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A Parent’s Guide to Setting a Successful Budget for a College Student

The post A Parent’s Guide to Setting a Successful Budget for a College Student appeared first on Penny Pinchin' Mom.

 You are getting ready to send your child off to college. Before you start helping them pack their belongings, there is one thing you need to do.

You need to help them create a budget. You need to teach them how to manage their money so they can learn the tools they’ll use long after they graduate.

WHY DO COLLEGE STUDENTS NEED A BUDGET?

The truth is everyone needs a budget. It does not matter your age. If you are dealing with money, a budget is necessary.

  1. Allows you to control your money. Rather than your money telling you what it wants to do, you get to tell your money where it needs to go. You are always in control when you have a budget.
  2. It teaches financial skills. A budget helps ensure that expenses such as rent, tuition, food, insurance, transportation, and housing are paid – before spending money on the fun stuff. (It also helps to make sure you don’t spend more than you make.)
  3. Makes you aware of where your money goes. When you use a budget, you see how you spend. It is very simple to see if too much is going toward dining out when you should be building your savings.
  4. Helps you track your goals. You need to cover expenses but you should also work on building savings at the same time. Your budget allows you to not only see those goals but track them in real time.

DOESN’T A BUDGET MEAN YOU CAN’T HAVE FUN?

Not at all! If anything, your budget will allow you to have guilt-free fun.

For example, the budget may allow you to spend $50 a week dining out. That means you can go to dinner with friends once (possibly twice) a week and enjoy yourself. You won’t be left wondering how you are now going to make rent.

WHAT TYPE OF BUDGET SHOULD YOUR STUDENT USE?

There are various methods of budgeting such as the 50/30/20 and the zero-based budget. For most college students, the zero-based is the simplest and easiest to follow.

The reason is that you track everything. You give every penny a job. That means if you earn $1,500 for the month that you “spend” the entire $1,500.

You will first cover the needs (food, shelter, transportation) and then your wants. If there is money “leftover” after this is done, it can be added to your savings.

You can use other types but if you have never budgeted before, using this method is the simplest.

WHAT SHOULD A COLLEGE STUDENT INCLUDE IN A BUDGET?

The budget will vary for each person, as the income and expense will be different. However, these are the most common categories that need to be included in a budget:

  • Rent
  • Renter’s insurance
  • Car payment
  • Car insurance (also saving for annual renewal fees)
  • Food
  • Clothes
  • Utilities (phone, electricity, gas, water, etc.)
  • Tuition
  • Fees
  • Entertainment (movies, games, concerts)
  • Dining out
  • Emergency fund savings

Again, you may have items that are not included above or see some that you do not need.

However, the most important thing of all is that every penny is given a job. Account for everything you will spend each month so you never have too much month and not enough money.

HOW DO YOU KEEP TRACK OF YOUR BUDGET?

For most college students, apps or digital trackers are the best options.  But, before you rush and sign up, keep the following in mind.

  1. Cost. Many apps are free and they will work perfectly fine. Other apps have a monthly fee attached to them. If you plan to use one of them, make sure you include that as one of your regular expenses. However, do not let the cost alone be a single factor when it comes to clicking the sign-up button.
  2. Security. Your security trumps all else. You need to make sure the app uses encryption as well as two-factor authorization.

Some of the best apps include:

  • Mint
  • You Need a Budget (YNAB)
  • PocketGuard
  • Mvelopes

However, your student may also like the traditional paper and pencil method – and that is OK as well.

Find the right one that works best for your student. That is all that matters.

TEACHING THEM TO BUDGET

Knowing you need a budget and where to track it is just the beginning. You need to teach your child how to budget.

Start by looking at each category that they need on their budget. You may already know the cost for each category but if not, you may need to make phone calls or do research to know.

For example, you know the rent for the apartment is $850 a month but how much are the average utilities? Ask the manager for these costs so you can include them in the budget.

Next, decide how much they want to allow themselves to spend on food. Show them how much a meal costs for a single person at each restaurant you eat at so they can create an average.

You will then have them decide how much “fun money” they want to include as well. You can base this on them wanting to go to the movies two times a month, one concert a month, or attending three events.

Now you can see the expenses for your student. Add their income to the budget and deduct the expenses. They will see if they are operating in the black (money left over) or in the red (spending more than they make).

Show them how to adjust the numbers by increasing their savings or lowering the amount they can spend on clothes – until the budget equals zero. Zero meaning they are spending every penny they earn.

And making them keep track now will help ensure they stay on track well into the future.

 

 

 

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Source: pennypinchinmom.com

8 401(k) Investing Tips to Maximize Your 401(k)

woman with laptop and clipboard

The best kind of 401(k) plan is one that is used. The employer-sponsored retirement plan is typically easy to open and fund (with pre-tax dollars often deducted straight from your paycheck), and offers tax benefits vs. saving and investing in a brokerage account.

Understanding the nuances of this all-important savings vehicle may help catapult investors into full-blown expert territory, helping them maximize their 401(k) investing.

While everyone’s financial and retirement situation is different, there are some useful 401(k) investing tips that could be helpful to anyone using this popular investment plan to boost their retirement savings. These 401(k) should apply no matter what stage of retirement saving you’re in—as long as you’re participating in a 401(k).

1. Take Advantage of Your Employer Match
2. Consider Your Circumstances Before Contributing the Match
3. Understand Your 401(k) Investment Options
4. Stay the Course
5. Change Your Investments Over Time
6. Find—and Keep—Your Balance
7. Diversify
8. Beware Early Withdrawals

#1 Take Advantage of Your Employer Match

This first 401(k) tip is admittedly basic, but also probably the most important. Understanding your employer match is essential to making the most of your 401(k).

Also called a company match, an employer match is a contribution made to your 401(k) by your employer, but only when you contribute to your account first.

Withdrawing money early from a 401(k) can result in a hefty penalty.

There are some exceptions, depending on what you’ll use the withdrawn funds for. For example, qualified first-time home buyers may be exempt from the early distribution penalty. But for the most part, if you know you need to save for some big pre-retirement expenses, it may be better to do so in a non-qualified account.

Another consideration is whether to put all of your eggs in your 401(k) basket. Of course, these accounts can offer big benefits in terms of tax deferral and may come with a matching contribution from your employer as well. But individuals who are eligible to contribute to a Roth IRA, may consider splitting contributions between the two accounts.

While 401(k) contributions are made with pre-tax dollars and taxes are paid when you make a withdrawal, Roth IRA contributions are the opposite—taxed on the way in, but not on the way out (with some exceptions).

If you’re concerned about being in a higher tax bracket at retirement than you are now, a Roth IRA can make sense as a complement to your 401(k). The caveat is that these accounts are only available to people below a certain income level.

#3 Understand Your 401(k) Investment Options

The first step is contributing to a 401(k); the second is directing that money into particular investments. Typically, plan participants are able to choose from a list of mutual funds to invest in for the long-term. Some 401(k) plans may give participants the option of a lifecycle fund or a retirement target-date fund.

To pick the right mutual funds, you may want to consider what is being held inside those mutual funds. For example, a mutual fund that is invested in stocks means that you are now invested in the stock market.

With each option, ask yourself: Does the underlying investment make sense for your goals and risk tolerance? Are you prepared to stay the course in the event of a stock market correction?

You may also want to consider the fees charged by your mutual fund options, because any management fee will be subtracted from your potential future returns. When analyzing your options, look for what is called the expense ratio—that’s the annual management fee.

#4 Stay the Course

Many investors will have at least a part of their 401(k) money invested in the stock market, whether through mutual funds or by holding individual stocks.

If you’re not used to investing, it can be tempting to panic over small losses. This is also known as a day-trader mentality, and it is one of the worst things you can do—especially with a 401(k). Remember, investing in the stock market is generally considered for the long haul.

Getting spooked by a dip (or even a stock market crash like the one in 2008) and pulling your money out of the market is generally a poor strategy, because you are locking in what could possibly amount to be “paper” or temporary losses. The thinking goes, if you wait long enough, that stock might rebound and your loss will go away. (Though as always, past performance is no predictor of future success.)

It may help to remember that although stock market crashes are disappointing, they are a normal and natural part of the growth cycle. Remember, the goal is to be patient and let the stock market do its thing.

Some investors find it helpful to only check their 401(k) balance occasionally, rather than obsess over day-to-day fluctuations.

#5 Change Your Investments Over Time

Lots of things change as we age, and one of the most important 401(k) tips is to change your investing along with it. While some principles of retirement saving are eternal—use the employer match as much as you can, don’t trade too much, pay attention to fees—some 401(k) advice is specific to where you are relative to retirement.

While everyone’s situation is different and economic conditions can be unique, one rule of thumb is that as you get closer to retirement, it makes sense to shift the composition of your investments away from higher risk but potentially higher growth assets like stocks, and towards lower risk, lower return assets like bonds.

There are types of funds and investments that manage this change over time, like target date funds, that make this strategizing easier. Some investors choose to make these changes themselves as part of a quarterly or annual rebalancing.

#6. Find—And Keep—Your Balance

While you may want your 401(k) investments to change over time, at any given time, you should have a certain goal of how your investments should be allocated: a certain portion in bonds, stocks, international stocks, American stocks, large companies, small companies, and so on.

But these targets and goals for allocation can change over time even if your allocations and investment choices don’t change. That’s because certain investments may grow faster than others and thus, by no explicit choice of your own, they take up a bigger portion of your portfolio over time.

Rebalancing is a process where, every year or every few months, you buy and sell shares in the investments you have in order to keep your asset allocation where it was at the beginning of the year.

For example, if you have 80% of your assets in a diversified stock market fund and 20% of your assets in a diversified bond fund, over the course of a year, those allocations may end up at 83% and 17%.

To address that, you might either sell shares in the stock fund and buy shares in the bond fund in order to return to the original 80/20 mix, or adjust your allocations going forward to hit the target in the next year.

#7 Diversify

In addition to employer matching, diversification is considered one of the few “free lunches” for investors. By diversifying your investments, you can help to lower the risk of your assets tanking while still being exposed to the gains of the market.

difference between stocks and bonds.)

Within stocks, diversification can mean investing in US stocks, international stocks, big companies, and small companies. But rather than, for example, owning shares in one big American company, one big Japanese company, a multi billion-dollar company, and a smaller company, it might make sense instead buy diversified funds in all these categories that are diversified within themselves—thus offering exposure to the whole sector without being at the risk of any given company collapsing.

#8 Beware Early Withdrawals

Perhaps the most important 401(k) tip is to remember that the 401(k) is designed for retirement, with funds withdrawn only after a certain age. The system works by letting you invest income that isn’t taxed until distribution. But if you withdraw from your 401(k) early, much of this advantage disappears.

With few exceptions, the IRS imposes a 10% tax penalty on withdrawals made before age 59½. That 10% tax is on top of any regular income taxes a plan holder would pay on 401(k) withdrawals. While withdrawals are sometimes unavoidable, the steep cost of withdrawing funds should be a strong reason not to, as it wipes away much of the gains that can come from 401(k) investing.

If you would like to buy a car or a house, or pay off debt, there are other options to explore. First consider pulling money from any accounts that don’t have an early withdrawal penalty, such as a Roth IRA (contributions can be withdrawn penalty-free as long as they’ve met the 5-taxable-year rule) or a brokerage account.

The Takeaway

If you have a 401(k) through your employer, you may want to consider taking advantage of it. Not only might you have a company match, but automatic contributions taken directly from your paycheck and deposited into your 401(k) may keep you from forgetting to contribute.

That said, a 401(k) is not the only option for saving and investing money for the long-term. One such option is a Roth IRA. While there are income limitations to who can use a Roth IRA, these accounts also tend to have a bit more flexibility when withdrawing funds than 401(k) plans. (If you don’t qualify for a Roth IRA, ask your tax professional for additional guidance.)

Another option is to open an investment account that is not tied to an employer-sponsored retirement plan. Sometimes called a brokerage or after-tax account, these accounts don’t have the special tax treatment of retirement-specific accounts, but can still be viable ways to save money for people who have maxed out their 401(k) contributions or are looking for an alternative way to invest.

Find out how SoFi Invest® can help you start saving for your future.


SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
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For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, http://www.sofi.com/legal.

External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.
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Financial Considerations When Getting a Divorce

In a recent episode, I shared that I would be doing a 4-part series on divorce.  I’ve been divorced for 5 years now and wanted to share what has worked for me, my ex-husband, and our 8 kids during this time. While divorce is not easy, time does help heal, and when your focus is putting your kids first, it is absolutely possible to maintain a healthy, happy family relationship.

My first episode in this series was 5 Expert-Approved Ways to Talk to Your Kids About Divorce.  My second episode in this series was 5 Ways to Co-Parent with Your Ex-Spouse. 

There really isn’t anything easy about divorce. Thankfully, as I discussed in the first two episodes, there are strategies and thoughtful ways to navigate through some of divorces issues, especially if the two parents are willing to put their personal differences aside and focus on their kids. In addition to the emotional turmoil that encompasses divorce, there is also another difficult component that couples must deal with and that is the financial aspect. 

After 25 years of marriage and 8 kids, Mighty Mommy had to get her financial house in order and make some significant adjustments going from a two-income household to a single income.

Here are four financial considerations, as backed by the experts, to keep in mind if you are thinking of or getting a divorce.

1. Get Your Financial Documents in Order

The entire divorce process is completely overwhelming, and when you begin to delve into the financial ramifications, the stress is taken to a whole new level. Once we began having our small tribe of kids, we decided I would leave my career to be home with our family. During the last 10 years of our marriage I went back to work part-time as a freelance writer but by no means was I contributing significantly to our income. My ex-husband managed the majority of our financial affairs so when the reality of our divorce settled in, I knew the first thing I had to do was get a handle on every aspect of our financial status. I honestly wasn’t sure where to begin, but my divorce attorney recommended I start by gathering all my financial documents.

Maryalene LaPonsie, contributor to USNews.com writes in 7 Financial Steps to Take When Getting a Divorce that “as soon as you know you’re getting a divorce, collect all the financial documents you can.” She continues, by stating that these include:

  • “Bank statements”
  • “Credit card statements”
  • “Tax returns”
  • “Retirement account balances”
  • “Appraisals for valuable items, if available”

In addition, other documents to consider are:

  • Mortgage Statement, including any Home Equity Loans and purchase information
  • Checkbook Registry for the last year
  • Any other long-term debt account statements you may have, including car loans

2. Know Your Income and Expenses

When we began our divorce proceedings, I admit I was far more focused on my emotional state than my finances. 

When we began our divorce proceedings, I admit I was far more focused on my emotional state than my finances.  Because my ex was the one who paid all the bills and the sole provider for most of our marriage, I never worried much about the details of our 401(K) plan, life insurance policies or what our overall assets and debt totaled.

One piece of advice I received many times over was that I needed to know what our budget was so I could begin to realistically know what my living expenses would be. 

Jason Silverberg, CFP at Financial Advantage Associates, Inc. and author of The Financial Planning Puzzle, told me via email: “If there was one singular, most important piece of financial advice that I could offer someone going through a divorce, that would be to understand where everything is and what everything’s worth. Without knowledge of what you own and who you owe money to, you really are going to have a hard time moving forward. You’ll also want to understand all of your sources for income and all of your monthly expenses as well. This will help you have a good handle on your budget to provide you critical understanding, so you can make smart financial decisions.”

He went on to say, “This exercise should be done both prior to as well as after the divorce. This way you can get a sense for how your household budget will operate on one income.” To help divorcing couples realize these figures, Silverberg has created the Personal Financial Inventory (1 page worksheet) inside the Picking up the Pieces eBook.

This exercise was extremely enlightening as I realized exactly where every penny (and then some) was going on a monthly basis. I was also able to gauge how much income I would need to start making in order to support these bills in addition to the child support and alimony payments I was receiving. One important factor to consider with child support is that it will decrease as your children get older, so I had to continually modify my budget based on this decrease. At first, it was overwhelming to see how much money I would need to keep our household running, but when you are armed with the figures and you pay attention to your monthly cash flow, it becomes easier to make adjustments. The fact of the matter is that some of the extra splurges such as frequent trips to the hair salon or buying my kids their usual top-of-the line items like sneakers or sports equipment had to be adjusted to what I could now afford. My kids have had some disappointments in this department, but they appreciated how we were trying to work together as a family-unit so that their lifestyle wasn't affected as drastically as it could've been which balanced everything out.


3.  Consider What Professionals Will Represent You

There are important considerations to keep in mind when choosing which divorce professionals will represent you. Adrienne Rothstein Grace writes on the Huffington Post, 3 Steps to Prepare for Your Divorce, that you must align yourself with the right professionals.  She explains “First, think about the divorce process you and your spouse will want to undertake and ask yourself the following questions:

  • “Is this going to be an acrimonious divorce? Or will my spouse and I cooperate?”
  • “Do I already know about all of our household and personal finances? Or do I suspect that I may be out of the loop on some assets, debts or income sources?”
  • “Do I trust my spouse to be cooperative and forthright?”
  • “Do I have any reason to believe that I will feel intimidated by my spouse during these proceedings?”
  • “Are we both focused on the wellbeing of our children?”

Grace says that “If you believe that you and your spouse will cooperate and will have joint best interests in mind while negotiating, then you might want to choose a divorce mediator or embrace a collaborative divorce. Those options are less costly, more private, and usually result in a more peaceful settlement process. However, if you’re not certain about finances, or cannot trust your spouse to be completely above-board and cooperative, then you might hire a traditional divorce attorney, who will only have your interests in focus while they help negotiate the complexities of your divorce.”

My ex-spouse and I decided to retain individual divorce attorneys. In addition, we also hired a Certified Divorce Financial Analyst, (CDFA) at the recommendation of each of our lawyers, who met with us jointly to give us a complete overview of what our financial future was going to look like. It's a huge wake-up call when you see all the numbers in front of you on paper.  At our first meeting with the CDFA I learned quickly that I was going to have to go back to work, full-time to sustain the home we lived in as well as the upkeep, taxes, insurance, and basics like groceries for our large family. 

It's a huge wake-up call when you see all the numbers in front of you on paper.

If you surround yourself with competent, caring professionals who will guide you through this very delicate journey, you will have made an important investment in your family’s future, financial well-being.

4.  Stay in the Financial Know Throughout Your Divorce

Throughout your divorce, you’re bound to get all kinds of advice from friends, family, co-workers and other concerned individuals that will be looking out for you and have your best interest at heart.  This can be both helpful and draining depending on your relationship with these people.  When I began divorce proceedings, I too received lots of comments and suggestions from well-meaning folks, but I also decided I wanted to be armed with my own facts so I began reading lots of articles and books as well as listened to informative podcasts about divorce, particularly financially-related pieces.

My QDT colleague, Laura Adams, Money Girl, recently did an wrote about divorce in Getting Divorced? Here's How to Protect Your Money. She interviewed Stan Corey, a divorce expert and author of a new book, The Divorce Dance. This podcast had some terrific insight and some of the topics she and Corey cover in this interview include:

  • Different types of divorce proceedings that you can choose
  • The biggest mistakes that can cost you financially in a divorce
  • Why relying on a single family law attorney can be a bad idea
  • Tips for dividing up financial assets the right way—especially when you’re not so financially savvy
  • How to get divorced when you don’t have much money to pay for it

As you continue down the path of your divorce, surround yourself with as much information as you can, so that you will be able to make the best decisions possible for you and your children.

Five years later, I am still watching my financial picture very carefully.  I work full-time and do freelance work on the side in order to maintain my home and other living expenses.  I am extremely grateful that my ex-husband is very supportive of many of our 8 children’s extracurricular expenses, but the reality is I’m responsible for my own financial future so I have learned to be extremely careful with purchases and expenses.

The final topic in this divorce series will revolve around putting your kids first after the divorce.

How have you managed your finances during a separation or divorce?  Please share your thoughts in the comments section at quickanddirtytips.com/mighty-mommy, post your ideas on the Mighty Mommy Facebook page. or email me at mommy@quickanddirtytips.com. Visit my family-friendly boards at Pinterest.com/MightyMommyQDT.

Be sure to sign up for the upcoming Mighty Mommy newsletter chock full of practical advice to make your parenting life easier and more enjoyable. 

Images courtesy of Shutterstock.

Source: quickanddirtytips.com

Zero-Based Budgeting: The Ultimate Guide

When you create a budget that works for you, you gain a sense of peace and freedom that comes with taking ownership of your finances. Although there are many approaches to budgeting, certain systems prove to be more effective than others. Zero-based budgeting is an easy and reliable method to achieve your financial goals. The concept of zero-based budgeting is simple: When you create your budget, you assign a role for every single dollar of your income.

By knowing exactly where your hard-earned cash is going, zero-based budgeting eliminates uncertainty and increases confidence in your financial decisions. Could a zero-sum approach to budgeting be the key to helping you regain your financial freedom? We’ll walk you through the specifics of this detail-oriented budgeting method so you can decide if it’s the right choice for your situation.

What Is Zero-Based Budgeting?

In short, zero-based budgeting is when you allocate every dollar you earn so that your income minus your expenses equals zero. If you earn $3,000 a month, the entirety of that $3,000 is accounted for in a zero-based budget. The goal is to avoid having extra money at the end of the month so you make wise spending choices.

Your budget should allow for spending money on monthly expenses like groceries and utilities, as well as “fun money.” Rather than waiting to see what’s left over after taking care of bills and other essentials, a zero-based budget forces you to make financial decisions in advance. If you truly want to align your actions with your financial goals, you’ll realize that every penny needs a purpose to make the most of it.

zero based budgeting

By forcing you to decide how much of your income will go towards goals like paying off debt or saving for a house before you even receive your check, zero-based budgeting encourages you to stick to your goals.

Is Zero-Based Budgeting Right For You?

Zero-based budgeting can be for everyone. A damaging myth of budgeting is that it’s only for people who lack the discipline to hold themselves accountable. No matter how much you’re struggling or thriving financially, you can benefit from taking control of your money with a zero-based budget. If you’re still skeptical about zero-based budgeting, take a look below at how it compares to the four other most popular budgeting alternatives, including the 50/30/20 method:

  • Zero-Based Budget: Make sure your expenses match your income each month so that your earnings minus your costs equal zero.
  • “Pay Yourself First” Budget: Dedicate money to savings and then the remainder is free to be spent how you choose.
  • Envelope Budget: Divide cash into physical envelopes filled with the exact amount of money you can spend on that category.
  • 50/30/20 Budget: 50% of your income is for essentials, 30% is for personal expenses, and 20% goes towards savings.
  • Value-Based Budget: Calculate the monthly cost of each need based on your values, then choose how to stretch your income to meet those needs.

When you don’t know exactly how you intend to divide your money each month, it’s easy to fall into spending traps. A zero-based budget using a digital budgeting tool is a great way to set yourself up for success and stick to your plan.

How to Create a Zero-Based Budget

Develop a zero-based budgeting plan by making it as simple as possible. Your main objective is ensuring your expenses match your income during the month. Don’t overcomplicate the process by stressing about making the “perfect” plan. The best part about creating a zero-based budget is that it’s easy to adjust month-over-month.

how to create a zero based budget

1. Record Your Monthly Income and Expenses

Write down every single monthly and seasonal expense to set yourself up for success. If you don’t know where to start, you know you’ll always have to factor in the cost of housing, utilities, transportation, and groceries.

Next, consider expenses you’re saving for, like a new car, a birthday or anniversary gift, etc. With a little bit of forethought, there shouldn’t be any surprises. It’s wise to set aside cash for unexpected or one-off expenses so you’re not immediately dipping into your emergency fund.

2. Adjust Your Budget Until Income Minus Expenses Equals Zero

When you’re new to zero-based budgeting, don’t worry if your income and expenses don’t balance each other out at first. It’s likely that you’ll have to reduce recurring costs or increase your earnings to reach a zero-sum. Canceling unnecessary subscriptions, packing your own lunch, skipping Starbucks, and starting a passive income-generating side hustle are all helpful.

Using an app with a budget categorization feature is particularly useful when you’re in the trial and error phase. Otherwise, it can be tedious and discouraging to manually re-adjust your budgeting strategy.

3. Track and Optimize Your Monthly Spending Accordingly

A zero-based budget is rarely flawless the first time around. Thankfully, you can optimize your spending by reallocating your funds as often as you need to during the month. Be sure to set yourself calendar reminders to have budget check-ins on a weekly or bi-weekly basis, especially if you’re working on budgeting as a family.

There are countless ways to increase and decrease your dollar allocations according to what makes the most sense for your circumstances. Oftentimes, three to six months are required to master zero-based budgeting. Once you get the hang of it, chances are that you’ll enjoy reaping the rewards so much that you’ll wonder why you didn’t start sooner.

Pros and Cons of Zero-Based Budgeting

There’s no right or wrong answer to how you choose to manage your finances, but the key is that you need some kind of systematic approach to handling your money. Budgets are essential to help you build an emergency fund, save for retirement, pay off loans, or grow wealth through investing. If you aren’t sure that zero-based budgeting is the best strategy for you, we’ve outlined the pros and cons below.

pros and cons of zero based budgeting

Business management expert Peter Drucker is well-known for saying, “you can’t improve what you can’t measure.” If you want to make progress towards your financial goals, you need a way to define and track where your money will go. If you’re not convinced that a zero-based budget will work for you, don’t force it. You can always give it a try for a month or two and fall back on a different budgeting solution.

In Summary…

Zero-based budgeting is an easy and effective method to help you achieve your financial dreams. Don’t miss the chance to get the most value from your money by budgeting. We’ve summed up our main points below.

  • Zero-based budgeting is when all of your income minus all your expenses equals zero. Every dollar of your hard-earned cash has a specific, purpose-driven role.
  • Having a zero-based budget allows you to make your income go further by proactively allocating your funds to different areas of spending and saving.
  • Using a digital budgeting tool like Mint helps to set yourself up for success and hold you accountable in your zero-based budgeting goals.

 

The post Zero-Based Budgeting: The Ultimate Guide appeared first on MintLife Blog.

Source: mint.intuit.com

These 50 Brands Will Fix or Replace Products You Buy From Them

Don’t worry about wearing out that backpack or yoga mat; these 50 companies will fix or replace your items for free.

This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.

Source: thepennyhoarder.com

How to Still Pay Your Bills During a Layoff or When You Miss A Check

The post How to Still Pay Your Bills During a Layoff or When You Miss A Check appeared first on Penny Pinchin' Mom.

More than 800,000 Americans are currently affected by the government shut down. And, while it would make sense to force our congressmen and senators to also not get paid during that time, it just won’t happen.

survive a layoff

Even though you may not be working and getting a paycheck, it doesn’t mean the bills stop.  You still need to feed your family and take care of yourself.

The truth is that a layoff or furlough can happen to anyone at any time. And, if you already struggle to live paycheck to paycheck, not getting paid will certainly increase your stress level.

WHAT DO DO IF YOU MISS A PAYCHECK

First off, if you aren’t getting paid, you need to take a deep breath. I know it is stressful and you are struggling, but it is all going to be OK.

Your first instinct may be to go take out a second mortgage or unsecured loan.  You might be tempted to get some additional credit cards.  And, that retirement account may be calling your name.

Don’t do that.

All you are doing is adding more stress by increasing your debt or tax liability.  Then, when you do start having paychecks again, you end up with more bills to pay.

It may be a short term fix, with long-term consequences.  Just don’t do it.

Go ahead and have a good cry.  Then, wipe your tears and create a plan.

 

1. MAKE SURE YOU HAVE A BUDGET

If you don’t have a budget, there is no time like the present to make one.  A budget is not going to restrict you from spending money.  In fact, it is the opposite.

Your budget shows you where you spend your money.  And, more importantly, where you might be able to cut back. It could mean stopping your gym membership and not dining out.  It could even mean canceling your cable service.

A traditional budget will show the income you bring in.  But, if you don’t have any regular paychecks, how do you do this?  You make your budget with the money you do have.

Don’t include the amount you normally make, but rather, just the amount currently coming in.  If there is no money at all, then create your budget with the money you have on hand.  You need to get everything out of every penny you make.

Your budget is crucial to surviving a layoff, furlough or government shut down.

 

2. COVER YOUR NEEDS

If you look at your budget, there are wants and needs.  A want is cable.  A need is housing.  When there is no money coming in (or less than usual), you must cover your needs.   This means making sure you pay for:

Housing
Food
Clothing
Transportation

Look at your budget and cover these expenses first.  Don’t pay your cable bill if you can’t put food on the table.  Cable is not important right now, but you must feed your family.

Once you cover your basic needs pay other bills in order of importance.  Don’t worry about the credit card bills right now – but pay your utilities.

You can’t pay everyone.  There is no getting around that.  Pay those you need to in order to protect your family.

 

3. SELL THINGS

A simple way to generate some quick cash is to find things you do not need and sell them.  The added bonus is that you get a chance to clean out the basement or the garage.

Use sites such as LetGo or Craigslist to sell big items.  If you have clothing check out ThredUp or Poshmark.  There is always someone who needs something.

 

4. STOP PAYING OFF DEBT

If you are in the midst of getting out of debt, you’ll have to stop — for now.  Getting out of debt can’t be your priority at this time.  You have to make sure you are taking care of your family.

Once your income returns to normal levels, you can pick up your debt snowball right where you left off.  And, if that means the balance had to increase in the short term, so be it.

 

5.  CUT BACK

When you struggle financially, it’s time for some big changes.  The first thing to do is look at your food bill.  See what you can cut from your spending.  Do some searches on Pinterest for very cheap family meals that you can make.

You may also want to check out different grocery stores.  For example, if you live near an ALDI, make a trip there to shop.  You’ll find almost everything you need, at very low prices.  You aren’t sacrificing quality.  You are just making the most of every dollar you spend.

Take a deep look at your budget and get rid of things such as monthly subscriptions like Hulu, gyms, etc.  You can always start these up again when you increase your income.  Once your income returns, you get to add these back in.  These are temporary cut backs just to help you survive this time.

 

6.  MAKE SOME CALLS

It is important to reach out to all of your providers and lenders to let them know you are part of the government shut down, or in the midst of a layoff.  You don’t want to risk getting service shut down due to lack of payment.

While many of them may not be able to make any concessions, they might be able to give you an additional month to pay or not charge a late fee.  But, you will never know unless you ask.  What’s the worst thing that will happen?

Note that during the winter months, utility companies are not allowed to discontinue services, but they can during other times of the year.

 

7. GET A SIDE HUSTLE OR TEMPORARY JOB

When there is no money coming in, you’ve got to find a way to change that.  It may be time to add a side-hustle. It could mean working fast food or getting a job at Walmart.  You just have to find a way to bring in money during this short period of time.

If your layoff or furlough is temporary, you may not be able to get another job. It could be part of the terms of your employment, so it is not an option.  That means you need to try a side-hustle.  It might mean you are an Uber driver or even tutor kids.

 

8.  ASK FOR HELP

Check your local food pantry or church to ask for help.  These organization can provide food and even money to help cover your bills.   You may also have family members who are willing to help by paying for your groceries or covering your electric bill.  But, you have to ask.

You have a family to provide for, so you can’t let your pride get in the way of getting them what they need.

 

WHAT DO WHEN YOU START GETTING PAID AGAIN

Once you are back at work and your income is back to what it was previously, don’t just go back to your spending like before.  You don’t want to struggle again should you find yourself in this same situation.

The most important thing to do is to work on building your emergency fund.  The idea is to build it up to have at least 3 – 6 months worth of living expenses covered.  I know it sounds like a lot.  And, it probably is.

You won’t build it up all at once.  It will take time.  But, you can do things such as sell more items or get a second job.  Even if you start saving just $10 a week, you’ll have saved more than $500 in a year.

surviving a layoff

The post How to Still Pay Your Bills During a Layoff or When You Miss A Check appeared first on Penny Pinchin' Mom.

Source: pennypinchinmom.com

The Risks of Playing The Stock Market

child's hand playing chess

To the uninitiated, the stock exchange can seem like a casino, with news and social media feeds sharing stories of investors striking it rich by playing the stock market. But while there are winners, there are also losers—those who lose money playing the market, sometimes pulling their money out of the market because they’re afraid of the potential of losing money.

Playing the stock market does come with investment risks. For new investors learning how to play the stock market can be a frustrating, humbling, and in some cases, incredibly rewarding experience.

While investing is a serious business, playing the stock market does have an element of fun to it. Investors who do their research and tune into the news and business cycles can take advantage of trends that might better enable them to earn good returns on investment.

This is what you need to know about how to play the stock market, the risks involved, and what makes the market so alluring.

Playing the Stock Market: What Does it Mean?

Despite the phrase “playing” the stock market, it’s important to make the distinction between investing and gambling up front.

safe investment—in a way each investment can feel like a gamble. However, it’s important to keep in mind that the market is not a casino, and just because there’s risk involved doesn’t mean that “playing the market” is the same as playing roulette.

So what does “playing the stock market” actually mean? In short, it means that someone has gained access to and is actively participating in the markets. That may mean purchasing shares of a hot new IPO, or buying a stock simply because Warren Buffett did. “Playing,” in this sense, means that someone is investing money in stocks.

Playing the Market: Risks and Rewards

Learning how to play the stock market—in other words, become a good investor—takes time and patience. It’s good to know what, exactly, the market could throw at you, and that means knowing the basics of the risks and rewards of playing the market.

Potential Risks

In a broad sense, the most obvious risk of playing the market is that an investor will lose their investment. But on a more granular level, investors face a number of different types of risks, especially when it comes to stocks. These include market risk, liquidity risk, and business risks, which can manifest in a variety of ways in the real world.

A disappointing earnings report can crater a stock’s value, for instance. Or a national emergency, like a viral pandemic, can affect the market at large, causing an investor’s portfolio to deflate. Investors are also at the mercy of inflation—and stagflation, too.

For some investors, there’s also the risk of playing a bit too safe—that is, they’re not taking enough risk with their investing decisions, and as such, miss out on potential gains.

Potential Rewards

Risks reap rewards, as the old trope goes. And generally speaking, the more risk one assumes, the bigger the potential for rewards—though there is no guarantee. But playing the market with a sound strategy and proper risk mitigation tends to earn investors money over time.

Investors can earn returns in a couple of different ways:

•  By seeing the value of their investment increase. The value of individual stocks rise and fall depending on a multitude of factors, but the market overall tends to rise over time, and has fully recovered from every single downturn it’s ever experienced.
•  By earning dividend income. Dividends can also be reinvested, in order to further grow your investments.
•  By leaving their money in the market. It’s worth mentioning that the longer an investor keeps their money in the market, the bigger the potential rewards of investing are.

How to Play the Stock Market Wisely

Nobody wants to start investing only to lose money or otherwise see their portfolio’s value fall right off the bat. Here are a few tips regarding how to play the stock market, that can help reduce risk:

Invest for the Long-term

The market tends to go up with time, and has recovered from every previous dip and drop. For investors, that means that simply keeping their money in the market is a solid strategy to mitigate the risks of short-term market drops. (That’s not to say that the market couldn’t experience a catastrophic fall at some point in the future and never recover. But it is to say: History is on the investors’ side.)

Consider: If an investor buys stocks today, and the market falls tomorrow, they risk losing a portion of their investment by selling it at the decreased price. But if the investor commits to a buy-and-hold strategy—they don’t sell the investment in the short-term, and instead wait for its value to recover—they effectively mitigate the risks of short-term market dips.

Do Your Research

It’s always smart for an investor to do their homework and evaluate a stock before they buy. While a gambler can’t use any data or analysis to predict what a slot machine is going to do on the next pull of the lever, investors can look at a company’s performance and reports to try and get a sense of how strong (or weak) a potential investment could be.

Understanding stock performance can be an intensive process. Some investors can find themselves elbow-deep in technical analysis, poring over charts and graphs to predict a stock’s next moves. But many investors are looking to merely do their due diligence by trying to make sure that a company is profitable, has a plan to remain profitable, and that its shares could increase in value over time.

Diversify

Diversification basically means that an investor isn’t putting all of their eggs into one basket.

For example, they might not want their portfolio to comprise only two airline stocks, because if something were to happen that stalls air travel around the world, their portfolio would likely be heavily affected. But if they instead invested in five different stocks across a number of different industries, their portfolio might still take a hit if air travel plummets, but not nearly as severely as if its holdings were concentrated in the travel sector.

Use Dollar-cost Averaging

Dollar-cost averaging can also be a wise strategy. Essentially, it means making a series of small investments over time, rather than one lump-sum investment. Since an investor is now buying at a number of different price points (some may be high, some low), the average purchase price smooths out potential risks from price swings.

Conversely, an investor that buys at a single price-point will have their performance tied to that single price.

The Takeaway

While playing the market may be thrilling—and potentially lucrative—it is risky. But investors who have done their homework and who are entering the market with a sound strategy can blunt those risks to a degree.

By researching stocks ahead of time, and employing risk-reducing strategies like dollar-cost averaging and diversification when building a portfolio, an investor is more likely to be effective at mitigating risk.

With SoFi Invest®, members can devise their own investing strategy, and play the market how they want, when they want. Whether you’re interested in short-term trading or have your eyes on a longer-term prize, SoFi Invest is a way to dip your toes into the stock market and start investing today.

Find out how to get started playing the stock market with SoFi Invest.


SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC Registered Investment Advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).
2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.
3) Digital Assets—The Digital Assets platform is owned by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.
For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, http://www.sofi.com/legal.

Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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The post The Risks of Playing The Stock Market appeared first on SoFi.

Source: sofi.com

How to Plan a Budget If Your Home Is a Fixer Upper

When your home is a fixer-upper, it can be difficult to even know where to start with a renovation. The list can be overwhelming—fix the patio, change out the mustard yellow carpet, buy furniture, paint the house. With a never-ending to-do list, planning a budget can seem virtually impossible.

By sorting through your list of wants and needs and focusing on essentials, you can outline a budget that won’t keep you up at night. Here are some tips on how to plan a budget for turning your fixer-upper into your first dream home.

How to Plan a Budget If Your Home is a Fixer Upper

1. Sort through the “wants” and “needs.”

Where do you even start with a renovation budget? With a limited fixer-upper budget, it’s essential to make functionality the first priority. When the roof is leaking and your fridge is dead, this is where the budget begins. First, determine what infrastructure items require repair or an essential upgrade, as these are typically big-ticket items. Next, focus on beautifying projects that will reap benefits in the long run, like bathrooms and kitchens. Hold off on budgeting fancy appliance upgrades and expensive decor if you already have working items—these can come at a later time after you take care of all the essentials.

How to Plan a Budget If Your Home is a Fixer Upper

2. Consider purchasing used over new.

Give your budget more flexibility by going for used over new with certain big-ticket items. Used appliances, for instance, can be found in great condition from other remodels or homeowners upgrading to the latest technology. Used furniture is also a fantastic way to keep your fixer-upper budget low. Don’t forget—sofas, vintage chairs, tables and more can be easily reupholstered and refinished. They’ll look brand new for just a fraction of the cost. 

How to Plan a Budget If Your Home is a Fixer Upper

3. Be ready to DIY with a gift card.

As a first-time buyer, there’s a 99 percent chance you’ll be diving into the realm of DIY. Learning one or many DIY skills will not only come in handy with home repairs in the future, but it’s a fantastic way to keep labor costs low. If you’re worried your DIY supply budget will get out of hand, however, shop with a gift card to your local hardware store. That way, you’ll always be working with a fixed amount of money and won’t be tempted to add on any expensive extras. It’s a guaranteed way to keep your budget in check.

How to Plan a Budget If Your Home is a Fixer Upper

4. Get creative.

Fixer-uppers are great hands-on projects, and creative solutions are key for keeping your budget in line. For items like cabinetry that may be in good condition but out of style, get creative with refinishes to bring new life into your space. Give your kitchen a fresh take by painting cabinets in a modern shade, or reface them for a whole new look without the added cost of all-new cabinetry. Replace hardware on cabinetry, furniture and built-ins to make your pieces feel brand new. Even outdated fireplaces, doors, furniture and windows can go a long way with a fresh coat of paint and new hardware. Consider this cheap alternative to help save room in your budget for the fun stuff.

How to Plan a Budget If Your Home is a Fixer Upper

5. Let the professionals help.

Whether you’re starting with the kitchen or diving into a full-scale remodel, don’t be afraid to seek professional help. No matter what your budget, a professional’s advice can help ensure that your renovation has as few hiccups as possible. City codes, minute details and hidden elements can wreak havoc on projects, so let a master guide you through those hurdles instead of trying to blindly tackle them yourself. Don’t let the potential price tag deter you from investing in having expert guidance—many architects and designers have options for paying an hourly rate. This is a great option, especially for fixer-upper and DIY projects, as it allows your plans to be looked over by professionals without the price tag of a full design scope. 

What are your must haves for your fixer-upper?
 
 
Kerrie Kelly is a California interior designer who has helped many young couples choose their “first-home-together” decor. Kerrie writes on her design experiences for The Home Depot, offering homeowners ways to save money without compromising design.
 

Source: quickanddirtytips.com

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