Search Results for: emergency fund

I Challenge You to Track Your Expenses

Have you ever written down a budget to see where your money is going? Well, we did this earlier this month and everything looks fine, meaning that we make more than we spend.

That means we can pay our bills – great! That’s check one. Check two – are we saving enough? No, we we’re not, but where do we get the money? We won’t find extra money to save until we find out exactly where our money is going.

If you want to do this process with me, follow these steps:

1. Write down a couple of short and long term goals, so you’ll be inspired to do the work.
Short term goals can be planning for a vacation, buying a car, paying down debt, saving for something that you want, and starting an emergency fund.

Long term goals can be saving to purchase a home, saving for your children’s education, retirement planning, and paying off debt/mortgage. What are yours? Imagine what you want or need and write it down now.

2. Track every penny you spend. That means finding a way to record your spending as it happens.
Don’t wait until the end of the month and use your bank statement or receipts. A single store can fall under many spending categories and receipts don’t always list items by name (or by names that you can decipher). Don’t think for a minute that your grocery store trip can be lumped under food. You may buy your pet food there, as well as cleaning supplies, shampoo, or even magazines.

I know this sounds time consuming, but it’s worth it. You can carry a pen and pad with you and write down everything by hand. Another way to track your money is by using a phone app. Choose the way that works best for your lifestyle.

3. Write your totals in a budget worksheet to see where you stand.
Once you see a month’s worth of numbers, than you can begin to analyze what is going on. With this clear picture, you can make changes – lower bills to save money, get rid of unused services, check out the competition to switch etc.

Tell me what you have discovered with this exercise. Next issue, I will tell you what we have changed.

If you would like to receive my inter active budget tracker, just sign up for my free bi-weekly newsletter here.

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Financial Independence Part 1

In honor of Independent Day/Fourth of July, I want to talk about many people’s ultimate goal of financial independence. According to Wikipedia, financial independence is described as “generally used to describe the state of having sufficient personal wealth to live, without having to work actively for basic necessities. For financially independent people, their assets generate income that is greater than their expenses”.

Yes, we all probably want this and therein lies the problem. How do we attain this?

There are some generally agreed upon principles that are good practices that we all should attain to:

Avoid consumer debt
Spend less than you earn/Pay yourself first (save)
Don’t keep up with the Jones’

These are all great suggestions and work really well, but what if you need to work on some of these steps. In my opinion it all goes back to budgeting. Budgeting is the road map of your finances. You can see where your money is going and then make the necessary steps to eliminate consumer debt, reduce your spending, save by paying yourself first and break your habit of keeping up with the Jones’. It may sound simple but it isn’t. So with this issue and the next three I will tackle these issues.

Today, let’s look at avoiding consumer debt. This can be difficult to attain. But on the other hand, this is so important – too important not to strive for.

There have been times in my life that I have had more debt than I would like to admit. Yes, this happens to me too. In my opinion, there are two steps to start on the path to being debt free. First, you have to stop creating debt. Yes, you heard me. You need to do whatever it takes to avoid adding more to the debt. With that said, you can’t put every extra penny towards your debt and not have an emergency fund. Otherwise, the next time an emergency happens and you don’t have a fund to fall back on, you will create more debt.

In May and June, my husband had surgery and was home from work for a month without pay. We only had about 6 weeks’ notice to plan for this. We got through this period with the help of the emergency fund and savings to cover the shortfall. This was the key to us being able to live and pay the bills. Without the savings to fall back on, we would have had to use credit cards and create debt. So you can see how having an emergency savings plays a big part in getting rid of debt.

Back to the debt. Second, there are many ways to tackle this. Start by taking an honest look at your all your debt. Make a list including how much you owe, the minimum payment, interest rate, etc. I understand this is hard, but it’s necessary.

Now make the plan. You can payoff the smallest debt first to eliminate one debt (gives you momentum). You can payoff the debt with the highest interest rate (saves you money). You can plan to get more money (bringing in more income) with many options to add to your payment. Take some time to brainstorm what will work best for you and then put that plan into action.

You’ll need to stop creating additional debt and to create or increase your emergency fund. Next issue, I will discuss spending less than you earn/pay yourself first.

Save

Say Bon Voyage to Your Debt Part 4: Prepare for Surprises

Step four might surprise you.

I want you to start an emergency savings account and your goal is to save an initial $1,000. Yes, you read that right.

Why would I tell you to put money into savings when you’re trying to pay down debt? It’s not like the interest you earn is going to be more than the interest you’re paying, right?

Because, if you don’t have a savings account to fall back on, you’ll be back in debt the next time you’re blindsided by an unexpected repair or medical bill. Life happens. If you don’t have money in the bank, how will you pay for the surprises it brings? With a credit card or a loan? It’s a bad habit, and it’s better to start breaking it now rather than later.

Just like your debt didn’t happen overnight, your emergency savings isn’t going to happen overnight, either.

1. Make a plan to save money from each paycheck.

2. Start small with $5 per week and increase over time.

3. Remember to pay savings first (and automatically) before you pay the bills.

You can put money in savings automatically through your payroll department. If you don’t have a direct deposit service through work, you can set it up with automatic transfers at the bank.

As I said, start small and work your way up. The ideal goal is to put 10% of your income into savings. But first, start with the emergency fund so the little emergencies don’t discourage you from your quest of paying down your debt

Next issue: We will actually start paying off your debt – bet you thought we wouldn’t get to this.

Step One to Having it All

One of my clients told me that a 6-figure income would give her everything she wanted. She could pay the bills, have a home, save for the future, travel, and indulge in all the little things.

I gently pointed out that there are a lot of 6-figure earners who wished they made more money. A bigger income means a bigger mortgage and a more expensive lifestyle. High earners often find themselves pushed to their budget limits, balancing debt against what feels like a meager paycheck.

That’s human nature for you. We pick up more than we can carry, then blame nature for not gifting us with extra arms. We grab for everything, instead of just those things that make us feel fulfilled.

You can have it all (maybe not at once), as long as you know what having it all means to you. The key is in knowing what will really make you happy, having a plan, and working towards your goals.

When my client dreamed of making 6-figures, I believe she was really fantasizing about the freedom of living debt-free, with money in the bank for travel, retirement and a comfortable home life. But, without a plan and goals, she would have fallen into the big-earner/big-spender debt trap.

You may already know what you want, but, if you are living your life day to day with no goals, how do you expect to get to where you want to go? You may not even know if you are headed in the right direction without action steps to judge your progress.

The first step is to set a goal. What is it? Do you want to eliminate your debt, save for a vacation, save for a down payment on a home, start an emergency fund, save for retirement, your children’s education, or something else? Remember the goal must be reasonable and measurable.

Examples of wishy-washy goals:

I want to get out of debt by the end of the year (may not be reasonable).
I want to have an emergency fund (not measurable).

Examples of reasonable and measurable goals:

I want to pay an extra $100 per month, and stop creating new debt, to eliminate my debt in two years.
I will save $20 per week to build an emergency savings of $1,000.

This is Step One: determine your goal(s). Write them down and put them where you will see them every day.

In our next Quick Tips, we’ll discuss Step Two and the action steps you’ll take to have it all.

I Challenge You to Track Your Spending

Have you ever written down a budget to see where your money is going? Well, we did this earlier this month and everything looks fine, meaning that we make more than we spend.

That means we can pay our bills – great! That’s check one. Check two – are we saving enough? No, we’re not, but where do we get the money? We won’t find extra money to save until we find out exactly where our money is going.

If you want to do this process with me, follow these steps:

1. Write down a couple of short and long term goals. (Just so you’ll be inspired to do the work.)

Short term goals can be planning for a vacation, buying a car, paying down debt, saving for something that you want, and starting an emergency fund.

Long term goals can be saving to purchase a home, saving for your children’s education, retirement planning, and paying off debt/mortgage. What are yours? Imagine what you want or need and write it down now.

2. Track every penny you spend. That means finding a way to record your spending as it happens.

Don’t wait until the end of the month and use your bank statement or receipts. A single store can fall under many spending categories and receipts don’t always list items by name (or by names that you can decipher). Don’t think for a minute that your grocery store trip can be lumped under food. You may buy your pet food there, as well as cleaning supplies, shampoo, or even magazines.

I know this sounds time consuming, but it’s worth it. You can carry a pen and pad with you and write down everything by hand. Another way to track your money is by using a phone app. Choose the way that works best for your lifestyle.

3. Write your totals in a budget worksheet to see where you stand. Once you see a month’s worth of numbers, than you can begin to analyze what is going on. With this clear picture, you can make changes – lower bills to save money, get rid of unused services, check out the competition to switch etc.

Tell me what you have discovered with this exercise. Next issue, I will tell you what we have changed.

Download my budget worksheet here.

Jill interview in the New York Daily News

Back to school season and it’s time for the other big talk: money

BY Jean Chatzky
Monday, August 23, 2010, 4:00 AM
Original Article Link in the New York Daily news
PDF Version

Back to school season in my house, and likely in yours, means a long to-do list. Stock up on school supplies and clothes. Organize binders. Send everyone to bed a little bit earlier. I know: You’re busy.

But this year I want you to add one more thing to your list: I want you to talk to your kids about money. Many parents are intimidated, yet what you need to teach them is not something they’re likely to learn in school.

“Parents tend to feel that they’re not comfortable with the information, that they don’t have enough expertise or that they themselves have made mistakes,” said Laura Levine, executive director of the Jump$tart Coalition for Personal Financial Literacy in Washington. “But it’s important to understand that kids really do see them as a primary source of information about money.”

When it comes to teaching your kids about money — just like when you’re helping them study for a test — you can’t expect to know it all. I don’t, nor do I pretend to. When one of my kids asks me a question that I don’t have the answer to, we look it up together and discuss what we find. It’s so much better than putting the discussion off altogether because the earlier we start teaching our kids financial basics, the less likely they are to fall into traps.

To encourage people to talk, I’ve joined with American Express to create resources for the first National Money Night Talk, set for Sept. 16.

To take part, parents pledge to talk to their kids about saving, budgeting, credit cards and credit scores. Visit moneynighttalk.com for free tool kits I created to give you the talking points, questions, answers and exercises you and your kids can do together. There’s one for middle school-aged kids, another for high schoolers and another for college students.

Here are a few key concepts to keep in mind when you have your talk.

HOW MUCH TO SHARE

A reason many parents shy away from a big money discussion is that they don’t want to share their own financial information — salaries, debts — with their kids. That’s okay, you don’t have to, but you also don’t want to send the message that money shouldn’t be discussed, said Jill Russo Foster, author of “Cash, Credit and Your Finances: The Teen Years.”

“I’ve taught classes and asked how many kids know if their parents own or rent their home. If they don’t know, I send the question home and I’ve had parents who wouldn’t answer. I’m not asking you to tell them how much you make each week, but this is a basic question,” Foster said.

I like real-life examples, but it’s okay to pick ones that aren’t so personal. Kids want to know how much it will cost to live on their own. Pick ones you feel comfortable discussing: How much you spend on groceries each week, the phone bill, the cost of a MetroCard and the percentage of your salary you try to save.

THE GREAT RECESSION

Today’s teens know they’re experiencing tough times. Maybe a parent or a friend’s mom or dad lost their job, or there were foreclosures in the neighborhood. They may be wondering about the impact on you and your family but have been reluctant to ask.

This is a good way to work in lessons about living within your means, saving money and creating an emergency fund in case of a layoff, unexpected expense or emergency.

SET AN EXAMPLE

This year, try a different approach to your back-to-school spending: Tell your kids you’ll be spending a set amount of money. (Decide how much you can afford before the talk.)

Together, make a list of what you need to buy. Then pick a day to go shopping and let them budget their money.

If they pick out a pair of $100 sneakers, help them figure out what they still need to purchase — and whether they can afford the pricey kicks.

Your Money columnist Jean Chatzky is financial editor of NBC‘s “Today” show, a contributor to “The Oprah Winfrey Show” and the author of seven books, including, “Money 911: Your Most Pressing Money Questions Answered, Your Money Emergencies Solved.” Check out her blog and learn about her Debt Diet Online at jeanchatzky.com.

America Saves Week – Saving for Your Future

I always hear that there is never any money leftover to save. I used to think that way too until I implemented an automatic savings plan where I pay myself first. Each pay period, I have money automatically taken from my check and put into my savings. It’s as easy as that!

Setting up automated savings puts money into your savings first – either having your employer split your paycheck into two accounts or doing this through your bank. Once you set it, it’s done. No more saying “I don’t have money to save”.

Start with a small amount and increase it yearly or when you receive an increase in pay. $5.00 a week will get you $260; $10 a week will get you $520.

Once you get this set up, you might want to think about the different types of savings you will need in your life. Everyone needs an emergency savings for unexpected expenses. In addition, start think about your goals that need funds – auto, children’s education, security deposit for an apartment, down payment for a home, retirement, travel plans and more. Set up a savings account for your specific goal and set up an automated amount so that you can reach your goal in your time frame.

It’s never too late to start saving for what you want. You can achieve it if you want to.

Getting Ready For 2021, But Do These Things First

2020 has been a challenging year – job losses / furloughs, pay decreases, health challenges and more. This was the year that you needed your finances in order and an emergency savings to fall back on. Plan ahead so that you will be financially prepared in your time of need.

Before 2020 ends, you may want to consider these steps to help with your finances and do them in this calendar year:

If you pay estimated taxes, consider making your January payment before Dec 31.
If possible, you can prepay your January installment of your real estate taxes before Dec 31. This may be difficult to do if your taxes are escrowed in your mortgage payment. You will need to check with your town’s tax department for details in your city / town.
Fully fund (or as much as you can) your retirement accounts – IRA and Roth IRA’s (you can do this in 2021 for 2020 too).
Fully fund (or as much as you can) your HSA (you can do this in 2021 for 2020).

These steps may work to your advantage with your income tax. Always check with your tax preparer about your individual situation.

My Top 5 List

I want to share with you my top 5 list of what we have done with our finances over the years that have taken us from being in debt to having a safety net for our finances.

We automatically save from each and every paycheck. When we receive a deposit, there is an automatic transfer of funds from our checking to our savings. By doing this, we have built up an emergency savings account. Something we all need.
Taking our large annual bills and dividing them by 12. Then saving that amount monthly. That way when a large bill is due, we are able to pay it in full without any scrambling or stress. For example, our car insurance is about $900. annually. That means we save $75 monthly to be able to make the payment. All we must do is to plan for the increase in premium to make the payment in full each year.
Earning interest on our bank accounts (yes, even our checking account) and not paying any fees to have the bank accounts.
Maxing out our retirement contributions to our IRA’s accounts each year to have a nest egg for retirement. In addition, we contribute to our 401K / 403B retirement accounts. You can never have too much saved for retirement.
Contributing to a Health Savings Account (or a Flex Savings Account) to cover our medical costs that insurance does not cover.

I wrote this so that you can know what is possible. Start today and make changes so that you can achieve your goals. For us, this was not something that we did overnight, it took many years of making small changes to get to where we are now.

Bon Voyage to Your Debt – Part 5

Say Bon Voyage to Your Debt Part 5: Make a Custom Plan

Originally posted August 15, 2014 By Jill Russo Foster

With Step 5, we’re going to get into the hard stuff – the actual debt payoff. If you have kept up with the series of newsletters or the Facebook group, you have completed the following:

You have reflected on the actions, inaction, thought process, or events that got you into debt.
You have “faced the truth” by compiling a complete list of your debt.
You have reflected on ways that you can find more money in your budget or bring in more income.
You have started your emergency savings plan.

With these steps in place, it’s time to create your own custom action plan for paying off the debt.

To start, you need to do some brainstorming.

Sit down with paper and pen (or at your computer) and write down your answers to this question: “What can I do today to lower my debt?” Just write the first 20 ideas that come to mind – you can worry about whether they’re even possible later.

Your list might look like this:

“What can I do today to lower my debt?”

Consolidate my credit card debt into one monthly payment
Apply for a home equity line of credit for debt consolidation
Sell home and downsize
Live frugally and only buy essentials so that I can pay off the debt faster
Stop funding my / our retirement until the debt is paid off
Apply for zero percent balance transfer to pay off debt quicker

Now, put the list away and wait a few days. Stepping back from what might be a difficult choice will help you reevaluate your priorities.

After 2 or 3 days, come back to your list and choose one. There is no right or wrong answer. Remember, you are designing a plan that tailor-made for your individual goals and needs. You have to determine what is best for you and your situation.

Now, go through the process of exploring whether that choice will work for you. You may have to contact a third party like a bank, mortgage broker, real estate agent, etc. You may have to look for zero percent balance transfer offers. You may have to get the whole family on board to see if they can live on a smaller budget. If it all works out, then you can start your plan. If not, go back to your list, choose another option, and explore it thoroughly.

Because you didn’t accumulate your debt overnight, it won’t be going away overnight either. You will make your choice (you can try many choices on the list), and you may need to follow through on it for over a year or for several years.

This whole process is definitely worth your while, because you will gain control over your finances. You will stop working just to pay your creditors, and actually save money as you eliminate the finance charges you’ve been paying.

Yes, I know (and have been there) that these are hard choices to make. But if I can do it so can you.