Budgeting

How Much Is Too Much Money in Your Savings Account?

May 14, 2020 By Trey LaRocca Leave a Comment

We have hammered into your brain at this point that you need to be saving. It is far too important to overstate that you have to have some sort of rainy day fund to ensure that you can stay afloat in hard times. For those who develop the skill and discipline it takes to save much more than they will need for an emergency, the location of that money becomes the main point of progress. Once you begin to see your savings go from 3-4 months-worth of expenses to a beginner retirement fund, that money needs to start growing outside of a traditional savings account. Roth IRAs, 401(k)s, mutual funds, and index funds are all places that will see more gains than your bank will give you, and the sooner you start one, the better. So, how much is too much money in your savings account?

Quantity

“Too much savings” is definitely not a problem. The issue comes when you have so much in your regular bank account that you are leaving gains on the table that could be found elsewhere. The point at which this becomes a noteworthy issue is different for everyone. A good rule of thumb is that if you can survive six months on your savings account balance, you have enough. Three-to-four months will serve just as well as justification for putting some cash elsewhere; six months is where I would say things are bordering on excessive. Once you can do that, it is time to start getting some tax-free gains elsewhere. This will ensure that you keep a cushy level of liquidity, but still maximize your wealth accumulation. This is vital in ensuring that you have a comfy retirement.

Quality

The question now is, “where should I put my money now?” Well, here is something you should’ve already been doing: Contributing the maximum amount to a 401(k) or Roth IRA that your employer will match. If you haven’t been doing this, you have literally been foregoing free money. Not to fret, just start doing it now. Not only does your money get matched by your employer, but it also gets withheld tax-free. This lowers your taxable income for the year (yay, lower taxes!). These are 2 separate ways you are already gaining money before the actual retirement account even starts doing its thing; that thing, by the way, is growing. With few exceptions, retirement accounts like these bring great, reliable gains to your money over time. This makes sure that your retirement is as comfortable as possible. Other options for those who want more manual control of their money (after you have maxed out employer match) are index funds, mutual funds, and individual stocks. My recommendation on those is pretty much told in the order they are presented.

Use These 5 Steps to Make and Stick to a Budget

May 13, 2020 By Kathryn Vercillo Leave a Comment

Do you find it hard to make and stick to a budget? You aren’t alone. However, if you break it down into bite-sized chunks, then you’ll discover that it doesn’t have to be challenging at all.

I can almost hear your protests. I can hear them because I feel them stirring inside my own mind. The arguments are familiar to me because I have found it hard to make and stick to a budget in the past. For me, making the budget is usually easy; sticking to it is the hard part. However, as someone with inconsistent income, even making the budget can be hard.

Like I said, it doesn’t have to be. Here are five steps that can simplify for you how to make and stick to a budget. Step one, setting SMART Goals, is where you make the budget. The other four steps will help you stick to it.

1. Make Your Goals SMART

The first step in budgeting your money is figuring out why you want to do this in the first place. Then you can set goals that align with that vision.

Why Do You Want to Budget?

Some of the most common reasons that people want to budget include:

Desire to save money towards a specific goal, such as a family vacation
Desire to save money more generally for the future, to have a cushion
Awareness that spending has gotten out of control, wanting to rein that in
A budget can assist you in feeling like you have more control over your finances, so that they aren’t a mystery
You and your partner aren’t on the same page about finances but you want to be

Set SMART Goals

Once you know why you want to make and stick to a budget, then you can set very specific goals. Use the SMART method:

Be Specific

You can work on the “S” of smart goals at the same time that you’re working to determine exactly why you want to make and stick to a budget. Answer the “what and why” details. For example:

“I want to make a budget so that I can be free of debt. Why? Because I find debt to be incredibly stressful. If I am able to reduce my spending and use the extra money to reduce my debt, then I will feel freer.”

Alternatively: “I want to budget so that I can save $10000 for a family vacation in Europe in three years. I want our family to have this memorable experience together without the strain of going into debt for it.”

Get as specific as you can to help you really drill down to the meat of the goal.

Make Goals Measurable

Now it’s time to apply numbers to that goal. How much do you want to save? What is a realistic amount to budget for each necessary expense in your life?

For example, “My rent is $1800 so I need to budget that much for rent. I currently spend $1000 per month on food. However, I can budget $600 instead. I will set the other $400 into savings.”

Alternatively: “I want to go on vacation in three years, which is 36 months. If I want $10000 by then, I need to adjust my budget so that I can save $275 per month.”

Is Your Budget Achievable?

This is where you marry your goals and dreams with your realistic financial situation. In other words, this is where you make a budget. You list all of your expenses. Go through your financial history to get a realistic sense of what you spend each month, not just on set items (such as utilities and your phone bill) but also on miscellaneous (such as entertainment and clothing).

Analyze what you spend and what you earn. Look at your budget goals and see if you can make the numbers work out. For example, in the case of the three-years-away vacation described above, can you adjust your budget to save that $275 per month? Most likely, yet. If not, then you might need to tweak your goal. You could plan for a vacation that is four years away or you could reduce the amount you would like to have within three years.

Make sure that you make your budget work on paper. That’s the only way you have a chance of making it work inn real life.

Are Your Goals Relevant?

If your goal isn’t truly in line with your personal values then you’re not likely to make a budget and stick to it. Saving for a family vacation is relevant if you all enjoy traveling and you believe that such experiences are valuable individually and collectively. It’s worth it to you to stick to your budget because you believe in the larger goal it will allow you to accomplish.

If, on the other hand, you don’t actually enjoy traveling but you think you “should” because it’s “good for the kids” then you might self-sabotage your budget without intending too. Go back to the “why” that you looked at earlier and make sure that the answer aligns with all of your loftier ideals in life.

Place Time-Boundaries on Goals

As you set the specifics of your goal, you will want to limit it with time. The aforementioned three years of saving is a good example.

You can set time boundaries even if your budget goals seem looser. For example, “I want to create a budget that will allow me to save money so that I have a cushion for the future.” Make that more specific. How much do you want to have? By when do you want to have it? How can you break down that budget into annual and monthly goals?

For example, “I want to retire at 65 with $500,000 in my savings account. I am 35. That means I need to save $500,000 in 30 years, which is about $16,700 per year or $1388 per month.” This lets you know that you need to set a budget that will allow you to save $1388 within a one- month time frame.

2. Write Out Your Goal and Post It

Use the SMART method to create your budget. If you need additional help with the specifics of analyzing your finances in order to create this budget, here are some helpful links:

Once you have established your budget, write it out. Make it like a mission statement. Couch it in affirmative language. Then post it where you will see it regularly.

You might want to post it in several places. For example, a bullet list of the steps you plan to take makes a great phone screensaver. A paragraph about why you’re budgeting goes well on an index card that you use as a bookmark. Get creative. Where will you see the plan most frequently and how can it most motivate you to action?

3. Review Your Progress Regularly

The visible reminder from step two will help you stick to your budget. However, you should build in additional accountability. Therefore, you should review the goal regularly. Check your progress against the goal. Ask yourself if you need to make any adjustments. (You can always go back through the SMART steps if you do.)

I like to do a weekly quick check-in with my budget. Then I do a bigger review at the end of each month. This helps me stay on track throughout the month. It also helps me plan out the next month in the best way possible. I may discover that I can’t stick to my $600 food budget, so I will rework my budget accordingly in order to still meet my goals.

4. Reward Yourself for Success

Make small goals within the larger goal. Each time that you achieve one, reward yourself. You do not have to spend money to reward yourself. Keep a running list of things that give you great pleasure. When you meet a goal, choose at least one thing from your list and indulge.

This step is especially great for families or couples trying to stick to a budget together. Instead of nagging and annoying each other into compliance with the financial restrictions of a budget, you can use teamwork and encouragement to achieve your shared goals. Celebrating together will build momentum and keep you working towards the goals together.

5. Get Back on the Budget Horse When You Fall Off

Are you the type of person who plans to diet, then the second that you “cheat” you just go into a total binge? Many people do this when it comes to budgeting. You work hard to set the budget goals. You restrict your spending to see the budget. Then something happens and you slip. You over-spend. It feels like you’ll never get back on track, so you stop sticking to the budget altogether. This doesn’t make sense.

With a diet, let’s say that you ate a piece of cake which went over your caloric budget. Does it make sense to then just add a whole bunch more calories on? Will it feel good to your body to quit the diet altogether and eat all of the foods that are worst for you? No. You ate the cake. Enjoy it. Then move on. Get back to the diet. Eat the way you intended starting with the very next meal. Likewise, overspending once doesn’t mean you should keep spending. Go back to the budget. Start with it right away, as soon as you realize that you slipped up. Don’t berate yourself, shame yourself, guilt yourself, or avoid the truth. It’s all okay. Get back up on that budget horse and ride it to your goal.

What is the biggest challenge that you have had when it comes to learning how to make and stick to a budget?

Costco Mother’s Day Deals

May 7, 2020 By Trey LaRocca Leave a Comment

When it comes to getting great gifts, Costco never really disappoints. With tremendous variety and a reputation for value, you can’t go wrong. This makes it all the more exciting when they go above and beyond to offer extra sales around the holidays. These opportunities are addicting to gift-givers, and it is no wonder why. With Mother’s Day around the corner, it is time to gear up and go to your nearest warehouse (provided they are open). Before you head out, it is wise to brush up on what deals you can expect. So, without further adieu, here is the info we have on Costco Mother’s Day Deals.

What is on sale?

While most of the particulars are on Costco’s website, we can briefly explain the main categories of sales they will offer. Keep in mind, these are only available while supplies last. This means that once current inventory for sale items is depleted, there will be no restocking at current sale prices.

Beauty – Get your hands on some great grooming and cosmetic products for mom this mother’s day. these can include traditional toiletries, all the way up to more expensive skin care and makeup products. These are in high-demand, and the sales may run out quickly.
Clothing – Pretty self explanatory. If you want to grab some extra closet assets for your mother, Costco has got the goods. Demand is still high here, but there is so much inventory that you can afford to take your time.
Home Goods – You’ve got your blenders, your mixers, your fryers; if your mom is a whiz in the kitchen, check out the home goods sales. These are some of the most aggressively marked-down products, and will make a terrific gift. This one has a pretty massive variety, ranging from throw pillows to the aforementioned kitchen appliances. Anything that makes your home more livable is marked down under this category.
Sweet Treats – Candy. Everybody loves candy.
Jewelry – If you’re looking to step up your gift game, these ones are for you. With a pretty wide array of price points, Costco’s jewelry deals are a great way to get something truly special for mom this year.
Handbags – Not sure why these are in their own category, but they are on sale nonetheless. Pretty similar to the jewelry category, getting some eye-catching accessories is never a bad plan for a holiday.
Floral – If you’re a serious gift-giver, you know that no gift is complete without some flowers. Now, Costco’s flower stock is small, so sales will be over pretty much as soon as they begin. If your local spot has some, though, grab a cheap arrangement to give with your gift, and your mother will not be disappointed.
Backyard and Garden – If your mom prefers to plant her own flowers, more power to her. From seeds to decorations, everything you need for your garden is on sale at Costco Warehouses around the country.
Electronics – No better way to blow someone’s mind than some new tech. Plus, if your mom is a little older, odds are she needs an upgrade. Make her day, maybe even her year, by getting her some new toys that will probably make her life a whole lot easier.

For more info, or to find exact prices, check out Costco’s website here.

Happy Mother’s Day!

What Is the Average Retirement Savings for Those Over 60?

May 5, 2020 By Trey LaRocca Leave a Comment

Saving for retirement is one of the greatest gifts you can give to yourself, but sometime the number in the account can seem discouraging. It is important to keep expectations realistic, and to do so requires some points of reference. While it is not always wise or healthy to compare, it is good to at least know where people your age are. Now, there are many different ways to measure retirement savings, and many different data sets to pull from. Take our numbers with a grain of salt due to these possible variances. We will be looking at the Center for Retirement Research numbers regarding the median retirement balance in different age groups. So, here is the average retirement savings for those over 60.

The Numbers

In people aged 55-64, the Center for Retirement Research found that the median retirement account balance is $104,000. Now, there are a few pieces of context to work out here. First, these numbers are from 2017. Obviously there will be some variance, especially after the recent coronavirus crisis causing many to tap into savings they probably meant to leave untouched. Additionally, this does not mean $104k is optimal. Ideally you will have much more than this, as the idea is it is the only money you will have or need in retirement. This brings us to the last point, that these numbers aren’t indicative of the entirety of these subject’s retirement savings. This only counts 401(k)/IRA balance, so it doesn’t include any assets outside of these. So, if you hold property, cash savings, personal brokerage accounts, or anything else that isn’t included here, you want to factor that in.

What If I’m Not Over 60?

The numbers for people who are a little younger break down as follows:

Ages 35-44 have an average account balance of $37,000
Ages 45-54 have an average account balance of $80,000

What do these numbers mean? Firstly, it shows that retirement savings clearly see an uptick later in life. This is for a few reasons, one of which being awareness. You can get ahead of the pack just by thinking about it earlier and life and setting aside as much as you possibly can. The other, though, is that income tends to grow as you age, and that can’t always be helped. Again, these are great numbers to use when comparing just your IRA/401(k) balance. This should not be how you decide what your total retirement savings should look, as it isn’t a wholesome look. As long as you take these in the right context, they can help you stay educated and motivated.

How Should I Approach a No-Spend Month Challenge?

April 29, 2020 By Kathryn Vercillo 1 Comment

It has been a very long time since I took on a personal no-spend challenge. I’ve done well with budgeting and saving in recent years. Therefore, challenges like that have fallen by the wayside. However, due to a variety of financial challenges in the past year, including challenges associated with COVID-19, I am in the position where I would like to save as much money as possible. Therefore, I plan to make next month a no-spend month.

What is a No-Spend Month?

A no-spend month is one of the toughest money challenges. In fact, when you look at personal finance challenges, you’ll often see that they recommend a no-spend week or even just a single no-spend day. Can you go a single day without spending money? Usually, yes. But a whole month?

The idea behind a no-spend challenge is, obviously, not to spend any money. Of course, the reality of my life is that I can’t spend zero dollars in a whole month. There are certain bills that I absolutely have to pay. For example, I can’t just fail to pay my rent this month. So no-spend in this case really means “no unnecessary spending.”

What Spending is Truly Necessary?

In order to actually maximizing my savings from this personal finance challenge, it’s important for me to get really clear on what I mean by “unnecessary spending.” After all, it’s easy to justify expenses as “necessary” when you really want to purchase something. That can quickly defeat the purpose of the challenge.

Here is how I have chosen to define what spending is necessary during this challenge:

Spending is necessary this month only if failure to spend would incur objectively negative repercussions.

For example, if I don’t pay my rent, then I upset my landlord and incur a late fee, which is a negative repercussion by objective standards. If I had no food in my house at all and didn’t spend money on groceries then there would be health repercussions. However, since I have food in my house, I can use what I already have. Therefore, spending on extra food is unnecessary.

Where to Make Spending Cuts This Month

It will be necessary to spend money this month on rent, utilities, and credit card minimum payments. Next I need to go through the following items and see if I have enough of them to last all month:

Food for myself
Food for the dogs
Household supplies (such as trash bags)
Personal care supplies (such as shampoo)

Those items are necessary. However, if I have enough to last the month, then I want to use what I already have instead of purchasing anything new. If that means eating rice and things-previously-frozen for a whole month, so be it.

I’m pretty sure that I actually have enough of all of those things to last the month, except the dog food. The dog food is already slated for automated delivery.

What About Monthly Subscriptions?

Speaking of automated delivery, there are a lot of things I’m automatically signed up for each month. I use delivery systems to get weekly produce deliveries, bi-weekly complete meals, the dog’s food and meds, my own meds, my contacts and shaving supplies and so many other things. I can go through and pause some of those subscriptions for the month.

For example, I have plenty of razors so I can pause the shaving goods delivery. I do not have enough contacts to last the month, though, so I have to decide – does a no-spend month mean that I just wear glasses all month long? In this case, yes. I want to save as much money as possible. I return to my rule: Spending is necessary this month only if failure to spend would incur objectively negative repercussions. Wearing glasses instead of contacts for one month isn’t objectively negative. Therefore, I’ll pause that subscription.

Dealing with Shared Subscriptions

What about the other things that I subscribe to, though? For example, I have Netflix, Hulu, and Philo subscriptions for watching television. Should I cancel those? Is it worth the hassles of canceling them for only one month and then resuming them? After all, they aren’t that pricey. And yet, taking a month off of them would not objectively incur negative repercussions. If I’m going to be ruthless about saving absolutely as much as possible, then I need to cut those out.

There might be a loophole here, though. I share some of my subscriptions with my family members. For example, I pay for Netflix and Hulu accounts that allow multiple users. My parents and siblings utilize my account. I have never asked them to chip in because I would pay for those things anyway. But perhaps now is the time to ask them if they want to pay for a month of service or if I should cancel it completely during my no-spend month. If they chip in, I don’t have to spend anything and can still enjoy the entertainment. If they don’t think it’s worth it, then I’ll go ahead and cut it off.

The Purpose and Benefits of a No Spend Month Challenge

There are multiple benefits to attempting a no-spend challenge like this one. First and foremost, it cuts out all unnecessary spending, which means saving a lot of money. That’s the key reason that I’m doing this. I want my finances back on track and eliminating all possible spending is critical to that.

However, this is also a great chance to reset financial priorities. It’s so easy to get in the habit of routine spending. I eat out a lot through Postmates. I flip frequently between the three different streaming television apps that I use. These things are nice, and on their own they are not that expensive, but those little costs add up. By cutting everything out for a month, I can get a better sense of what I truly want to spend money on each month. Perhaps I’ll discover that I don’t want to resume any streaming television. Or maybe I’ll pick just one of the three to resume after the no-spend month is up.

Finally, this type of money challenge helps me really tune in to my impulse spending. It’s so easy to stop into a coffee shop and pick something up (even in these socially distanced days!) That’s why even a single no-spend day or week can be beneficial; it shows you clearly where you’re just throwing money away. A full month of this attention to spending always helps me get back on track. I’ll keep you posted on how it goes.

Have you ever done a no-spend money challenge? For how long? What were the best and worst parts of it?

How to Price Match at Best Buy During the Holidays

April 21, 2020 By Trey LaRocca Leave a Comment

When it comes time to buy a gift, spend some extra cash, or use a gift card, getting the best deal is imperative. Nobody wants to overspend, and making sure you get the best value is almost part of the holiday fun. Deal hunters everywhere are always looking for ways to save money on the newest tech or land an awesome price on something they need. Lucky for them, Best Buy has made it easier than ever to “shop around” by price matching local retailers, including their online prices. To figure out how this works, here are some of the guidelines on how to price match at Best Buy during the holidays.

What is eligible?

As a rule of thumb, services or subscriptions (like cell contracts) are not eligible for price matching. That being said, most physical and digital products are matchable. There are certain exclusions, but those leave a pretty wide swath of eligible items. In fact, Best Buy will even price match Amazon products that are sold by an actual retailer. Although, some exceptions exist when it comes to matching Amazon prices on store brands like Insignia. They will price match almost any large retailer, as well as smaller local retailers as long as the product is readily available. If the seller you show them is out of stock, it is not eligible for price matching. Despite the few restrictions, Best Buy has a very generous policy on making sure they will not be beat on price. They will even match warehouse club pricing at places like Costco and Sam’s Club. In fact, they will honor prices that are below the cost they paid for the product!

What if they change their price?

In yet another impressive policy move by Best Buy, they will honor any price reductions that take place during your return/exchange period. This means that if your product is still eligible for return, and they do a promotion dropping it’s price by $30, you can go in and have them give you that same discount. They will credit you the difference as long as you go in and request it. Some may allow this over the phone or online, but it’s a much safer bet to go in and try face-to-face. This is a pretty unique policy, and we are thankful for it.

How do I do it?

The process is simple. When you are at the store, find the product you want and grab a Best Buy representative. Simply show them proof of the competitor’s price, and they will let you know if you can price match it. You can also bring it up at the cashier, but this will slow things down. It is more considerate to take care of it before people are stuck in line behind you. The ad or web listing has to be current and in-stock; Best Buy does reserve the right to contact the competitor to verify price and current availability. This may hinder your ability to price match insane blowout deals that sell out quickly, so be careful.