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How Are Social Security Benefits Calculated?

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Social Security Benefits

You’re going to retire in the relatively near future. You intend to get some or all of your retirement income through social security benefits. How will that work? Many people aren’t quite sure how the Social Security Administration calculates their benefits. If you don’t understand that, then you might not know how much post-retirement income you can expect. And without that information, it’s very hard to plan for the future.

How Social Security Benefits Are Calculated

The Social Security Administration explains that they calculate social security benefits by taking the following into consideration:

  • The amount of money that you have earned in your lifetime from employment.
  • They adjust this amount to consider how average wages of changed over the years.
  • They base the adjustment on the 35 years you earned the most money during your lifetime.

Then it says, “we apply a formula to these earnings and arrive at your basic benefit” amount.

While the words sound straightforward, this is all a little bit confusing. After all, you probably don’t know how to adjust your wages for changes in wage rates across thirty-five years of employment. Moreover, this tells us nothing about the “formula” they apply.

Digging Deeper Into These Calculations

In order to better understand, we need to dig deeper. The Social Security Administration publishes an Annual Statistical Supplement that includes an appendix that provides us with more information about how social security benefits are calculated. The 2019 version explains that a basic calculation:

  • Assumes that you didn’t take any disability time during your working years. Further assumes that you didn’t work after becoming eligible for retirement.
  • They use “wage indexing” to calculate your lifetime earnings. This is how they figure out what you earned, adapting decades-old wages to modern standards of living. They base the adjusted amount on the year that you turn 60. For example, as of 2017, someone who earned $20000 in 1990 would have that count as over $47,000 towards their lifetime earnings based on the “wage indexing” math. You can see further examples of Wage Indexing math on this page.
  • Now about that “formula” – this is a weight of giving weight to “provide a higher replacement of earnings for lower-wage workers” in retirement. The SSA says that “the formula for persons aged 62 in 2019 is 90 percent of the first $926 of AIME; plus 32 percent of the next $4,657; plus 15 percent of the AIME over $5,583.”

So, as we dig deeper, we see that social security benefits are calculated based on what you earned (at today’s current value for those earnings) for the 35 highest-paid years of your career. This number is then adjusted with that “formula.”

What Can Change These Basic Social Security Benefits?

However, additional things can increase or decrease your basic benefits. Varied factors include:

  • Early retirement; if you retire at age 62, you can still get benefits but they’ll be lower than if you wait to retire until age 65
  • Late retirement; if you retire later than 65, you’ll typically increase the amount of benefits you can receive
  • Continuing to earn money after age 61 but still retiring at 65
  • Long periods of not working during your working years
  • Cost-of-living adjustments for the years after you’ve turned 65
  • Military service, pensions, railroad work and other factors that impact the Social Security tax you’ve paid

This is complicated stuff. No wonder many people aren’t sure how social security benefits are calculated! There is a worksheet here that can help you calculate all of this.

Get an Estimate of Your Social Security Benefits

The link above will take you to a worksheet that you can print out and fill in yourself. It should provide you with an accurate representation of what you can expect to earn in social security benefits. However, if that’s too much work for you at the moment, you might instead wish to use the Social Security Administration’s Retirement Estimator.

This is not going to give you the exact number. It fails to take into consideration many of the more complex details about how social security benefits are calculated. That said, it can give you a good starting point to guess what you are likely to earn in social security income. To keep things even simpler, although perhaps not quite as good of an estimate, the SSA also offers a Quick Calculator.

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What Are the Common Traits of Millionaires?

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Common Traits of Millionaires

Getting to a net worth of one million dollars is a goal for a lot of people. Millionaire status is a hot topic on most finance websites, as it comes with the idea of long-term financial stability. Even those who aren’t obsessed with money have good reason to work toward it, as it means security for themselves and their family. While it seems that this goal is unattainable, there are common traits of millionaires that can help you get there. By implementing these in your life, it could make the road a little less scary for you.

Long-term Investing

There are a lot of “get rich quick” investment strategies out there. It seems that anybody who watches finance videos on YouTube is going to be targeted by ads covering things like drop-shipping and day trading. While there are a few people who famously made millions doing this, it isn’t the common factor among wealthy people. Their wealth comes from more conservative, reliable investment strategies. Accounts like IRAs, index funds, mutual funds, and others are great ways to create reliable growth over time. They are low risk, and therefore seem a lot less glamorous than their short-term counterparts. The issue with the “fast” ways of doing things is that most people lose money on them. Becoming a millionaire usually takes time, so don’t let yourself get distracted by the rush.

Budgeting and Financial Planning

To the majority of millionaires, knowing where your money comes from and where it goes to is of vital importance. Budgeting, whether you do so strictly or not, is almost a requirement to ensure you end up meeting your goal. You need to address how much money you are making, how much is going to taxes, and how much you actually need to spend. This will help you address issues of overspending, which is the trap most people fall into. Having a budget and a plan to increase your income is a great way to keep updated on how close you are to millionaire status.

Work With a Financial Advisor

The previous tip is so important, we even recommend that you get professional help if you don’t have much experience with it. Wealth management professionals, CPA’s, and other finance experts can all feed you valuable information that will carry you closer to financial freedom. Use these resources to build your financial plan, and get feedback on your budget.

Invest in Yourself

While it doesn’t look the same for everyone, self-investment is a major through-line among most millionaires. Whether it is spending on education, investing time to learn a skill, or getting quality tools and equipment, these investments can rapidly shift you in the right direction. High-level degrees can make you great money as a doctor, lawyer, or engineer. Time spent on a trade can make you a desirable mechanic, artist, or assist in many other occupations. For most of these jobs, reliable transportation, work equipment, and housing are paramount to maintaining your success. So, don’t be hesitant to invest in yourself, so long as you can afford it.

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If you enjoy reading our blog posts and would like to try your hand at blogging, we have good news for you; you can do exactly that on Saving Advice. Just click here to get started. If you want to be able to customize your blog on your own domain and need hosting service, we recommend trying BlueHost. They offer powerful hosting services for $3.95/month!

How to Make $50 a Day

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How to Make $50 a Day

Learning how to make $50 a day can significantly improve your finances. You can use that extra cash to pay down debt. Alternatively, you can put it into savings. There are many different ways to earn this extra cash through hustling, passive income, and making money online. Here’s a roundup of suggestions to get you started.

Make $50 a Day with Items You Have

There are things that you already own that can help you easily begin to earn extra money. Let’s start there:

Rent Out a Room with AirBnB

If you have a spare room in your home that you can rent out then this is one of the quickest ways to make $50 a day. After all, that’s as cheap or cheaper than most hotel rooms. Therefore, people are often willing to pay that rate. Of course, you should take into consideration that you’ll spend a little more doing extra laundry and cleaning, but overall this is one of the most consistent ways to earn that extra cash.

Rent Out Your Car

If you aren’t using your car every day then why just have it sit there? Instead, figure out how to make $50 a day by renting it out to others who need to use it temporarily. There are sites such as Getaround that make it easy for you to navigate setting this up.

Rent Out Garage / Storage Space

If you have extra space for storage then you can rent that out to someone who needs it. Of course, whether or not you can make $50 per day doing this really depends on your area. Right now in San Francisco there’s a huge exodus of people leaving the city, at least temporarily, due to COVID-19. As a result, storage rental prices have drastically risen. People need that storage space so they’re willing to pay high prices.

That said, you can also get creative to make more money from your garage. For example, could you rent it out a few nights a week to different bands that need rehearsal space? What about renting it to an artist who needs a studio? Or, during these times when people are working from home, you might even be able to rent it out as a “man cave” / “she shed” to people who are happy to pay $50 per day to escape from home for a little while.

Rent Out a Parking Space

Do you have a parking space in your building that you don’t use? Or do you own a home with its own garage? If so, and if you live in an area where parking is at a premium, then you might be able to rent out your parking spot. Here in San Francisco, it’s not impossible for people to make $50 a day renting out their parking spot to travelers who are staying in certain neighborhoods.

Sell Your Stuff

Declutter your home and sell everything that you don’t need. Become an eBay seller. Try Poshmark. Sell your books online. Sell your old computers, phones, and gadgets. Although this isn’t sustainable forever, since of course your amount of stuff is finite, it’s a great way to make $50 / day for a short period of time to boost your savings or pay down debt. And, if you discover that you really like selling stuff, you might be able to parlay it into a side job doing the same work for other people at a commission.

How to Make $50 a Day Online

It’s nice to be able to make use of your possessions to earn extra money. However, honestly, when most people think about how to make $50 a day, they’re thinking about what they can do online in their spare time to earn that extra cash. There are many great options:

Freelance Writing / Design

Notably, this isa real full-time professional job so it’s not easy to break into if you’re new. That said, if you already have skills that translate well then you can begin finding work fairly quickly. For example, if you have already done content writing within the context of your work history, then you can brush up your resume to reflect that and start looking for freelance writing jobs. If you have a graphic design background, there’s work for you as well.

Virtual Assistant

Anyone who has basic administrative experience can parlay that a job working as a virtual personal assistance for someone who needs help across all kinds of different fields. And even without that kind of experience, there might be jobs out there for you. If, in your spare time, you’re happy to help someone schedule their appointments, book travel plans, and organize their calendar then you might do well in this kind of work.

Rideshare / Delivery Driver

Of course, this is a hybrid offline/online job as it requires that you leave the home but also that you’re connected to the Internet constantly. In any case, this kind of app-based gig work using your car is one of the most popular ways that people turn to today when looking for how to make $50 a day.

In the same vein, you can sign up with a site like Instacart to do shopping for others.

Get Paid to Take Surveys

The truth is that you will have to spend quite a few hours of the day doing this if you want to make $50. That said, it’s not impossible. And it will put some extra cash in your pocket. Learn more about getting paid for your opinion here.

Offline Ways to Make $50 a Day

If you’re already online regularly for your day job then you might want to know how to make $50 a day offline. After all, you can only stare at a screen for so many hours of the day. Luckily, there are a lot of fun gigs that will allow you to earn some extra cash:

Dog Walking / Pet Sitting

If you’re an animal lover then this can be one of the most pleasurable ways to make that extra cash. Whether you join a service like Rover, set up an account on a site like Care.com, or simply head to the dog park and use word of mouth, you should quickly find it easy to get gigs. You can walk one or more dogs at a time. You can petsit in your home or in someone else’s.

House Sitting

This is often a spinoff of petsitting because so many of the people who want you to stay in their home expect you to care for their pets. However, that’s not always the case. Even if you don’t want to watch pets, you might be able to get some good house sitting gigs. Some people just want a person who will water the plants, collect the mail, and accept deliveries while they are away.

Babysitting/ Childcare / Mother’s Helper

If you prefer children to pets then perhaps you’ll want to get a gig taking care of them. This can be a delightful way to spend a few hours, easily earning $50 or more per day.

Tutoring

During the pandemic, children have started doing a lot of their learning at home. Parents don’t always have the time, skills, energy, or willingness to devote to educating their children. Therefore, there’s a growing interest in home-based tutors. (Of course, this can also be an online job or a hybrid of the two.)

Decluttering / Organizing

Do you excel at and enjoy organizing closets, files, and other areas that many people keep cluttered? If so, people need your skills. Start by offering to declutter for friends for a small fee and take it from there.

Tailoring / Upholstery / Domestic Skills

Do you know how to sew? What about reupholstering old furniture to make it look new? If you have domestic skills like these then you can market those. This is a great way to start making extra cash, perhaps doing something that you really enjoy.

Lawn Care

Mow lawns. Rake leaves. If you can do a bit of gardening and landscaping then you can earn even more money on the side.

Almost Any Part-Time Job

Remember when you were a teenager and you were willing to accept almost any job just to start earning some money? If you’re looking for how to make $50 a day then go back to that mentality. Get a job at a coffee shop, a fast food restaurant, cleaning offices. Work the minimum number of hours required to earn that small amount of money. Since it’s your second job and not your career, you might even find that it’s kind of relaxing this time around.

More Ways to Make That Extra Cash

If you’re still asking how to make $50 a day in other ways, here are some miscellaneous extra ideas:

  • Create a course and sell it through a channel such as Udemy.
  • Write and sell one or more ebooks.
  • Make and sell your own food.
  • Make and sell your own jewelry, stationery, art, etc. using a site like Etsy.
  • Start a blog / YouTube channel and make ad income.
  • Take the time to get good at investing your money and earning that passive income.
  • Taking the long view, purchase a second home as a real estate investment.
  • Advertise on your car.
  • Become a paid friend to a tourist, elderly person, or other in need.

What is your favorite way to drum up $50 a day quickly?

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If you enjoy reading our blog posts and would like to try your hand at blogging, we have good news for you; you can do exactly that on Saving Advice. Just click here to get started. If you want to be able to customize your blog on your own domain and need hosting service, we recommend trying BlueHost. They offer powerful hosting services for $3.95/month!

 

Advice on Saving Money in College

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You are likely already worried about student debt in college, but your personal finances are also something you should be thinking about. Even though you may not have a job or only work part-time, the money you have now is valuable and worth saving. Putting money away now while you’re young can help you develop the skills you need to be financially successful later in adulthood. The habits you’re forming now are going to stick and be harder to shake as you get older. That means being irresponsible with money because you’re only a student will cause you to draw similar conclusions as an adult with a career; you may waste any funds leftover from your paycheck because it’s ‘only a little bit’ or ‘I don’t earn enough to save.’ Avoid falling into the trap and start getting money smart in college with these tips.

Study Faster

What does studying have to do with money? More than you may think. Consider those long hours in the library; when your attention starts to drift and energy wanes, you likely get up and head to the coffee shop or hit the vending machine. Maybe you see your friends and decide to go out to eat. You don’t have to spend money to go out, but you’re more likely to do so when you’re staying away from home for long stretches of time. When you throw in a boring textbook or homework you’d rather not be doing, you’re more likely to look for distractions elsewhere. Here are a few ways you can save time studying:

  • Read chapter summaries first to take priority notes.
  • Avoid cramming right before tests or exams.
  • Break up studying into 30-minute chunks rather than multi-hour sessions.
  • Use a video to text service to translate long lectures into notes you can highlight and review.
  • Avoid studying in groups more than you study alone; you’re more likely to get distracted and start rehashing the same material.
  • Get a tutor, especially in weak subjects. They can help you with your homework and teach you ideas more quickly than you’d learn on your own.

Stop Rationalizing Your Overspending

You’re always going to be able to find an excuse if you don’t want to stop spending money. Overspending can become a bad habit just like anything else, and our brains don’t like acknowledging bad habits. Instead, it finds ways to justify them. The next time you feel a pang of guilt or hesitate to make a purchase, accept it. Being a good saver requires honesty. You have to be open about what you need, what you don’t and what would be more valuable left on a shelf.

Start Cooking and Making Your Own Coffee

Turn food out into a treat rather than the norm. Food delivery apps make it even easier for people to become over-reliant on restaurants. Not only do you waste more money, but you also wind up missing out on learning how to cook like an adult. Cereal and ramen will only get you so far. Coffee is another major money sink that can drain you of hundreds of dollars every year. One $4 cup of coffee every day is $28 a week, which equates to $112 each month. Start meal planning, and learn how to make more of your favorite dishes and drinks at home. You’ll save more money and likely eat better, too.

Immediate Steps to Take if You Suspect Fraudulent Charges on Your Credit Card

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fraudulent charges on a credit card

These days there are so many different ways to monitor for fraudulent charges on a credit card. You should be in a position to notice such charges almost immediately. As soon as you do, you should take action. The faster you address the issue, the better chance you’ll have of not owing any money or becoming a worse victim of identity theft.

Contact the Credit Card Company

The very first thing that you should do is contact the credit card company. Ask to speak to a representative in the fraud department. Let them know that you see fraudulent charges on the credit card. They’ll ask you for some basic information to confirm that you’re the account holder. Then they will take action to help you.

You Are Protected

There are two key ways that you’re typically protected from having to pay a lot of money for fraudulent charges on a credit card:

  1. Most credit cards offer zero liability. In other words, they will reverse those charges for you. Sometimes they do so immediately. Other times they have to investigate.
  2. You also have federal protection. If you report a missing or stolen credit card before someone has used it then you don’t ever owe anything. If it has been used, you can only be charged up to $50 for fraudulent charges on a credit card.

Note that the rules are slightly different for debit cards. If unauthorized charges are made on your debit card, then you may be held liable for all, some, or none of those charges.

Ask the Credit Company What Steps They’ll Take

The credit card company may do any and/or all of the following things:

  • Immediately reverse the charges so that you don’t owe the money.
  • Contact the vendor and do an investigation then reverse the charges.
  • Ask you to contact the merchant and work it out with them first. Then to call them back if that isn’t effective.
  • Put a freeze on your credit card account at your request. This pauses the account while you take time to investigate the issue.
  • Cancel the credit card number. Then they issue you a new card. This prevents you from further fraudulent charges on a credit card.

You might also want to follow up with the credit card company in writing. The FTC has a template for a sample letter that you can use to dispute all types of billing errors. They note the following important tips:

  • Send the letter within sixty days of the phone conversation reporting the fraud, the sooner the better.
  • Make sure to send it to the right address, which is usually not the same as the payment address for the credit card.
  • Include copies of all pertinent information and supporting documents.
  • Send it with a return receipt request so that you can be certain that it was received.

The FTC also offers additional information about disputing credit card charges.

Review Your Credit Cards and Credit Report

Once you have straightened out fraudulent charges with the credit card company, you need to make sure that you don’t have any other problems with your accounts.

First, check all of your credit cards for unauthorized transactions. If you see any, go through the same process to contact those companies.

Next, order your free credit report. Make sure that everything looks as it should. In particular, check to make sure that no new accounts have been opened in your name without your authorization.

The other key action to take at this time is to change all of your account passwords for online banking accounts.

Report the Fraud to the Credit Bureau

Once you know the extent of the fraud, it’s time to contact one of the three major credit bureaus: Experian, Equifax, or TransUnion. Let them know that you have been a victim of credit card fraud. Ask for them to put a fraud alert on your account. Alternatively, they can also freeze your credit, which might be the better option if you have been the victim of extensive fraud as opposed to fraudulent charges on one credit card only.

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If you enjoy reading our blog posts and would like to try your hand at blogging, we have good news for you; you can do exactly that on Saving Advice. Just click here to get started. If you want to be able to customize your blog on your own domain and need hosting service, we recommend trying BlueHost. They offer powerful hosting services for $3.95/month!

10 Ways to Renegotiate for a Rent Decrease

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Renegotiate Rent Decrease

I have lived in San Francisco for well over a decade. During that time, rents soared year upon year. Then COVID-19 hit. While it’s terrible to be in this pandemic, one silver lining is that rent prices have gone down significantly. I’ve never had to renegotiate a rent decrease before. It simply wasn’t an option here in the past. Now, however, I’m studying all that there is to know about the topic. Here are ten ways to renegotiate a rent decrease:

1. First, Simply Ask

If you are on good terms with your landlord then you might just come right out and ask for a rent reduction. This is particularly common during the coronavirus pandemic, when landlords certainly understand that people are facing economic hardship. This tends to work best in small buildings where you deal directly with the landlord rather than large complexes where you work with a property manager.

2. Write a Letter Explaining Your Case

Unfortunately, many people simply aren’t in the position to ask their landlord face to face to renegotiate a rent decrease. You may feel anxiety, not have a strong relationship with your landlord, or otherwise want to go through a more formal process. In this case, it’s smart to write a letter to your landlord. Here’s a sample template to get you started.

Generally speaking, you’ll want to include the following things in your letter:

  • A dated statement that you are writing to renegotiate a rent decrease.
  • Information about what the current market rate is for comparable housing.
  • Comparison of what you pay compared to that market rate.
  • Clear statement of the amount you wish to pay.
  • Examples of the ways you’ve been a good tenant (on-time payments, etc.)

During the current climate, you might also point out that approximately one-third of renters aren’t paying their rent during COVID-19. Emphasize that you have options such as eviction moratoriums but that you would rather work directly with the landlord to lower the price to something more manageable.

3. Ask for a Property Assessment

I’ve lived in my apartment for over a decade. The landlord has done little to nothing in that time to upgrade the apartment. Therefore, what was a good deal on my rent ten years ago isn’t such a good deal today. After all, everything from the appliances to the paint is ten years older. If someone else was going to move in, the landlord would have to invest money to bring the place up to date.

Therefore, one option is to request a property assessment. You might have an appraiser come in on your own or you might work with your landlord on this. The point is to highlight to the landlord all of the things that the apartment needs. Then offer to renegotiate a rent decrease instead of having the landlord make all of those improvements. Doing this allows the landlord to see that it’s to their benefit to reduce your rent.

4. Barter Services for Lower Rent

Are there things that you could do around the apartment building to make life easier, and perhaps cheaper, for your landlord? For example, we have some common areas in my building that need regular cleaning. Perhaps I could get some money taken off of my rent in exchange for maintaining those areas for the landlord. Property maintenance, painting, lawn care, marketing, showing other units to prospective renters, and other similar tasks may be worth it to your landlord.

5. Offer to Give Up Some Things

Maybe your apartment comes with a parking space but you don’t need or use it. Ask the landlord if you could give up the parking space (allowing them to rent it to someone else) for a rent reduction.

6. Offer Advance Payment

If you have some savings then you might be in a position to pay your rent in advance. Some landlords will accept a significantly reduced monthly rate if you pay three months, six months, or even twelve months in advance. While most of us aren’t currently in that position, it’s a great option to consider if you are.

7. Sign a New Lease

If you’re on a lease that’s coming up for renewal then that’s the perfect time to renegotiate a rent decrease. When your landlord sends the new lease, let them know that you won’t be signing it before you discuss the rent. This is when you can go step-by-step over the details.

Even if your landlord decides not to lower your rent, they might be willing to negotiate other terms of the lease to your benefit. For example, a landlord that previously didn’t allow pets might be flexible on that. Or they might agree to pay utilities if you keep your rent rate the same. Getting more for the same price is effectively a rent reduction.

Another thing to consider is extending your lease. If you typically sign a one-year lease, ask the landlord if they would consider lower rent if you commit to a two-year lease instead. Landlords like good tenants to stay put so this can be good incentive for them.

8. Suggest a Temporary Rent Reduction

Realtor.com explains that some landlords are willing to offer a temporary rent reduction for short periods of time. For example, if you’re facing financial hardship, have been a good tenant, and happen to be in the off-season for the landlord’s properties then there’s a good chance that you could renegotiate a rent decrease that lasts 3-6 months. It’s better than nothing and can help you save some money.

9. Ask What Would Help Lower Your Rent

Perhaps you’re not getting anywhere with your landlord. Sometimes it can help to put the ball in their court. Ask them what you can do to renegotiate a rent decrease.

This changes the narrative. Instead of you asking for a decrease and the landlord simply saying no, you give them the chance to get creative with what they would like to see happen to lower your rent.

The answers might surprise you. Your landlord might want you to reduce water waste in a place where they pay the water bill. Perhaps they’d charge less if you pay on the 25th of the previous month instead of paying on the 1st during the month rent is due. Ask, review their answer carefully, and decide if it’s the right choice for you.

10. Threaten to Leave

If your landlord isn’t budging on the rent, and the market is right for it, then you might want to consider moving. You shouldn’t threaten to do this unless you truly intend to. If you’re at this stage, you can begin looking at comparable apartments to move into. As you make those applications, you can keep your landlord abreast of the places you’re finding and where you might consider moving. Don’t be shy about sharing the (lower) rent offered at these places. When your landlord realizes that you are serious about moving, they might get more flexible about the amount of rent that you pay.

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If you enjoy reading our blog posts and would like to try your hand at blogging, we have good news for you; you can do exactly that on Saving Advice. Just click here to get started. If you want to be able to customize your blog on your own domain and need hosting service, we recommend trying BlueHost. They offer powerful hosting services for $3.95/month!