The Best Apps For Tracking Spending

April 11, 2025

In my 16 years in the financial services industry, I have noticed an interesting phenomenon when it comes to spending plans (aka budgets – those terms will be used interchangeably in this post). Most people I coach understand the importance of tracking their spending to ensure they are spending less than they make. Despite that understanding, many people do not actually have a spending plan in place.

I hear a lot of reasons for this like, “it’s too much work,” “I don’t know where to start,” or “I’ve started to make a budget, but just never stuck with it.” Luckily in today’s age of technology, we no longer need to write out our expenses or plug them into a spreadsheet. There are a slew of apps that will help us see where we are spending our money and make sure that we don’t spend more than we make.

Let’s look at several of the more popular ones out there to see how they work and who they work best for (in no order of preference):

YNAB or You Need A Budget

www.youneedabudget.com

Cost: $14.99 per month or $98.99 annually after a 34-day free trial

How it works: YNAB is a pure budgeting solution – it does not offer other features like investment tracking or bill pay. Previous versions of YNAB were desktop-based apps, but the latest version is web-based. This means you can automatically connect your bank and credit card accounts to import transactions versus uploading files from your bank, and you no longer have to manually enter transactions to make sure they are all captured.

Because budgeting is all YNAB does, they provide a strategy using three rules to help you spend less than you make, pay off debt, and stop living paycheck to paycheck.

Who it works best for: Those looking for a more hands-on approach and who resonate with the three rules YNAB applies to their budgeting strategy. Also, those “budget purists” not looking for other features like access to credit scores and investment tracking will enjoy the quality of the budgeting resources.

PocketGuard

pocketguard.com

Cost: Free. Upgrades for an added fee.

How it works: PocketGuard connects to all your financial accounts and creates a simple budget. It focuses on what you have available for spending – aka what is “left in your pocket” for the day, week, or month. It does account for bills, spending, and savings contributions as well. PocketGuard also allows you to dig a bit deeper to track certain spending categories like groceries, clothing, or eating out.

Who it works best for: Those looking for a simple, bare-bones budgeting app.

GoodBudget

goodbudget.com

Cost: Free version or $10 per month ($80 per year) for an upgraded version

How it works: GoodBudget is a digital version of the old envelope system. Instead of carrying around an envelope with cash for each spending category, this app allows you to do that digitally. Each time you spend in a certain category, money is removed from that envelope. Once the envelope is empty, you can’t spend any more in that category.

It is not required to link accounts to GoodBudget, but you can upload a CSV file from your bank to populate transactions. You then create your envelopes and add money you earn or is already there. Then you fill your envelopes and track your spending from those envelopes. Not overspending becomes easier with the envelopes and allows you to save for other goals.

Who it works best for: Those who like the envelope system (it has been around for a long time because a lot of people have had success with it) and are looking for a digital way to use it. You can use the free version across two devices, so couples can stay on the same page. Remember, it only works if you stick to the philosophy of the envelope system – once an envelope is empty, you must stop spending!

Banking apps

Many banks also have budgeting tools and apps to help you track your spending and save for your financial goals. Some have internally developed apps, while others have acquired platforms. For example, Chase offers an app that tracks spending. These apps generally integrate with your bank account automatically. Check with your bank to see what tools they offer and test drive them to see if they work for you.

The bottom line

As you can see, there are a lot of tools out there to help you with your spending plan (this list is not exhaustive either). Each one works a bit differently and offers unique features and different pricing as well. Finding the right tool for you is critical in helping you develop your budget, and most importantly, stick with it!

Having a spending plan is so important to your financial well-being because it allows you to live within your means, avoid debt, and save for the things that are most important to you. If you have struggled to put one in place in the past, hopefully, this will help you renew your commitment to your financial goals. Happy budgeting!

The Ins And Outs Of Credit Scores

February 07, 2025

We sometimes view our credit scores the same way we look at household appliances or cars: we don’t think very much about how they work, but when we do, it’s usually because something has gone wrong and is causing us discomfort or inconvenience (often both). However, understanding how it works can help you maintain a better score (and better appliances) so when you need it, it will work best for you.

Here’s a closer look at what influences our personal credit scores and why this information is important.

Why does your credit score matter?

There is the obvious, of course. When you want to borrow money, good credit means you can get the loan you need and at a competitive rate. There are also some less obvious reasons to keep your credit score looking good, because your credit history can also affect:

Your ability to get the job you want
How much you pay for insurance
Renting an apartment or home
Paying a security deposit (or not) for utilities and cell phones

How credit scores are determined

Our friends at the credit reporting agencies here in the U.S. (Experian, Equifax, TransUnion) rely upon the following set of weighted credit behaviors when calculating credit scores:

Paying on time (35%) – Late payments hurt. Use your bank or credit union’s auto-pay feature to avoid late payments.
Utilization (30%) – Keep credit card balances below 30% of your credit limit. This is why carrying around a “maxed out” credit card hurts your score. Although keeping or opening a second card with a zero balance can help your overall utilization ratio, the maxed-out card can still hurt your score. Credit reporting agencies count your per-card utilization as well as your overall credit utilization.
Length of credit history (15%) – Having “older” loans and credit accounts helps your score because it indicates experience with managing credit. Closing older accounts and opening new lines of credit can lower your score because these actions reduce your average credit age.
Variety of credit lines (10%) – Having a combination of both installment loans (e.g., car or student loans) and revolving credit (e.g., credit cards) helps your score somewhat. However, this only accounts for 10% of your score, so opening up additional credit lines just to round out the mix isn’t going to help your score very much (and if not managed well, might hurt your score).
Number of inquiries (10%) – Whenever you apply for new credit (personal loan, auto, student loan, credit card, mortgage, etc.), this results in the lender performing a credit check. These credit checks are recorded on your credit history and can affect your score for up to one year. They only account for 10% of credit score, so the best practice here is to not open too many new lines of credit within a 12 month period.

Which actions and behaviors affect your score the most?

Whether you are trying to repair an iffy credit history or you simply want to make sure your stellar credit score remains that way, here is a breakdown of the major things we should and shouldn’t do in order to have good credit:

DEFINITELY DO:

Check your credit score for free at sites like CreditSesame or CreditKarma. Checking your own credit score does not count as an inquiry and will not lower your score.
Pay the bills on time, every time. This action alone affects your credit score more than anything else.
Keep revolving balances (credit cards) below 30% of the borrowing limit. Aim for paying them off in full every month so you don’t carry a balance and pay interest on it every month. Loan balances have the second largest impact on your credit score.
If you miss payments and a loan is sold to a collection agent, pay this off as fast as you can, even if it means selling possessions or taking on an extra job. Collections items are like a heavy anchor on your score and constitute a financial emergency.

AVOID DOING:

Opening additional lines of credit if you don’t need them.
Opening several new lines of credit all at once.
Ignoring late notices. The next step is often a call or letter from a collection agent (and a nosedive for your credit score).
Paying someone to “repair” your credit. This is an additional cost for doing something you can do yourself.
Borrowing from your retirement plan at work (401(k), 403(b), etc.) to pay off debt balances. There are exceptions, but avoid this unless you are facing more serious consequences, such as filing bankruptcy.

Like any good financial habit, creating and maintaining a healthy credit history (and therefore, a healthy credit score) requires some knowledge and effort. Fortunately, the two criteria that carry the most weight – paying on time and limiting balances – are well within our control.

How To Prioritize Debt Payoff Against Your Other Priorities

February 06, 2025

Whether it’s student loans or credit cards, it’s tempting to want to make paying off debt your top priority, but should it be? In some situations, other goals might come first. Here are some questions to ask yourself:

Am I able to pay essential expenses?

If you’re in a really tight financial situation, make sure you can pay your rent/mortgage, make your car payment, keep food on the table and the lights on even if that means falling behind on credit card bills. Instead, see if you can negotiate those debt payments, work with a credit counseling service, and possibly consider bankruptcy protection.

Do I have adequate emergency savings?

You want to be able to pay your essential expenses in the future even if your income is reduced by a job loss. That’s why financial planners generally recommend your first savings goal should be to build up an emergency fund that covers at least 3-6 months of necessities.

Am I contributing enough to my retirement plan to get the full match?

If not, don’t leave that free money on the table! Even paying down high-interest debt can’t compete with a guaranteed 50-100% return from getting your employer’s match.

What’s the interest rate on the debt?

If the interest rate is above 8% (like most unsecured consumer debt such as credit cards), you’re probably better off paying down the debt before saving or investing for any other goals (except the above) because there’s a good chance you’ll save more in interest by paying down the debt than you’d earn by saving or investing that money. If the interest rate is below 6% (like a lot of secured debt, such as mortgages and car loans), you are probably better off investing extra money. That’s what’s called “good debt” because the interest rate is lower than what you are likely to earn on your investments in the long term. If the interest rate is between 6-8% (like a lot of student loans), you can go either way.

Once you’ve decided to prioritize paying down your debt, pay it off fastest by putting any extra payments towards the highest interest debts first. As each balance is paid off, you would then put those payments towards the remaining debt with the highest interest rate. You can use our Debt Blaster calculator to keep you motivated by seeing how quickly you can pay the debt off and how much interest you will save with this strategy.

Is It Ever OK To Borrow From Your 401K?

February 05, 2025

Ideally, never…or at least rarely. Plundering our retirement piggy banks can be tempting when a financial emergency arises or perhaps when we are looking for cash to finance a home purchase or to pay off some high interest credit cards.

Although IRS rules do allow for retirement plan loans, the maximum loan size is either (1) the greater of $10,000 or half of your vested 401(k) balance or (2) $50,000, whichever is smaller. While borrowing from yourself in this way can be convenient and seem relatively harmless, this type of short-term fix may have some long-term consequences that are more expensive than we realize.

401(k) loans seem attractive…at first. On the one hand, borrowing from our company retirement plans is tempting for several reasons:

No credit check is required and consequently, it will not affect your credit score.
The interest rate is potentially lower than that of a traditional loan.
You pay back the loan conveniently through payroll deduction.
You are borrowing your own money and paying yourself back with interest. Where’s the harm, right?

Then things can get ugly. A closer examination of exactly how all of the moving parts work as well as some of the things that could potentially go wrong might lead you to conclude that getting a bank loan, borrowing against home equity, selling other assets, or even borrowing from family might be better for you in the long run. Here are some of the reasons to think twice before taking out a 401(k) loan:

You will pay taxes on the same money twice. It is true that you pay yourself back with some interest, but you also use after tax dollars to make those interest payments. In the future, when you spend your pre-tax 401(k) money in retirement, those future interest distributions will be taxable as ordinary income, meaning you actually pay taxes twice on that money.

Lost growth and compounding. The money you borrow from your 401(k) is temporarily removed from the underlying investments, missing out on any market growth, interest, dividends, etc. The double whammy comes from the missed opportunity for this growth to be reinvested and earn even more through compounding, which is the financial superpower that comes from investing – and staying invested – over time.

Treating your 401(k) like an ATM. Once you dip into your retirement stash and use it to relieve some type of financial pain, you can begin to slide down a slippery financial behavior slope. Having rewarded yourself once with a relatively easy source of cash, you run the risk of training your brain to think of this strategy as a reasonable substitute for creating and maintaining better financial habits, such as regularly saving cash in an emergency fund, sticking with a budget, or increasing your retirement plan contribution rate. Staying faithful to healthier financial priorities helps you avoid disturbing your retirement plan’s progress by treating it like an automated teller machine and dipping into it multiple times.

Less take-home pay. While you are repaying your loan, your paycheck will be reduced by the amount of the loan repayment. If your cash flow was tight before raiding your retirement fund, you may soon discover that it becomes even more challenging with a reduced paycheck.

Severe taxes and penalties. If you leave your employer for any reason – whether it is your idea or if your employer fires you – you might have to repay the entire remaining loan balance within as little as 60 to 90 days. This requirement varies from plan to plan. Some company retirement plans allow you to continue making the scheduled loan repayments without having to pay it all back early.

However, your payments obviously will no longer come from payroll deduction once your job ends. If your period of unemployment is lengthy, you might not be able to keep up with the required repayment schedule.

Once you default on a 401(k) loan, the IRS then treats any remaining balance as a taxable distribution. If you are under age 59 ½ at that time, there may be an additional 10% tax penalty for taking an early withdrawal from your retirement plan. What was once a temporary financial fix could quickly become an expensive tax bomb.

**It might be okay to borrow once, if:**

You have high interest rate (think double-digit) debt and you have exhausted all other opportunities to refinance or negotiate a lower interest rate. The ongoing challenge will be to reduce any temptation to begin using the same high interest credit cards or loan sources again and recreate the problem. Once you pay back the 401(k) loan, take that monthly loan payment you were making and redirect it to a savings account at your bank, building up an emergency fund you can use for future financial emergencies, rather than raiding your retirement plan like a pirate.

You owe the IRS back taxes. With interest and penalties stacking up on overdue taxes, this financial burden can become very serious over time. In this case, a 401(k) loan might be your saving grace. However, you may qualify for relief under the IRS guidelines for alternate payment plans and hardship.

You are in real danger of defaulting on a student loan. In most cases, bankruptcy is not an option for these.

You are facing imminent bankruptcy or eviction from your home. Talk to a nonprofit consumer credit counselor (nfcc.org) about alternatives to bankruptcy. If a 401(k) loan can buy you some valuable time while you restructure your cash flow and other investments to support a sustainable strategy and repay your 401(k) loan, this might be an appropriate financial move.

The important thing to keep in mind regarding loans from your retirement plan is to make sure you address the underlying need for cash rather than simply assuming the 401(k) loan will solve the immediate problem. Otherwise, you could find yourself on an unhealthy financial treadmill where you repeatedly borrow from your 401(k) and begin to seriously jeopardize your ability to retire on time, comfortably, or both.

A good way to see just how damaging and expensive a retirement plan loan can be to your financial future is to use a 401(k) Borrowing Calculator. This calculator shows how much less money you may have for retirement if you borrow from your retirement plan versus not taking out a 401(k) loan.

Bottom line: make sure you have carefully considered all other alternatives before you undo much of the hard work you have already invested in growing your retirement nest egg.

This post was originally published on Forbes.com, August 3rd, 2017.

Here’s Why You Need to Stop Measuring Your Financial Progress Against Your Income

February 05, 2025

Did you find yourself looking at the total income amount on your tax return for last year and thinking to yourself, “Well, I certainly don’t FEEL like I make that amount of money?” You’re not alone. One of the most self-destructive financial beliefs that I see as a financial planner is people justifying living outside their means because they have the idea that someone who makes what they do should be able to have the things that they want. Here’s the thing: they were already living like they made this amount of money before they got there.

They find themselves in debt because they just couldn’t wait to have the new house with the furniture and that amazing vacation to Italy. Then they had kids who now have all the gadgets (and of course, they need a comfortable, stylish car to drive them around in). Sound familiar? Welcome to the club!

So now that they’re here, stuck paying off the stuff they bought when they borrowed against this higher income they knew they’d eventually make, they find themselves struggling to prioritize paying off that debt versus saving for college, a bigger home for their growing family and retirement. And as they struggle, they keep up the cycle of revolving debt, postponing taking care of the stuff that seems so far off. (Perhaps the first 15 seconds of this classic Queen song will help explain.)

So here’s the thing. In order to get on track and really start to feel like you’re making the better income level you’ve achieved, you need to spend a couple of years living like you’re making less to pay off that debt. It’ll be tough, but it’s doable. The blogosphere is packed with people who paid off tens of thousands of dollars in debt and they can’t wait to tell you about it. I’ll save you the reading and break it down into these three non-negotiables:

Non-negotiable #1: GET THE MATCH. If your employer has a 401(k) match, you should save at least enough to capture the match even if you could potentially lose it if you leave the company before it vests. Worst case scenario: you leave the job and lose the match, but you still get to keep the money you saved for retirement. Future you thanks you profusely and compound interest is excited to get to work for you.

Non-negotiable #2: STOP USING CREDIT CARDS UNTIL THEY’RE PAID OFF. I’ve seen too many people try to juggle paying off the new charges while also paying down balances and end up getting deeper and deeper in debt until they had to enter a formal debt management plan to get out of it. This could mean a few months of pain while you adjust to only spending the cash you have on hand, but it’s the only way you’ll see the light at the end of the tunnel. Make your credit card payment a fixed amount, then use the Debt Blaster calculator to pay it off. Once the debt is gone, you’ll already be used to not spending that amount of money, so you can use it to turbo-charge other savings goals.

Non-negotiable #3: GET A LITTLE NEST EGG SET ASIDE. There are personal finance celebrities who would say differently, but you need to have some savings set aside while you pay off debt or you risk sliding right back down the next time something unexpected pops up. When I started digging out of my debt hole in my 20’s, I also started saving $25 per paycheck into a separate savings account. I used that money if my only alternative was credit cards (read: a real emergency like having to buy a plane ticket for your grandma’s funeral, not a sale on your favorite Lulu® pants).

It won’t be easy, but it will be worth it. And keep these Jedi money mind tricks in mind to keep you from straying from the plan.

Insider Tips: How To Work with Your Creditor to Adjust Payment Terms

January 21, 2025

When you’re having trouble making payments on your debt, you may feel like throwing in the towel and ignoring the bills and calls. That’s understandable, it’s a lot of work to figure this out. However, in the long and short term, it’s worth it to stay on top of things. Here are some tips to work with your creditors to help you stay afloat with as little damage to your long-term financial wellness as possible.

Be proactive

Contacting your creditors BEFORE you miss a payment is a best practice that’s often skipped. We often hear people are afraid that if they tell a creditor that they are having trouble that the creditor will require them to pay everything back right away; but that is typically the opposite of what happens. At the end of the day, the companies you owe money to want to be paid back – it’s in their best interest to help you make that happen, even if it means that it takes a little longer than the original plan.

Requesting a payment holiday

If you just need a little grace for a month and you’ve otherwise been on time with your payments, most creditors will grant you a “payment holiday,” meaning you can skip a payment without penalty. You’ll still pay interest on the amount of the skipped payment, which is the downside, but if taking a month off will help keep you afloat, it’s better than not paying. The most important thing to know about this is you have to ask.

Giving yourself a payment holiday by just skipping a payment without notifying your creditor is a late payment, and usually comes with a fee and often an increase in your interest rate. After a certain number of days, they can report the skipped payment to the credit bureaus, which will hurt your credit score for years to come. You’ll still owe the interest, so it’s best to ask. If you’ve already missed a payment, it still can’t hurt to call and ask about your options.

Tell the truth and stick with your story

You don’t have to give them all the details, but it’s helpful to tell the truth:

“My overtime got cut and we are in the process of making adjustments, but we don’t have any money to pay this month.”
“I was out of work last month due to a back injury, and I’m trying to get caught up.”
“The interest rate increase has made it impossible for me to keep up.”

Ask for your options and take notes

Different types of creditors may offer different options, so make sure you take notes on what you’re offered.

Mortgage payment adjustments

If you find yourself unable to make mortgage payments due to loss of income, you can ask for an application to modify your loan. There’s paperwork involved, but if your situation is long-term, a loan modification can keep you in your house with a more affordable payment.

Auto loan adjustments

You may not be able to modify your car note (although it’s worth it to ask), but you can usually request that your payment due date be changed to work better with your cash flow. Resist the urge to just mail in your keys – you’ll still end up owing the difference between what your car is worth and what you owe. If your credit has improved, you may benefit from refinancing your car note.

Student loans

If you have federal loans, look into different repayment plans to lower your payment. Private loans may be more challenging to negotiate, but many lenders will give you a few months’ grace period if you’re out of work and can’t pay.

Credit card debt adjustments

Beyond requesting a payment holiday, you may be able to request a change to your payment date if that will help with cash flow. You may be offered a debt settlement by your credit card company. Keep in mind that settling a debt for less than the total balance will lower your credit score, but if doing so can help you avoid bankruptcy or having the account go to collections, settling it is the preferable route.

Get everything in writing

While most of these techniques involve making a phone call, make sure you get any new agreements in writing before you act. Take detailed notes of your phone calls, including names or ID numbers of agents you speak with, as well as the specific terms you are offered. Also request confirmation in writing via email or regular mail. This will help you to ensure that the new terms are in effect and will also serve as proof if any creditors try to walk back their offers after the fact.

Consult a credit counselor if you feel you’re in over your head

If you find that this is too much to handle, The National Foundation for Credit Counseling (NFCC) offers free consultations and low-cost debt management plans– the counselors will basically do all of the above on your behalf. Be aware of anyone who suggests you stop paying or requires you to start paying them instead. Any company that reaches out to offer you debt settlement services or with promises of wiping debt out is likely to harm your finances more in the long term, even if they can offer short-term relief. Counselors through NFCC can help you understand the legal options available to you and make sure you aren’t taken by a scam that will make things worse.

The No-Tracking Budget

April 21, 2023

You don’t have to be a financial planner to know that one of the critical ingredients of financial security is having a budget, but knowing you need one and actually sticking to one are two different stories. We’re not here to lecture about why you should budget; let’s instead discuss a way to make it less painful. The purpose of a budget is threefold:

First, to ensure you are not spending more than you earn.
To figure out how much you can actually afford to save.
If you are spending more than you make or you’d like to save more, then it helps to figure out where you might be able to cut back.

Finding a way to stick to your budget

Putting together a budget is one thing. Sticking to it is another. Putting together is relatively simple, and while there are many tools to help, sticking to it is where most people give up. So let’s talk about that part, assuming you already know how much you need to spend each month on needs versus wants.

Stop obsessing over categories when tracking.

Confession: I can’t tell you exactly how much I spent dining out last month. And I can’t tell you how much I plan to spend on it this month. That’s because that number isn’t as important to me as first ensuring I cover all my other financial goals.

I can tell you how much I’m saving toward several small but significant financial priorities so that whatever is left over is what I can spend on things I can go without, such as sushi night, shopping, spa services, or Target. (Yes, Target is a discretionary expense for me, and don’t tell me you also haven’t discovered their magnetic carts that just attract things.)

By prioritizing the things I know I need to make happen financially, I essentially back into what I can spend on wants without any tracking beyond setting up an alert to tell me if my account dips below $100.

Make it automatic

I do this through automatic transfers set to happen each payday. I have a series of savings accounts, one for each financial priority, through an online bank that lets me set up as many different savings accounts as I want. It’s the electronic version of the envelope system.

My checking account for spending money is at a “bricks and mortar” bank, and I have a checking account for bills that’s also housed at the online bank. Here are some other accounts that you might set up:

Accounts to set up for the no-tracking budget

Monthly bills

Separating your known monthly bills into a separate account and setting them on auto-pay might revolutionize your relationship with money. This account is for things with due dates and relatively set amounts like rent/mortgage, cable, cell phone, etc. You may need to estimate for things like electricity and gas. I use the highest amount from the past year, which ensures I’m well-funded.

What isn’t this account for? Things you can pick and choose how much and when to spend each month like groceries, personal care, and even your dog walker. Yes, this is money you need to spend, but it doesn’t have a due date or a set amount, which defeats the purpose. This fixed amount would only fluctuate if you made a drastic change like moving, canceling cable, etc.

Emergency fund

Getting this account funded with three months of expenses was my top priority, so before I even opened another account, I saved as much as I could. Now it’s just there, accruing interest. I can’t over-emphasize the peace of mind this gives me.

What isn’t this account for? Things I forgot to include in my “oh crap” account, like expenses to stand up at a wedding, Christmas gifts for family, or a plane ticket for a funeral. Those are all important things, but they are not an emergency.

Car stuff

This account is for car-related things such as insurance, new tires, repairs, registration, etc. Once it’s paid off, I’ll transfer my monthly payment into this account too, so I can save to buy my next car with cash.

What isn’t this account for? Gas money – that’s discretionary and comes out of my spending account.

Pet Medical

Pet insurance can run from $10-$90 per month, and Consumer Reports found that it’s not worth the money for the average healthy pet. Instead, pay yourself the premium so that if/when an expensive injury or illness pops up, you have some money saved. It’s worth noting that most pets’ major expenses come when they’re older, so if you do this throughout their life, you should have a sizable chunk built up by the time you need blood work and x-rays to figure out what old age ailment they have.

What isn’t this account for? Pet food (spending account), pet-sitting (spending or vacation account), and routine visits unless you’re accounting for that with the amount you’re setting aside into this account.

Kid activities

If you have kids, then you know that their extracurricular activities can add up pretty quickly. Try annualizing the costs and transferring one-twelfth each month to ease the burden of sign-up and gear-up season.

What isn’t this account for? Clothing, toys, everyday family expenses – try to isolate the “extra” stuff in this account, which can be a way for spouses who may disagree about how much to spend on this stuff to keep tabs on it in an agreeable way.

Depending on what’s important to you and what you want to better control your spending on, you may have other accounts. For example, my friend with a side gig has an account where she puts 20% of her income aside to have enough at tax time.

It takes some work to set up these accounts, but it’s worth it.

Real Results

I shared this system with a colleague of mine who is a busy mom of two young children, and her email to me says it all:

“I just wanted to say thank you. I’ve separated all my fixed bills through those accounts and set up a few savings accounts for shorter-term larger dollar items – Christmas, home improvements, and travel. That way, we don’t have to either put off those things or feel guilty about spending money on them.

Plus, I set up accounts for the girls for them to earn money and use on toys or whatever, and the transition of seeing the numbers is easier for them because they are still learning math and identifying the value of the paper/coin money. So, they earn it in cash, then we add it up and deposit it into our bank, and I transfer the money to their accounts.”

If you’re having trouble sticking to your budget, why not try it? What will your accounts be? Customize it to your life, and just make sure you’re also being deliberate with any “extra” money you find by trying this process!

Why You Should Start Saving NOW

March 20, 2023

Pretty much every personal finance resource will tell you that the earlier you start saving, the better off you’ll be. It’s a bit of a “well, duh,” thing, but there’s more to it than just the fact that you’ll have longer to save if you start early. The thing is, the earlier you start, the earlier you can stop saving if you want to.

That’s right. People who save aggressively in their 20s and 30s and then stop while they deal with other financial priorities like buying homes, educating kids, traveling the world, etc., may be better off than people who wait to start saving until 45 and plow money away until they’re 65. This concept seems a little crazy, so let’s do the math.

Compound interest effect

Let’s say you start saving at the age of 25, putting away $6,000 per year (that’s $500 per month or just $250 per paycheck if on a biweekly earning schedule), and then stop at the age of 45. At that point, assuming a 6% moderate rate of return (meaning you invest the money in, for example, a target-date fund aligning with your 65^th birthday), you’d have $231,020 saved. If you stop saving at that point and just “let it ride” until you’re 65, that amount could grow to $764,723, assuming that same 6% average performance over the years.

(You know that saying, “You gotta have money to make money?” That’s evidenced here. Your money makes money for you.)

Now let’s reverse that. Say you wait until you’re 45 to start and then decide you’re going to buckle down and save aggressively for the next twenty years. Then, to amass the same amount of $765,000 by 65, you’d have to save almost $20,000 per year (or $1,656 per month/$828 per paycheck).

In both scenarios, you’d be saving for 20 years. However, by waiting to get started, you’d have to save more than three times as much each month to get the same result. That is crazy! But the math doesn’t lie.

Tips to start saving

The challenge is finding the cash to get an early start, especially if you’re trying to pay off debt. However, the lesson here is that even a tiny amount of money saved early can significantly impact your future savings. So here are a few tips:

1. Always get the match in your 401(k)

That’s a 100% guaranteed immediate return on your money, and we’ve yet to find another legal way to achieve this.

2. Live within today’s earnings (aka don’t borrow against the future)

Our instant gratification society has us thinking that we need a posh lifestyle straight out of school. But that’s just a recipe for postponing financial independence. To stick to your savings priorities, you might have to live a bit minimalistic until you can afford more. It’s better to live frugally than to elevate a lifestyle to what it would be at a higher income.

3. Sometimes, it’s all in your head

Don’t rely just on willpower to save more money. Instead, try using money mind tricks to help you stick to your intentions.

4. Start small

Even if it’s just $25 per paycheck, it’s better than nothing. So that’s where I started. I then just raised the amount over time as my income increased and my debts decreased.

5. Use the auto-escalator tool

Check to see if your 401(k) plan has an auto-escalator. It’s a tool that lets you set up your contributions for automatic increases at set intervals. Try setting up a 1% increase each year to coincide with your annual raise so you’ll never feel a reduction in your take-home pay. A 35-year-old earning $50,000 who uses the auto-escalator to go from 5% to 15% over 10 years will have more than $250,000 extra saved at age 65.

The numbers don’t lie. If you’ve been thinking that you’ll wait until you feel more like you can afford to save, it’s time to shift away from that mentality. Starting early, often, and setting your savings on automatic is a way for you to make yourself afford it now.

3 Clever Ways to Trick Yourself Into Saving Money

February 24, 2023

I actually don’t think we have a financial literacy problem in America as much as we have a financial wellness problem. Everyone I talk to on our financial helpline knows what they’re supposed to do to be more financially stable. But while knowledge is power, putting that knowledge into action is where the real trouble is. It’s the same thing with eating well and exercising. We know what we’re supposed to do, but we don’t always do it. Continue reading “3 Clever Ways to Trick Yourself Into Saving Money”

How to Prepare for a Potential Layoff

February 22, 2023

I recently spoke to a friend who was scared of getting laid off. She asked me how she could prepare for a layoff. The following was the guidance I gave her:

Stop paying extra on debts and start stockpiling cash.

I know this may sound counter-intuitive to many people, but if you are facing a layoff, you need as much cash to live on as possible while you look for work, especially if you have less than three months of expenses saved. Consider paying your credit card debt minimum and funneling as much cash as possible to a savings account. Also, consider earmarking any tax refunds to savings.

Review the budget and trim the fat.

This fat can be a cable or cell phone package with all the bells and whistles. You can ask for a cheaper cable plan or cut the cable cord altogether. You can choose a more affordable cell phone carrier or cancel a rarely-used subscription.

Contact creditors in advance to let them know of a potential layoff.

If you talk to your creditors before there is a problem, they can be more willing to work with you. Then, take full advantage of your potential layoff and ask your creditors for a reduced interest rate.

Review workplace benefits.

If you have accrued vacation or sick leave, ask if your company will pay you for unused time if you leave involuntarily. Have you had your annual checkup or been putting off dental work? Now is the time to take care of all your medical needs. See which benefits such as life insurance, long-term care insurance, and even some legal benefits are portable, meaning you can continue them after you separate from service.

If you have outstanding 401(k) plan loans, ask your plan provider how they handle loans during a layoff. Some companies will give you a short period to pay it back, and then the remaining balance counts as taxable income with a potential 10% penalty if you are under 59 ½. Other companies allow you to continue to pay your loan balance from your checking or savings account. In addition, medical saving plans such as HSAs can go with you, and you can use the funds for healthcare premiums while receiving unemployment benefits.

The key is to prepare in advance. If you are laid off, you have done the legwork to be financially prepared. If the layoff does not happen, you have built up savings and are in a great position to start re-attacking debt.

A Balanced Approach to Cutting Back

February 22, 2023

As a financial planner, I enjoy listening to other financial planners. I love when they discuss strategies to help people get out of debt and better manage their money. Although I agree with many of the money management strategies, it strikes me that some approaches are extreme. Additionally, many common strategies have little room for a more balanced approach.

For those knee-deep in a financial crisis, I agree that drastic financial cutbacks are needed to climb out of an emergency. There may be a better approach for others not in crisis but need ways to save and pay off debt. I always tell people to gauge what strategy will keep them consistent in paying off debts and saving more. The more extreme you cut back, the quicker you will reach your goals. However, you can still reach your goals and enjoy some of the extras in life with a little modification:

Cable and Streaming Services

I do agree that cable is a want, not a need. However, perhaps watching football or the Real Housewives of “insert city here” is one of the joys in your life. In that case, consider reducing your cable plan to a cheaper streaming service covering your most watched channels. Better yet, look at cable alternatives such as Sling TV or Playstation Vue, where you can watch your favorite cable channel shows in real time. Or rotate your “extra” streaming services so you’re constantly binging the hottest show.

Eating out

Again, if you are in a financial crisis and are seriously behind on your bills, you may have to eliminate eating out. However, if this isn’t the case, and you can’t seem to stop eating out, consider simply cutting back. If you spend an average of $20 eating out and cut it 2x weekly, that’s $40 a week, $160 a month that can go towards saving for emergencies or paying down debt. If you have a typical weekday at work that you work longer or a day where your kids have a lot of after-school activities, you could make those eating-out days (give yourself a budget) and still save towards your financial goals.

Entertainment

Consider some modifications if you are single and going out is your main social activity. For example, you can order an appetizer or a small salad if you eat before going out with friends. Your wallet will thank you. Better yet, skipping drinks with your meal or having only one cocktail with your friends can save even more money.

If you enjoy going to movies, check to see if your employer offers movie ticket discounts. Look for deals using websites like Groupon or Living Social, or search for dollar movies in your area. If you go to a big event, consider either not buying food since it is so expensive or getting the kids’ options, which are cheaper but still give you your food fix.

Cutting back doesn’t have to mean extreme deprivation. As you can see, you can still enjoy your life and save money. The key is looking for certain areas to cut back in and modifying the areas that matter most to you so you can save money with a more balanced approach.

What Is a Credit Builder Loan?

February 01, 2023

A credit builder loan is a tool to help people build their credit for the first time or repair their damaged credit scores. With a traditional loan, you receive a lump sum of money that you pay back over time. With this loan, you pay the bank or credit union over some time and then receive that money back as a lump sum. It’s almost like a reverse loan.

So, let’s learn more about credit builder loans below and who can benefit from this option.

What Is the Purpose?

This loan builds up your credit score by proving that you can make consistent payments over time. Payment history is one of the most significant factors related to credit scores. So, if you miss mortgage or credit card payments, your credit score can drop.

A low credit score tells banks that you are a high-risk borrower. They might deny loan applications or charge higher interest rates because of a low credit score. This means you pay more to borrow money.

By making consistent payments on your credit builder loan, you can increase your credit score and qualify for more loans and loans with lower interest rates.

How Does It Work?

When you take out a credit builder loan, your bank will set aside the designated amount you intend to pay in a specific account. You will make flat monthly payments for the duration of the loan (usually between six to 24 months). During this time, the bank will report your on-time deposits to the major credit bureaus, which builds your credit history. Once you complete your payments, your lender will give you access to the money.

For example, if you take out a $2,000 loan, you would make payments of $166 on the principal balance over 12 months. Your monthly payment would likely be higher than $166 based on the interest charged on the loan.

What Are the Risks and Rewards?

Every financial decision comes with its risks and rewards. The main risk with taking out a credit builder loan is missing payments. Your credit might worsen if you can’t make your monthly payments.

However, if you can make these monthly payments, you could build your credit while saving money. For example, you could take your improved credit score, and lump sum returned to you from the credit builder loan to put a down payment on a house or car with a more reasonable interest rate than you would have been approved for before your loan.

How Quickly Can You Improve Your Credit Score?

May 06, 2019

People often ask me how long it takes for negative information to no longer appear on a credit report and how many points they can see their score rise when that happens. The answer depends upon how “bad” your bad credit history is. Some credit infractions are more serious than others and will logically take longer to fix.

Fortunately, there are relatively few infractions that result in permanently bad credit, as long as you don’t become a habitual credit abuser. You might even be able to “repair” your credit history to some extent and improve your score faster.

Time is your friend

Assuming whatever took place that caused your credit score to nosedive (missed payments, collections activity, liens, judgments, bankruptcy, etc.) is no longer happening, time alone will begin to heal your credit score. Thanks to the Fair Credit Reporting Act, a statute of limitations applies to credit reporting agencies, so your prior credit indiscretions won’t be reported forever. More good news: the older a negative item is on your credit report, the less it drags down your score.

Here is a summary of what actions appear on your credit report and for how long:

2 years:

Credit inquiries, such as when you apply for a credit card, mortgage, auto loan, etc. However, only inquiries within the previous 12 months are included in your credit score. Conducting your own credit score inquiry does not affect your score.

7 years:

Late payments (from the date of the most recently missed payment)
Charged off accounts (from the original delinquency date)
Collections accounts (from the original delinquency date reported by the original creditor)
Foreclosure (from the first missed mortgage payment)
Civil claim judgments (from filing date)
Chapter 13 bankruptcy (from filing date)

10 years:

Chapter 7 bankruptcy (from filing date)

Forever:

Open accounts with positive payment history. This is a good thing! Continuing to add positive, on-time payment history can help offset some of the older negative activity.
Delinquent Perkins (student) loans
Unpaid tax liens (though reporting agencies may drop them after 10 years)

As you can see, if you do nothing other than keep good credit habits going forward, most negative credit activity can eventually “fall off” your credit report in 7 to 10 years. Consumers are usually in a bit more of a hurry to fix ailing credit scores, however, but what can they do? Your credit report is a history of previous activity (or inactivity). Once done, the historical record that is your credit report is more or less permanent for the next seven to ten years – or is it?

How to (possibly) remove negative items from your credit report

Although some negative credit history is there for the 7-10 year duration, there are a few things consumers can do to potentially remove negative credit activity sooner. Removing even a few negative entries could add up to many positive points on your credit score. The process will require some of your time and in some cases, money.

Here are some tips that might get some of those negative entries on your credit report dropped sooner rather than later, along with potential credit score improvements:

Late payments: If you made a loan or credit card payment late, the lender most likely charged you a late fee. They probably made an entry on your credit report about the late payment as well, which brings your score down. Call the lender and ask them (nicely) if they could remove that pesky late fee now that you are current on your payments. Often, when they remove the late fee, they also drop the late payment from your credit report. Potential credit score boost = 5-60 points.
Charged-off or settled accounts: These can be difficult to remove because, well honestly, you didn’t pay back what was owed. Subsequently, the lender wrote it off as a bad debt (and may have sold your bad debt to a collection agency). However, you might still be able to remove this blemish from your credit report in two relatively easy steps:
1. Offer to pay the lender or collector what is owed (or a smaller amount if you choose to negotiate your debt) in exchange for a letter stating you have paid the debt.
2. File a dispute with the credit reporting bureaus stating the account has been paid. Potential credit score boost = 15-75 points.
Auto repossession: This is a tough one. If your auto loan is with a smaller local lender, you might be able to dispute it with the credit bureaus. If the lender does not verify the loan status with the credit bureaus within 30 days, then under the Fair Credit Reporting Act, the credit reporting agencies must drop the item from your credit report. Keep in mind, this is not necessarily a permanent fix and it is a bit of a technical grey area (you did owe money on the vehicle, right?). However, if it does work in your favor (or when it falls off your report over time), the potential credit score boost = 30-80 points.
Bankruptcy or foreclosure: These are the biggies, and they are going to stay on your credit report for 7 to 10 years. No shortcuts available here. Once they fall off due to the time expiration, however, the potential credit score boost = 30-60 points.

Fortune favors the bold

While there are no guarantees that taking steps to repair your credit on your own can improve your score faster, what have you got to lose by trying? In case you are thinking about hiring a credit “repair” company to do it for you, save your money. Many of them will offer to settle debts at a reduced amount and/or dispute items on your credit report – steps you can easily do yourself.

3 Financial Tips For NFL Draft Picks

April 26, 2019

I love the NFL draft! Admittedly I’m a huge football fan so it’s a chance to geek out on all things football for days, but it’s more than that. The pure joy and excitement those guys show when their name is called and they get to walk across the stage, knowing that their dreams have come true really gets me – I just love it.

It makes me so happy for all of those guys (except maybe the ones drafted by the Patriots). OK, even the guys drafted by the Patriots – as a Chiefs fan, I can even concede that.

What we tell all the new draft picks

As the Financial Wellness partner of the NFL Players Association as well as the Players Trust (which is powered by the NFLPA for qualified former players), I look forward to getting a chance to be a financial coach to some of these guys. Before they head to their first rookie mini camp, I’d like to offer these three tips for all of those players getting the chance to live out their dreams in the NFL:

Go Beast Mode

Two of the greatest players of this generation are Marshawn Lynch (aka “Beast Mode”) and Rob Gronkowski (“Gronk”). They have more in common than just Super Bowl rings – they both saved every penny they earned in the NFL! Beast Mode and Gronk lived off of their endorsements while they were playing and were able to save all of their take home pay from the NFL. That has set them up for total financial freedom now that they’ve retired.

If you get some endorsement opportunities, maybe you can do this too, but even if you don’t, you can still practice this in spirit by banking your signing bonus – or at least half of it – then set your life up to live below your means with your salary.

Former Lions player Ryan Broyles is a great example of what that means: he gave himself an allowance of $5,000 per month, then saved the rest. Vikings QB Kirk Cousins had similar habits and basically set his family up for life by driving a used car and keeping his housing costs down.

In other words, you don’t have to spend everything you’re making to enjoy a baller quality of life – make a plan right now to bank as much of your salary as you can and I promise you won’t regret it.

You can have anything, but you can’t have everything

This is one of my favorite quotes from my good friend Dana. What she means is that it is perfectly OK to spend some of your money on things you enjoy, but make it something that really matters to you and don’t blow it all trying to have it all. If you love cars, then getting a nice ride may be a good reward to yourself, but that probably means you won’t be able to travel the world first class and party like a rock star (at least not in your first couple seasons).

So before you start spending money, think about what is the one thing that brings you the most joy so you can splurge a bit there, then stick to your savings plan in other areas.

Take your money as seriously as your health

If you hurt your knee and you feel like it’s serious but the doc says, “you’re fine,” what are you going to do? Most likely you’re going to get a second opinion. Do the same thing with your finances.

You are going to need a CPA for sure to make sure you’re good with the IRS and other taxing authorities, and in many cases you may also need a financial advisor to help with investing and budgeting. Have the CPA take a look at your accounts and the transactions and vice versa so that those two partners in your financial life can keep checks on each other.

If you decide to work with a firm that provides both to you, or one referred the other, consider calling one of our financial coaches just to make sure that you have some unbiased guidance.

You also need to make sure that they explain things to you in plain English – do not accept intimidation because you don’t know the jargon – most people don’t! If you need a translator to help educate you on the terms and what they mean in your language, we can do that too.

Congratulations to all of the players drafted this weekend and their families! You have beat the odds and made a dream come true. Best of luck in your career, in life and make the most of this opportunity!

Scammers Are Out There & Even Millennials Are Falling For Them

April 25, 2019

I recently read an article about how millennials fall for financial scams more than any other age group. Now, I’m not going to pick on millennials here, but it got me thinking about how prevalent financial scams are, especially if the generation who grew up doing internet research is falling for them.

How can we all protect ourselves from being scammed in this age of social media and online consumption? It can be a challenge when so much of life is shared online and so many of our purchases are made on computers and devices. Scams work because they look and sound legitimate and can catch us when we are not expecting it.

Common scams that people are falling for today

This is not an all-inclusive list, but some common scams include:

Phony debt collections – this can include people claiming you owe an outstanding debt from a credit card, medical bills, or even the IRS. This is especially easy to fall for if you actually DO have one of these things.
Identity theft – people can access personal information by hacking corporate records to access data they can use to steal your identity.
Impostor scams – scammers pretend to be a family member in an emergency to try and convince you to send them money to help.
Travel, vacation and timeshare scams
Mortgage and debt relief scams – more than one of my non-planner colleagues has forwarded an email about student loan relief, asking if the planner team thinks it’s legit and those things look real if you don’t do some digging!

Avoiding a scam

Scams most often present themselves through an email or phone call, although more and more are showing up as social media posts. Ever received an email from a wealthy person in some far-off country wanting to give you millions if you just wire them some cash to move the money to you? Or get a call from the IRS saying you owe thousands right now or they will have you arrested? Some scams may be easy to spot, while some may be tougher to identify.

Here are some great tips from the Better Business Bureau to help you avoid being scammed. In addition, know that the IRS does not call people to collect tax debts – they will send you a letter. And law enforcement does not charge you a fee for their services, so if you get a call from law enforcement asking for money, that is a huge red flag!

Trust your gut

I spoke with someone a few months ago who was in a panic because they received a call from a debt collector demanding immediate payment from a debt that was allegedly from several years ago. They had not received anything in the mail regarding this debt – another red flag. They could not recall ever doing business with this company.

We took a step back and went through the following steps to flush out if this was real or a scam:

Pull your credit report – if this was a real debt, it would show up on your credit report. In this case, it was not on the report.
Ask the creditor to identify the name, address and phone number of the company they are calling from – if it is legitimate, they will provide this information without hesitation. If not, they may avoid providing this information. Even so, do not discuss this over the phone! Request a validation notice be sent via mail – which they are required to do.
Ask them for the last four digits of the debtor’s social security number. If they provide that information – huge red flag! Real debt collectors are not allowed to do that by law.

After taking these steps, we spotted the scam and saved this person thousands. Trust your gut and ask questions!

By following the tips provided, you can protect yourself as much as possible from scams that are out there. Being diligent is the key and safeguarding your information makes it much harder for scammers to victimize you.

Stay safe out there!

How Much Can You Save By Improving Your Credit?

April 23, 2019

Once you understand all the things that go into computing your credit score and take steps to improve it, what does that really mean to you monetarily? Is it really worth doing all that credit management stuff?

Life can be short and uncertain, and we all have great experiences we want to enjoy while we can. As someone with many hobbies and interests (and a healthy credit score), I get it. But why make it so expensive by leveraging our financial futures? There are better (and cheaper) ways.

Iffy credit is expensive

Imagine if every day when you wake up and venture outside, you find $3. Every single day for the foreseeable future. You’d be pretty happy, right? Maybe not ecstatic, but three bucks is three bucks. What if you found $9 every day? How about $20? That’s between $1,000 and $7,200 in “found” money each year. Who wouldn’t like that?

Unfortunately, instead of finding these extra dollars each day many of us are needlessly donating (think “losing”) those dollars to interest paid on consumer debt (aka credit cards, payday loans, etc). And the worse your credit score happens to be, the more money you are giving away.

OK, but where do those number come from?

That $3 you could be finding each day? You are giving that away to the bank if you financed a loan with an “okay” credit score rather than an excellent score. If you are carrying credit card balances at high interest rates, you might be giving away another $9 per day, and your $20/day donation is likely going to your mortgage lender.

Let’s go shopping for a $10,000 personal loan payable over five years and compare to see just how expensive bad credit can be:

Credit Rating	Interest Rate	Monthly Payment	Total Interest	Cost of Bad Credit
Excellent (720 – 850)	13.9%	$232	$3,920	$0
Good (690-719)	18.0%	$254	$5,240	$1,320
Fair (630-689)	21.8%	$275	$6,500	$2,580
Bad (350-629)	27.2%	$307	$8,420	$4,500

The relatively small differences between monthly payments for each credit rating can be deceptive. With multiple lines of credit, these small amounts add up to big amounts and become the answer to the common question, “Where did all of my paycheck go?” If you want a real eye-opener, take a look at Credit.com’s lifetime debt calculator. Bad credit can end up costing you more than $200,000 in additional interest payments over your lifetime!

Start finding extra money now

Although a debt-free lifestyle is an admirable goal (and many people do achieve it!), modern life can make it challenging to get there. Along the way, however, there are plenty of steps we can take to reduce the interest bite, even if living debt-free is still a distant dream:

Review your current credit score using free sites such as Credit Karma or Credit Sesame. Looking at your own score will not damage your score, and you need to know where you stand in order to make improvements.
Complete the Debt Inventory Worksheet. Take a serious look at all of your loan balances and how much you are paying on them each month, including the interest rate.
Use a Debt Blaster Calculator or similar to see how making extra payments on your highest interest rate debt can help you pay off all of your debts even faster – and put those interest dollars back into your pocket.
As your credit score improves over time, contact your lenders and negotiate a lower interest rate while you continue to aggressively pay down balances.
Look for low-or-no-interest rate credit card balance transfer offers.

Committing to a debt makeover starts with having a plan. As you execute your plan and begin to accelerate debt payments, you get close and closer to a debt-free lifestyle, or at least a reduced-debt lifestyle. That can mean having several thousand “extra” dollars in our pocket each year and less stress and anxiety over those pesky loan payments.

3 Different Ways To Save Green By Going Green

April 22, 2019

Whether or not you think that climate change is an issue in today’s day and age, there’s no denying that there are things you can do to help the environment that can also help to save you money. Here are some ideas:

1. Consider the priority of Reduce, Reuse, Recycle

Many well-meaning environmentalists think that recycling is the end-all, be-all of going green, but it’s actually lowest on the list of priorities when it comes to preserving resources. Don’t get me wrong, recycle what you can, but it’s actually better to not even use the material in the first place. A few ways this applies:

Grocery shopping bags – Paper is definitely better than plastic because you can recycle paper easier, but even better is bringing your own bags. Not only is it better for the environment, but it will most likely save you money – most grocery stores give a discount for bringing your own bag and many cities are starting to tax bags as well! Here in Chicago, that’s $.12 per bag I save due to the $.07 tax and $.05 discount. (I keep my bags by the door in a cute bin, and also try to keep one in my purse and in my car in case I forget.)
Clothing – I’ve had little success shopping at thrift stores, but I’ve had great success selling to places like Buffalo Exchange or Plato’s Closet as well as using apps like Poshmark or thredUP to sell and exchange clothing, especially stuff I can’t wear anymore but that’s still in great shape. Sure, I could donate that stuff but a lot of it gets thrown away anyway or shipped overseas. Why not ensure it’s actually reused and also make some cash in the meantime (or save some if you’re buying)?
Glass jars – Many years ago when I lead a committee that started a recycling program for local bars in Cincinnati, I was surprised to learn that the reason more bars don’t recycle is that recycling plants don’t want all that glass – it actually takes about the same amount of resources to recycle glass as it does to make it new from sand. While it’s still better to put your used glass in a recycling bin over a landfill, consider re-purposing glass jars in your house as food storage containers. It’s better for your wallet (no need to buy containers) and even better for your health as reheating something in plastic may lead to increased cancer risk, while glass does not “leach” into your food when heated.

2. Compost, even if you don’t have a yard

I’ll admit that this one takes a little more commitment, but if you had told me 5 years ago when we moved into our condo that I’d have a thriving colony of worms that produces literally pounds of “black caviar” each year in my office, I’d definitely have given you a strange look. And yet here we are, and unless I pointed it out to you, you wouldn’t even know – it doesn’t smell and it’s totally contained in a storage tote.

Besides the obvious impact of keeping food out of the landfill, there are some financial benefits to this green practice:

I don’t have to buy dirt when it comes time to plant my summer garden, I just mix some compost in with last year’s dirt
It helps me grow healthier flowers and produce, so I don’t have to replace dead plants
I’m actually able to grow some produce in containers, which means I don’t have to buy basil, tomatoes, cucumbers or spinach for awhile
Less trash = less trash bags needed and less trash service
It’s a safe place to recycle shredded documents (remember that scene from Argo where they pieced the shredded photographs back together? Obviously I’m not that paranoid, but still…)
If I wanted to, I could actually sell my compost – we have a neighbor who sells hers for $20 per 8 ounces (did I mention ours is in a 15 gallon container? That’s almost $5k in worm poop!)

3. Turn off the lights and water and beware vampire energy

This one might seem old-fashioned, but even in today’s age of Compact Fluorescent light bulbs, there’s still merit in turning off the lights when you leave the room, let alone turning off the water when you’re brushing your teeth.

Vampire energy is a newer term, which refers to electronics that continue to pull power, even when they are off. For example, your Keurig, which keeps water hot all the time in standby mode, or your DVR which is always in ready mode to record the next episode of your favorite show. I’m not suggesting you unplug everything all the time, but knowing what leaches power, such as your printer which probably doesn’t need to be on standby all the time, or your electric toothbrush, which you might only need to plug in every 4th night to recharge, can save power and money.

And when you’re going out of town for awhile? Take a minute to walk around and unplug things like your wireless router, your smart speaker, your coffee maker and other devices you don’t need plugged in when you’re not home.

Most of these are small tweaks, but just like cutting out dining out for lunch a couple times of week can help, it all adds up. Plus, it’s good for the planet, global warming or not.

Should You Really Be Freaking Out About Your Student Loans?

April 19, 2019

I’ve talked to several people lately who were freaking out about their student loans. They were feeling like they were failing at money and this debt was going to be the death of their chances at financial security. Yet when we looked into the details of their budget, I couldn’t find the technical issue.

They were making their payments on time according to the pay-off plan and were able to afford the other necessities of their life without falling into credit card debt. They were even able to save enough to capture the full match in their retirement plans and generally speaking, they were doing great at money.

Student debt payments can be crippling for many, but not in these cases. This post is for those people who are able to make their payments but are stressed about having them in the first place.

Are we being brainwashed?

I realized that the psychological impact of the loans is what’s causing most of the stress, not the payments themselves. People become fixated on the total balance of the outstanding debt and lament how little impact payments have on a monthly basis.

And because they are bombarded with messages in the media about the “student loan crisis,” they feel like they should be in crisis. It’s true that student loan debt is our nation’s fastest growing category of debt, but the average payment has not kept up that pace and in most cases, the payment is manageable for borrowers. And when it’s not, there are ways to lower it.

It’s like a mortgage on your future

I’ve heard plenty of people comment on the fact that some students graduate with student loan balances as big as a mortgage, and it’s typically in the tone of, “Can you believe that???” And while I won’t argue that the cost of higher education can be appalling, I’d like to point out that investing in your education and investing in housing by taking on debt could actually be classified in the same category: both offer you the opportunity to get something you would be unlikely to afford for many decades if you had to save up, and both generally offer the opportunity to improve your lot in life if you make good decisions about what to invest in.

The thing is, no one ever calls me freaking out about how they need to pay off their mortgage ASAP. They recognize that it’s “good debt,” where you’ll enjoy the benefits of the debt for many years beyond when it’s been paid off. The same is true of your college education, perhaps even more so, assuming you chose a field that offers great career opportunities, as most of the people I’m thinking have done. The average college grad makes $17,500 more per year than someone with just a high school diploma, so I’d say it’s worth it.

When you still just want to make them go away

“That’s all good and well,” you say, “but I still hate having these loans.” I get it. When my loans kicked in, I had to get a roommate and push back some of my savings goals because I underestimated my living expenses and the impact of taxes when I signed my first lease and purchased my first car. But as the years passed, I continued to make those payments on schedule and their impact eased on my overall financial picture as I received increases in income and paid off other debts. Clicking ‘Submit’ on that last payment in the summer of 2014 was a financial milestone for sure.

In the meantime, here are some other things to think about and ways to prioritize to help take some of that psychological stress off yourself.

1. Make sure you’re first getting the match in your 401(k) as well as any matching dollars in a health savings account, even if it’s a stretch. A 100% or even 50% return on your savings outweighs the 7% or so you’re paying on your loan. This article by Ron Lieber from the New York Times makes a great case for saving while paying down loans. It can make a 6-figure difference in your end balance.

2. Before you choose your employer based on a student loan benefit, look at the whole picture. Is the salary lower? What effect will that benefit have on your overall financial picture? Is the amount the employer is willing to pay really going to make a huge difference in your payoff timeline? Are there better benefits at your other offers like a higher match, better healthcare options or free financial coaching to help you make a plan?

3. Reframe your thinking about your loan payment. Put it in the housing payment category as just another bill. The good news is that unless you spread your payments out over your whole life, it’s a bill that will go away sooner than a mortgage in most cases.

4. Think twice before you refinance and give up benefits that come with federal loans. It’s true that refinancing can lower your interest rate and therefore decrease the total amount of interest you’ll pay over the life of the loan, but be aware that you’re turning it into a private loan and giving up benefits like income-based repayment plans or even loan forgiveness if you work in certain public service jobs.

It’s worth noting that I refinanced my loans in order to lock in an interest rate that was less than half of what I was paying, therefore cutting my payment in half while also saving me thousands in interest. So refinancing isn’t bad as long as you know what you’re giving up.

The bottom line is to stop beating yourself up just because you HAVE loans. Instead, try to focus on what else you wouldn’t have if you didn’t have the education those loans funded and then just stick with the plan. It gets better. I promise.

How To Plan For A Successful Launch Of Your Side Gig

April 18, 2019

In today’s age, more people are creating a business of their own, often to supplement their main source of income. Not too shabby of an idea as you look for ways to accomplish your goals sooner like saving more for retirement or passing on a legacy to your family. Perhaps you’re simply looking to pursue a life- long dream of having a business of your own.

Timing is important

I spoke to someone that had recently started a business on the side that she was extremely excited about. She was considering taking out a 401(k) loan to help cover a season of lower profits – it wasn’t due to low revenue, because business profits typically aren’t extremely high when a business is in the new phase.

Her issue was that it was winter and wintertime for her type of business is a very slow season, yet she had opened her doors for business just before the season started. We spoke more and worked through the details to help her move forward.

How to plan for success right out of the gate

People have many amazing business ideas, and some have the courage to go for their dream. I’ve found that people sometimes forget how much market research along with having a solid business plan can help them succeed sooner than later. It’s important to anticipate things like:

Who is going to be interested in what the business offers enough to actually make a purchase?

What’s the best time to start the business?
When might you expect lower revenue?
How can you prepare for that?
How can you compete as your industry evolves?

The list goes on.

Questions to answer and plan for

What if the needs or wants of those your business serves changes? What can you do to anticipate that before it happens, and how will you prepare your business to evolve accordingly? How will you serve your customers’ current needs, while anticipating and proactively being ready to serve the needs and wants they don’t even know they have yet.

Where to find help getting started

The good news is that there are plenty of resources out there to help you learn these important aspects. Taking time to review this stuff ahead of time can save you stress, help you avoid having to take on unnecessary debt and could possibly even be the difference between a business that succeeds versus one that fails.

Check out this 10 Step Guide to Start Your Business created by the U.S. Small Business Administration.
Use SCORE to find a mentor in your area, get help with building your business plan, join workshops/webcasts across various business topics and more.
Learn from a fellow planner’s journey with his wife in starting a business.
Finally, here’s another encouraging perspective.

The secret ingredient to all successful businesses

Whatever you do, remember to believe in yourself – you possess everything you need to succeed, and the things you’re missing are out there for you to learn as long as you’re willing to commit. That’s empowering.

The difference between you and the people you see being successful in their business is that they went for it. Fail forward. One guarantee that you will fail is to never try. So, happy planning!