Category: moneysavingtips

9 Ways to Get the Most Out of Your Stimulus Check

When you find yourself with excess money due to the COVID-19 stimulus check, you’re in a good position to put it to good use. Of course, many of us have to use that money to pay for necessities due to being out of work. But for those of us lucky enough to still be working, that extra $1,200 (plus $600 per child) can go a long way.

There’s a chance that Congress passes another stimulus bill that involves a second check. However, there are no reports of any such bill being in the works at the time of writing this article. Still, if it does happen, you can use all of the following tips for any additional influxes of money.

1. Use It to Pay Off Debts

The most obvious use of the stimulus check is to pay off any loans. These can include credit card balances, student loans, mortgage, and so on. But it’s always recommended that you pay off the option that has the highest interest rate first, not necessarily the one that’s closest to being behind you.

For example, it may be tempting to pay off more of the mortgage and leave the credit card bills for later. But if the mortgage interest rate is lower than the credit card’s, you’re better off paying down the credit card bill.

Still, any overdue bills should be prioritized, especially if it involves utilities or rent payments. But if the essentials are out of the way, you can distribute the check accordingly.

2. Put It in a High-Interest Savings Account

You can find a lot of different high-interest savings accounts online. But make sure to read the fine print before you choose the one you think is best. Terms like, “Up to 5% interest,” likely means that you need a large minimum amount to receive the maximum benefits. In some cases, the minimum could be $10,000. In others, the minimum can be 10 times that.

But a high-interest savings account is the safest way to invest your money. There’s zero risk – the amount in your account will accrue interest based on how much is in there. If you add more, you receive more in interest. And you can withdraw without a fee a handful of times per month.

3. Invest It in Low-Risk Stocks and Bonds

To see bigger dividends, you’ll need to take on a bit of a risk, but they’re minimal. You can invest your money in an IRA account, which is a popular choice that many uses to save for retirement.

You can also more directly control your investment portfolio with preferred stocks that payout fixed amounts every week, another low-risk option. Corporate bonds (4%-5%) can pay out more than Treasury bonds (1%-2%). But make sure you choose a strong company with a long history of good standing.

For more moderate risk, you can look into common stocks that pay dividends. Some companies have a yield as high as 6% or more paid out per payment period, which can be weekly, monthly, or quarterly.

4. Buy a High-Priced Item

You can turn your stimulus check into a product that brings entertainment or convenience value to your home. If you’d been holding off on purchasing the newest TV or smart home product, you can take the unexpected cash and use it for that.

Chances are that whatever you purchase will diminish in value over time. But if you already have a system for saving and investing money that doesn’t require a stimulus check, it’s not a waste of money to indulge.

This is can be especially valuable if you’re spending more time at home. Never discount the long-term effects of self-care, which can greatly reduce stress levels. There’s no shame in looking out for your—and your family’s—happiness.

5. Make A Down Payment

You may be surprised to learn that now is not a bad time to buy a new home or vehicle. A lot of lenders are even offering special loan discounts, even for those who are currently homeowners. Whether a house or a condo, now may even be the best time to lock down a new piece of property.

If you add $1,200 to a down payment, it can actually serve to lower your interest rate and shorten the length of your loan. At the very least, it means paying less at a later date when we don’t have a stimulus check coming in.

The stimulus check can also go toward moving expenses, which can add up quickly.

6. Use It to Shop Local

If you’re just looking to enjoy having a bit of extra cash on hand, consider spreading it around your community. Even buying directly from a chain down the street injects money into the local economy more so than buying from the corporate website.

But the biggest impact your money can have on the longevity of your local shops and restaurants is buying from a small business. The money spent is extremely likely to remain local, which can circle back to your business while ensuring your favorite spots remain open.

It’s tempting to simply buy from Amazon. But the benefits of shopping local to the community as a whole is substantial enough to be worth the minimal additional investment.

7. Support Someone Through GoFundMe and Other Channels

If you’re feeling generous, you can pay your money forward in extremely direct and impactful ways. Visit GoFundMe and explore the different causes that you can support. From hospital bills to bail funds to helping workers in industries hit hard by the lockdowns, your generosity can make a huge difference.

You may also see people you follow on social media directing people to specific Cash App and Venmo accounts. This is an even more direct way to help because neither you nor the recipient needs to pay fees.

8. Support Independent Media and Journalism

If you’ve been holding off on getting rid of those paywalls at some of your favorite publications, now may be the time. With the $1,200, you could pay $5 per month for 20 different services, and that’s the high end of the subscription fees.

Another example is premium podcast subscriptions and internet media companies. The folks whose work got you through countless hours of quarantining can use your support to create more content for you to enjoy for years to come.

Consider who you rely on the most for information and entertainment. The easiest way to ensure they continue is by subscribing to their content.

9. Give It to a Charity

The easiest way to help as many people as possible during this time is by donating to a charity. Pick a cause that means something to you, then look up the organizations within that cause. Resources like Charity Navigator help you know that you’re donating to a group that’s above board and transparent about their services.

It’s impossible to truly help others if we haven’t first helped ourselves. But if you feel supported enough to give, now is the time when people need you the most.

9 Tips on Lending Money to Your Friends and Family

9 Tips on Lending Money to Your Friends and Family
When a family member or close friend has come to you looking for a loan, what should you do? You’ve probably heard horror stories about how money and family don’t mix. However, it can be difficult saying no to someone you care about in their hour of need.

So, before you write someone a blank check—or shut the door in their face—check out these tips for lending money to a friend or family member safely and responsibly.

1. Ask A Lot of Questions

Before you say yes or no to anything, you should hear someone out – but also ask plenty of questions. You should know exactly why your friend or family member needs money and what they’re planning to do with the money you give them.

If someone is unwilling to tell you their plans for your money, you shouldn’t give them anything. Ask plenty of follow up questions about their plans for using your money, and their strategy for paying you back.

If the person can’t provide answers or doesn’t have answers that make you feel comfortable, it’s okay to say no and explain that you have concerns about their plan (or a lack thereof).

2. Think of Alternative Ways to Help

For people in need of a loan, asking a friend or family member is usually one of their last options. However, it doesn’t hurt to think of ways to help that person without loaning them money.

Maybe there’s another loan source that person didn’t consider before coming to you. Perhaps you can help that person put together a budget that can improve their financial situation. You might also be able to help them find a job or a side hustle that can help their financial situation without hitting you up for a loan.

Exploring every possible option with someone is also a good way to learn more about their financial situation and their ability to pay you back. And all without making them feel like they’re being interrogated.

3. Consider the Consequences

Before you say yes to anything, make sure you understand the risks. A lot of people lose friends or never speak to family members ever again because of disputes over money. You need to accept the possibility that this person might not pay you back. Can your relationship survive that? Could you maintain a relationship with this friend or family member if they never pay you back? Will you hold it over their head for the rest of your life? These are questions both parties need to consider – especially if the money exchanged is a significant amount.

4. Only Lend What You Can Afford

This might be the most important rule on our list. You should never lend anyone money if there’s a chance doing so could get you into financial trouble.

As we touched on in the previous section, you should assume that the money you lend will never be paid back. If you have a lot of money in an emergency fund or stashed away for a rainy day, you might be able to loan some out to a friend and be fine if you never see it again. But if you’re dipping into your retirement fund to lend someone money, or doing so will prevent you from making an investment elsewhere, you’re better off saying no.

It won’t be easy, but you have to make sure your finances are secure before helping other people with their money needs.

5. Make It Cash Only

If you can afford to loan someone money, that’s great, but make it a cash-only proposition. Co-signing a loan or giving someone a credit card in your name can be worse than loaning someone money that’ll never be repaid. These kinds of things can end up hurting your credit score if things turn south. Losing money is one thing, but damage to your credit score can have long-term consequences for your financial security. If a friend or family member asks you for anything other than a cash loan, you have to put your foot down and say no.

6. Charge Interest

Obviously, you’re not a bank, but if someone is going to treat you like a bank, it’s okay to act like one by charging interest. If you’re upfront with someone that you expect to be paid back with interest, they’ll be less likely to take advantage of you by never paying you back. You don’t want to gouge someone you care about with the kind of high-interest rate traditional financial institutions might offer. However, you can treat it like an investment with the hope of getting back more than you put in – while also holding that person accountable.

For large sums of money, you’ll actually be obligated to charge interest if you loan money to a friend or family member. As of 2019, you are subject to a gift tax if you give someone more than $15,000 in a given year. The only way to avoid paying this tax is to charge that person an interest rate that’s on par with the Applicable Federal Rate that’s set by the IRS every month. Even if your loan to a friend or family member is less than $15,000, charging at least a little bit of interest can be a good idea.

7. Write Out the Terms

Even if you loan money to a friend or family member you trust, it’s still best to have everything in writing. Technically, a verbal agreement would be legally binding, but it’s best to have a written agreement signed by everybody involved in case the loan isn’t repaid and you need to take things to small claims court. You need to write down how much money is being borrowed, the repayment date, interest rate, and late fees that will be charged.

Obviously, this doesn’t show a lot of trust in your friend or family member. But if they need the money, they should be willing to sign a formal agreement.

It might sound unnecessary. But if things don’t go according to plan, you’ll be glad that you wrote out the terms of the loan and made the agreement official, even if you don’t end up pursuing legal action.

8. Create a Payment Schedule and Track It Closely

Again, this is something a bank would do and something you should do if someone asks you to loan them a significant amount of money. If nothing else, you should create a spreadsheet with payment dates and amounts so both of you know when payments are expected and track when they’re made.

You should also make it clear that there will be penalties added if payments start coming in late. Of course, the payment schedule should be reasonable and within the borrower’s budget. But you still need to make sure you keep track of the schedule so payments are made on time. It will also help to receive payments in the form of a check or electronically; using cash makes it harder to track and could lead to disputes.

9. Be Patient

If you’re going to lend someone money, the best thing you can do is be patient and take a hands-off approach. This is why it’s best to set up a formal written agreement and pay schedule. Pestering someone about the money they owe you is only going to lead to problems and unnecessary tension in your relationship. You’re not Tony Soprano.

It won’t be easy, but you need to do your best to keep the money separate from your personal relationship. Avoid asking questions about how your money is being spent and when you’re going to get it back. Remember, when you chose to lend it, you decided you could afford to do so and have faith the borrower will pay you back. Be patient and trust that person; if you can’t do that, you shouldn’t make the loan in the first place.

7 Apps That Let You Borrow Money

7 Apps That Let You Borrow Money
The next time you find yourself in need of a loan, there’s (probably) an app for that. In fact, there are several apps that can set you up with fast cash. Here are seven for iPhone and Android that let you borrow money.

Branch

Branch is an app designed for those of us who live paycheck to paycheck and can’t always wait until payday. The only caveat is that you need to get paid via direct deposit into a checking account. As long as that’s not an issue, you just connect the app to your account and take out as much as $500 that will then be taken back automatically on your next payday.

Unfortunately, it usually takes two or three days for the money to transfer into your checking account. That is unless you want to pay $3.99 for an instant transfer.

Another useful feature of Branch (among others) is that your employer or multiple employees at your company can sign up for the app. This enables you to manage your work schedule and pay schedule on the app, making it easier to switch shifts with someone.

DailyPay

With DailyPay, your employer has to connect their payroll system to the app for employees to use it. If your employer signs up, DailyPay helps to track how many hours you’ve worked since your last pay, adding up money that you’ve earned but that you won’t receive until your next payday. DailyPay then allows you to transfer the money you’ve already earned into a bank account, payroll card, or a prepaid debit card.

Once you’ve requested the funds you’ve already earned, the money should transfer the following day for a flat fee of $1.25. If you need the money right away, an instant transfer will cost $2.99. If you’re lucky, you’ll have an employer willing to pay these fees when they sign up with DailyPay.

Dave

The Dave app is akin to have a friend (possibly named Dave) who’s willing to loan you a little money and help you plan out your finances. This is another one that requires you to accept direct deposits into your checking account.

Dave won’t require a credit check but will look at your account history to make sure you receive direct deposits on a regular basis, and that you can repay a loan. There is also a $1 a month membership fee.

However, if you plan on using Dave regularly, paying the membership fee could be worthwhile. With Dave, you can get a loan of up to $75 that will be deducted after your next payday without interest. You can also pay back the loan early if you’d like. It usually takes two or three business days for your loan request from Dave to show up in your checking account, although you can also pay a fee of $4.99 to get the money transferred to your account within eight hours.

Earnin

Earnin takes a little time to set up. But once you’re connected to the app, it should be quite useful for getting some quick cash before payday. In addition to banking information, setting up an Earnin account also requires that you upload a timesheet so that the app can figure out how many hours you work each week and how much money you take home after taxes and other deductions.

Once you’re set up, Earnin tracks how much money you’ve earned between paychecks and lets you borrow some of that money while you wait for your next payday. Initially, you’ll probably be capped at $100 between paychecks. But as you use the app and your account balances are in order, your maximum withdrawal can increase up to $500.

Earnin will then transfer the funds to your account in less than a day, and deduct that money after your next payday without any fees.

FlexWage

FlexWage is another app that will require your employer to connect their payroll system before you can use it. However, FlexWage can be useful for businesses that have frequent requests for paycheck advances. It can even give employees access to tips and bonuses in addition to monitoring earned wages, making it ideal for restaurants and other businesses in which employees make most of their money from tips or commission.

For employees, one of the biggest advantages of FlexWage is that it doesn’t require a bank account. While you can link FlexWage with a bank account, you can also request that funds are transferred to a prepaid debit card. Like similar apps, FlexWage makes accrued earnings available to you and then deducts that amount from your next paycheck.

Transfer fees with FlexWage are usually between $3 and $5, although some employers are willing to pick up the tab because the app saves HR and payroll workers a lot of stress.

MoneyLio

Compared to other payday loan apps, MoneyLion offers more ways to get money than most. If you sign up for a free membership, MoneyLion can give you up to 10% of your direct deposit paycheck with a limit of $250. This loan will be interest-free and will appear in your bank account almost instantly. On your next payday, the money you take out will automatically be sent back to MoneyLion.

MoneyLion also offers a Plus membership account that costs $29 per month. However, each day you can log into your account and earn $1 cashback by looking through a set of tips and advice, more or less eliminating the membership fee. In addition to getting a loan for up to 10% of your next paycheck, MoneyLion also offers Plus members a loan of up to $500 that you can pay back over the next year with a 5.99% interest rate. This can help those with poor credit get a loan and improve their credit score if they can pay it back on time or early.

PayActiv

PayActiv is another app that requires your employer to be on board with everything. As long as your employer allows it, PayActiv users can access up to 50% of the income they’ve earned between pay periods with the maximum withdrawal set at $500. The amount that you take out is then automatically deducted from your next paycheck. There is no interest on the money, although there is a $5 fee that some employers choose to cover.

In addition to payday loans, the PayActiv app also offers advice and financial counseling to users. It also makes it possible for users to pay their bills on the app or get discounts on their prescriptions. They also make it possible to access your earned income on a prepaid debit card. However, there is a fee of either $3 or $5 for using the app based on whether you receive paychecks weekly or bi-weekly.

Everything You Need to Know About Borrowing Money from Your Life Insurance Policy

Everything You Need to Know About Borrowing Money from Your Life Insurance Policy
With a huge number of ways to borrow money both online and off, it can be difficult to decide which is the best route. One option is borrowing money from a life insurance policy.

Of course, those without a life insurance plan will have to invest in one before they can consider borrowing from it. But even those with an existing policy may not know all the important ins and outs of taking advantage of this method.

Read on for all the ins and outs of borrowing from life insurance.

How Borrowing from Life Insurance Works

how does it workThe first thing everyone should know about borrowing money from a life insurance policy: it’s only possible if you have a whole life or universal life policy.

Term life insurance policies don’t offer this feature, which is part of the reason why they’re usually more affordable than a whole life policy. If you have a whole life policy, your insurance representative probably made you aware of this feature when you first signed up for the plan. Even if you’re sure that your plan allows you to borrow money, it’s usually best to contact your insurance rep to talk about how getting a loan will impact your policy.

It’s also important to understand that life insurance loans are only available after you’ve been paying premiums for a significant period. You can’t get an insurance policy and then immediately borrow against it. First, you must build up cash value on your policy. After a few years, insurance companies will allow policyholders to borrow against the cash value, although some insurers will have a cap of around 90% on how much you’ll be able to borrow.

Essentially, you are using your policy as collateral to borrow money. So, the longer you have the policy, the more you can borrow against it.

The Pros and Cons of Borrowing Money from Life Insurance

pros_consWhile borrowing from a life insurance policy can be a legitimate and useful way to get a loan, there are plenty of pros and cons to weigh before jumping into anything. In addition to asking your insurance rep about what borrowing money will mean for your policy, it’s important to compare the positives and negatives in regards to your specific situation.

Pro: A Life Insurance Loan Can Be Fast and Large

The most significant advantage of borrowing against a life insurance policy is that you have money available to you when you need it. Obviously, getting a loan from your life insurance isn’t something to do lightly and shouldn’t become a habit. However, if you don’t have enough in your savings or an emergency fund to cover an unexpected expense, it’s a nice fallback option.

In a lot of ways, getting money from your life insurance is easier than getting a loan from a bank or credit union. For starters, there is no lengthy application and no long wait while the bank decides whether or not to give you a personal loan.

On a related note, life insurance companies don’t ask a lot of questions about why you need the money the way other financial institutions might. You can use the money you get from your life insurance policy for whatever you want, no explanation required.

Pro: No Credit Check

Life insurance loans don’t have a credit check like traditional bank loans. Life insurance companies won’t perform a credit check because the loan is based on the cash value you’ve built up for your policy.

Firstly, a credit check can hurt your credit score, so that’s avoided. Second, you don’t have to worry about a loan from a life insurance company showing up on your credit report the way a traditional bank loan would. This makes borrowing from your life insurance a good option if you have less than perfect credit.

Pro: APR and Payment Schedule Can Be Better Than a Traditional Bank Loan

Paying back a loan you borrow against your life insurance policy is easier than it would if you got a personal loan from a bank or borrowed money against your credit card. Life insurance loans rarely have monthly payments you have to make, allowing you to pay it back on your own schedule. They also come with lower interest rates than most personal loans or credit cards because of the cash value you’ve built in the policy.

Con: A Loan Requires a (Relatively) Robust Policy

As mentioned, one of the downsides of borrowing money from an insurance policy is that it takes time to build up cash value on the policy. If it’s a relatively new loan, you won’t be able to borrow as much from the policy. In fact, you may not be able to borrow from it at all until you’ve paid premiums for several years.

Con: Reduced Life Insurance Benefits

Even if you’re able to borrow money from your life insurance, doing so will reduce your policy benefits until the loan is paid back. Odds are, you have a life insurance policy in the first place for the sake of your family if you pass away. However, the policy won’t pay out as much if the loan isn’t repaid in full. It’s important not to lose sight of this when you consider borrowing against your policy.

Con: You Could Lose Your Life Insurance Policy for Lack of Payments

On a similar note, you also run the risk of losing the policy altogether if you don’t have a plan in place to repay the money you borrowed. If the unpaid loan plus the interest total more than the policy is worth, your insurer can cancel your coverage, leaving you without a life insurance plan altogether.

Further, not making premium payments on time can also result in your policy lapsing. This is why not having monthly payments with this kind of loan can be a double-edged sword; it’s up to you to make sure you’re paying back the money you borrowed.

Con: Tax Concerns

Potential tax consequences can arise when you borrow against a life insurance plan. The specifics can get a little complicated (as is the case with taxes in general). But if your policy lapses or gets canceled, you can end up owing taxes on the money from the policy. This is another potential complication of borrowing from a life insurance plan if you’re not going to be able to pay back the funds in a reasonable amount of time.

For more personalized service, we recommend reaching out to a financial advisor, who can go over your finances and options to offer expert advice. Treat this as a general guide, and remember: you can never overthink or over-research a new loan, whether from a life insurance policy or otherwise.

The Most Foolproof Ways to Invest $1,000 in 2019

Investing can be a little nerve-wracking, especially when you haven’t done it before. In the back of your mind, you’re always thinking about the worst-case scenario and what will happen if you lose everything you invested. Luckily, there are (nearly) guaranteed investments you can make with a thousand dollars.

Further, investments can also pay off as well, and you could be missing out on something if you allow fear to prevent you from making the leap into the investment arena.

Sometimes, the key is starting out with something that carries little risk. That way, you can slowly grow more comfortable with investing.

With that in mind, here are some foolproof ways to invest $1,000 while you get some firsthand experience making investments.

Mutual Funds

Investing in mutual funds is usually a low-risk and hands-off approach to investing. Essentially, it involves multiple investors pooling their money together and investing in a variety of stocks and bonds. You can be as active or passive as you want to be when it comes to managing mutual funds, so it’s not something you’ll have to monitor on a daily basis. Investing in index mutual funds also tends to be relatively cheap, especially if you can find a no-load fund. This means that when you sell your investment and look to collect, you won’t have to pay a commission.

One of the caveats with metal funds is that they can sometimes have high minimums, so $1,000 isn’t going to be enough with some companies. However, if you do a little research, you should be able to find a company that has a minimum under $1,000 and get in on the mutual funds game.

Robo-Advisors

If you’re looking to do some 21st-century style investing, consider a robo-advisor. Sadly, these aren’t actual robots that know everything there is to know about investing. Rather, they are just software programs designed to manage your investment portfolio based on the instructions you provide.

After signing up with a company that has a robo-advisor, you’ll usually fill out a questionnaire to determine an investment strategy based on how much money you want to invest and how much risk you’re willing to take. In other words, if you only have $1,000 or less to invest and want to play it safe, a robo-advisor can find a portfolio that fits your needs.

Once you set up your profile and investment strategy, the robo-advisor starts investing based on your specific parameters. Then, it continues trading securities based on changes in the market and any returns you receive from your investment. However, the strategy and parameters you set are always followed.

High fees are a potential downside of using a robo-advisor. But if you have some semblance of an investment strategy in mind, they can be cheaper than hiring a financial advisor. The robo-advisor also does most of the hard work for you. Assuming you trust the technology, you can take a step back and monitor your investments without getting too hands-on.

Target-Date Funds

Target-date funds can be another good option for investing newbies who want a safe and passive method of investing a little bit of money. They are essentially mutual funds that come with an asset-allocation goal. There is both a specific goal and a specific deadline at the time of investment. For example, an investor may have a five-year plan for their money or they may want the deadline for their investment to line up with their retirement plans.

Between the time of investment and the future deadline, a portfolio manager will handle any and all adjustments to the target-date funds. This means you don’t have to obsess over how things are going or take it upon yourself to make changes. In fact, you won’t be able to alter your portfolio until the pre-determined deadline, which isn’t usually a problem unless your financial situation changes and your risk tolerance changes along with it. But as long as that doesn’t happen, target-date funds are usually a foolproof way to invest money.

Also, the key is finding a fund that doesn’t charge high fees; otherwise, your $1,000 investment may not add up to much at the end of the day once expenses have been deducted.

Start a Roth IRA

If you don’t have a Roth IRA already, starting one with $1,000 isn’t a bad idea. If your income is too high, you may not be eligible. But unless you make well over $100,000 per year, you don’t have to worry too much about eligibility. The downside of a Roth IRA is that contributions are not tax-deductible, which is one way this differs from a traditional IRA.

However, after you retire, all of your withdrawals are tax-free, which is where a Roth IRA differs from a traditional IRA in a good way.

Further, there are a number of other benefits to a Roth IRA if you use it the right way, including passing money to your heirs, or using it to help pay for qualified college expenses.

Lastly, there are plenty of online brokers that will allow you to open a Roth IRA with just $1,000 as a starting point.

Peer-to-Peer Lending

Another great 21st-century way to invest is with peer-to-peer lending, which can all be done online. Basically, someone is looking to take out a loan, and you front them the money. They then pay you back the loan with interest.

There are several peer-to-peer platforms online that you can visit as a potential lender. For some, you can choose to invest automatically without necessarily knowing where your money will go. This makes everything simple and easy for you. The other option involves considering various users on the platform who are looking for someone to give them a loan. This is a little more hands-on, but it also means you’ll know more about potential borrowers, allowing you to choose one who’s seeking a loan for a worthwhile reason.

Of course, some people on these sites will be seeking more than $1,000, and will, therefore, be more risky investments than others. But in general, you should be able to find a borrower that’s a good fit for you and a wise investment.

Pay Down Your Debt

Technically, this isn’t the same as investing per se. But if you have $1,000 set aside or received some kind of bonus or inheritance, paying down debt can have a similar effect to investing that money.

In fact, freeing yourself of debt can be more profitable than making a low-risk investment.

Essentially, paying down any debts you have makes you money in the sense that it reduces the amount of interest you have to pay in the long run. If you have a mortgage, an auto loan, or credit card debt, a one-time payment of $1,000 can eliminate a lot of future interest. Also, it’s probably a good idea to pay off as much debt as possible before making investments in other areas, especially if you have a monthly payment that’s accompanied by a high-interest rate.

Once you eliminate a debt that has a high-interest rate, you’ll be amazed at how much more cash you have in your pocket. Before you know it, you’ll have another $1,000 to invest in any of the above-mentioned strategies.

What you should save every month


It seems like every financial conversation we have comes down to one thing: how much money we have saved. Whenever we seek financial advice from someone or think about our current financial state, it all boils down to how much we have managed to put away for the future. But exactly how much of our weekly paychecks and yearly income should we be saving to make sure we have a safe and secure financial future?

Unfortunately, there is no simple answer to this question. Most people are familiar with the 50/30/20 rule. This dictates that 50 percent of our income (after taxes, that is) should go toward expenses that we need to live. 30 percent should go to discretionary spending that isn’t essential but helps make our lives enjoyable. And the final 20 percent should be saved for the future. The problem is that the 50/30/20 isn’t universally viable for everyone and isn’t feasible for everyone. With that being said, let’s try to understand the art of saving money based on this mythical figure of 20 percent.

Why 20 Percent?

First of all, it’s important to understand why 20 percent is considered the target figure for saving money. In theory, saving 20 percent of your income will allow you to maintain your current lifestyle and financial independence when you reach retirement age. In a vacuum, this would probably work out as planned. However, people don’t live in a vacuum. They have different lifestyles and different living costs. They are rarely able to save money at the same rate their entire lives or start saving at the same time.

The fact is that every person is different. Their lives have different variables to take into account when it comes to saving money and having enough to cover both unexpected costs and the cost of living when they stop working full time. If you take away one thing from our discussion of saving money, it should be that your case will be unique. What works for someone else may not apply to you. Nevertheless, the 20 percent figure can be a good figure to keep in mind so that you have a reference point when it comes to how much you’re saving.

Set yourself up for saving

In a perfect world, you will start saving money from the time you get your first paycheck and continue to save until you retire. However, you need stable financial ground before you start thinking about your future savings. In most cases, this means eliminating debt. Obviously, if you have a mortgage or car payments, these are long-term debts that you can count toward the 50 percent of your income that goes to living expenses. But you need to do your best to eliminate other types of debt, specifically credit card debt, as well as student debt.

Even if you have found a way to put aside 20 percent of your income, it doesn’t mean as much if you have credit card debt – or you’re paying only the minimum on your student loans. With these kinds of debts, it’s easy for interest to pile up, costing you more in the long run and negating some of that 20 percent you’ve managed to save. You shouldn’t worry about saving 20 percent of your income until you’ve managed to pay down most of your debt.

Get there gradually

For most people, saving 20 percent of every paycheck is unrealistic. It can be just as unrealistic for people in their 20s as it is for people in their 40s. After all, reports from January 2019 indicate that 78 percent of Americans live paycheck to paycheck. It will do you know good to throw up your hands and give up because you can’t afford to set aside 20 percent of your income.

Instead, start small and work your way to that figure. First, try saving 5 percent of your paycheck, which should be reasonable, even for those living paycheck to paycheck. Once you grow comfortable with that figure, try saving 10 percent. Eventually, try to make it all the way to 20 percent. Also, don’t think that making it to 20 percent should be your end game. If you’re at 20 percent and still living comfortably, don’t be afraid to continue to increase that amount if you’re able to do so.

Know what counts

It’s important to keep in mind that there is more than one way to save. For instance, if your employer puts money into a 401(K) for you, that money counts toward the 20 percent in your savings. For those lucky enough to have an employer who matches 401(K) contributions, always do your best to maximize your contributions. If not, look into setting up a traditional IRA. That way, part of your savings goes to your IRA and part goes into a savings account, helping you to strive for that 20 percent figure on multiple fronts.

Know every little bit matters

Perhaps more than anything, it’s important not to become frustrated if you’re not able to save as much as you like or as much as you think you need to. Always remember that anything you put toward your savings should be looked at as a positive. This is why you need to remember that 20 percent is a vague reference point and not something that you should look at mandatory. All you can ask of yourself is that you’re saving what you can. Every little bit you can save now will matter later on in life, and you should never lose sight of that or get discouraged if you’re below the 20 percent threshold.

Ways to increase savings

No matter where you are in relation to the 20 percent figure, there are always ways to increase the amount of money you’re able to save. In addition to cutting down on your debt, as mentioned earlier, look for ways to reduce living costs. This doesn’t mean you need to live uncomfortably or have no margin for error in your budget. Rather, look at the 30 percent or so of your income that’s going to discretionary spending and look for ways to cut back. However, this doesn’t mean you shouldn’t treat yourself to things you enjoy, but maybe don’t do it every day.

You can also look into direct deposits and automatic transfers to help boost your savings. For instance, if you have a direct deposit on your paycheck, set it up for some to go into your checking account and some into your savings account. It doesn’t have to be split evenly, but it ensures that part of every paycheck goes into your savings. You could also set up an automatic transfer from your checking to your savings every month. This way, you won’t have to remember to save; it’ll happen automatically. Even if it’s only a small amount that’s going into your savings account automatically, every little bit counts.

Finally, it’s important to stay ambitious financially. Don’t be afraid to pursue promotions or keep an eye out for other jobs that pay more. You should also consider part-time jobs or side hustles, especially if it involves doing something you enjoy. The more income you have, the easier it’ll be to set a higher percentage aside for the future. This doesn’t mean to work yourself ragged or make yourself miserable, but you might be surprised to find that there’s a little extra money to be made doing something you enjoy.

Don’t overthink, just save

In the end, all you can do is save as much as possible – that’s within reason for your lifestyle and financial situation. Don’t get caught up in thinking that the 50/30/20 rule is gospel. Remember, 50/30/20 is just an idea, it’s not going to fit everyone. Your financial situation is unique to you, and you shouldn’t cause yourself undue stress just because the 50/30/20 rule doesn’t fit you like a glove. At most, saving 20 percent of your income is a reference point and nothing more. Ultimately, trust yourself to save as much as you can, but always make financial decisions based on your own situation, not a rule that someone made up.

How to Create a Budget and Stick to It

For most of us, financial stability doesn’t happen by accident. Instead, it requires planning ahead – and sticking to your plan. The first step toward putting yourself in a good financial position is coming up with a budget and sticking to it. Admittedly, this is easier said than done and doesn’t sound that very exciting or all that much fun. However, sticking to your budget doesn’t mean you can’t indulge in the finer things in life; it just means you need to find room in your budget for them. With that in mind, here are some ways that you can create a budget and stick to it.

Compare Income to Expenses

The first step in creating a budget is to take stock of both your income and your expenses. Hopefully, the former is higher than the latter; otherwise, this will be a lot harder than expected. It’s best to add up all of your expenses over the past six months, possibly a year. This will help cover expenses that you may only have once or twice a year, including insurance payments or seasonal gifts. It’s also not a bad idea to add 10 – 15% to that number to account for any unexpected expenses.

Calculate a Maximum Budget

Once you’ve added up all of your expenses, you will then compare that number to the income you’ve had over the last six months or a year. This should include your salary, as well as any money you make from side jobs or other sources. Once you’ve calculated your income, you’ll know the maximum amount of money you can put into your budget.

Don’t Forget the Unexpected

Of course, you’ll want a rainy-day fund, so you may prefer not dedicated budget your entire salary. Depending on how your income compares to your expenses, you’ll also know how tight you have to be with your new budget.

Set Goals

Like most things in life, it’s never a bad idea to set goals for yourself when creating a budget. These should be both short-term and long-term goals. It’s best to have goals to help keep you motivated and remind yourself why you have a budget and why you want to stick to it. Maybe you want to save up to buy a house or take a once-in-a-lifetime trip. Either way, keep those bigger, longer-term goals in the back of your mind.

Meanwhile, short-term goals — like coming in under budget next month or cutting spending in a certain area — can help keep you focused on maintaining your budget on a daily basis. Best of all, accomplishing these will help you reach your long-term goals.

Keep a Calendar

As mentioned, part of keeping a budget is looking at things over the long haul, usually six months or one year at a time. This is why staying on a budget often means keeping a calendar of important events. Keep in mind that your expenses won’t be the same every month. You’ll have birthdays, weddings, and holidays where you’ll need to find a little extra in the budget to buy gifts for others. Your home expenses and cost of utilities can also fluctuate during different times of the year. Keeping a calendar can help you plan ahead and alter your budget if you expect your expenses to rise or fall in a particular month.

Be Reasonable and Realistic

Obviously, you want to stick to the budget you’ve created, but you don’t want to go overboard and become obsessive about it. There will be times when circumstances outside of your control force you to go over budget. You can’t stress out when these things happen, just move on and try to make up for it the next month. It’s unhealthy to dwell, and healthcare isn’t cheap.

You also have to accept that you won’t always follow your budget perfectly. Occasionally, you’ll need to indulge and treat yourself to something, even if it means going a little over your budget. Every life is about the little things and the big things. The good life is about both.

Wasted Food Is Wasted Money

Plan your meals ahead of time. While food is typically the most significant part of anyone’s budget, many people have trouble controlling how much they spend every month on food. This is why it’s imperative to plan out your meals ahead of time. Every time you go grocery shopping, you should have your breakfast, lunch, and dinner planned out between now and the next time you plan to go shopping. Budget wise, whatever you like to eat is likely fine, but every food item you buy should be bought with a purpose. Otherwise, it’s far too easy to spend money on food that you don’t need or won’t end up eating.

Limit Impulse Purchases

It likely goes without saying that impulse purchases are the mortal enemy of a healthy budget. Delivery and takeout are easy examples, but countless more exist. Therefore, it’s imperative to find a way to resist making impulse purchases on things you weren’t planning on buying. If you catch yourself considering an impulse purchase, stop and wait. If it’s an expensive item, wait a while and give yourself time to save up for it. During that time, you can also ask yourself if it’s something you really need and if it’s worth stretching your budget. This doesn’t mean you can’t buy it eventually. Instead of buying it right then and there, make it a goal.

Pay with Cash

Paying with cash is one strategy that can help you stick to your budget. Studies have shown that a significant number of people are less careful about how much they spend when using a credit card compared to paying with cash. With cash, people can literally see the money leaving their wallet and will be less likely to buy things they aren’t sure they need. When they pay with a credit card, people don’t always realize how much they’ve spent until the bill comes a few weeks later. By then, the damage has been done and you’re that much closer to going over your budget.

Stay Flexible

Sticking to a budget is always going to be a fluid situation. Remember that your expenses will often change from one month to the next. Depending on your profession, your income could change as well. This is why it’s vital that you remain flexible and not look at your budget as being exclusively black and white. You should be re-evaluating your budget on a regular basis and always staying open-minded to changes. There will be times when you need to tighten up your finances, but there may also be times when you can increase your budget and allow yourself to spend a little more. The key is simply to always remain flexible.

Get Some Supervision

You don’t have to think about being on a budget like being on parole, but it can help to feel accountable to someone. Consider asking a spouse, family member, or friend to help you create a budget and stick to it. You can have that person check up on you periodically to make sure you’re spending responsibly and not going over budget. If you know that someone is going to ask about how much you’ve spent, you’ll probably be less likely to make frivolous purchases that make it harder to stick to your budget. It also doesn’t hurt to have someone by your side to help you decide how much to spend in certain areas.

How To Improve Your Credit Score In Less Than a Month

Once you’re out of school and your SAT score no longer means anything, your credit score becomes the most important number in your life. Your credit score tells financial institutions how big of a risk you are, which can have a profound impact on what loans you can qualify for and the interest rates you’ll pay. A poor credit score can follow you around for a long time and can even make it tough for you to get credit. Fortunately, there are ways that you can improve your credit score in a short period of time. If you want to give your credit score a quick boost, here are a few things you can do.

Pay Off Bills That are Past Due

Your payment history is a huge part of determining your credit score and having bills that are past due can cause your score to drop like a rock. Naturally, the best way to rectify this and get your score moving in the right direction is to pay off bills that are past due. If you’re behind on your bills, even a little, call your creditor and come up with a plan for you to get paid up to date. You should also ask them nicely to remove any report of delinquency payments from your credit report. They may not agree to this, but remind them that this hasn’t been a problem in the past and assure them it won’t be a problem in the future. Missed payments will stay on your credit report for seven years, so finding a way to get them off your credit report is huge for your credit score.

Setup Automatic Payment

One of the best ways to avoid late payments in the first place is to set up automatic payments on your accounts. Your lender can also send out reminders, but having an automatic payment is the best way to avoid any payment coming in late. Every time you make a payment on time and in full, you take a step toward improving your credit.

Look for Errors on Credit Report

Credit scores aren’t always perfectly accurate. In fact, it’s estimated that around 5% of people have errors on their credit report that have a negative impact on their score. It’s best to make sure you’re not one of those people. Once a year, you’re able to get a free report from one of the three major credit bureaus. If you haven’t done so lately, request a report and look for any mistakes. It’s possible for there to be old or inaccurate information on there. Maybe the account numbers listed aren’t yours or the balances are wrong. If you find a mistake, dispute it with the three credit bureaus so that you don’t have inaccurate information bringing your score down.

Remove Late Payments and Collection Accounts

Even if the negative aspects of your credit report are accurate, it doesn’t mean you can’t try to get them removed. As mentioned earlier, you can call your creditor and ask them to remove any mention of late payments from your report in a show of good faith. If they say no, you can dispute that the payments were late or negotiate a way to remove them from the report. Some lenders will agree to remove a late payment if you set up an automatic payment, which will help your credit score moving forward.

If you have a collection account, it can be a little more complicated to remove it. However, one thing to keep in mind is that you don’t just want to pay off a collection account if you get one. Doing that won’t take it off your credit report, so it could still hurt your score. Instead, negotiate a “pay for delete” in which you pay off the collection account in exchange for it being taken off your report. If you can remove derogatory items like late payments or collection accounts, your credit score will start improving overnight.

Stay Under Your Credit Limit

Even if you’re paying off your credit cards on time, it hurts your credit score if you’re pushing your credit limits to the max. If possible, make sure you’re utilizing no more than 30% of your limit. For example, if your credit cards have a combined limit of $10,000, don’t have more than $3,000 charged at one time. Doing this will improve your credit score by showing that you’re responsible financially without needing to utilize all of the credit available to you.

If you go over the 30% threshold with a big purchase, try paying it off right away as soon as it’s listed on your account online. You can also ask your creditor to raise your limit to help you stay under 30% of your limit. The caveat with that is you need to make sure they are willing to do so without a “hard” credit inquiry, which will cause your credit score to drop.

Pay Bills Twice Every Month

Sometimes, paying everything on time is only half the battle, especially if you’re trying to improve your credit score. If your monthly bills consistently have a high balance, it indicates that you’re overusing your credit, even if you’re able to pay everything in full every month. To avoid this, pay off at least half of your bill midway through the month so that bill at the end of the month isn’t so high. If you keep the balance on your bills at a reasonable level, it won’t look like you’re close to maxing out on your credit limit, which will help improve your credit score.

Reduce What You Owe

Roughly 30% of your credit score is determined by the debts you owe. Naturally, you can improve your score by reducing how much you owe. Obviously, making your monthly payments in full and on time will help. However, if you have a car, home, or student loan, it can help to pay more than the monthly minimum in order to decrease the principal balance on those loans. This will reduce how much debt you have to pay off and give your credit score more room to grow. Even if you have to make some sacrifices, paying down your debts is worthwhile if it helps you improve your credit score.

Piggy Back on Someone Else’s Good Credit

This method of improving your credit score will require a trusted family member or friend who’s in a good place financially. As long as this person agrees to this, they can list you as an authorized user on their account. You’ll receive a card with your name on it, although you probably won’t use it. However, your credit report will now list you as an authorized user on an account that’s in good standing. As a result, your credit score will improve because of your association with this account. If you know someone who’s willing to do this favor for you, this can be a great way to get your score moving in the right direction.

Keep Unused Credit Cards

If you have credit card accounts that you don’t use, keep them. As long as you’re not paying an annual fee, they’re not hurting you. On the contrary, having it increases your overall credit limit, so getting rid of this card will actually hurt your score. In fact, if you have an extra credit card that doesn’t get much use, start making small purchases with it that you’re able to pay back right away. Using multiple sources of credit, as long as you’re paying them off, will help your score. For some people, getting a new credit card and using it for a few small purchases can help get their score moving upward. However, opening multiple accounts in a short period of time can make you look desperate financially and harm your credit score rather than helping it. This is why it’s best to keep unused cards and perhaps even start to use them a little bit.