What Do You Really Need?

February 24, 2017

I try to maintain a calm demeanor in most circumstances. Even-keeled would typically be a good descriptor for me. But some things are worth really getting excited about.

When I saw the headline “Nation’s Bacon Reserves Hit 50 Year Low as Prices Rise”, I was no longer so calm, cool and collected. “ARE YOU KIDDING ME??? WHAT THE ***??? YOU CAN NOT BE SERIOUS!!!” That’s just a small and sanitized version of the words that came out of my mouth.

Bacon is good! Most things are better with bacon. (I’m part of the crispy bacon fan club. I don’t like it under-cooked.) But…I digress (which bacon always makes me do).

The good news is that we are in no danger of running out of bacon, which the article points out toward the end. It just took a wee bit of calm to come over me to process that little tidbit. I can’t imagine a world without bacon, and I’m glad that I won’t be forced to live in it. The thought of that, if only a fleeting thought, made me ponder the concept of living without things…and living with too many things.

For most of the developed world, we live in abundance. We don’t have to stalk our prey and kill it in order to eat. We head to the grocery store and come home with bags or we hop on our phones and order take-out. We sit on furniture and have to figure out which of the many articles of clothing in our closets we want to wear on any given day. Painting with a broad brush, we in the United States live in abundance right now.

Yet, that abundance creates some issues. Our near constant state of abundance helps create an instant gratification society, which leads many people to live above their means and incur a fairly sizeable amount of debt. It’s through over-spending that I see far too many people with near-crippling levels of credit card debt. 

When someone really wants to reverse that trend and get serious about paying off their debt and building wealth, I sometimes steer the conversation into the concepts of abundance vs. scarcity. The “what do we REALLY need?” question is a fun one to ask. It helps to re-frame the conversation.

In an effort to see if someone is receptive to a radical life change, I will ask (when the person seems like they are willing to engage in the discussion) if they’ve ever considered moving into a very low cost housing situation, selling most of their possessions and trying to live like a minimalist. Most people won’t ever consider that lifestyle, but for my deep debt conversations, it’s a starting point for things that they are willing to live without. (Bacon is NEVER one of the things I suggest living without.)

I know a lot of the personal financial press will talk about small ways to save money (give up Starbucks and pack your lunch), and I talk about that stuff too. But I like to start with the two biggest areas of spending in most people’s lives – housing and transportation. Most of the people I’ve met with who have large credit card balances (except those who incurred the debt because of job loss or medical expenses) pay 60-70% of their monthly income on mortgage/rent plus car payment and car insurance. I’m a big fan of keeping housing costs below 25-30% of take home pay and transportation costs below 10-15%.

If those expenses can be trimmed, progress can happen quickly.  Cutting back on some of the small things can add fuel to the fire. Going slightly minimalist and selling “things” at a yard sale or on eBay can simplify life and raise funds to pay off debt. It all adds up. But for me, starting the conversation with the biggest expenses creates the opportunity for the biggest results.

If you’re in debt and looking to get out, think about the things that you REALLY need and the things you could live without.  Start big! Look at the biggest expenses in your budget and challenge yourself to reduce them. And if you try to take my bacon, prepare to lose a limb!  

Why Is Your Budget Failing?

February 21, 2017

Why is my budget failing? My friend asked me this question a few days ago. She has been trying to budget for the last few years and just can’t seem to stay on track. I told her that I have found that there are some common reasons why budgets fail and if she addressed the following common reasons why budgets fail, she can become a successful budgeter:

1. Budget categories bursting at the seams. Years ago, I worked with a woman who was diligent about creating and tracking a budget but struggled to handle emergencies. When I looked at her expenses, I saw that over 50% of her spending was her mortgage and 30% was a car payment. There was no wiggle room to handle emergencies. Luckily, she was able to get a roommate and downsize her car. Consider reviewing articles like this one as a starting point as to how much to spend in each budget category.

2. Not sticking to your budget. A budget only works if you actually follow it. I always tell people that there are two parts to a budget. One is forecasting what your spending needs are for the month and the other is tracking. If you are not doing both then it will be hard to stick your budget.

3. Using the wrong budgeting system. Using the wrong budgeting can make budgeting feel like a dreaded chore. If you hate technology, use a budgeting worksheet and either a notebook to write down expenses or keep receipts in an envelope. If you are comfortable with spreadsheets then use Excel, which can do the math for you. If you want more features then explore the various online budgeting software programs and find out which best matches how you want to budget.

4. Unrealistic Budgets. My friend had a family of seven that wanted to budget $350 a month for food.  Considering she had five very tall teenage boys to feed, we decided that her budget was not realistic. If you find that you are constantly going over certain budget categories, consider increasing your budget and maybe using cash for purchases in that category. Also be honest with yourself. If a Mocha latte or a manicure keeps calling your name, just put the expense in your budget.

5. Not changing the budget with life changes. It’s rare that your spending is the same every month. As gas prices, food prices and your utility bills change, so will your budget. Be flexible and adjust your budget to accommodate changes in your expenses.

Now, these aren’t all of the reasons why budgets fail. But if you are struggling with your budget, the list above gives you a good starting point. With a few tweaks, most people can become budgeting gurus in no time!

How to Create a Budget After Divorce

January 10, 2017

It’s probably not going out on a limb to say that just about everyone knows of someone who either got divorced or is getting divorced. Over the years, I have worked with several people getting ready to divorce and I find many are unprepared for what life is like financially afterwards.  Going from two incomes to one means an overhaul of your finances and for some, a readjustment of their lifestyle. If you find yourself wondering how to put all of this together after a divorce, consider using the following tips to get you on the right track:

1. Know what money is coming in. Review payments you may be getting or receiving from your divorce and adjust your total income accordingly. Typically, child support does not impact your income tax whereas alimony paid can reduce your income and alimony received counts as income. If you are getting or receiving alimony, you can use the IRS tax withholding calculator to make sure you aren’t paying too little in taxes or giving the IRS a large tax-free loan

2. Know what money is coming out. Create a spending plan to account for how much money you need to have monthly to maintain your lifestyle.  Consider ALL  of your expenses beyond  mortgage/rent, car payments and debts. Typically, the most underestimated and forgotten are auto and home maintenance, groceries and eating out.

If you are not sure where to begin, consider using online tools at your bank to find out how much you have been spending. Most online tools will categorize your spending, so first consider adjusting the categories. Then choose a 30-90 period to see what your average spending looks like.

3. Know what the difference is. Subtract your income from your expenses to gauge if you can afford your current lifestyle. If you have a surplus, review your numbers to make sure they are realistic, you have a category for savings and you have a buffer (10% or greater) to account for unexpected expenses (better known as Murphy’s Law).

Also review how much you are spending in each category. For instance the guidance is for household expenses to take up no more than 25%-35% of your net income and auto expenses (car loan, insurance, gas and maintenance) should be no more than 20% of your take-home pay. If you are spending more in those categories, you may not have the cushion to lessen the blow of an unexpected expense. If you have a deficit, then you may not be able to afford your current lifestyle and expenses may need to be cut. This could mean downsizing to a less expensive home, a less expensive car and in some cases, a less expensive neighborhood.

Divorce is hard enough on its own. You don’t want it to cause too many financial problems as well. Taking the time to review your expenses after a divorce can go a long way into making the transition process easier.

Let’s Get Ready to Rumble…

May 24, 2016

I may have mentioned in prior blog posts that I am a huge boxing fan. There really was no choice. From the time I could crawl, I remember sitting in my dad’s lap watching boxing with my brothers and loving every second of it. (Unfortunately, I loved it a little too much and my teacher once called my parents about a boy I practiced my left hook on – mind you, he did dare me.) My earliest memories of television are watching Michael Buffer introduce the boxers and give his famous tagline,  “Let’s Get Ready to Rumble.”

When summer starts coming and the expenses start mounting, I often think of Michael Buffer’s tagline. Summer time is a rumble between my finances and ever-mounting increases in expenses. Initially, I just noticed that money was tighter in the summer time, not really being able to figure out why. After I discovered the power of creating a monthly spending plan and tracking my expenses over a number of years, I noticed a certain pattern began to emerge in my family’s spending and I was able to prepare for the increases in expenses.

Summer Camp – I live in the south so my kids are done with school and free daycare (public school) at the end of May. Even though they have after-school care and school activities, summer camp is still more expensive. If this sounds like you, consider contacting your daycare about sibling discounts, reductions based on income or early registration. Second, research the summer camps not only for the best fit for your children but for the best value. Consider using last year’s childcare expense as a starting point, divide it into 12 to get a monthly average and contribute that amount to a dependent care flexible spending account (FSA) if eligible so the funds can come out tax-free to pay for your childcare expenses.

Vacations – Make sure your summer vacation does not follow you for the next 6+ months in credit card expenses by saving for it now. Honestly assess your finances to see if you can afford to get away on a vacation or if an inexpensive staycation is a better financial fit. Consider using a  travel budget calculator to estimate your travel expenses. To come up with the amount of money you may need to save for your vacation, divide the estimate by the number of pay periods you have. From there, it’s a matter of setting aside the funds until your vacation.

Utilities – Depending on your climate, you may find your utility bills creeping up. I live in Atlanta and I find my electricity skyrockets in June. If you have a pool, your expenses may go up due to water and pool maintenance. Your water bill may also increase due to lawn care. Review your statements from last summer to estimate your costs for this year and look at where in your budget you may need to cut back to make up for the additional cost.

Holidays – I find Memorial Day, the Fourth of July and Labor Day to be expensive holidays because we typically do a day trip or a lot of activities on those days. Consider thinking through what activities you want to do. Will you be flying or driving? Will you need a hotel? Will you be eating out or munching on picnic foods?

Write down what you think the expenses may be. Add 10% for extras. Then break down the amount by the number of pay periods you have until the event and start saving.

Parties –  If you are like our family and love to cook and feed people then summertime gives you plenty of opportunities as well as expenses. All of a sudden, the patio furniture may need to be replaced and a new grill may be “needed.” Plan for the food and estimate the costs. Then divide the costs by the pay periods you have until the event to estimate how much you may need to save.

Gas:   Typically gas prices go up in the summertime. There’s not much you can do about the increases, but you can look on apps like gas buddy to look for cheaper gas. You can also use some of the fuel economy tips from the U.S. Department of energy like driving the speed limit or removing unneeded items from your truck or using cruise control to make your car more fuel efficient.

Consider thinking about the things you want to do and start saving for them now. One great idea I heard was to create a “summer sinking fund” that you use to save throughout the year so you have a pool of money available for upcoming summer expenses. Saving now, even in small amounts, will a long way into taking out the worry of summer expenses.

 

7 Things I Didn’t Do When I Was in Debt

May 11, 2016

It may surprise you to know that since graduating from college, I’ve dug myself out of credit card debt not once, but twice. The reasons I got into debt are best saved for future posts, but both times I got out because I reached a point where I basically put the cards away and settled in for the long haul of paying it off. In both instances, becoming debt free again involved some significant lifestyle sacrifices. Here are 7 things that I do today, some big and some small, that I DIDN’T do when I had debt:

1. I didn’t take cabs. One of the things I love the most about living in Chicago is that there are literally at least four ways that I can get from one place to another. When I was facing a $12,000 credit card balance while trying to build a business and working a minimum-wage retail job in 2011, I rode my bike everywhere. If I couldn’t ride, I took public transportation. Riding in a cab was out of the question unless my personal safety was in question. These days I’m more inclined to hop in a cab to save time or if I’m tired, but I still try to avoid paying to get from place to place if I don’t have to.

2. I didn’t go on vacation. This is a tough one, especially since I had a sense of YOLO exacerbated by the fact that I have some pretty major personal travel goals, but part of the reason I was in debt was due to meeting some of those goals. Sure I went places. Friends and family got married and I didn’t miss that, but I’ll always remember the time a close friend got married in Florida and while I attended the wedding, I was unable to extend the visit into a real vacation because I couldn’t afford the extra nights in a hotel or the time away from work. These days, we plan ahead for travel and don’t go if we can’t pay ahead of time.

3. I didn’t shop at Nordstrom. I honestly didn’t even know what the inside of a higher-end department store looked like until I was debt-free. If I needed to buy clothing, I shopped at discount outlets or Target. It didn’t feel right to me to spend money on luxury brands while I was still paying down debt. Now I’m more of a Nordstrom Rack aficionado but only if I can turn around and pay off the charge card the day after I shop.

4. I didn’t drink $12 per glass wine. When I went out with friends, I usually stuck to cheap beer or limited myself to one glass of wine before attempting to move the party to a BYOB situation. Nothing sucks up extra money like alcohol and while these days I can afford to be picky about what I drink, I definitely couldn’t afford to be a wine snob when I was debt-ridden.

5. I didn’t get my nails done. To me, having manicured fingers and pedicured toes is a luxury. And while no one can make my nails look as nice as a pro, this was not a “need” in my book while I was in debt. I did my own or occasionally traded my mom for a good foot rub. (We still do that!)

6. I didn’t get massages. I am well-aware of the health benefits of a good massage and during my years of credit card debt, a fair share of birthday and Christmas gifts were massages, but it was not something that I scheduled on a regular basis. If I could afford a massage, I could afford to pay more on my debt.

7. I didn’t get my hair colored.  I’ve been coloring my hair since the age of 25, and I really appreciate having a colorist fill in my roots every 6 weeks or so. Back in the day though, I did it myself with color kits purchased at BOGO sales at the drug store.

This is what worked for me and my values and it may not work for you. But if getting out of debt is a top priority, then I encourage you to take a look at where you’re spending your money and see if you can cut out one or two of these things in order to increase your payment. For motivation, plug it into the “New Monthly Amount” of the Debt Blaster calculator to see how much sooner you can be debt-free.

 

11 Easy Ways to Save Money Without Changing Your Lifestyle

May 02, 2016

Does saving more money mean you have to make big sacrifices? If you are trying to find wiggle room in your budget to apply towards important goals like retirement or paying off debt, the first place to look is at the easy hacks. Where can you cut expenditures without drastically altering your lifestyle? Here are some ideas, all of which I have personally tried:

Spend less on hair and nails. I live in NJ, where big hair and gel manicures aren’t just something you see on reality TV shows. That kind of primping at the hair or nail salon is expensive.

Switch from coloring your hair to less frequent highlights and you can save $100 per month.  Doing your nails at home can save another $40-$50. For guys, switching from a salon stylist to a barber can save you another $40.

Give up restaurant beverages. Drink water instead of soda or alcohol and you can save 10-20% on the cost of eating out. If you eat out frequently, including lunch at work, you don’t even have to do this all the time, just most of the time, to see big savings. Your employer doesn’t provide beverages at work? Bring your own from home instead of using the vending machine or corner convenience store.

Join the library. I once had a Very Serious Book Habit. I adore book stores, read voraciously, and could easily spend $150 per month or more on new books and magazines. If I didn’t like the book enough to keep it, I’d trade it in for store credit after I was finished reading it.

I reduced my book buying habit reluctantly. First, I gave up magazines in favor of the library copies and then I made a concerted effort to also read library copies of those books I was pretty sure I didn’t want to own. I now use an e-reader and buy fewer printed books, which has cut my book buying considerably.

Go from two cars to one or even none. Do you really need two cars?  Maybe, but maybe you don’t.

Try living with one car for two weeks and see how you do. Can you take public transportation, carpool or catch a ride to work from your spouse? You may find it’s less painful than you expected. Giving up a car can save you as much as $700-900 per month. I know because I did it myself.

Shop for insurance. You may be able to save by changing your home and auto insurance. Every few years, shop around to compare coverage and prices. The right coverage could save you $100-$200 per month.

Host a swap party. Clothes, accessories, toys, holiday cookies, unopened gifts, books – almost anything could be swapped! What is unwanted to you could be valuable to someone else and vice versa. For more tips on hosting a clothing swap party, see this article.  The same principles can be applied to any swap or exchange party.

Share babysitting. A reliable babysitter can cost $10-15 per hour in my area. Babysitting during a night out with your spouse adds $40–$90 to the total cost of the evening.

What can you do if you don’t have family to help? Form a babysitting club to trade nights out with your friends. You watch their kids one time and then they watch yours the next.  Some friends I know took it a step further, forming a neighborhood group. Once a month, one family hosts a pizza/movie night at their home, while all the other parents get a night on the town.

Fill up at the cheapest gas station. Our neighborhood suffers from zip code inflation in gas prices. A favorite hack of my husband, Steve, is to take a certain route home from work that passes a less expensive station and fill up there. The result? He spends 30 cents less per gallon.

Quit the gym and mow the lawn. Another one of Steve’s hacks is that he thinks of yard work as his personal exercise program. Instead of paying a gym membership, he mows the lawn and chops wood, doing something every day as his workout.

He decided he wanted to do this on purpose, even though we planned for landscaping in our budget. Did I mention we live on top of a hill and have three acres and abundant trees? Needless to say, he is very fit, and our bank account is fatter.

Stock a snack box. How many times a week do you pick up a snack at a coffee shop or store? Those lattes and muffins can easily add up to $3-10 per day. Add in kids, and a quick trip to Starbucks is twice as much. Keep a well-stocked box in your car and your office with easy snacks.

Not ready to give up the coffee shop coffee? I don’t blame you. (I am a fan.) Consider ordering a less expensive version, such as an iced coffee instead of a fancy coffee drink. You can save 50-60% on each cup.

Fill a gift closet. If you have kids, you know that birthday party gifts can cost upwards of $100 per month. Plus there are always hostess gifts, teacher gifts, office gifts, etc. It’s easy to forget those expenses, but they can really eat into a monthly budget.

Set a maximum amount you’ll spend on them for the year and then shop in advance. We recently bought 8 ultra cool birthday presents on Woot.com for only $80! Stock up on inexpensive small house presents and interesting wines when you see them on sale so you’ll always have something to bring when you have dinner with friends. Better yet, shop for holiday gifts right after the holiday season has ended, often for 75-85% off.

Do you have an easy way to save money without changing your lifestyle? Please email me at [email protected]. You can also follow me on Twitter at @cynthiameyer_FF.

 

 

Detox Your Finances

April 26, 2016

Every spring, I get the itch to clean. It drives my family crazy but I cannot stand clutter. If I see an item either not being used or not organized for a future purpose, I am probably throwing it away. The great part about my habit is that my family is scared to leave anything out so I rarely have to pick up behind anyone. My reasoning is that everything is either working towards a goal or working against a goal – in this case, clutter.

Finances can be looked at the same way. Either what you are doing is working towards your goals or working against your goals. This is a great time to detox your finances of anything that may be toxic to you reaching your financial goals. If you are not sure where to start, consider this as a starting point:

Did you get a big tax refund or owe Uncle Sam a check? The goal should be to break even – not give the IRS an interest–free loan or owe money. Use the IRS withholdings calculator for guidance on how much withholding to claim on your W4. This is extra money that could be used for financial goals like savings, getting out of debt or college.

Do you feel like your money goes into a black hole the second you get it? Consider detoxing your budget of expenses that are wrecking havoc with your finances. These are what I consider to be the most toxic:

Eating Out: This is like a vortex that sucks money from you. Consider bringing your lunch to work 2x a week. If you go out with friends, eat before and have a large appetizer or salad or soup

Cable: There are so many options today that make it easy to cut the cable cord. Consider streaming devices like Google Chromecast, Apple TV, Amazon Fire TV or Roku to stream TV and movies through services like Netflix, Hulu, and Sling TV so you won’t go into television deprivation.

Mobile Phone: Contact your cell phone provider about discounts on your cell phone package.  Another consideration is to use tier 2 carriers such as Cricket, Metro PCS, Boost or Straight Talk that generally work with the same cell phone towers as the bigger carriers like AT&T, Sprint, T Mobile and Verizon but at a fraction of the cost.

Are you looking to make a major purchase like a house or car? Get an annual free credit report from all three reporting agencies from websites like annualcreditreport.com. Once you get your credit reports, review them for toxic information using websites like Nolo.com. If you find errors, you can dispute them online. As you review, pay close attention to the following:

  • Review your personal information to make sure all of your information is correct – your name, Social Security number, marital status, etc.
  • Review the your account history to make sure that it is accurate.

Don’t just do spring cleaning. Take the time to detox your finances as well. It can help rejuvenate your New Year’s resolutions and help ensure that all of your finances are working towards your goals.

 

The Last 10 Things This 42 Year Old Mom Spent Money On

October 13, 2015

In addition to writing for the Financial Finesse blog, I also write for Forbes. One of the Forbes staff members, Samantha Sharf, laid her wallet bare and shared her last ten purchases. She then challenged other writers and readers to do the same. One of our financial planners, Scott Spann, took the challenge and shared his last ten purchases. Realizing first with horror that I am older than he is and second the need for people to see that we are not perfect, I took up the challenge to share my last ten purchases over the weekend: Continue reading “The Last 10 Things This 42 Year Old Mom Spent Money On”

All Good Things Must End

August 07, 2015

As an addict avid watcher of Game of Thrones, I always hope that the series will go on for as long as The Simpsons. But as we’ve all seen in our lives, eventually all things (good and bad) must end.This article discusses the potential end of the run of GoT. I guess we will all have to deal with a series finale at some point within the next few years. The good news is that with Breaking Bad, Walking Dead, Friends, Seinfeld, MASH, etc. (depends on your generation which one will most resonate), we have precedent in watching our favorite show end.  Continue reading “All Good Things Must End”

The Best Laid Plans…

May 14, 2015

Let’s face it. No matter how perfectly you plan your expenses, life will always throw you those unexpected curveballs that could wreak havoc on even the best of budgets. After all, it’s impossible to account for everything that could possibly happen to your life. I’m not just talking about the real emergencies like a broken car you need to get to work. There are also things like weddings to attend and your kid’s piano lessons…not exactly “emergencies” but not quite frivolous spending either. Here are some ways to prevent these expenses from derailing your financial plans: Continue reading “The Best Laid Plans…”

Should You Have an Anti-Budget?

October 16, 2014

A friend of mine recently sent me this blog post called “How the Anti-Budget Can Save Your Wallet.” The basic premise is that a traditional budget isn’t realistic for most people because they just don’t stick to it and it isn’t even necessary to have one. Instead, it suggests simply setting aside your savings first (at least 20% of your income) and just spending the rest without having to categorize each of your expenses. Continue reading “Should You Have an Anti-Budget?”

Are You in a Cash Flow Drought?

July 11, 2014

Living on the East Coast but working for a California based company, I get to hear about things that are newsworthy on both coasts. One of the more recent news items that I talked about with my CA coworkers was the drought that they are currently experiencing.  This article talks about the drought and what it has done to the price of water in California. Continue reading “Are You in a Cash Flow Drought?”

Show Me the Money — to Pay Down Debt

July 09, 2012

One of the common complaints I hear from people who are trying to get out of debt is they are financially strapped.  “How can I pay down debt when I can barely make ends meet?”  Since the economic downturn in 2008, overtime pay has gone away, salaries were cut and haven’t come back up, and those who lost jobs and found new ones are unfortunately getting paid less.  It’s tough to find extra money to pay off credit cards and other loans but it can be done. Continue reading “Show Me the Money — to Pay Down Debt”

What Can Superbowl Ads Teach Us About Financial Decisions?

January 13, 2012

I just read this article about NBC selling out all of its Super Bowl ad inventory.  $3.5 MILLION is the average price for each 30 second ad!!!  Wow, that’s a lot of money.  (Unless you’re in Congress where even $3.5 Billion doesn’t seem like a whole lot of money…..)  What do the companies who purchase these ads get?  A big audience and the chance to make a memorable ad that hopefully drives customers to purchase more of their product or use their service are their rewards.  But $3,500,000????  Really????  That’s a big expense for any company.  For some companies, it pays off.  For others, it’s not very effective.  So, spending money isn’t always the best choice!  (Are you listening, Washington D.C.?)  In our own lives we can incur big expenses.  The question we have to answer is if it’s the right choice. Continue reading “What Can Superbowl Ads Teach Us About Financial Decisions?”