How to Easily Crush Your Goals With a Budget
Oftentimes when people hear the word budget, they curl up inside as they start to imagine all the fun things they won’t be able to do anymore. I’m here to stand up for the budget! But when done correctly, a budget does the exact opposite, it helps curate your dream life.
So let’s dream a little. If money wasn’t a factor, what would your life look like? Would you move to the beach? Go back to school? Upgrade your car? Whatever you want to achieve in life, here’s how you can utilize a budget to help you achieve real results.
Set SMART Goals
If anything is true, it’s that you can’t get somewhere if you don’t know where you are going, the same goes for your goals! This may not be the first time you are hearing about SMART goals but if it is, you want your goal to meet the following criteria:
Specific - make your goals specific.
Measurable - define how you’ll know if you are making progress.
Attainable - make it something that’s actually attainable.
Relevant - align with your values and long-term objectives.
Time-based - be clear and realistic on your end-date.
When you create goals, you’ll want to calculate how much it will cost. Whether you’re paying off debt or running a marathon, your goal will require a set amount of money. Set some time aside to ensure you’ll be able to reflect on your goals without interruptions. Bonus points if you get cozy with your favorite beverage as you dream.
Adjust Categories to Save for Targets
Once we have our SMART goals, it’s important to look at your budget to financially account for this new goal. If you are thinking to yourself, ‘what budget?’ then don’t sweat! Simply look at all of your planned money going out of your accounts (in the form of bills, household expenses and cost of living) compared to your income.
If you have a plan to run a marathon this year and you want to start going to the gym, you’ll want to save for your membership, a new pair of shoes and miscellaneous expenses as you test out different energy gels or performance enhancers.
If you don’t have a wellness category in your budget, be sure to add it to account for your new goal. If you do already have a wellness category, you may need to increase the amount you’re saving each month.
Saving small amounts of money over a period of time is called a sinking fund.
Adjust as Needed
As we start saving for new items (or take on a new expense) it’s important to look at our budget as a whole to see if your income allows for this change. If you have extra money in your paycheck it’s easy to allocate these funds to go towards your goal. If you don’t have extra money you might need to adjust your budget by reducing spending in other areas.
You never want to be spending more than you bring in each month, that is how we accrue debt. Be sure to follow a zero-based budget to ensure every dollar is accounted for while avoiding excessive spending.
Start Saving Early
The best time to start saving for something is today! A clear example that I think a lot of us can relate to is saving for Christmas. If you start saving in January you’ll have a full year to reach your target versus sacrificing your entire paycheck in November and December.
Outlining your goals early will allow you to save with less stress as it will require less of your paycheck each month.
Automate
There are plenty of tools to help you automatically save and transfer money. I personally love YNAB (You Need A Budget) to keep track of my monthly savings goals. Otherwise setting up an automatic transfer at your bank into a savings account will help you stick to your goals.
Pro tip, be sure to have a tracker to know how much of your savings account balance is earmarked for each goal. As a transfer happens, increase the amount funded for each goal in your tracker.
A Real Example
Here’s an actual screenshot of a portion of my budget within YNAB. Below are goals that we have committed to saving for at the beginning of the year, each with a financial target and date we need the money by. By using sinking funds we are able to take off some of the stress of life being so darn expensive while also ensuring we reach our goals.
There are plenty of other sinking funds in other parts of our budget that include paying for my MBA in cash, completing house projects or saving for pet expenses. The number of categories you have will depend on how specific you want to be.
9 Things That are Better When Buying Used Than New
Each time you go to make a purchase, I want you to ask yourself if this is something you can find used. First, buying used in the categories below will always save you money. Second, buying used eliminates waste.
Every time we buy from a thrift store, garage sale, online marketplace or from a friend, we prevent another item from making its way to the landfill, giving it a second chance at life while reducing waste.
Here are nine things that are better when buying used rather than new.
Clothing
Shopping at thrift stores, garage sales, online second-hand marketplaces or your friend’s closet isn’t just good for the environment, it’s also good for your pocketbook. The standard clothing markup from a wholesaler to a boutique is normally 2 or 2.5 times their purchase price. This doesn’t mean the price isn’t justified, a lot of money goes into owning a business and producing fair trade items. But paying premium prices for clothing must be something intentionally set out to do, not just because you landed yourself at the mall.
Books
Whether you’re looking for a specific book or your next fun read, online bookstores allow you to buy books that are both used and in top condition. If you are looking for audio books, apps like Overdrive allow you to connect using your local library card and rent e-books and audio books for free. You can also look for used textbooks online for school at sites like Amazon, Chegg and Campus Books.
Designer Labels
Whether you’re looking at clothing, handbags or accessories, buying used will always reduce the cost. Look for designer consignment shops or search for specific brands on your favorite online secondhand marketplace. Be sure to watch out for fakes and always meetup in public places if you are buying from an individual.
Jewelry
I bought my engagement ring at an estate jeweler and not only did I pay less than what it was appraised at, but was able to find a vintage 1930’s ring that fit the unique style I was searching for. Be sure you are using certified and trusted dealers, you don’t want to be spending money on misleading or fake pieces. Here are some additional helpful tips when shopping vintage.
Exercise equipment
Remember when Peloton was blowing up in the beginning of the pandemic? It seemed like everyone I knew bought a bike. Those same bikes, purchased by well-intended individuals, are now selling for hundreds off online, barely used.
Being in the first wave of shoppers comes with its perks but if you are willing to wait, this is an industry that will always have used equipment for sale at a heavily discounted rate.
Sporting equipment
Retailers like Play It Again Sports are a great example of buying used with heavily discounted prices. Buying kids gear used is an especially good idea since they often outgrow items before the next season. Shop by sport and filter your results even further by specific pieces of equipment or by gender. Stores located nationally!
Furniture
It is few and far between when I buy new furniture, the last time I did was for a desk and it was because what I was looking for basically didn’t exist in the beginning of the pandemic when everyone was working from home. Besides these rare occasions, you can find anything online. If you’re looking for something specific, Facebook Marketplace is always a favorite, allowing you to set up alerts when new items are posted. You can also filter by price if you want to browse but know you don’t want to spend more than $20.
Pro tip, I often upgrade my furniture using Facebook Marketplace as I get sick of something. I have replaced my coffee table three or four times, selling the old item often for more than I buy the new one for.
Lawn & Garden
Rakes, shovels, hand tools, garden wire, pavers and so much more are available online at discounted prices, oftentimes free. I use Facebook Marketplace here as well and most of the time it’s a matter of remembering to search used before going out to Home Depot for whatever you need. You’ll see more of these items seasonally once people clear out their garages or as they move. Prices will be much cheaper off-season so if you know you want a new snow shovel, summer is the time to start looking!
Kitchen Misc.
I recently was on the search for ice cube trays and while I could have purchased them on Amazon for probably $2 I wanted to find some used because I knew thrift stores are always filled with them. Items like plates, blenders, graters, cooking utensils and storage jars are easy to find and almost free. Look for these both on Facebook Marketplace and your local thrift store or garage sales.
Can Being a Minimalist Build Wealth?
The idea of owning more is a western phenomenon that assigns value for having more stuff. If you don’t have a boat or a wardrobe full of the latest fashion trends you are less worthy and should probably go buy something now to fill the void (just kidding but that’s how we feel, right?).
What is Minimalism?
The idea of minimalism has always intrigued me, especially as I clean and wonder how I ended up with so much crap! And then when I really start to think about it, I realize that I purchased all this stuff, most of which I didn’t even know I owned and certainly don’t use.
The Minimalists describe minimalism as, “a tool that can assist you in finding freedom. Freedom from fear. Freedom from worry. Freedom from overwhelm. Freedom from guilt. Freedom from depression. Freedom from the trappings of the consumer culture we’ve built our lives around. Real freedom.”
Using Minimalism to Stay Frugal
This is where minimalism and frugality come together to make a beautiful frugal baby! When we buy less stuff and focus on only what makes us happy, or is a necessity, we have more physical and financial space in our lives. We also get the wonderful side effects of having less stuff to clean, organize or manage.
The FIRE (Financial Independence Retire Early) community does a great job of bringing these two ways of life together to live intentionally while focusing on building wealth. When we clarify what is important to us and commit to only spend money in those areas, we free up a lot of income to invest and build wealth. This is a topic of its own but if it interests you at all, read more about it here.
How to Start Living Minimally Frugal
So what are we to do about it? The Minimalists also have a great 30-Day Minimalism Game which can help you start to clear out what you currently own. Look around and find patterns in areas that you spend money that you end up getting rid of. Home décor your weakness? Or maybe it’s books? Whatever it is, commit to spend less in these areas and use that money to pay extra on debt or invest. Having less is more after all.
Is It Too Early to Bring Up Holiday Hangovers?
This week marks six months until Christmas! While we’re newly into a maskless Minnesota summer I wanted to bring it up because I am sure it’s the last thing on your mind. Now hear me out, saving for Christmas doesn’t have to be a daunting task and this is the one holiday related activity that you won’t be called out on for starting too soon (we see you Target with your decorations in September). I’m here to show you that you can actually enjoy the holidays without January credit card guilt and I’ve even included a free tool below if you appreciate a good spreadsheet!
Christmas Is Expensive
The holidays are an expensive time of year and if you don’t have any money set aside for it, I am sure you feel the stress of your paycheck being gone before you even get it. Holiday parties, gifts for friends, family and even co-workers, all that extra booze, it adds up! According to Deloitte, in 2019 American households spent an average of $1,496 on Christmas. Even more staggering, 22% of Americans believe their spending will cause them to go into debt.
Christmas happens the same day each year, yet we are constantly running in circles trying to start saving for Christmas in November while we are still stuck paying down holiday debt in March. By saving a little bit of money year round, we can avoid debt and ensure holidays are reserved for what truly makes us happy; spiked eggnog and holiday parties!
Calculating How Much You Need to Save Each Month
When trying to determine how much you should save for Christmas, let’s first figure out what you normally spend money on. Write out a list of all things Christmas related; wrapping paper, extra tape or bows, extra groceries, gifts for your immediate family, gifts for friends and extended family, home decorations, travel, etc.
Set a spending amount for each category that is backed by some research. By that I mean look at old statements or look online to see how much items cost that you are including in your budget. For example, if you normally host a party, think of how much you might spend on food and alcohol to get an accurate estimate.
Once you get totals for each category in your mini Christmas budget, add up all the totals to get your grand total that you plan to spend on Christmas. To determine how much money you should start saving, divide that grand total number by six since we have six months until Christmas. This is the amount you should start saving each month to have Christmas fully funded without worrying about holiday debt.
Here’s a free tool, no email necessary, to get started on your holiday budget! Be sure to save a copy to your drive first to get started.
Make Sure Your Savings Aligns With Your Budget
After you do the hard work in determining how much you need to save per month to leave Christmas debt free, look at your current finances and ask yourself, can I afford to put this money aside each month?
If the answer is yes, great job, you did it, now you just have to automate the transfer to make it even easier! If the answer is no, go back and look at your mini Christmas budget. Are there some extra items in there that you can eliminate or reduce your spending on? If not, is there temporary work that you can pickup between now and then to give your income a boost?
By saving for Christmas before the holidays come around, you are allowing yourself to fully dive into boozy happy hours with coworkers and exploring the latest ice sculptures with friends and family without the holiday stress of “can we afford this?”
Every penny you save now is one less penny you are paying interest on later. Let’s bring back the most wonderful time of the year as a time that’s truly full of joy and peace.
How Jealousy Stopped Me From Building Wealth
How many times have you said to yourself, “once I make more money we can start paying off debt” or “I could pay off my student loans if I made as much money as (insert name).”
Unfortunately, I know that feeling all too well and it didn’t do me any good! I was constantly making excuses as to why I wasn’t making progress or why I wasn’t further ahead in life.
I would blame it on my income or the fact that I didn’t have parents that paid for my school. But in reality, it was because I didn’t use the money that I was making efficiently. I was still spending tons of money going to restaurants or out on the weekends. I was young and I deserved that, right?
Looking back, if I would have dedicated a portion of my income to debt, I would have been able to pay off my student loans so much quicker than I had and, this is the important part, I would have had so much less stress around money. I could have afforded to make less money because I wouldn’t have had student loan debt and I wouldn’t have had to miss out on trips because I had to work.
When I was comparing my situation to those around me, basically having an enormous pity party for myself, I wasn’t able to make progress in my life.
Once I decided that it was time for a change I immediately saw a shift in my stress and the clarity that I had around money. I wasn’t making any more money but I was seeing my debt total decrease so much more quickly than I ever had. All because I was actually using my income to change my life, versus wishing I had more income or less debt.
When we stop wishing for things to improve our lives, we are actually able to see what we can do to live happier lives. Stop worrying about the new car your neighbor bought or your friend that is looking at cabins up north. This is your life, use your resources to curate your version of happiness.
It's Finally Happening and We Paid for It in Cash!
I’m jumping in this week to talk about something to hopefully inspire you to take action on something that you have been dreaming about, but haven’t quite pulled the trigger on yet. If a global pandemic has taught me anything, it’s that we should be spending as much time as possible doing what we love most with whom we love most!
Since I have been working from home I have been driving my car so much less, and I sort of love it! Of course I drive my car and this is not an article about how you should take up biking but it is a lesson in searching deep into our souls to find out what we truly love in life.
For us it was traveling, specifically around the United States. Yes, we are all about international travel but we live in such a large country and we want to explore every nook and cranny. And to be honest, we are obsessed with our dog and she can’t travel internationally.
After two road trips we realized our Jeep wasn’t cut out for longer trips. It drove wonderfully, had modern luxuries and had great mileage yes, but we couldn’t sleep in it and we had too much stuff to make it enjoyable to temporarily live out of.
This is where the idea of #vanlife came in and we finally decided to go after it! No, we didn’t have tens of thousands to buy one of those fancy vans and a loan was out of the question, so we decided to start looking at older ones that will need some TLC.
In preparation we sold my car to become a one car household during this transition, we are fortunate enough to have this flexibility since I work from home and we don’t have kids.
After months of searching and lots of patience our dream van popped up on Marketplace and I jumped on the opportunity to schedule a time that same day to see the van in person. The van was everything that we ever imagined and we paid cash on the spot so that we didn’t miss out as the market is really competitive at the moment.
My dad came to test drive it with me as Derek was out of town - and of course Kona came with!
Purchasing this van is something that we have always dreamt about but it never felt realistic. We can’t afford three cars. We both have jobs, what are we going to do with a van meant to live out of? COVID has taught me that anything is realistic and it just takes a little bit of thoughtful planning to make sure it happens without added stress.
By selling my car, setting money aside each month and focusing on our van life dream, we were able to pull the trigger when the perfect van popped up! This adventure vehicle will ensure we make the most of our long-weekend getaways. It means that we will be able to see more state and national parks as we will have to pay less in lodging. It means that we will be able to have our pup involved in all of the memories we will be making as we explore our beautiful country.
What is your version of van life? What are your dreams that you are setting aside because you haven’t sorted out yet how to make it work?
I want this to be your sign to make time in your life for your dreams. What do you need to do to start making it a reality? How much money do you need to set aside to ensure as little stress as possible?
What You're Missing Out on if You Have One Job
The days are long gone that you get everything you want in life from working at one company. Not only might your needs and wants change but benefits aren’t like what they used to be, oh man I sound old. Pensions are rare and the days of a household having one working parent and one stay at home parent without financial stress are gone.
There are so many benefits to making a little bit of extra money outside of your day job, let’s dive into just seven of the reasons and then we’ll explore how you can make more money!
Protection for you and your family
If 2020 taught us anything, it’s that our jobs are not guaranteed. Losing your job can be out of your control and it can also be out of your company’s control. It doesn’t matter how great an employee you are. So let's protect ourselves and our families. If your hours are reduced at work or you don’t get that annual bonus, don’t let your lifestyle or your goals suffer.
Limitless income
When you start working for yourself, your income is tied to you, not the limits to your job title at work. If you are selling custom earrings for example, you can make more money as you make more products, share them online or attend artisan fairs. When you take the reins and start acting, not reacting, your options are endless. I don’t say that to sound cliché, I say that because it’s true.
Making money while you sleep
Selling without having to physically be in a specific space is magical. This is how you see so many people making money while on vacation or waking up to “you have a new sale” email. When you can streamline your side hustle to be online and available to consumers 24/7, your income ceiling is limitless. Go create a website or post your products on social media and start selling while you sleep.
Exploring a hobby
Have you ever wanted to start something but was afraid for some reason? Turning a potential hobby into a side hustle is a great way to test the waters. I didn’t start flipping furniture because it was a dream I had. I started because I loved buying vintage pieces but quickly had too much furniture for our tiny house (I was also spending more money than I wanted to). So I started selling furniture that I didn’t mind parting with as I bought new pieces. I sold my coffee table when I found one I liked better and I did the same with my dining room table. I quickly learned that I could make money at the same time that I was updating my house. Start small and start with an area you are already interested in, you don’t have to go all in right away.
Reaching your goals faster
When you have a side hustle and you are intentional with that extra income, you are able to reach your goals rather quickly. It doesn’t matter if you are trying to pay off debt, build an emergency fund, go on that family vacation or stop the paycheck to paycheck cycle. This was a big motivator when I was paying off my student loans. Since I was working extra I was able to still go out to eat and go on vacation because my extra income was all going towards debt.
Flexibility to work when you want
A huge perk of being an entrepreneur is that you get to work when you want. You get to decide if you are maxed out at your day job and need a break or have some free-time and want to dive in. Don’t create unnecessary stress by over committing yourself. Complete tasks you need to get done for your side hustle when you are up for it, and stop when you are over it. If you find that you are never really in the mood, choose a new side hustle, that might not be the one for you.
Potential to go full time
When I started Money Gal Coaching, I wanted to show people how I got out of debt and how anyone could do it. I never imagined this would be a career change for me. But since I started with a passion that I did in my spare time, I was able to find something that I loved that I can turn into a long-term full-time passion. When you can turn your hobby full-time, work becomes fun and less of a chore because you do what you love and you get to create the rules.
Ok so you have decided to go after your hobby or increase your income, but what should you be doing? There are so many options, here are just a few but take some time to think about what you love doing and how you can make money at it.
We Often Don’t Include the Most Important Things in Our Budgets
Before I started on the path to figure out my debt, I was completely in the dark about a budget. What is a budget for? Who needs a budget? What am I supposed to include in my budget? Once I have a budget, now what do I do?
I initially started with listing out all of my bills and the sort of obvious things, like groceries or restaurant spending. That made sense, right? I quickly hit a brick wall when I bought a present for a friend’s birthday, that didn’t fit into any of the categories I had listed.
So there it began. I would add categories to my budget as life happened, and I was missing a lot of things! I didn’t account for bachelorette parties, weddings, insurance premiums, attending Twins baseball games or annual events like the Minnesota State Fair.
How was I so far off? The idea of saving for these “smaller expenses” didn’t even cross my mind until they started adding up. One summer I remember being a bridesmaid in three weddings and attending 10 more, I was broke!
This is what got me looking at my calendar and creating space in my budget for the things that were already scheduled and I wanted to attend. I would quickly add up what I thought that event was going to cost to calculate how much I had to start saving with the time that I had left.
Sure spending $200 at the Minnesota State Fair wasn’t necessarily going to break the bank, I could pick up another shift at work and be fine. But when I started saving just $17 a month year around, that affected my finances so much less!
That is when buying all the beer at the fair and eating all the fried pickles, corn and donuts became really fun. Because it didn't matter if I also went out to eat that week, because I planned for this.
So I challenge you, take a look at your calendar and what can you start saving for right now? Make a list and figure out how much you should save a month. Here’s a free tool to get you started on all those categories you might be forgetting in your budget.
7 Questions to Ask Yourself to Be Better With Money
Reaching goals can be hard and it just doesn't happen by accident, we have to actually put in the work. So whether it’s running a marathon, eating healthier or getting that next promotion at work, a plan is laid out so we know, how am I going to get from A to Z? The same works with reaching financial goals or simply getting rid of stress around money.
For example, if you want to increase our savings for an emergency fund, you have to determine, how much money am I going to need? From there, how much can I afford to set aside each month? Then you have to set that money aside and actively not spend it unless it’s an emergency.
Below are 7 questions to ask yourself so you can stay on track with your goals and crush it with your finances.
What can I do to increase my income?
I am sure you know by now but the side hustle game is real! It has never been more important to have diversified income because a job is not forever. There are so many options today so get creative, try selling something you enjoy making, teach or consult in your area of expertise or pick up some dog-walking clients.
Can I afford to pay more towards debt? What would my budget look like without debt?
If you are making your monthly payments on debt I would push you to see how much extra you can afford each month, especially on high-interest debt. By making only the minimum payments we are paying more in interest and increasing our chances of disaster if something were to happen with our income. Best bet is to pay it off as quickly as possible. And for a bit of extra inspiration, take a look at a life without those monthly debt payments, what else could you be spending that money on? Más vacaciones por favor!
Am I saving enough today to fund my vision for retirement in the future?
How much are you saving per month and are you on track for retirement? The answer is different for everyone, it depends on how much money you would like to have for retirement and how long until you want to retire. Use this calculator to see what your balance will be at retirement. If you haven’t bumped up your contributions lately you might want to look into that, 15% of your paycheck is a good goal if you don’t have high interest debt. Bonus credit if you want to reach financial independence at an earlier age, use this FIRE calculator (FIRE stands for Financial Independence Retire Early) to see when you can reach this goal!
Is my emergency fund all set or how much do I need to get it funded?
Having an emergency fund to fall back on will relieve a lot of stress in case a pandemic happens, an expensive car repair is needed or your furnace breaks in the middle of winter. A good rule of thumb is to have 3-6 months worth of expenses saved up and set aside in an account that you have easy access to. Don’t include unnecessary spending while calculating this number, it should only include what you would need to get by, we aren’t going on vacation during an emergency.
What are two of your big goals and do you have a plan to get there?
In order to truly enjoy life, we have to be sure we are doing the things that make us happiest. Sure we have to go to work and pay bills but outside of that, on the weekends or in your spare time, what do you enjoy doing most? Maybe you want to save up for a camper or you want to buy a cabin up north. Whatever it is, are you setting money aside? Do you know how much it will cost? Have you created a vision board on Pinterest to stay motivated? Ok, the Pinterest part isn’t necessary but it sure can be fun!
What system am I following to stay on track with my spending?
Just like we have to be intentional to reach our goals, we need a system in place to help us get there. Do you have a budgeting app to watch your spending? Do you use the cash-envelope system for categories you tend to overspend in? Do you log everything in Excel and update the pivot charts to see your savings progress? Whatever method speaks to you, put in some solid effort and you’ll be amazed how easy it will become.
Is there anything holding me back from taking action?
If you aren’t able to get started on the above items, why? Are you too stressed to even start? Do you not have a supportive partner? Does your debt seem too high to even begin to dream about retiring? Whatever it is, take one little step forward. Choose one thing that you can start to work on and begin there. You’ll be amazed that with a little support, it’s not as scary as you might have imagined!
Start Here if You Are Feeling Overwhelmed With Your Finances
I get it. Start budgeting! Pay off debt! Refinance your loans! Save for an emergency! Don’t forget about retirement!
We are constantly hearing messages on how we should be doing better and how to fix things. There are a ton of routes you can take while on your personal finance journey, so feeling overwhelmed is normal.
Instead of not starting because you feel paralyzed, let’s break a few of the important items down into manageable tasks.
Once you start to see progress, you will build up your confidence and motivation to continue on this journey.
I compare a financial journey a lot to our health and wellness journeys. You could start working out, eating better, drinking more water, or getting your steps in. They all are good things but you can’t do everything all the time, that is a recipe for burnout.
So, this is how you start. And remember, you take this one day at a time, if you are starting to feel overwhelmed, come back tomorrow. The key is to make small daily progress, tiny steps forward, that will add up to big improvements in your life.
Dream big. Get a clear mental picture of the reason you want to clean up your finances. Maybe it’s for your kids or so that you can go on a dream vacation without going into debt. Depending on your style, you can detail your dream out in a journal, Pinterest board or app on your phone.
Put a list together of all your accounts. Write out all your debts and assets. By seeing on paper how much debt you have, you will be able to get a better idea of how bad (or not so bad) your finances are.
Track your past spending. List out and categorize all your spending from the last 90-days to see where your money has been going. This will help you see if it’s going towards things that are important in your life.
Debt or savings. Decide what your main goal is so we can add it to the budget.
Create a budget. Use your past spending, and debt or savings goal, to create a budget that aligns your income with your spending. Don’t forget to include those larger annual expenses and break them up into monthly savings goals.
Follow the plan. Track your spending moving forward and try your best to stick to your budget. It won’t be perfect the first few months but you will get better each day, week and month.
Ready to dive in but want a bit of help? Schedule a free call today and let’s chat. This is an investment into your future, your future self will thank you.
3 Holiday Tips to Avoid January Buyer's Remorse
Here we are, that wonderful time of year where we show love and affection by participating in our consumerist culture while worsening our own financial wellbeing.
Ok that was dramatic, but is it not true? This year has taught us that physically being with one another is not only something we crave, but it’s something we need.
Dinner parties with friends, trying something new with a spouse or connecting with loved ones at the annual holiday gathering is far superior than anything big box stores have to offer.
Black Friday this year broke records for online shopping, topping off at $9 billion. And as you might have guessed, Cyber Monday broke another record at $10.8 billion.
While I can’t stop the economy from surging during the holiday season, I can ask that we all reflect on what we are buying, why we are buying it and does anyone actually want it?
Here are three tips to keep your holiday spending under control so that you don’t start the new year with buyers remorse.
Be sure you are setting money aside. Presents, gift wrap, holiday grocery store runs, it all adds up. Create a realistic budget that you know you can follow this year and remember that your January self would appreciate little to no credit card debt. Click here to download a template to get started on your budget.
You don’t need to buy a present for everyone you have ever met. Keep your shopping list to a realistic size and only give something that you know the person truly would enjoy (hint, you don’t always have to buy something, handmade items can be just as fun)
If you are buying gifts, whether it’s with a family gift exchange or for a spouse, agree on a total dollar amount that you are comfortable spending. To help you stay on track be sure to compare prices on multiple sites and shop early for deals.
You Can Be Earning Cash, on Your Cash!
Not to start off with a cliché Alber Einstein quote but “Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it.” I lead with this because not only is it so true, but I'm willing to bet you’re paying interest on something as you are reading this (and probably on a few things).
But there is hope! The easiest way that anyone can take advantage of compound interest is to start a high-yield savings account. If you are asking yourself, ‘what the heck is that’ then you are in exactly the right place.
A high-yield savings account features a higher interest rate and generates more returns, which is a fancy way of saying that it gives you more money back for just having money in the bank. Yes, real money, not rewards or points.
Money.com goes into detail explaining that, “unlike other methods of generating returns, such as investing in the stock market, putting your money in a high-yield savings account poses little to no risk...if you’re going to hold cash, you want to seek out a bank that has consistently competitive rates to maximize earnings on that cash.”
Pro-tip, since the amount of interest earned depends on the amount of money you have in the account, be sure your savings for larger purchases are in this account, such as a down payment for a house, vacation fund or your emergency fund.
Here are how the numbers break down. If you had $2,000 in a checking account with a standard APY of 0.06%, you would earn $1.20 over the course of a year. In a high-yield savings account with a 1% APY, you would earn $20 a year.
Be sure to read the details of your high-yield checking account, they all are a little different. They will have different interest rates, requirements on an initial deposit or minimum balance and some might even have fees.
Here are some examples of some accounts you may want to look into but be sure to do your research and find an account that will fit your needs!
Habits of a Millionaire, Just in Time for the Holidays?
Let’s get straight to the point. Budgets are the key to building wealth and while you might know the importance of one, I don’t know if you are giving them as much credit as they deserve.
Ramsey Solutions, the Dave Ramsey empire, conducted the largest survey of millionaires, with over 10,000 participants, all to find out what some of the common trends were.
Here is what they found:
8 out of 10 invested in their company 401k
79% did not receive an inheritance
Only 31% averaged $100,000 a year over the course of their career (and one-third never had a six-figure salary)
The average millionaire made a habit of budgeting every month
Since the holidays are here, and 52% of us Millennials are going into debt because of it, I’m here to offer a solution. Don’t wake up in January with your credit cards maxed, desperate to cure your holiday hangover, let’s change the path you might be headed down.
Here is a free, easy-to-use template to get your holiday budget created today! Use this spreadsheet to organize your holiday spending categories, assign dollar amounts to avoid debt and record your transactions to help you stay within budget!
While this year’s budget may not be fancy, we only have a month until the big holiday so let’s be realistic with how much you can save, I want you to know that it’s ok. 2020 has tested us, pushed us and prodded us to act differently.
So here we are, creating a budget, changing our spending habits and building a future for ourselves because we deserve more than just going to work and paying our bills. Thanks 2020 for the wakeup call.
Turning Junk Around the House Into Cash!
If spending this much time at home has taught us anything, it’s that we have a lot of crap!
Seriously, how many knickknacks, items in a drawer, old electronics in a closet or old clothes does someone need?
I personally think that if Marie Kondo’s sparking joy movement would have landed on Netflix shortly after the ever-so-amazing Tiger King, we would be in a much better place physically and emotionally with our homes.
I don’t keep a list of random odds and ends that I sell, I honestly don’t need to rehash the amount of stuff that I owned at one point. But, by perusing my history on Facebook Marketplace (much better for household items than Craigslist these days) I have recently sold:
An old painting for a neighbor - $40
An extra trash can - $20
A leaf blower - $200
An extra charging hub - $15
An old cable modem - $30
An electronics docking station - $25
A Vikings jersey that I won at bar pre-covid - $75
Our dining room table, I found a cheap one that I liked better - $700
Our coffee table, also found a better one for free that I refinished - $80
That's $1,185 in my pocket that I never would've had otherwise, and I had to do was take a picture and describe the item on Facebook Marketplace.
You get the point. If you find yourself staring at something every day and it doesn’t make you happy or proud that you own that item, get rid of it! There is no rule that you have to keep it.
And if it can bring in some cash, then why not?
15 Ways to Save Money
Saving money is something that you are either really good at or it goes against everything that brings you joy. I find that while I really enjoy saving money some ways, other ways can be tedious and not worth the effort.
Here are some tips I personally use. I find them helpful whether you lost a job, are looking to get that emergency fund started or just want to be a little better with your money.
Pay off your debt - payments to interest is like throwing money out the window
Keep a running total while you are grocery shopping as a reminder of how quickly the bill adds up
Oh and buy generic brands, because it’s the same thing
Review all of your subscription services and cancel those you use the least
Send money to a savings account automatically and for specific items (it’s easier to save for that trip to Mexico this spring versus for a generic vacation fund)
Unsubscribe from those companies that always email you tempting offers
Bring your lunch to work (if you aren’t working from home of course) and save restaurants as a way to treat yourself
Say yes to the match for your employer’s 401k benefit - free money
Look at your cell phone bill - can you get on a family plan, ditch your insurance, get on a plan with less data or sign up for an off brand servicer like Cricket or Visible
Make your morning beverage at home
Rent books at the library (you can even request books they don’t have)
For your next vacation, grab an airbnb rental during the week, you’ll find a cheaper rate you won’t have to spend lots of money on gas or fancy plane tickets
Sell anything around your house that you are sick of, don’t use or is more work than it’s worth - you won’t miss the junk once it’s gone and you’ll love the cash
Challenge yourself to not spend any money (besides the essentials) for a week
Shop around when making larger purchases, you might be able to find it cheaper at another nearby store or get a price match
This App Will Change How You Think About Budgeting !
While I was getting out of debt I started using an app early on that I think was a total game changer. This app not only helped me stay accountable, but it took all the guessing out of “how much do I have left in groceries” or “oops I spent too much, now what?”
Drumroll please - YNAB (You Need A Budget). Yup, that’s the name of the app!
Now, there are a lot of budgeting apps and there is a chance that you might already have one. But let me tell you why this one is different and why you should think about spending the $7 a month for it.
First off, if you spend too much in a category, YNAB will turn the category red and you won’t be able to ignore the problem. It will then ask you where you want to pull money from to make things right again. When you overspend that money has to come from somewhere and YNAB has no problem holding you accountable.
The second reason I love YNAB is that it let’s you use credit cards and it’s easy! I won’t go into the details here but just know that you can still accumulate your miles while you are paying off your debt.
Lastly, it makes saving for larger items a piece of cake. Maybe you want a savings goal for a specific item, like a new coach. Or you are saving for vacation but are going to be spending money along the way. Or maybe it’s a monthly bill and you are sick of looking up how much it is each month. Yup, it’s all there, and more!
The point I want to make is to encourage you to reach out and find tools that will make things like budgeting or paying off debt easier. Don’t try to create fancy spreadsheets or processes for saving receipts that you will never use.
Why make things harder?
Why You Might Not Need an Emergency Fund
This is a BOLD statement, I get that. But do you know why I say that? I think when we have a large buffer sitting in our bank account we become compliant and lazy with money.
When I only had $2,000 in the bank as my buffer when I was paying off debt that scared me. I was constantly thinking about some possible emergency that could happen and I would be screwed.
But do you know what happened? Nothing, I just worked my tail off to get out of debt so that I could start saving for an emergency and feel safe again.
Saving for an emergency was important to me because I wanted to know that if something happened, I was prepared. If I lost my job (which unfortunately we all know too well right now) I had time to find something I loved doing versus reacting to my new situation.
Don’t get me wrong, you should still have some money saved up while you are paying off debt, but let’s not save 3-6 months just yet
Here’s what you should do:
Save $1,000 for each member of your household before tackling debt
Once you have your minimal emergency fund, stay focused and on plan to pay off your debt
Once you are debt free, save 3-6 months of expenses and set it aside in a high yield savings account for a higher interest rate
Why and How You Should Be Saving With Sinking Funds
A sinking fund is when you set small amounts of money aside each month towards the purchase of a larger item. Wouldn't it be easier to save $100 a month for Christmas and have $1200 by December rather than putting Christmas on a credit card and stressing about it in January? YUP! Or how about that 6-month insurance premium? It's much less scary setting aside money each month rather than sacrificing all your fun money the month it's due.
Sinking funds can be used for anything that is not a monthly expense and becomes a line item in your monthly budget. So for example, in your budget, you will have a line item for your rent/mortgage, groceries and Christmas sinking fund (along with a bunch of other stuff). And each month you are setting money for the Christmas sinking fund aside but you aren't actually spending money in that fund until it get's closer to December.
How do you organize money from all these sinking funds? You can transfer the money into a separate account or keep it in a labeled cash envelope. There are also a few apps that help you organize money into separate categories to make your account balance more clear - Qapital and YNAB are a couple that I recommend. Use whatever makes the most sense for you!
Let's Create a Vacation Budget!
Did you know you could create a budget for just about anything? When you sit down and do the basic (yet crucial) steps that involve creating a budget you become aware of how far (or not far) your money can get you, no matter what it is being used for.
Let's take an example that we can all relate to - vacation! Let's say you have $600 in your vacation savings account and a friend asks if you want to go to Chicago for the weekend because flights are only $100 - yep! Your hotel, for three nights, is $200 (splitting with your friend). You head to Target and buy a couple of new shirts and some toiletries, $75 (at least!).
Once you get to Chicago, you buy the 3-day train pass for $20 because your hotel isn't as close as you wanted it to be. You start figuring out that you are spending $80 a day on food, two quick meals and one sit down restaurant. By the end of the weekend you will have -$35 with the new food expenses. You still have a concert you planned on going to and a couple of local museums, so you put the rest on your credit card and will figure it out when you get home.
Well, here we are. Home with more credit card debt. This is an endless cycle that creating a quick budget could have solved. Maybe you don't run to Target the night before. Maybe you get a hotel a little further out since you will have the train pass. Maybe, you can't go?
Let's practice! Create a sample budget of a past vacation - write down all your expenses and what categories they fall in. Once you're done, use this as a template for future trips and rearrange money as needed (maybe you need less restaurant money but more flight money).
How to Calculate How Much Money Should Be in Your Emergency Fund
Any good emergency fund consists of expenses that continue on during an emergency. While there are a few different scenarios in determining when we can tap into this savings, there is only one way to calculate it and it is pretty simple.
1. Housing - rent or mortgage, it also includes electricity, trash, water and those sort of bills. Netflix is not here, and if times are tough, neither is WiFi.
2. Food - groceries. Don't put your restaurant spending money or brewery adventures in your emergency fund calculations. This is how much money you need to put food on the table for your family. And if members of the house are still working, this includes packing a lunch (no going out to eat at work either).
3. Transportation - let's be realistic, even in a crisis you will need gas to go buy your groceries or to pick up kids from school. Maybe you take the bus, include your bus passes here instead. You aren't accounting for saving for a car in this fund or a repair that you want to get done in the future.
A proper emergency fund consists of 6 months of savings for the above items. Add up expenses for each month, times it by six and there you go! This money should live in a savings account that you have quick and easy access to. You are not trying to gain interest on this money, you are getting prepared for an unfortunate time in your life.