daily to keep their lists up to date.

Once you have a list of potential short sale properties, contact the homeowners to discover whether they might be interested in a short sale. Some will not be interested, but others will be highly motivated. Do your homework at this point to be sure that you have accurately assessed the value and condition of the property before approaching the bank with an offer.

Finding short sales prospects is easy if you use a foreclosure list. Foreclosure lists do the legwork for you at the courthouse and provide a list of homeowners who may be open to a short sale. You can make a short sale offer at any time before the actual foreclosure sale takes place. You will need to act fast if a property is nearing foreclosure sale, but the potential profits make this worthwhile.

Bad Credit Loans

Bad credit loans are readily available for those borrowers who need to take advantage of them. Not everyone is capable of staying out of financial difficulty. After all, stuff happens and life is expensive. Unemployment often comes as unexpectedly as expensive medical bills or emergency home repairs. Although subprime lenders specialize in this type of loan, the bad credit loan is provided by all types of lenders.

Bad credit loans are usually more expensive than their counterparts, good credit loans. The interest rate is usually higher, leading to higher monthly payments. Plus, the fees associated with the origination of the loan are also higher in general. Even though the bad credit label might be easily attached to an individual’s credit report, obtaining financing is not quite so easy to achieve. A price has to be paid and the individual with bad credit is going to be the one to pay it.

In general, however, bad credit loans operate in the same manner as any other type of loan. The borrower applies for the loan, requesting a certain sum of money. The lender approves the loan or denies it. An interest rate is attached to the debt and a repayment schedule is determined.

How To Get A Credit Card With No Credit History

Having no credit history isn’t all bad. After all, if you don’t have any credit history, chances are you have no debt! The conservative use of a credit card, however, is one of the easiest ways to build the credit needed to take out a car loan, a home loan, or achieve many financial milestones. While not having credit history will almost certainly make it more difficult to get a credit card, there are still many ways to obtain a card that’s right for you.

One way to get a card is through a credit card cosigner. If you have no credit history but have a family member or close friend with good credit–someone who trusts you–see if he or she is willing to cosign with you on a credit card. Many banks and financial institutions that would otherwise decline your credit card application due to insufficient credit history will be more likely to consider you for a card if you have a credit card cosigner with a high score. Keep in mind that your cosigner’s credit score will suffer if you don’t pay off the balance at the end of the month.

Another way to get a credit card when you have no credit history is to consider a high interest card. Some financial institutions will still issue you a card with a very high interest rate because they consider you a high-risk customer. If you don’t plan to carry a balance and want to pay your bill in full at the end of each month, a credit card with relatively high APR may not be a bad bet. Building a good credit score through use of the card will soon allow you to obtain a card with a better rate.

Even if you have no credit history, getting a card may also be as easy as checking with your bank. Some banks and credit unions offer lines of credit to people who already have relationships with those institutions, and it may not even matter if you have bad credit or no credit.

Although the proper use of a credit card allows you to reap financial rewards, credit cards also put many people into debt. While no credit history means you don’t live in fear of phone calls from debt collectors, it also means you can’t enjoy the benefits a good credit score brings. Thankfully, getting a credit card isn’t completely out of the question for anyone in this situation.

How Much Life Insurance Coverage Do You Need?

How much life insurance coverage you need will depend on your family situation, assets, and expenses. However, deciding what the right amount for you and your family can be confusing. You will find that insurance agents and authoritative websites give different and strong advice for which calculation to use. Here are three of the basic calculations for deciding how much life insurance coverage to purchase. Use the one that makes the most sense to you and for your family’s needs.

The Mortgage Formula

With this formula, you consider the mortgage on the house and the current working status of each parent. For a parent working full time, you want to have life insurance coverage that equals twice the amount due on the home mortgage. For example, if the mortgage were $250,000, you would want at least $500,000 for each working parent. This way if one parent passes, the mortgage is paid off and there is extra cash.

If one parent does not work outside the home, you may only need half that amount for the non-working parent. In the example above, this would be $250,000. The idea being that the surviving parent has a full-time job that can pay the mortgage and the extra cash from the insurance policy will be used for daycare and other expenses related to raising the kids.

Income Replacement Formula

With this simple formula, the gross annual salary is multiplied by a minimum of ten years up to the number of years you have until retirement. If you make $50,000, are 30 years old, and plan to retire at age 65, then you will need a policy that pays between 0.5 to 1.75 million upon your death.

Line Item Formula

Some insurance experts feel writing down and adding together every expects expense is the most accurate formula, but it will take some time to calculate. It is an exact calculation of basic expenses your family would need for life should you die today. To make this calculation you need to add up the expected expenses such as mortgage payments, daily living expenses, college, childcare, medical, and any other predictable expense over the next few decades.

An insurance agent can work with you on different formulas to determine how much insurance you need. You may need to also consider how much you can pay per month towards life insurance premiums. The more coverage you get, the higher the monthly or annual premiums will be.

4 Signs You Are Headed For Financial Ruin

The things you do with your money today affect your financial future not just tomorrow, but years down the road. The following are 4 signs that you might be headed down a bad financial road and how to make a change:

1. You don’t track your income or savings

If you don’t know how much you are bringing in and spending, you don’t really know what’s going on with your finances. In order to spend wisely and save money, you need to know that you’re spending less than you make. If you spend more than you’re making one month and less than you’re making another month, things might even out in the end, but you should still know how to budget. Budgeting makes it possible to spend less than you make and as a result save more money for your future.

2. You dip into your savings frequently

You might be a good saver, but if you’re dipping into your saving often to either pay bills or buy fun things that you want, you’re not truly saving money in the end. Continue saving money, but stop dipping into it to pay for things. If you are spending more money than you make each month, you need to adjust your spending.

3. You think being in debt isn’t a big deal

You might feel this way because so many people are in debt, but that doesn’t mean that it’s okay. In fact, being in debt can ruin your credit, which can make it hard or impossible to buy a home, a car, or even rent a place. Many places do credit checks to make sure you’d be safe to rent or sell to. If your history is not good, they can turn you down. The good news is you can fix your credit and get back on track.

4. You loan money and never get paid back

If you’re willing to loan money to people who have never paid you back, you’re a sucker. They know you’re a sucker, too, and that’s why they keep asking you for money. Whether it’s a sibling or a best friend of 20 years, if you loan someone money and they never bother to pay you back, stop lending them money. Yes, it will be hard to say no, but you need to protect yourself and your money.

Learning to be financially wise isn’t rocket science, but it will require creating new habits and learning to say no. Don’t fret though, once you see the results of your new habits, you’ll be motivated to continue on your new path