spending habits

Simple Ways to Get Into Good Financial Shape

July 20, 2016 By Jennifer Clark 1 Comment

Before you can start investing, you should be in good financial shape. Knowing where and when to invest is also important but you need a solid financial foundation before you can build.

Your finances can become stronger in other ways too, by making small changes in your life. We are already halfway through the year which is a great time to evaluate your monetary status and habits. If you missed a spring cleaning, consider this a summer cleaning of your accounts and spending.

Below are just a few simple ways to get into good financial shape:

Adjust your spending.

Sometimes, we spend more than we need to for everyday items without even realizing it. If we spend more time focusing on where we can save money on these items instead of buying without thinking, we can make room for other financial opportunities in our lives. These examples include:
- Your glasses. Eyeglass frames often cost more at the eye doctors and may leave you with little options. While we believe in supporting your local businesses, you may want to research cheaper alternatives to help your budget. Sites like Ebay.com and Vision Direct are two sources to check into. You will even be able to find bigger brands at a lower cost on Ebay.
- Lottery tickets. Skip purchasing those lottery tickets, and instead, put that money toward something more productive like a savings account or your retirement fund. If it’s the thrill of the unknown that you enjoy about lottery tickets, consider investing in stock instead.
- Groceries. Focus on buying what you need rather than what you think you’ll need. Produce goes quickly, so only buy the ones you know you’ll be eating. Plan your meals out in advance to have an idea so that you prevent wasting food as much as possible. Also, look for coupons and review your local grocery stores to see where shopping may be cheaper.

Automate your savings.

We discuss this often here at Saving Advice, but if you have yet to do this, you need to start. Having money come out from your paycheck each month to automatically go into a savings account or fund account of some kind is important for getting your finances in shape. There are many options out there, but you can review a couple here.

Create an asset allocation.

Asset allocation is an investment strategy where one evaluates the balance risk and reward for portions of each asset into an investment portfolio based on goals, risk tolerance and investing period. Basically, it is dividing up your investment portfolio into different asset categories: stocks, bonds and cash. It helps to put your money in the right place for you and creates a balance instead of focusing on one particular investment type. Additionally, research shows they yield most observed returns on investment over time. When and how you set up your asset allocation depends on where you are in your life. Stocks tend to be less risky for younger investors due to their longer investing time available while those closer to older retirement ages should focus more on bonds.

Maintain low fees.

You should look to keep fees as low as possible. Online resources like WiseBanyan and Acorns, discussed in this article, help to get you started on your financial goals while maintaining your portfolio for you with low fees and no minimum contribution requirements. Always double check the fees, especially from financial advisers who may push you into an investment product simply for the commission rates they receive. Never be afraid to ask too many questions and have all details explained to you thoroughly. Also, consider signing up for checking and savings accounts that don’t charge you monthly maintenance fees.

As you work toward getting into good financial shape, remember to also spend less than you earn and always contribute extra to your employer’s 401(k) plan (if applicable). The more you do now, the better off your future will be financially.

What would you add to the list?

Fastest Way to Pay down Debt

August 19, 2015 By Will Lipovsky 2 Comments

I’ll assume you’re reading this post because you’d like to become debt-free as fast as possible. Who wouldn’t? This post will tell you exactly how to do just that. But keep in mind, getting rid of debt quickly is not easy. It takes great focus and will power. These two factors are essential. What’s not essential is keeping your emotions on your shirt sleeve. Meaning, you’ve got to be tough to conquer debt! There’s no crying in ~~baseball~~ debt payoff!

When I write about paying down debt quickly, remember throughout that you need to be tough. Talking about debt isn’t for fussy people. Your only emotions should be focus and will power. They are essential for doing what’s necessary to put debt in the rear view mirror.

Debt Snowball vs. Debt Avalanche

The snowball debt repayment method means you pay off your debts from smallest to largest. However, that’s mathematically incorrect. It makes no logical sense. I’m not sure it makes any emotional sense either. A person always has the greatest will power when beginning a task. You should focus and early will power on doing the most good. It’s like when going through a list of tasks, it’s best to get the hardest stuff out of the way first.

The method you want to use instead is the avalanche method. Using the avalanche method means paying down the highest-interest debts first. It’s smart because you’re attacking what is hurting you most. This is important.

Allow me to paint a picture. If you were stuck in a forest, what which would you attack first, the striking snake or the bird that keeps pecking at your hair? I’m gonna kill that snake so I don’t die. The bird can wait until the snake battle gets finished.

Although… the snake battle is probably a little dramatic. Depending on your situation, you may not save that much information by going with the avalanche method. But it will be a significant amount. You’ll have to run the numbers for yourself but it’ll probably come out to something like $2,000 gained (based on the average American’s debt levels) every 5 years by using the avalanche method. But yes, to me, $2,000 is still a significant amount of money. It should be to you as well, especially consider you’re in debt.

Debt Repayment Is a Rally, Not a Race

That initial will power will wear off. Eventually, your debt repayment plan will become routine. But that’s a good thing. It’ll be set on autopilot. You’ll be able to focus on earning money instead of worry about how large your budget burden is growing.

If for some reason life takes a nasty turn, you’ll want to be ready. Keep ready by always having a fully funded emergency fund. This can be anywhere from $1,000 in liquid funds to 9 months’ worth of expenses. Do whatever feels comfortable. During this time, make sure to communicate with your creditors! Don’t leave them in the dark. Explain the situation. They would much rather you tell them than have you just randomly slow down the debt repayment.

Good luck using the avalanche method. It will serve you well.

How to Write a Check

August 18, 2015 By Will Lipovsky 1 Comment

The paper check is a dying payment method. But even if it is dying, it still comes in handy sometimes. We might use them to pay the doctor or the landlord, for instance. Just one of those reasons is enough to know how to write a check. After all, you don’t want to miss a rent payment because of an improperly filled out check!

When you need to write a check, there are just a few simple steps to follow.

Filling in the Blanks

Writing a check is a simple matter of filling in the blanks:

Date – The top right corner has a line for you to fil in today’s date. Include the month, day and year. Some people will postdate a check for cashing at a future time. This is called postdating and there’s nothing wrong with it as long as you can be certain the funds to cover the check will be in the bank by the date you put on the check.

Pay to the Order Of – Write the name of the person or company you’re giving the check to in the line next to this phrase. Use the full legal name and be careful to spell it correctly. Avoid writing too large or else risk running out of space.

Dollar Amount – Most checks have a box on the right for the check amount in dollars and cents. The dollar sign is usually already printed next to the box. If the check you’re writing is for $100.00, you only need to print “100.00” in that box.

Write Out the Amount – To be sure the amount in the box is correct, checks include a second line ending with the word ‘dollars’ under the ‘Pay to the Order Of’ line. Here you will write out the check amount in words. Using our example above, you would write ‘One Hundred and 00/100’ on that line, or simply, ‘One Hundred’. If you do not use all the space provided, put a line through the unused space. This way, no one can change the amount by adding a word, changing it from ‘One Hundred’ to ‘One Hundred Thousand,’ for example.

Memo – The memo line is optional. It’s really just for record keeping purposes. Most people don’t take the line too seriously. You can use it for an account number if you’re tired of writing out words.

Signature – The lower right of the check includes a line for your signature. Be sure it’s the same way you sign your name on your bank account, credit card slips and legal documents. Be consistent.

Following these simple steps will ensure you write checks correctly while minimizing the chances of someone using your check fraudulently. Writing checks is simple but it’s very important. You were wise for taking just a few minutes to learn how its properly done. There will be no more guessing about this payment type from now on. If you’ve understood this post, you’ve mastered the skill of writing checks. If you have yet to get a bank account, read this post about how to apply for a bank account.

Suggested reading: Simple Ways to Avoid Bounced Checks

How Does Your Spending Stack Up Against Your Neighbors?

June 14, 2010 By Jennifer Derrick 4 Comments

I lost a good couple of hours of my life this week to a website that a friend directed me to called Bundle.com. This site lets you look at the aggregated monthly spending habits of people in any city, county, or state in the U.S. You can further break it down by age groups, family types (kids, no kids, single, married, etc.) and income brackets. It’s pretty interesting stuff and as I wandered my way through all of the information, I found that a few hours had disappeared.

In my county and demographic bracket, the average total monthly spending is $5,565, broken down as follows:

Shopping: $1,637
Travel/Leisure: $386
Food/Drink: $1,095
Health/Family: $926
House/Home: $762
Getting Around: $759

Note that nowhere in this total monthly spending does Bundle account for your rent/mortgage. So, in my county, I probably need to tack on about another $1,300 per month for average rent/mortgage payments. Even without that, Bundle has the average person in my county with my demographics spending $66,780 per year ($82,380 if you count rent/mortgage). I about fell off my chair. According to Quicken, my average yearly spending, including the mortgage and all other spending (no matter how frivolous) is $42,000 per year ($3,500 per month), or slightly more than half of Bundle’s average. Granted, we live in a fairly affluent county where a lot of people seem to have money, but those numbers still seemed high to me. I checked with the census and the average yearly income in my county is $66,000. So if Bundle’s data is correct, people in my county are, on average, living above their means by about $16,000. Yikes.

You can break each large category down and see the individual items that comprise the larger category. For example, shopping is broken down into Clothes and General Shopping. People in my county are doing a lot of shopping. They spend $283 on clothes and $1,149 on “general shopping” per month. Their average purchase is $74. I can’t even imagine coming anywhere close to those numbers. They also dine out a lot, spending $534 per month on eating out and $561 on groceries. We consider it a bad month if we spend $100 eating out or more than $300 on groceries. The other sub-categories seemed just as outrageous. My county spends $183 monthly on phone service, $107 on cable TV, and $287 on home improvement. At least they are charitable, giving $117 to charity each month. If these numbers are the true average for my county, then it’s a little bit scary.

For giggles, I searched the neighboring county. We live right on the border, so I thought maybe we would come in closer to the average there, since it is a much less affluent county. The monthly spending average there is $3,511. Aha! I belong with the people in the other county. Broken down by category, my expenses mirror theirs more closely. Granted, our income is higher than the average in that county so our savings average is likely to be higher than most in that county, but at least I found some people with similar spending habits.

Where does all this data come from? Bundle says that they get it from government sources, third party data providers and, interestingly, from transaction information from Citi. If you bank with Citi or do any transactions through any of their networks, I guess you’ve contributed to the Bundle database.

I also took their quiz to determine my spending profile. This was disappointing to me because all of the profiles are based on pigeonholing you as some type of consumer. There are no categories for “super saver,” “charitable giver,” “retirement conscious,” or anything like that. Everything points back at how you consume and what you like to buy. It’s not really a full picture of how you act financially. It’s fun to take the quiz, but don’t believe that you’re only about the spending you do. You know you have a fuller financial life than the shallow picture Bundle paints.

The site is still in Beta and some things don’t seem to be working. There is a “Saving” tab which, presumably, would show you how much others are saving each month and where. That would be really interesting. Given the spending amounts in my county, I can’t see how anyone would have anything left to save. And maybe they don’t. There is also a feature in the “Go Deep” portion of each expense category that looks set up to eventually show the top merchants in each category. Soon you’ll be able to see just where your neighbors buy their stuff.

Is this a life changing site? For most people, no. Most people will just find it amusing to see how their spending stacks up when compared to others. You’ll spend an hour and then move on. Since the site is hooked into Facebook, you may spend some more time looking at what your friends have done on Bundle. However, some people may find real value in the data. If you were to look at your city and your demographics on Bundle and discover that you were spending vastly more than the average, that might be something you want to examine more closely. Why are you spending so much more? If you’re spending significantly more in one category, but significantly less in another, do they average out? If you’re spending significantly less, pat yourself on the back for your frugal efforts.

As with any sort of “average” data profiling, you have to take Bundle’s results with a grain of salt. No two situations are alike and comparisons between your family and the “average” may not be valid. However, it can’t hurt to hold your budget up to Bundle’s data and see where you stand. In my case I got a good, long laugh out of it. You may find room for improvement. At any rate, it’s a fun way to get a peek at what others in your area are spending.

Dave Ramsey Financial Peace University: Week 2

February 25, 2010 By Maggie Ellis 13 Comments

This is a series of posts about what you will find in Dave Ramsey’s Financial Peace University course. This is week two (week one)

This week’s lesson is about money and relationships. I was excited about this week because relationships are something that everyone has to deal with, no matter how much money they do or don’t have. I was interested to see what advice Dave would give to deal with those times when money strains relationships. Money fights are probably more common when a family is struggling, but everyone fights about money from time to time, even those who have plenty of money. Some couples are complete opposites and one is a saver and one’s a spender. Other couples are closer to each other in terms of spending habits, but money can still cause problems. In my house, despite the fact that things are going well money-wise and we’re both natural savers, we still have times where we argue over spending or saving priorities. Rather than focusing in detail on relationships however, this lesson jumped all over the place.

It started with a discussion of the stereotypical roles that men and women play in marriage. Men like to negotiate, women prefer to bargain hunt. Women like security, men like risk. Women like to shop, men can’t stand it. Men tie money to self-esteem, women tie money to security. Men handle the money, women handle the kids. In other words, women and men approach money very differently and this is the source of friction. While I understand that drawing such generalizations makes it easier for Dave to make his points, it did get old after a while because I know many couples that don’t fit these stereotypes. I found myself wondering if he makes these generalizations just for the laugh factor and for simplicity’s sake, or if this is really how he sees the world. I can’t answer that, but knowing he comes from an extremely conservative worldview, it makes me wonder.

Despite all the generalizations, his main point for the lesson is that both partners have to take an active role in the family finances if there is to be any success. There also has to be open communication. He spends a lot of time talking about free spirits — those who don’t really care about money and just want to spend as they see fit — and nerds who are the ones who like budgets. The nerd is often guilty of trying to control or browbeat the free spirit and the free spirit is often guilty of blowing off the nerd’s suggestions. If this is your relationship, I can certainly see the problems. However, Dave doesn’t spend any time dealing with what happens when both partners are nerds (my house) or both partners are free spirits. In my house, we tend to over-control the money, sometimes to the exclusion of some much needed fun. Couples who are both free spirits would have a hard time staying out of debt and ever saving anything, I imagine. I doubt that most couples are as directly opposite as Dave would like the class to believe.

Related Articles

Dave Ramsey Financial Peace University: Week One

Dave Ramsey Financial Peace University: Week Two

Dave Ramsey Financial Peace University: Week Three

Dave Ramsey Financial Peace University: Week Four

Dave Ramsey Financial Peace University: Week Five

Dave Ramsey Financial Peace University: Week Six

Dave Ramsey Financial Peace University: Week Seven

Dave Ramsey Financial Peace University: Week Eight

Dave Ramsey Financial Peace University: Week Nine

Dave Ramsey Financial Peace University: Week Ten

I do agree that, whatever your natural tendency, be it nerd or free spirit, honest communication is essential for financial success. You can’t have each partner off doing their own thing and expect to stay on budget. You can’t have opposing goals, either, unless you negotiate how to save for both. You can’t have a partner sneaking off and buying things, or lying about how much they cost. Eventually the other partner is going to find out and stuff is going to hit the fan. Communication and openness is key and on this I agree with Dave.

The lesson hit briefly on the challenges faced by singles and then moved on to teaching kids about money. This probably could have been a lesson unto itself. There are many challenges involving kids and money, starting with the “allowance,” which is essentially giving kids money for nothing. Dave expects kids to work for the money and he calls it a “commission.” I like this approach because it begins to tie the concepts of work and money together for even the youngest kids. He also believes in making kids pay their own money for their “wants,” even if it means they are disappointed or frustrated at times. He also wants us to teach kids to give at a young age by giving a portion of their “commission” to the church. I’ll get to that in a minute.

While I don’t have kids, I have to agree with his advice here. This method of teaching kids about money seems far preferable to the approach taken by one of the members of our small group. This woman admitted that they have been giving their kids all the money they ask for for years. Now that the kids are teens, they have no real concept of where money comes from or what it means that there is no more. Now that the parents are trying to get their financial house in order, the kids are having fits because they aren’t getting what they used to. The woman is afraid that it might be too late to help her kids and I fear she may be right. It will be interesting to see, as the class goes along, whether this woman can get her kids to understand money.

Now, about the giving: In just two weeks of this class, the concept of giving to the church or “tithing” has come up no fewer than twenty times, both in Dave’s lectures, in the small group, and during the general administration/recap period that precedes each class. It’s also mentioned often in the workbook and in Financial Peace revisited. I understand where this is coming from. Dave makes no bones about conducting these classes with a Christian worldview in mind. As such, he urges people to give to the church. And the church where this class is taught would really like us to give there, so they also put in their pitch.

I don’t have a problem with the message per se, although I do wish it were uttered a little less frequently. However, if the concept of tithing bothers you, be aware before you sign up for the class that you will hear it often. If it bothers you, you can try to reframe it in terms of giving to an organization other than the church. The main point of the class is that, once you have enough money for yourself, it’s your moral obligation to give back to society. If that’s the church for you, great, but there are a lot of other charities out there that can benefit from your generosity that might suit you better.

My other growing beef with the lectures is the constant sales pitches. So far I’ve heard pitches for Financial Peace Junior for kids, Dave’s program that can be taught in high schools, the envelope system (of which we received a free version, but apparently there is a deluxe version that we can pay for), the website (that we get for free for now, but we’re encouraged to pay when our free membership runs out), and tickets to see Dave live. The workbook is peppered with ads for everything from Dave’s apparel and water bottles, to all sorts of other tools and books that we should consider. I get it. Dave is a business and needs to make money. But at the same time this is irritating to me because many of the people in the class are deeply in debt and don’t have any extra money to spend. Tempting them and making suggestions about things that can “help” them seems wrong, somehow.

When we moved on to small group, it was inspiring to see what a difference the quickie budget has made to most people in the class. Several people reported having already paid down some debts using money they freed up once they did the budget. Several more people reported that, now that they can see where the money is going, they were able to trim their spending and save up large amounts of money already. One couple got paid just as we were beginning the budget and they were able to save $390 out of that paycheck. That’s more money than they’ve ever had in the bank before. When they added the proceeds from some sales of unneeded stuff, they had managed to accumulate close to $500. They are halfway to their emergency fund in one week. Other couples had similar stories. The point is that seeing where the money was going gave them some control. So far, the plan is working for many people.

As for me, I’ve managed to put away about $50 in coupon savings that I transferred directly to savings, plus I racked up about $65 from some rewards programs, rebates, and found money. I sold a few DVD’s we no longer watch and made another $20. I didn’t count my regular contributions to savings because those aren’t “new” to me. I’m trying to come up with $1,000 of money as though I didn’t have the extra income to just put it away easily. I’m at $135, although next week I should get some more because I have some payments for side work coming in.

Another story emerged in small group that I’m interested to follow. One couple has about $35,000 in debt, not counting the house which has an ARM that is about to reset. They don’t know what to do next, but even as the husband is recounting all of this, I hear an element of pride in his voice that he has a big motorbike in the garage, that he dresses well and travels often, and that he refuses to eat leftovers. Even as he admits that these things and habits are causing some of their financial problems, I can tell he does not yet want to change. He takes pride in consumption and it’s not something he seems willing to give up just yet. The wife says that the class was her idea. It will be interesting to see if the husband comes around to her way of thinking.

Next week we’re supposed to get into hard core budgeting with a detailed budget. This week for homework, in addition to reading, we’re to start saving all of our credit card offers that we get in the mail. At the end of the class we’re going to tally up how much potential debt was offered to the class. I probably won’t get many since I opted out long ago from the mailing lists, but I still do get a few that I’ll put aside. I’ll keep saving up that $1,000, too.

Next: Dave Ramsey Financial Peace University: Week Three