Saving Money

How Do You Develop A Financial Strategy to Stay Out of Debt and Save Money

April 2, 2020 By Tamila McDonald 2 Comments

Total U.S. household debt hit $14.15 trillion in the fourth quarter of 2019. Based on a population of nearly 330 million, the average owed per person (including infants and children) is a startling $42,879. Many households struggle to get their debt under control. They may have issues making payments and get stuck living paycheck to paycheck. Making their savings goals a reality may seem impossible, leaving them scared and frustrated. If you want to live your best life, developing a financial strategy that keeps you out of debt is a must. If you don’t know where to begin, here are some tips.

Make and Follow a Budget

Having a clear, defined budget is critical if you want to avoid debt. It allows you to outline your expenses and gives you a way to set spending limits. Plus, you can allocate a certain amount to savings, which is a critical part of staying out of debt.

If you don’t have a budget, create one immediately. Tally up your income, list all of your debt payments and living expenses, and add a line item for saving. See how much you have available after covering those necessities.

If your income falls short, you may need to explore ways to cut back. If you have a surplus, then consider how it can be best used. You could bolster your savings, pay down debt, or otherwise find ways to ensure your financial well-being.

Get an Emergency Fund

A buffer is critical if you want to avoid debt. Without an emergency fund, you might have to turn to credit cards or loans to handle the unexpected. That isn’t ideal.

Begin by socking away at least $1,000. Usually, that amount is enough to cover home or auto deductibles, for a start. It can also handle many smaller emergencies, like a flat tire, trip to the doctor, or major appliance failure. You’ll have a safety net that you can use for those costs and replenish much more quickly and easily than if you were repaying a similarly sized debt.

Once you have at least $1,000, you may want to shift your attention to paying down high-interest debt, if you have any. After you square that away, work to stash three to six months of living expenses. Usually, that’s a sufficient enough cushion to weather even a severe financial storm.

Consider Going the Cash-Only Route

One of the benefits of using cash is overspending isn’t an option. The money in your pocket, purse, or wallet is all you have available. Once it’s gone, you can’t spend any more.

The cash-only route allows you to ensure you stick to your budget. You can pull out cash for each of your spending categories, like groceries or gas for your car. Next, place that money in envelopes designated for each purpose. When you make an associated purchase, use cash from the corresponding envelope.

Using cash can make your spending feel more real, essentially increasing your awareness of what you’re handing over and what you’ll have left. You might make smarter choices, as a result, and that can make a big difference long-term.

Plan Ahead for Large Expenses

Your emergency fund can become a sizeable cash stash, so it may be tempting to use that money for large expenses. But that isn’t the purpose of an emergency fund. It’s there to handle the unexpected, not what you know is on the horizon.

Whether you want a new television, will need to replace your roof, or intend to buy a car, make the cost part of your financial plan. You may want to create dedicated savings accounts for each one. That way, you can deposit into them regularly and build up the amount you need.

This approach essentially supports a broader cash-only lifestyle. Avoid making the purchase until you have the full amount, ensuring you don’t need debt to cover the cost. At a minimum, if an expense genuinely can’t wait, you can use what you do have stashed to lower how much you need to cover with debt. That can reduce your long-term financial obligation, making it easier to rid yourself of that debt as quickly as possible.

Do you have tips for developing a financial strategy that can help people stay out of debt? Share them in the comments below.

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.

Biggest Money Mistakes Made by New Graduates and How to Avoid Them

March 30, 2020 By Susan Paige Leave a Comment

College is one of the most fun and exciting times of any young adult’s life. In many cases, you find that this is probably the very first time most students are on their own financially. You set your agenda financially in terms of spending. After college, however, the ball game is on a whole different level. Here, you’re likely managing a full-time job, repaying the loans you took out in school, and getting acclimated to life outside the safety and security of the campus. Because of that, many fresh graduates often make major money mistakes that may have repercussions spanning years. Here are some of these mistakes and how to avoid them.

1. Not saving enough

Many, throughout college, don’t have a saving culture. They spend nearly every dime on various expenses, often with the knowledge that they’ll get more money from their guardians. After college, most students are hit with sticker shock as they are establishing their new lives outside the college. Imagine an entire paycheck being decimated on regular expenses such as rent and utilities like transport. Graduates must create a strong culture of saving; monies which can then be used as an emergency fund or invested.

2. Blowing money

For graduates, a steady paycheck equates to new-found freedom and independence. For those with money doled out in a limited form, maybe in terms of financial aid, scholarships, or allowances, this money gives them a sense of autonomy that many like to push, ending up in unreasonable spending on recreational experiences or discretionary items. Since assets either appreciate or depreciate in the real world, spending your hard-earned cash on assets such as TVs, cars, and clothes might bring some happiness, but will do nothing for your financial well-being.

3. Neglecting your loans

Most students go through college using one form of financial assistance or another. These are often low-interest loans that have very generous repayment terms. However, most students, after graduation, ‘forget’ about these loans. As a fresh graduate, you should always look to factor your student loans into your budget. Financial experts highly recommend keeping your total debt and housing payments below the 36% threshold. Since these loans often have a grace period, take advantage of them, and make the payments a fixed expenditure, so that you can never forget to service the loan. If you do accrue more debt after graduation, always make sure you’re following up. Also, always watch your spending and don’t use the card when it’s not necessary. You can click here to learn more about debt management.

4. Not starting to save for retirement immediately

When you’re fresh out of college, retirement is the last thing in your mind. Since many think there will be plenty of time to save for retirement, putting money aside now might seem trivial. Since saving for retirement and its benefits aren’t highlighted in school, you have to figure out which retirement plan suits you best. You can work with an IRA, a 401(k), or both and start saving up from your very first job. When you get used to doing this, you’ll continue saving, even as you continue to create a higher profile in your career.

5. Ignoring your personal finances

Most young adults, after graduation, aren’t bothered with the state of their finances, provided they can pay for their expenses and not lack any of the essentials they like, and life goes on without a breeze. However, it’s high time you take more interest in your finances. This, in a nutshell, means taking an active role in how you manage your finances. That means learning about financial concepts and building healthy financial habits. You can start by creating a financial plan which can detail your short, medium, and long-term financial goals and obligations and how best to get there.

6. Spending too much money on housing

After college, you have to find your own space. Once people start having a regular paycheck, they might be tempted to get a lovely apartment even though it might be a bit pricey. Since you’ve probably just started on your new job, don’t be shy to start modestly. Since the most attractive jobs are in places with high housing costs, you can either look for a roommate or find a spot outside town with an easy commute. All-in-all, experts say your total housing expenses shouldn’t surpass 28% of your salary. Money saved on housing can be used on other expenses or saved for a rainy day.

7. Not paying your bills on time

While some cases are unavoidable, you should always endeavor to pay your bills on time. Fresh graduates think that a few missed payments here and there won’t hurt. But then, the reality is each of those missed payments, especially with financial institutions, damages your credit history. In your youth, good credit doesn’t seem that important, not until you need a significant loan. With poor credit, no financial institution will lend you a substantial amount of money, and if they do, the interests will be higher because of the risk involved. What might be the result of a few late payments can cost you up to seven years to fix up.

8. Avoiding credit

While there are fresh graduates who can’t stop using their credit cards, there are those who dislike them completely. The perception some young adults have is that credit cards are bad. However, in reality, they are a great tool if you can use them responsibly. After college, you must build positive credit because it will help you later on in the future when you’re looking to get a loan for a home, car, or business. Since credit cards can be very tempting to use, strive for a balance where you can use your card comfortably and also be able to pay it all off at the end of the month.

The world of adult finance can be tricky and a bit confusing for a fresh graduate. Take things slowly and build up your knowledge of finances. When you begin healthy financial habits from a young age, you’ll accomplish your goals sooner and without falling into pitfalls others before you did.

Image source: Peter Lundberg, via Flickr.

For more great saving advice articles, consider reading these:

The 52 Week Money Challenge

The 365 Day Money Challenge

Saving Money Under The Mattress

How Do You Budget With Irregular Income?

March 25, 2020 By Trey LaRocca Leave a Comment

Sometimes it feels like the only thing I write about is budgeting. This is something I am extremely proud of. Budgeting is one of the most valuable disciplines one can master in life, and it can bring balance and peace to so many other aspects of life. Some people, though, struggle to get a solid monthly budget plan because they have no idea when or what they will be paid. Commission workers, small business owners, and independent contractors all have widely varying payment schedules and amounts. This can cause stress when coming up with a monthly budget when there is no real solid “monthly income” figure. No need to fret, though; we are here to help. there are ways to strategize and work around this obstacle, and we have some ideas. So, without further adieu, this is you budget with irregular income.

Cost Deduction Method

The Cost Deduction Method is really a fancy name I am using to flip the roles on traditional budgeting. Where your monthly income is usually the anchor to your budget, cost deduction makes your monthly expenses the new focus. Instead of subtracting figure after figure from your monthly total income, you add up your expenses starting with your needs. The way this works in practice is you mark down the bare necessities, and you dedicate all of the money you make to those until your income surpasses them. After which, you check those off. Then, as the income starts to move past those expenses, you move to the traditional strategy of deducting from income, except you use the difference between the cost of your needs and your total income for that month.

Priority List Method

This one is much simpler. The priority list method involves making a list, in descending order from most important to least important, and marking down their costs next to them. As your income comes in, you start to check things off of that list, and you stick to the order. The great thing about this method is that you organize your priorities when you are in a logical and rational mental space. After doing this, it is pretty much on autopilot. You have already decided how you are going to spend your money, and once you have exhausted the list, everything is extra to be saved! This one is similar to the first in the sense that you are using expenses as your anchor point, which takes the stress out of trying to predict what your monthly income will be.

In Summary

Despite the fact that there are only two options here, I really think there is something for everybody. Budgeting should be simple, and these are two very simple ways to get it done. I’m not going to try to make you do financial gymnastics, as that is really the fear assigned to budgeting in the first place. Just pick a method, and let the tools do the work. This will make your finances feel much less unpredictable, and bring a lot more stability in your life.

Want to Save Money on Your Electric Bills? Follow These 3 Tips!

March 24, 2020 By Trey LaRocca Leave a Comment

Depending on where you live, your electric bill could vary pretty widely. For many in the US, though, it becomes a major burden on a monthly budget. With summer coming down the line, a triple-digit bill in the mail is a reality for a solid portion of the population. With so many looking down the barrel of this issue, it is important to know how to cut these costs without living like a caveman. We don’t want anyone sweating like mad in their living room, and we aren’t gonna have you unplug everything in your place when you aren’t using it. With that said, here are our 3 tips on how to save money on your electric bills:

Get a Smart Thermostat

This one benefits you in two ways. The first is that many electric and gas companies will give bill credits for customers that buy a qualifying smart thermostat. These credits can pay for a substantial amount of the cost incurred by getting the device, and make sure to check how and if your providers participate in this kind of program before buying. The second way is the more obvious one: they are smart. These thermostats give you the ability to change and monitor home temperature from anywhere. They also often use a function that automatically turns off your climate control when you get far from home and turn it back on when you get back inside of the “geofence” radius. All of these functions work in the background to save you money on your electric bills. Not only are smart thermostats convenient, but they also save you some serious cash.

Use Your Windows

Sometimes when your house gets a little stuffy, it is still reasonably comfortable outside. The instinct to hit the thermostat is a strong one, but before you do, pop outside for a second. If it is still pretty nice and cool outside, consider just opening windows and sliders to get some airflow in. Use a fan in or near one of these windows, and see if that does the trick. Oftentimes this will serve the same purpose as the AC without the same hit to the budget. Not only that but it also just feels better to get some fresh air in the home, as stagnant air can often feel far more stuffy and muggy than what comes in from the window.

The “Dark Hour”

A really useful technique, financially and otherwise, is to take an hour every day to turn everything off. If it has to happen at night, a light or two is fine. The point of this time is to get off the screens, shut down all the tech and sit and enjoy your family. If you live alone, take some time to read a book or clean the place up a little bit. Hell, shut off the lights in the bathroom and take a relaxing candle-lit bath and just relax. This can be beneficial in so many different ways, so much so that the financial benefit is really just a bonus. this one is my favorite, as it costs nothing and really helps you connect with yourself and your family.

Never Pay Full Price For a Cell Phone Again With These Tips

March 18, 2020 By Trey LaRocca Leave a Comment

Cell phones are extremely important devices in this day and age. Sometimes it can feel like our entire world revolves around our phones. Work, school, friends, and family are all readily available at the touch of your finger. This makes having a reasonably current phone pretty dang important. The struggle here, though, is that you are often forced to pay out the nose to get a new phone. So, how do we make sure your phone is current and wallet-friendly? Here are the best tips to make sure you never pay full price for a cell phone again.

Used Market

Just like any tech purchase, the used market is a great place to start. Oftentimes, you don’t need the newest phone to stay current, and you can absolutely land a very similar experience from a generation older. This opens the door to great prices on the used market, where you can easily save half the cost of a new phone. Make sure you buy from sellers with good reputations on whatever marketplace you use, and verify the phone works before sending any sort of payment. This will ensure you get the best value without having to pay any installments on the phone itself. the best part about this one is you can always sell the phone for pretty close to the price you purchased it if you don’t like it.

Holiday Deals

Patience is a virtue, and you should use this to your advantage. Cell providers almost always have new-plan discounts around the holidays, and they can be very aggressive. So, if you are making your purchasing decision, and you have the ability to wait until the nearest holiday, definitely do so. This will allow you to roll the phone’s value into your cell payments if you don’t have the cash on hand. It also means you’ll have a brand-new phone, which matters a lot for some people.

Phone Leasing

Leasing is a touchy subject for most financially-inclined folk, but I think a phone is a perfect lease. It isn’t something people tend to hold onto for more than a couple of years, and the lease allows you to pay far less each month to own the phone for as long as 2 years before upgrading. The great news is, they don’t tend to require down payments. After your 2 years, you could easily find the next new phone for a similar payment, making the next update move a lot smoother.

At the end of the day, there are a lot of great ways to accomplish your goal here. With these tips, you definitely should never pay full price for a cell phone again. Just be smart, keep your eye out, and utilize patience when making any buying decisions. All of these together, as well as knowing what you need out of your phone, will ensure that you never pay more than you should.

Streaming Services You Should Cut Out Now

March 18, 2020 By Trey LaRocca Leave a Comment

When it comes time to reign in your spending, the little things are almost as important as the big ones. While streaming services are nice to have, a lot of the time we end up paying for ones we barely use. Not only that, but a few of them even share common content that is available on other platforms. All of these are things to take into consideration when cutting some out to save money. To help make the decision a little easier, here are the streaming services you should cut out now.

The One You Forgot You Had

We have all done it. Maybe it started as a free trial, or just the one you snagged to binge on particular show, but they both ended the same way. You were checking your bank account, and you were hit with the “oh yeah” moment. Oftentimes this comes after months of paying for it without knowing it. Now, what some will do is say “well I paid for the month, might as well keep it and see what’s on.” Don’t be that person. If you forgot about it once, you’ll do so again. Cancel your subscription and enjoy the time you have left with it.

The One You Only Watch One Show On

Sort of ties into the top one, but this is for those who intentionally keep those subscriptions running. If you only watch one or two shows on the streaming service, there is no reason to keep it running year-round. If the premier of a season really sneaks up on you, it doesn’t take more than 5 minutes to start your plan back up and watch to your heart’s content. Don’t waste $200 on something that should only need to cost $15-30.

The One With A Bunch of Projects “In the Works”

The name of the game for most streaming services is original content. The quality and quantity of exclusives is what really sets each one apart from the others. If you end up paying for one that is slow to put out new stuff, you can always cancel and start back up when they have actually finished a few things up. None of the big services really have a problem getting content out, but when it comes down to the wire, count out the original series that you actually must see as they come out on each service. Whichever has the lowest number can go for now, and you can catch their “in the works” projects as they come up.

At the end of the day, this decision will be different for everyone. For this reason, I have refrained from naming any specific services. I personally only subscribe to two streaming services, because I only watch a few shows. I understand that others have a lot of different things they like to see, though, so my recommendations won’t exactly help much. Just keep these factors into account, and make sure you aren’t just buying up every service until you end up essentially paying a premium cable bill.