Personal Finance

The Financial Costs of Allowing Adult Children To Move Back Home

May 10, 2021 By Vicky Monroe Leave a Comment

Young adults at the beginning of their careers have been hit especially hard by the pandemic. Due to the economic effects of COVID-19, 68% of entry-level job openings were eliminated.

This left many new grads without a job or a way to support themselves. As a result, 32 million adult children have moved back into their grandparents’ or parents’ homes since April 2020.

A recent survey showed that most parents are happy to have their kids return to the nest after college. But there is a financial cost to welcoming your kids home. Before you let your kids live in their childhood bedrooms rent-free, consider whether or not you can afford it.

Can You Afford To Let Your Kids Move Back Home?

You probably think that it doesn’t cost that much money to let your adult children move in with you. After all, you have the space and wouldn’t need to move into a bigger home to accommodate them.

But according to a study by Porch, allowing just one of your kids to come back home will cost you $459 per month. Adding another person to your household increases your gas, grocery, and utility costs.

Those expenses can add up and put a big drain on your finances, especially if you would’ve invested the money instead. Putting $459 per month into your retirement account for a decade could give you an extra $79,791 in retirement if it earns an average return of 8%.

If you’re on track for retirement, you may be able to make that sacrifice. But if you’re one of the 40 million American households that doesn’t have a nest egg, you might not be able to afford to take your children in unless you charge them rent.

Charging Your Kids Rent Is a Good Financial Compromise

If you have consumer debt or an underfunded retirement account, you may not be able to afford to house your adult children rent-free. But luckily there are ways to help them out without sacrificing your own financial future.

Many parents in this situation ask their kids to help out with bills or charge them rent. Covering the utility bill or paying below-market rent will cost your kids far less than living on their own. They’ll still be able to pay off their student loans or build up savings without putting financial strain on you.

If They’re Unemployed, Ask Them To Contribute in Other Ways

But what if your child’s income source dried up due to the pandemic, leaving them without a lot of spare cash? They can still chip in by doing chores and maintenance around the house. Ask your child to mow the lawn so you can stop using a landscaping service and save money. If you order takeout because you don’t have time to cook, your child can help you out by making dinner.

Encourage them to keep applying for jobs aggressively so they can get on their feet. Even if they can only find something part-time or outside of their degree field, emphasize that it’s better to have some money coming in than none. Although you may love having your kids at home and getting to spend extra time with them, it’s important for them to understand that it’s not a permanent solution.

They still have to contribute to the household and make strides towards becoming independent adults. You won’t be around to support them forever, and you have your own financial future to worry about. So don’t be afraid to set some boundaries and give them a timeline for when you’d like them to move out.

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5 of My Favorite Personal Finance Books

May 6, 2021 By Rachel Slifka Leave a Comment

People sometimes ask how I got into personal finance. The simple answer is by reading. Admittedly, I didn’t know much about money as a young adult. It wasn’t until I graduated college and found myself struggling to pay off my student loan debt that i decided to pick up my first personal finance book. Since then, I’ve been hooked! Here are 5 of my favorite personal finance books.

1) Rich Dad, Poor Dad by Robert Kiyosaki

Rich Dad, Poor Dad is unique for it’s conceptual descriptions. If you’re interested in wealth building versus simply earning more money, then this is the book for you.

Kiyosaki describes growing up with his father (the Poor Dad) and his friend’s father who was a business owner and mentor (the Rich Dad). In his book, he compares the thinking of his Poor Dad versus his Rich Dad and the lessons he has learned from both.

What I like the most about this book is the story behind it. It’s not a book that spews advice and facts to you. It’s concepts are very simple, but they are effective, and it’s an enjoyable read.

2) Total Money Makeover by Dave Ramsey

Although he can be controversial, there’s no doubting Dave Ramsey knows his stuff when it comes to money. Total Money Makeover was one of the first books I read when I was paying off debt, and I used most of his tactics to pay off my student loans.

If you’re struggling financially and aren’t sure where to start, this is a great book. Ramsey’s “baby-steps” map out the exact next step to take. His snowball method for paying off debt has helped thousands of people become debt-free. Defi8nitely worth the read!

3) Hustle Away Debt by David Carlson

Looking to make more money? Or, start a business in your spare time? Then read Hustle Away Debt by David Carlson.

Carlson, who runs the popular personal finance site Young Adult Money, has been a side-hustler for years. In his book, he talks about how to leverage a side hustle along with your day-job to pay off debt.

Personally, I was inspired by the site Young Adult Money to start my freelance writing side hustle in order to pay off debt. Eventually, I actually started writing for Young Adult Money as part of my side hustle! Without Carlson’s site and book, I wouldn’t have been able to pay off my student loans as soon as I did!

4) The Psychology of Money by Morgan Housel

Most people think about the math behind the money, but what about the psychology? The Psychology of Money by Morgan Housel discusses the behaviors associated with personal finance.

If you understand the basics of money, but are interested in why we spend the way we do, then this is a must-read for your list. It’s fascinating to understand the behaviors behind our relationship with money.

5) You are a Badass at Making Money by Jen Sincero

Jen Sincero has a few books in this series, but You are a Badass at Making Money is one of my favorites. If you are looking to increase your income but aren’t sure you can, Sincero’s book is for you. It’s an easy and fun read, and Sincero is genuine and approachable. If you doubt your ability to make more money, then give this book a chance!

Retiring During a Pandemic Is Possible

May 4, 2021 By Vicky Monroe Leave a Comment

The pandemic changed many people’s plans, including retirees. About a third of people who were planning to leave the workforce decided to hold onto their jobs in light of COVID-19.

Considering that the stock market crashed as a result of the coronavirus, delaying retirement in 2020 was a smart choice. But now that the economy is reopening and the stock market is recovering, it may be safer to retire.

Now May Be a Better Time to Retire Than You Think

Although the pandemic isn’t over yet and the future still feels uncertain, things are looking up.

Vaccines are being rolled out throughout the country and COVID cases are declining rapidly in some areas. The economy also appears to be on the rebound with an unemployment rate of just 6.3%.

All things considered, now may not be the worst time to pull the trigger and leave the workforce. Here are a few more reasons why you should feel optimistic about your retirement prospects.

The Stock Market Is Rallying

The pandemic caused millions of Americans to lose their jobs. When COVID struck, the nation was entering the worst recession since 2008. However, the stock market seems to have bounced back. and plunged the economy into the worst recession since 2008. However, the stock market seems to have bounced back.

The S&P 500 grew about 16.3% in 2020. Additionally, S&P 500 companies recently posted strong first quarter earnings reports, which bodes well for the economy.

Although the stock market is still volatile, experts seem optimistic. Many are calling this turnaround the fastest bear market recovery in history and expect things to continue improving. So it may not be the worst time to start drawing down your investments.

Home Prices Are Surging

Home prices have surged during the pandemic due to low interest rates, high demand, and a lack of inventory. The median home value rose by 14.9% in the fourth quarter of 2020. CNBC estimates that the average homeowner gained a whopping $26,300 in equity last year.

This hot real estate market is good news for homeowners who are nearing retirement age. If you sell your house and downsize, you could walk away with a sizable profit. This may enable you to pad your investment accounts and grow your nest egg, putting retirement more within reach.

Americans Are Spending Less

Another factor that may make it easier to retire is that you’re probably spending less. Nearly 40% of Americans reported that their spending decreased during the pandemic. Because dining out, shopping, and travel were all restricted, many people found it easier to reign in their budgets and save more money.

If you’ve learned to live on less during quarantine, you may not need as big of a nest egg to retire. This could make it possible for you to leave the workforce sooner than you thought.

How To Know if You’re Ready To Retire

Pandemic aside, there are lots of factors you’ll need to consider before you decide to exit the workforce. Here are some questions to ask yourself to determine whether or not you’re ready to retire.

Evaluate Your Assets and Sources of Income

Retirement is only possible if you have enough assets and income to fund your desired lifestyle. So first, you’ll need to calculate your monthly cash flow and see if it will cover your bills and leave you with some cushion for unexpected expenses.

Add up all of the sources of income you’ll have in retirement, like social security, pensions, side jobs, and rental income. If you plan on waiting a few years to collect social security to increase your payout, you’ll need to make sure you have enough money saved to cover that gap in income.

You’ll also need to figure out how much money you can safely withdraw from your retirement accounts. Many retirees use the 4% rule, which means you’ll withdraw 4% of your investments in the first year of retirement and adjust that amount for inflation every year thereafter.

Decide if You Have Enough Money To Live On

Once you know how much money you’ll have coming in every month, you’ll have to decide if it’s enough to live on. Financial experts say that you’ll need about 70% to 90% of your pre-retirement income to live comfortably in your golden years.

But if you have debt or other financial obligations like adult children who depend on you, that may not be enough. You might also need a larger nest egg if you have big dreams for your retirement like traveling extensively or opening a business.

If you don’t qualify for Medicare yet, don’t forget to factor in the cost of health insurance. Marketplace plans can be expensive, so make sure you have a plan to pay for it.

Many seniors will also need to move to a nursing home at some point during their retirement. Most financial planners recommend that you purchase long-term care insurance before age 65 to help cover the cost so you don’t drain your nest egg.

But if you’ve looked into it and decided insurance isn’t right for you, make sure you have some other way to cover unforeseen medical expenses like long-term care.

Planning for retirement can be difficult even when there isn’t a global pandemic. If you’re uncertain whether or not you’re financially ready to leave your job, it’s a good idea to speak to a financial planner. They can help you navigate the extra challenges that retiring during a pandemic brings.

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5 Ways I Treat Myself Without Breaking the Bank

April 21, 2021 By Rachel Slifka Leave a Comment

During the chaos of the Coronavirus pandemic, it’s become clear that self-care is essential to your well-being. But if you’re on a budget, or even out of work due to the pandemic, you may not have extra funds laying around to go treat yourself. Typical self care, like massages, facials, and manicures all cost a pretty penny. Here are 5 ways I treat myself without breaking the bank.

1) Buy Flavored Coffee

If you’re a coffee drinker like me, you know just how luxurious a delicious cup of joe can be. But before you go running out to your local coffee shop and splurge on a pricey drink, consider making your own instead.

I bought a cheap French-press at Ikea to make my own coffee at home. But I will splurge on buying nicer, flavored coffee, like caramel, French vanilla, and hazelnut. While the flavored coffee is a little more expensive than the old-school brands you can buy in bulk, overall, it’s still much more affordable than going out to grab a coffee on the go.

And you can take it a step further by buying flavored creamer, a milk frother, and a pretty coffee mug. It truly starts my day off on the right note, and doesn’t cost much money at all.

2) Do an At-Home Spa Night

Once a week, I like to treat myself to an at-home spa night. All you need is time and a few of your favorite products!

You can go as simple or as in-depth as you want. From hair treatments to bubble baths, at-home manicures, and homemade facials, you can pamper yourself without breaking the bank.

3) Go for a Walk

During a chaotic day, there’s possibly nothing better than taking a short break to take a walk, especially if it’s a nice day. And best of all? This is totally free!

Plus, you can take a timeout to listen to your favorite music or podcast. Personally, I love to take my dogs with me, which always puts me in a better mood.

4) Cook a Healthy Meal

Admittedly, I’m not a great cook. I tend to eat on-the-go, and rarely give myself time to really enjoy a meal, let alone cook one.

But recently, I have been experimenting with cooking simple, healthy meals. I have to say, it’s fun! You can take a few basic ingredients and make it into something delicious that makes you feel good.

So try out a new recipe and get out the nice dishes. Your body will thank you.

5) Take a Nap

Lastly, when I find myself really stressed or anxious, I love to treat myself to a quick nap. After all, how liberating is it to take a timeout to take a nap? I find that a nap is essential when I’m overwhelmed, especially on busy days. Then I can wake up rejuvenated and focused.

If you’re able to, find time to build a quick power nap into your day. It’s a luxury that’s completely free!

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. Check out these helpful tools to help you save more. For investing advice, visit The Motley Fool.

3 Money Rules I Live By

April 7, 2021 By Rachel Slifka Leave a Comment

There’s a ton of financial advice out there. How do you know what will actually work for you? As a personal finance geek, I’ve jumped on board and tried just about every financial trend and pieces of wisdom. Some tips worked for me, while a lot didn’t. But when it’s all said and done, here are the 3 money rules I live by, no matter what.

Money Rule 1: Check in on your finances daily

First on my list of money rules – I check in on my finances daily. I set this rule for myself when I was a recent college grad. I wasn’t earning much money, and I carried several thousand dollars of student loans. While it was definitely tempting to put my head in the sand and ignore my financial situation, I decided to face it head on. No matter how ugly my finances looked, I made it a point to check in on my accounts daily.

This step may seem small, but it was single handedly the best thing I have ever done for my finances. By checking in daily, I got a real-time snapshot of exactly where I’m sitting. That helped drive my spending decisions during the day. After all, that $5 latte loses its appeal when you see how else you could use that money.

Checking in daily also kept me motivated towards my financial goals. Once I started making a tiny bit o progress in paying off my student loan debt, my motivation increased. Seeing progress is key!

Money Rule 2: Never carry a credit card balance

Fortunately, I implemented this rule in my life early enough to never have had credit card debt. I am an avid credit card user. I use the points to pay for travel and vacations. However, I made it a point to never carry a balance on my credit cards, and I’m glad I did.

Credit cards have insanely high interest rates, making it extremely difficult to get out of debt. Instead of relying on credit cards in an emergency, I worked to build my emergency fund. Even when I was in student loan debt, I kept my emergency fund. Even a small, $500 emergency fund can save you when you need it.

Money Rule 3: Pay cash for large purchases

Out of all my money rules, this is likely the most debatable, but I always pay cash for large purchases. Most large purchases, such as cars, furniture, or home improvement expenses will allow you some sort of financing option. The interest rate, if you choose to finance, is typically pretty low here, so most people choose to finances versus pay cash for these types of large expenses.

So why do I always pay cash? The primary reason is I simply don’t like owing anyone anything. Once I paid off my student loans, the only debt I had was my mortgage. It feels liberating to own something outright and not have to worry about making payments on it.

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Secondly, I can use cash as a bargaining tool. For instance, I can walk into furniture with a $2,000 budget and see a couch for sale for $2300. By having cash, I can make quick decisions and offers. Most of the time, I can get that $2300 couch for $2000 simply because I can pay in cash and leave today with the item. Not everyone will bite at a cash deal, but it’s fun to use this tactic to try to negotiate the best price!

How to Wisely Spend Saved Money

March 24, 2021 By Vicky Monroe Leave a Comment

During the pandemic, the average American’s savings rate increased from 12.7% to 32.2%, so you may have a small nest egg that you’re wondering what to do with. It’s important to wisely spend saved money instead of blowing it so you get the most benefit from it. Here are some responsible things you can do with your money to improve your financial position.

Start a Business

Although there are businesses you can start with very little or no money, having a cash infusion will open up a lot more options.

It’s a great time to launch an online store because everyone is shopping from home due to the pandemic. You can use your savings to buy inventory or craft supplies to make your own handmade products. Any extra money you have can be spent on marketing to spread the word about your new shop.

Commercial cleaning businesses will also be in high demand as restaurants, gyms, and salons begin to reopen. Employees may not have time for the strict cleaning protocols that are required, so companies may bring in outside help to ensure the health and safety of their customers.

Starting a commercial cleaning business usually costs a couple thousand dollars, but could earn you $100,000 per year or more. So this is definitely a way to wisely spend saved money.

Buy a House

Buying a house is a great way to make your money work for you. You’ll be building wealth with every housing payment instead of lining your landlord’s pockets.

Although many people believe you need a 20% down payment saved to buy a house, there are cheaper options. FHA loans, for example, only require a down payment of 3.5%. Some conventional loan programs even allow you to put down 3%.

If you don’t have enough money saved for closing costs, there are grants that can help you cover them. So you may be able to get into a home for much less money than you thought and start building equity.

Make Upgrades to Your Current Home

If you already own a home, making repairs and upgrades is a way to wisely spend saved money. Improvements can increase the value of your home and reduce the amount of capital gains tax you have to pay when you sell it.

Kitchen and bath remodels are some of the most profitable renovations. They can net you up to 182% more than what you paid for them in resale value. Replacing your home’s roof, upgrading the siding, and landscaping are also good investments.

Invest in Your Career

Another way to wisely spend saved money is investing in your career. Going back to school and getting a master’s degree could increase your lifetime earnings by as much as $620,000. Taking a course that teaches an in-demand skill like data analysis, user interface design, or cloud computing can also help you get a better job and earn more.

Although it’s tempting to spend your savings on tech gadgets or a vacation, wisely investing it in your career or home will pay off more in the long run.

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