Tag Archives: saving

3 Tips to stay in the Money-Saving Mindset

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Everyone once in a while we need to know why we do what we do. This article is a short and sweet reminder help you stay focused on savings

3 Tips to stay in the Money-Saving Mindset

If saving money isn’t your strong suit, don’t worry. Changing your money habits will have its challenges, but with a little effort, you can stop making so many unnecessary purchases and start building a sizable savings. The first step is to think about your goals and priorities. Why do you want tosave money? You might be looking for the security of an emergency fund, hoping to spend less time working, or preparing to buy a new car. Recognizing what’s important to you will help you get to a place where saving money seems only natural.

1. Remember why saving is important to you

Here’s where your savings goals come in. Think about why you want to save money and take every opportunity to remind yourself. Talk about it out loud. Write it down. Even if your goal is as simple as saving for a single vacation, keep it in the back of your mind as you go shopping or seek out money-saving opportunities in your daily life. If your goal is to be a great saver in the long term, think about the financial freedom you will be gaining. It can be easy to concentrate on what you have to give up in order to save money, but if you shift your attitude to focus what you’ll get in return, it’s much easier to make the daily decisions needed to get there.

2. Hold yourself accountable

Budgets, spreadsheets, and shopping lists are enough to put the average consumer to sleep, but don’t be afraid to give this strategy a try. People who are already in the habit of jotting down notes or lists will likely be very successful making strict shopping lists and sticking to them. It doesn’t take much time, and it might save you the effort of trying to remember what you actually need when you get to a store. Once you make a reasonable budget for yourself, don’t stray from it.

3. When you get a raise, don’t increase your spending

It might seem natural to start spending a little more after a promotion. Maybe you start eyeing a larger apartment or some high-end gadgets. http://www.cheatsheet.com/money-career/3-tips-to-stay-in-the-money-saving-mindset.html/?a=viewall#ixzz3jEOhua00

6 Reasons Not to Be Ashamed of Your Frugal Ways

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Our society does a great job of labeling people that are different. Take a look at this great article from Yahoo that discusses the importance of FRUGALITY.

6 Reasons Not to Be Ashamed of Your Frugal Ways

A lot of people cry broke and whine about never having enough cash to get by, yet they’re not always willing to do what it takes to free up cash and save money. Being a frugal person is hard work. And if frugality doesn’t come naturally for you, resisting impulse buys can be a daily struggle, and you may go back-and-forth with whether to spend money on an item.

At the end of the day, a frugal mindset benefits your bottom line. So, while others may make you the butt of their money jokes, here’s why you’ll eventually have the last laugh.

1. This is who you are

We all have different money personalities. Some people are big spenders, whereas others hold onto a dime as if they won’t earn another. To each his own.
Just know that there’s a difference between frugal and cheap. Cheapness can affect the quality of your life, but frugality lets you enjoy the same qualify of life for less. Those who like to spend money might pressure you to loosen the purse strings. But if you’re not bothered by your spending habits, you don’t have to change your ways.

2. You don’t care about keeping up

If you’re committed to being frugal, chances are you don’t feel pressure to keep up with the Joneses or anyone else for that matter. We live in the age of financial peer pressure. This is a big problem in some social circles. If one friend buys a house, then the others are ready to upgrade. If someone wears designer clothes or buys expensive gadgets, then the others have to follow suit. It’s an exhausting cycle that not only reveals an impressionable mind, it keeps people broke.

3. It’s a financial necessity

Others might pressure you to spend money or make comments about your frugal ways. But if you’re frugal out of necessity, there’s no reason to be embarrassed or ashamed, especially since you’re willing to sacrifice more than a lot of people.
When dealing with money problems, some people want to save face, so they don’t make adjustments to their lifestyle. They continue with old habits, even if it further complicates their situation. A frugal person, on the other hand, does whatever it takes to save money so they can keep a roof over their head, food on the table and clothes on their back.

4. You might have a bigger bank account

This isn’t a guarantee, but if you choose not to spend your extra income, you’ll probably have a bigger bank account than those who poke fun at you. So, the next time you feel ashamed or pressure to adjust your frugal mindset, look at your savings account and consider how most Americans don’t have enough in their savings to handle a small emergency.

5. You can reach your goals sooner

You might have a long list of financial goals, but without a lot of extra money, it can take years to fulfill these goals. Being frugal speeds up your progress. If you reduce spending and free up cash in your budget, you’ll have income to pay off debt, save for vacation or prepare for retirement.

6. You’re teaching your kids good money habits

Kids often mimic the money habits of their parents. Remember this the next time you start feeling embarrassed about your frugality. If you’re an irresponsible spender, your children could imitate this behavior in adulthood with long-term financial consequences.

How to start your 2013 off the right way with a financial plan!

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Financial independence is a slippery idea.

It is hard to define. A simple Google search yields a fantastic amount of, sometimes contradictory, definitions. The best one, in my opinion, tells us that financial independence is when you have sufficient personal wealth to live indefinitely without having to work actively for basic necessities. Financial independence is even harder to put into practice; but it is not impossible.  It is much easier when you realize that becoming financially independent and amassing wealth is a slow process that takes time, self-discipline and most importantly a plan.  You must be consistent, create good habits to cut your everyday expenses, generate extra income, and put money into some of the following standard investments (i.e., stocks, mutual funds, bond, real estate, etc.) that can be beneficial to you now and in the future. With your time and effort what you are doing is developing a strategic plan that will begin to look like something. So now 2013 is here and you are wondering what steps you are going to take to start your 2013 off the right way to become financially independent with a plan, here we go: Create a plan and make sure you stick to it with. NO EXCUSES!  Before you create a plan make sure you understand the difference between Gross Income and Net Income. Gross income is your salary- the total dollar amount your employer agrees to pay you over a given time period. Net income is what you take home- the amount you earn after your employer makes deductions for taxes and benefits.  People make a huge mistake of budgeting from their gross income when they should be budgeting off of the net income. You must create your financial plan from your net income.  Having a financial road map that is generated from your net income will help you prepare your plan with numbers that will keep you out of trouble and make sure you are not unrealistically assuming you have money that you don’t have.  A financial plan based on your net income will also help you figure out how much you’ll need to retire and then help you determine how you’ll hit that goal on a weekly, monthly, and yearly basis. The goal of your financial plan is to look at where you are today and where you want to go. Then it sets out all the steps you need to take to get there: helping you create a budget, track where your money is going and reevaluate if your money is being spent strategically to help you attain your financial goals (being knowledgeable about how every dollar is spent, saved, or invested is crucial for staying on track). You will also need to make sure you understand how much you will need to retire. You can do this by talking with professionals or, if you are like me and pinch every penny, you can use free websites and calculators. You can type “How much do I need to retire” into Google. I believe that when looking to create an effective, efficient and compelling financial plan you need to identify and be specific with your financial goals.  Financial goals need to be created using the SMART system (Specific, Measurable, Attainable, Realistic, and Timely).  It’s not enough to say that you want to create an emergency fund you need to use SMART and say I want to create an emergency fund and have $7,500 in it by the end of the year by saving $150 out of each paycheck.  Being as specific as possible will make your financial plan realistic by putting measurable goals into the forefront of your plan. Not having a financial plan is not acceptable. Remember it is not about getting rich it is about becoming wealthy (on your own financial terms) and doing more with what you have. If you have no plan you have no progress. Not having a plan will create stress in your life. You’ll likely have more worries about money, you may not know where you are today or how to plan ahead, you could even lose control of your spending and fall behind on your bills, etc. So remember you would not take a long road trip without a map. In the same way, you need a road map for your financial future. A financial plan looks at where you are today and where you want to go. Then it sets out all the steps you need to take to get there. I hope the content above helps you start your 2013 off the right way with a financial plan.

The best way to start saving

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People think that there is some magic bullet to start saving but I’m here to let you know that there is no magic bullet when it comes to saving.  Saving money is not easy, but it is essential to achieving financial well-being and securing your future. Honestly it’s about setting realistic goals, prioritizing how you’ll manage your money and sticking with it. Below are some ideas to get you started with saving without feeling pressured.  It’s important to understand the difference between Gross Income vs. Net Income, creating goals: short and long term goals, creating a simple budget, saving (ER fund, 401K, IRA, etc), paying off debt, and enjoying life.

 1. Gross Income vs. Net Income:  People really need to understand the difference between Gross Income vs. Net Income before   they start creating a budget, saving and paying off debt. Gross income is your salary, the total dollar amount your employer agrees to pay you over a given time period. Net income is what you take home: the amount you earn after your employer makes deductions for taxes, benefits, etc.  People make a huge mistake of budgeting from their gross income when they should be budgeting off of the net income.

2.  Create Saving Goals:This is important to understand why and what you are saving for and how much you will need to achieve your goals.  Creating short and long-term goals will get you pumped and motivated about saving.  Short-term goals (1-5 years) may be: family vacation, buying a new car, buying a video game system, paying off small debt amounts.  Long-term goals (5 years-longer) are saving for retirement, buying a house, having a baby, paying off large debt amounts, becoming financially independent.

Your circumstances do not matter. It is important to realize  your goals and start saving for those goals.  Once your goals are identified you can begin making your dreams a reality. When your goals are clearly defined on paper you are more likely to make those goals come true.  Remember to start small and build up from there.  With goals outlined and attainable it will make it easier than you thought to save and achieve those goals.

3.  Simple Budget: It is crucial to create a simple budget to track your income and expenses.  My budget consist of no more than two columns in an excel spreadsheet:

                                            a)      Income

                                            b)      Expenses

Your budget may change throughout the year due to circumstances outside of your control.. I really enjoyed the following website about simple budgets:http://frugalandthriving.com.au/2009/creating_a_simple_budget/.

4.  Make saving automatic and effortless:  You should start out by saving a minimum of 5% of your income and make it automatic; the more you can save the better.  My savings are automatically taken from my paycheck so I don’t have to think about it.  Paying myself before I pay anyone else is an important concept to understand. The benefit of making your savings automatic is that you don’t see it; therefore you don’t miss it.  I have been using IngDirect to do this since 2002. Remember it’s not how much you save. It can be $5, $10 or $15 every time you get paid. It’s about making it automatic and effortless so it becomes a habit.

  1. Emergency fund: This is where you should first start. I recommend saving enough money to cover your basic living expenses for three to six months. The money in your emergency fund should be kept in an easily accessible savings or money market account so it is easily accessible if an emergency was to occur.  It is important to only use the money set aside in your emergency fund in the event of an emergency, such as your car breaking down, receiving unexpected medical bills, losing your job etc.
  2. 40lK or 403b Plan: If your employer offers a retirement savings plan, such as a 401(k) or 403b plan, sign up and contribute all you can. Your taxes will be lower, your company may kick in more, and automatic deductions make it easy. Over time, compound interest and tax deferrals make a big difference in the amount you will accumulate. Find out about your plan. For example, how much would you need to contribute to get the full employer contribution and how long would you need to stay in the plan to get that money.
  3. Roth/Traditional IRA: You can put up to $5,000 a year into an Individual Retirement Account (IRA) and you are allowed to contribute more if you are 50 or older. IRAs provide tax advantages. When you open an IRA there are two options:  a traditional IRA or a Roth IRA (you should talk to your financial advisor or research which  one is best for you based on your income). The tax treatment of your contributions and withdrawals will depend on the IRA you select. IRAs can provide an easy way to save, you can set it up so that it can be  automatically deducted from your checking/savings account and deposited into your IRA.
  4. Investing: If you are thinking about investing I believe you need to think about  how to buy rather than what to buy. You should understand that investing is risky and you can’t eliminate that risk but you can become an educated investor who makes informed decisions. Being educated about the market allows you a margin of safety and a cushion in case events go against you. Once you start thinking about investing in stocks, bond mutual funds, your first steps should be to talk to a financial advisor. You need to understand what type of investor you are and what risk you are willing to take.

5.  Paying off Debt:  Paying off debt is definitely going to mean making sacrifices and going without sometimes. It’s the sacrifice you make to live debt free. As a debt-free individual I can’t tell you how much pleasure I get from having no consumer credit card debt or student loan debt. It creates so much happiness and freedoms that you don’t get to experience with having credit card debt.  It is important to pay more than the minimum payment each month. Paying the minimum of the outstanding balance only prolongs the torture of paying the debt off.  The longer you keep your credit card debt the more you become best friends with the banks that you owe and of course the more you will owe them. The system that I used to eliminate my debt was simple I used the snowball elimination:

  1.   I listed my debts from lowest balance to highest balance and I created a timeline of when I wanted to have the debt paid off;
  2. I called my credit card companies on a monthly basis to have them lower my interest rate (most of my cards had an interest rate of 6.99% or lower);
  3.  I designate a certain amount of money to pay toward debts each month;
  4.  I paid the minimum payment on all debts except for the one with the lowest balance;
  5.  I threw every other penny I possibly could at the debt with the lowest balance;
  6. When I eliminated that debt, I did not alter the monthly amount used to pay debts, but what I did was threw all I could at the debt with the next-lowest balance;
  7. This method allowed me to become DEBT-FREE.

*While trying to become debt-free remember to try and live as frugal as possible AND to increase your income (yard sales, selling items on craigslist, get a weekend or second job, babysit, etc), if possible.  The combination of living frugal and increasing your income will make it easier to pay off your debt quicker. Also do not use your credit cards while paying them off (don’t close your accounts just don’t use them).

6.  Living Life: It is important to remember to live your life while putting all of these steps into place.  It is a lot to think about, but you have to make sacrifices in order to become independent and wealthy. You also do not need to sacrifice so much that you are taking the happiness out of your life.  The point of all this to make your life easier now and in the future– so just remember to make sure to enjoy putting these steps into place so you can enjoy life in the future.