Category Archives: Finance

Go Cashless

Can a Merchant Go Totally Cashless?

The move toward a cashless society seems to be gaining ground, though it’s moving along about as slowly as just about anyone could ask it to. There’s an interest in mobile payment systems, and growing use and acceptance of these, but for most it’s just a convenient novelty. Visa’s looking to push this concept forward with its recently-announced Visa Cashless Challenge.

The Visa Cashless Challenge calls for businesses—mostly smaller businesses, and among these more service-oriented businesses, the kind that routinely deal in cash anyway—and is offering 50 of these businesses up to $10,000 each, a cumulative total of $500,000, to augment current systems and bring in cashless operations.

Visa isn’t just calling on other businesses to start going cashless; it’s also actively demonstrating the impact of cashless operations by serving as the official payment partner of the first ever Formula E running, the New York City ePrix. With several New York restaurants—from Fish Cheeks to Mulberry & Vine—joining in, it’s out to make the value of cashless clear.

The idea of no longer handling cash can be an attractive one, especially to any operation small enough to have the same person take money and then handle food. Easier accounting, less risk of theft or pilferage, and a variety of other benefits likely prove attractive to the small food service business. That’s before considering how many customers might be happier about using mobile payments systems, and if there’s a loyalty program and a mobile order-ahead option built in, the numbers likely only rise from there.

The end result is that, while there were benefits to going cashless, there wasn’t much incentive to try and a lot of expense involved in doing so. Visa’s looking to pull that particular stop out, and get more businesses interested in going cashless. Should you do it? Well, you should consider it. But before you do, make sure that your plastic card payment processor is up to task – and get a high risk processor, like eMerchantBroker.com

Earn Extra Money On Christmas Time?

If the financial worries of Christmas are bringing you out in a seasonal sweat, then fret no more. In this time of austerity, it’s easy to feel more like Scrooge than Santa, but if you’re facing a credit crunch this December, here are a handful of ways to make a bit of extra money this holiday season.

Trade in Last Year’s Gadgets
Christmas can be an expensive time with kids wanting the latest releases of everything. So, why not trade in old models to help with the costs? If you’ve got old mobile phones, computer consoles or laptops gathering dust in your home they can be traded in for cash this Christmas. Websites such as gazelle.com or exchangemyphone.com are good places to start when it comes to discovering how much your items are worth.

Rent out Your House
Are you going to visit family for Christmas or New Year? If your home is going to be empty over this period you should consider renting it out? Airbnb is one such site where you can list your home for a short period. This could be a lucrative way to earn money over the holidays if you live in a popular city. Make sure that you check the terms of your lease and take steps to ensure your home will be safe. Going through a reputable company will go a long way in this regard.

Put in Extra Hours
Over the holidays, bars, shops and restaurants are often looking for extra staff. If you have the time, then maybe you could pick up extra hours that work around your current job. Perhaps you work in an office that closes for a week over Christmas. You could make the most of this downtime by getting a second job. If you’re willing to work in a restaurant or bar on Christmas Eve, Boxing Day or New Year’s Eve, you can expect the wage to be worth your while. If you own a car, driving for ride-sharing apps like Uber and Lyft is also a good option to rake in some quick cash.

Get Cash Back

Although this may be of little help in time for this Christmas, putting all your Christmas (and other spending throughout the year) on a credit card that gives you cash back can be an easy and free way to make extra money. Some credit cards will pay a percentage of your spending back to you. Just be sure you always pay the balance on these cards off in full. If you don’t it is a not a good deal at all.
If you’re reluctant to take out a credit card, there are cash back sites that will give you a percentage of any online spending. Does this sounds too good to be true? Well, it’s not. Cash back sites make money by referring you to other sites that you buy something on. To thank you for going from its website, the site shares this money with you. Many even offer bonus payments for referring a friend to the site. Topcashback.com, ebates.com are examples of such sites. If you did all your spending through a cash back site or card over the next 12 months you could have several hundred dollars ready to spend for next Christmas.

Bake Your Way to the Bank

Are you skilled in the kitchen? Christmas cakes are difficult to make and take time that many of us do not have. So, if your Christmas cake is good, why not sell it to friends and neighbors? Be sure to price up the ingredients and include the cost of cooking them to ensure that it makes good business sense. Advertise your services to friends on social media sites and fliers in your neighborhood.

Smile for the Camera

Companies are always looking for pictures of happy families at Christmas. So, get photographs of the family around the tree, and then upload them onto a stock photo website where people pay to use your image. Shutterstock and Getty are two websites in which you can upload your photos and get paid every time someone downloads them .

The Bottom Line

Christmas can be an expensive time, but there are ways to make a few extra dollars, and with these tips, Christmas needn’t break the bank after all.

Companies with the Best Parental Leave and Benefits

When employees think about their dream jobs, it isn’t always about competitive salaries or the work itself. Employer missions and values, inspiring leadership and career opportunities have a big impact on worker satisfaction. Company benefits such as healthcare, vacation and parental leave can also be key in helping employees decide whether to accept job offers.

In that mode, American Express just announced that any U.S. employee of either gender who becomes a parent in any way, including adoption and surrogacy, can have 20 weeks of paid leave, with an additional six to eight available to birth mothers. But the most generous leave is coming mostly from tech companies that are competing for employees – and trying to attract and keep women – in an ever-tightening labor market. Look at the list below for the best benefits.

Google

The company culture at Alphabet Inc. (NASDAQ: GOOG), the holding company for Google, is designed to make workers feel valued and respected. Employees are free to concentrate on work without worrying about their errand lists, because Google offers an array of onsite services, including health clinics, laundry rooms and oil changes. Some Google benefits also extend to families of deceased employees. The company pays surviving spouses or partners 50% of deceased employees’ salaries for 10 years.

Netflix

Netflix Inc. (NASDAQ: NFLX) is known for its generous parental leave benefits for its 3,700 employees. The streaming internet subscription entertainment company, based in Los Gatos, California, offers up to one full year of paid maternity or paternity leave for new parents. Netflix also gives new parents the option of returning to work on a full- or part-time basis, or taking time off throughout the year as needed.

Adobe

Adobe Systems Inc. (NASDAQ: ADBE) is headquartered in San Jose, California, and has nearly 14,000 employees. Workers don’t have to worry about finding time off for summer and year-end vacations, because the digital media solutions company shuts down for one week in the summer and one week in December.

Airbnb

Airbnb Inc. is a marketplace that connects travelers with lodgings throughout the world. The privately held company has 1,600 employees and was voted Glassdoor’s best place to work in 2016. Employees do more than facilitate vacation stays for marketplace users, they also have the opportunity to use Airbnb themselves. The company gives employees a $2,000 travel stipend to stay in Airbnb listings worldwide.

Twitter

Twitter Inc. (NYSE: TWTR) has 3,800 employees around the world, but most of them work at the social media company’s San Francisco headquarters. Twitter employees enjoy onsite perks, such as fitness classes, acupuncture and three catered meals every day. The company also has an unlimited vacation days policy.

Epic Systems

Epic Systems Corporation is a healthcare management software solutions provider. The privately held company is headquartered in Madison, Wisconsin, and has 9,000 employees. Epic employees don’t have to choose between career growth and personal interests; the company offers workers with five years at the company paid four-week sabbaticals to pursue creative talents.

Salesforce

Salesforce.com Inc. is located in San Francisco and has about 10,000 employees. The company’s CEO Marc Benioff and his wife, Lynne, are well-known for their philanthropy in the Bay Area. The company also encourages employees to give back to the community. Salesforce employees get seven paid days per year to volunteer and the company also matches donations that employees give to charities.

 

Money saving if on Scottish roadsbank.

The Scottish have long been famed for their frugality and practicality. Henry Duncan, a Scottish minister, founded the world’s first commercial savings bank. Adam Smith, one of the most famous figures in economics, also hailed from Scotland.

It’s no coincidence that many successful  today have among their portraits of former CEOs and founders, a painting of a side-burned Scot whose eyes suggest any spare change would have to be pried out of his cold, dead hands.

In this article, we will look at three ways you can give your budget a boost using some of the famed Scottish frugality.

Be Utilitarian

When William Wallace led the Scots against the English in the 13th and 14th century, the militiaman’s weapon of choice was more likely to be a pitchfork or scythe than a spear or sword. Why? The average Scot used a pitchfork everyday, but swords were expensive and rare.

In battle, a sharp pitchfork was just as fatal as a sword, so very few men needed swords. Many people would be well served just by learning this one lesson: buy what you need, and if your needs change, adapt. It’s foolish to buy a sword if a pitchfork will do just as nicely.

Examples abound of people paying for more than what they need: a polished teak table to hold up a TV dinner; a brand new laptop to send email and print photos; an SUV to drive to the suburbs and back; or a huge house that is ruinous to maintain. The waste goes on and on.

Plan your purchases as you would plan a vacation. Know precisely what you need and how much you are willing to pay for it. Write it down and carry it like a talisman to ward off aggressive salespeople.

Buy Second Hand

Britain’s economic emergence during the Industrial Revolution owed much to a single invention: the Watt Steam Engine. In 1763, James Watt, a Scotsman, got his hands on a broken, second-hand steam engine and modified it to be much more efficient. Within years, Watt went from refurbishing old models to creating his own line of powerful engines – engines that drove the factories that made up the industrial revolution. The lesson of buying second hand, while less dramatic than powering the industrial revolution, is that it can save you significant amounts of money.

Used goods were once the specialty of pawnshops – where you could get a near-new stereo for a 70% discount if you didn’t mind the bullet holes and the dark stain on the left speaker. However, these goods have now become commonplace. Quality second-hand shops are popping up all over the place. These stores offer used models in good working condition at significant discounts compared to buying new. Garage sales, warehouse auctions and eBay auctions are also great places to search when you know what you want.

Another area where buying second-hand pays off is in cars. Because new cars generally plummet in value once they have been driven off the lot, a careful buyer can find a used car comparable to the showroom model at a huge discount. Japanese cars in particular seem to hit a certain price and stick there whether you own them for two years or five. This means if you find a decent used car, you may be able to sell it after a year or two for nearly the same price as you paid for it. Whether it is a car or a stereo, you can save yourself a lot of money by finding a used model with the same capacity.

Do It Yourself

When the Oxford English Dictionary was floundering on the edge of oblivion, the university brought in a Scotsman by the name of James Murray. Where the previous chief lexicographers delegated and did little, Murray rolled up his sleeves and began hammering away at the dictionary letter by letter. His do-it-yourself attitude saved the dictionary. He managed to keep expenses down and still produce results. This attitude will save you more money than you may realize.

You are the cheapest labor you can hire. When you pay someone to do a task such as mow your lawn, paint your house or change your oil, the service is costing you much more than the amount on the receipt. To understand what you are losing by not being hands-on, you have to look at how much income you have to earn to produce enough after-tax dollars to pay for a particular service.

For example, if you pay $1,000 to have someone landscape your yard, and you are in the 28% tax bracket, the job actually required around $1,400 of before-tax income. Getting out the shovel and doing it yourself is like adding $400 to your yearly income, let alone saving the $1,000.

The Bottom Line

The Scottish aren’t the well-known misers they used to be. However, the work of Scots during the Industrial Revolution still stands as one of the greatest leaps forward by a country and its people. All that hard work would have meant nothing if it wasn’t enforced by frugality.

You don’t need to feast on haggis or wear a kilt, but if you bring some old-time Scottish frugality to your own budget, you might find you’re pleased enough to at least try the haggis.

The Path to Financial Abundance

There are many paths to financial abundance: inheritance, marriage, lottery, business success, just to name a few. For most of us, however, the path to financial abundance will be paved with savings. It is a method based more so on self-discipline than luck. In that regard, it can be gratifying. The essence of saving is to spend less than what is earned. Yet this simple concept is easily lost in the complex world of digital money. Quite simply, it is very easy to over-spend.

To manage this potential problem effectively, it helps to look back to simpler times, remind ourselves what worked then, and adapt those strategies to today’s realities. As a young adult in the 1980s, I lived for years in a cash-only manner. I would cash my paycheck on Friday afternoons. The cash was then allocated to a series of paper envelopes labeled rent, truck payment, utilities, food and extra. Each of the first four would receive 25% of the required monthly obligation. Any cash left over went into the extra envelope. At month’s end my bills were covered, provided I remained faithful to the system week after week. Then my bills would be paid either in cash or by money order. I had no checking account, only a savings account.

Limiting Discretionary Spending

Any discretionary spending had to be paid from the extra envelope. This placed limits on my spending, a form of self-discipline. On those occasions when an unexpected necessity exceeded the contents of the extra envelope, I would “borrow” from one of the other envelopes knowing it had to be repaid from the next paycheck. With no credit cards on which to accumulate debt, my net worth grew over time.

With the benefit of hindsight, what made the envelope system work so well is that I always had a clear awareness of my cash flow. With that awareness, I had the information needed to make sound spending decisions throughout the month. My bills were covered and I knew how much extra was available at all times.

Tracking Personal Cash Flow

To bring that clear awareness and real-time management into today’s environment of credit cards, checks, automatic debits, etc., a different tactic is needed. There are some digital tools available, but I am a pencil-and-paper kind of guy. So, that was my challenge. My solution was to divide my monthly spending into two categories: normal and discretionary. Normal encompasses the recurring monthly bills which once upon a time had their own envelope such as mortgage, truck payment and utilities. This is the relatively fixed or inelastic portion of my household budget. I have those items listed on a monthly spending sheet along with the total amount required each month.

With this number in mind, I decided on an all-in spending number (normal plus discretionary) that was below the household income. This ensures a positive cash flow situation, the essence of successful savings. From the all-in spending number, I subtract the normal value leaving what represents the amount that would be in the extra envelope. The last bit of math is to divide that number by 30 so that I have a daily spending target. This discretionary spending of extra money gets tracked on a notepad every day. A running tally of the over/under is also tracked daily. It may sound overly-simplistic but I have been using this method for years. It really works! (For related reading from this author, see: What Are the True Costs of Your Household Expenses.)

Financial abundance is within reach for all of us. To achieve it, one must get and stay cash-flow positive on a consistent basis. With a clear awareness of income versus spending coupled with diligent tracking and management, everyone can succeed in this important quality of life issue. For more details and insights into this and other important financial topics, please see my book, “The Game Changer’s Guide to a Better Financial Life,” available through Amazon.

 

How Much Money Do You Need to Live in Los Angeles?

As the second-largest city in the United States, Los Angeles attracts residents from across the country and around the globe. As the epicenter of the multibillion-dollar entertainment industry, the city is a magnet for aspiring actors, directors and screenwriters. With idyllic weather year-round, beautiful beaches and a diversity of scenery, it is possible, during some months, for an Angeleno to snow ski in the morning and surf in the afternoon.

Los Angeles is a perfect study in how the demand curve works. When demand for something is high, prices rise. There is plenty of demand to live in Los Angeles. As a result, everything including rent, food, gas, and utilities is expensive. When considering a move to LA, the first order of business is understanding how much money it is going to take to pay the bills.

The following information is detailed in averages, but keep in mind Los Angeles is a huge, sprawling city. Prices vary wildly depending on where you plant roots. Rents in Santa Monica are not comparable to rents in South Central LA. By understanding the average cost of rent, utilities, food and transportation in Los Angeles, and then making adjustments based on your unique circumstances, you can narrow down the range of how much money you need to live there.

Average Rent in Los Angeles

As of March 2017, based on figures from Numbeo.com, the average cost for a one-bedroom apartment in the city center sits at approximately $1900 per month. If you are looking to get roommates, a three-bedroom apartment averages slightly over $3,420. The good news is that while these averages may seem scary to a new resident, they are skewed upward by the presence of extravagant luxury rentals in the wealthy areas of town. You can find plenty of Los Angeles rentals for under $1,500 per month if you go outside of the city center, though it is advisable when you find something that seems cheap for the area, to investigate the neighborhood and the apartment to ensure it is somewhere you are willing to live.

Average Home Cost in Los Angeles

If you can afford to buy in Los Angeles, prepare yourself for stiff competition and sky-high prices. According to real estate website Trulia, the average price of a home per square feet in Los Angeles is $554 as of March 2017, and current trends indicate this number will soar this year. Currently, the average cost of an LA home is hovering at $699,000. If you’re considering buying in the LA area, it is beneficial to get pre-approved for a mortgage as this will assist you tremendously when closing a deal with the seller. You can research current mortgages available for a home in LA using a tool like a mortgage calculator.

Average Utilities in Los Angeles

Like many parts of California, the Los Angeles region does not have a monolithic climate. Several micro-climates comprise the area. For example, the San Fernando Valley regularly reaches the triple-digits during the summer and can be quite cold for Southern California during the winter. Malibu, by contrast, rarely exceeds 80 degrees and has only dipped into the 30s a handful of times. Your utility bill can vary greatly based on the specific climate in your neighborhood. Citywide, the average utility bill is $133.50 per month for an 85m2 apartment. This figure fluctuates throughout the year and will vary according to the size of your home, but you can use it as a benchmark.

Average Food Costs in Los Angeles

Food in Los Angeles is significantly more expensive than the national average. A gallon of milk costs $3.79, and a loaf of bread costs $2.50. A dozen large eggs is $3.62. For a pound of boneless, skinless chicken breasts, the cost is $4.54. Even a frugal consumer, to be safe, should build $500 into his monthly budget for food costs in Los Angeles.

 

Save More Money Can Reduce Financial Stress

I’ve long held the position that even though we live in one of the wealthiest, most financially blessed countries ever, as a society, we also live a life of serious financial stress. I often joke that it’s probably less stressful to live in the rainforests of South America, hunting and gathering, than to live in our modern, tech-savvy society, paycheck to paycheck. A lot of this stress stems from the fact that, as a society, we just don’t save money very well. According to a past Marketwatch article, almost 69% of Americans have less than $1000 saved. That is an astonishing amount of us that are basically one paycheck away from homelessness, or at least raiding our retirement funds in case of an emergency.

Why Americans Have a Hard Time Saving Money

There is a plethora of reasons behind our insufficient savings habits, such as a lack of discipline and making bad financial decisions. Maybe, it is simply that good jobs and hourly rates just don’t exist anymore for the lower and middle class (which I would argue as a legitimate factor). We can even rationalize that the value of the dollar doesn’t go as far as it used to, therefore, neither will our paychecks. Regardless of the validity of these arguments, our financial habits have a direct impact on our ability to save and our overall financial well-being, regardless of the inflation rate or our income level.

How to Alleviate Financial Stress

If you find yourself significantly stressed out over money, there are several adjustments that can be made to alleviate that pressure and simplify your life. But it does require discipline and sacrifice, and a willingness to live with less. For example:

  1. Flip the “whip” – Many of us cannot legitimately afford the car parked in our garage; it’s possible we can’t afford the house it’s parked in either. If your car payment exceeds 15% of your monthly net income, not gross (we live off the net), then it’s time to consider downsizing or getting rid of your vehicle. I have done this before myself, and although it’s unpleasant, it’s better than living in stress and worry. Maybe 15% doesn’t sound like much, but if your mortgage or rent is near the recommended limit of 28-30% per month, almost half of your net income is being consumed by rent and a vehicle. The change is worth it. Alternative transportation could be used for the short term if available, such as public transportation, occasional ride-sharing with Uber or Lyft, and even carpooling to work. Assuming your car is not upside-down in value and you are diligent in saving in other areas, it shouldn’t take too long to buy a used, older car outright, completely eliminating a car payment. (For related reading, see: Options for When You Can No Longer Afford Your Car.)
  2. No cable – In my opinion, cable service is one of the biggest wastes of money. In the average household of three to four TVs, cable and internet services can run $200 per month or more. I recommend having only internet and purchasing a streaming device with no recurring monthly cost. These “sticks” allow you to stream movies or purchase programs or apps. I have recently done this myself, and eliminating cable alone is saving me close to $1500 per year. (For related reading, see: Alternatives to Cable TV.)
  3. Gym membership – these can easily cost $600-800 per year, depending upon how swanky the establishment and package that was chosen. With YouTube and DVDs, it’s so easy to get a quality workout at home without having a ton of money worked out of your wallet. Eliminate the membership, not the exercise.
  4. Side hustle – I have always been a huge proponent of a side hustle, or part-time gig. During my transition of leaving corporate America to go independent, I also had a part-time job while I built my practice. Even if you have a stable job or career and feel you could save more, find a good side hustle. Do something you enjoy and make some extra cash while doing it.

If you are feeling the monetary strain, downsizing your car, getting rid of cable and the gym membership, and finding a side hustle can have a dramatic impact on your budget. It takes a bit of courage, but one can transition from living check-to-check to having a net surplus per month, depending upon your situation. If you are having debt and/or budgetary concerns and you want to make some positive changes but are not sure where to start, reach out to a qualified financial advisor. If you change nothing, then nothing changes!

 

Money-Saving Cruise Ship Tips

Cruise! Just that one little word conjures up images of a luxurious vacation complete with fine dining, exciting nightlife, interesting ports of call, a room of your own – and a single, all-inclusive price. At face value, cruises are tough to beat. But many people, once they step onto the deck, forget how hard they searched for a bargain fare before booking the trip. Suddenly feeling like they have endless credit and bottomless wallets, they flag down every passing waiter to purchase the drink of the day in a souvenir cup, and they buy their suntan lotion on board instead of at a discount store.

Unfortunately, the party ends with a six-page bill tucked under their door at the end of the trip. The all-inclusive bargain has suddenly become very expensive. If you’re looking to save money on your next cruise, here are some tips that will help.

Research and Plan in Advance

On the day you decide that a cruise is in your future, start putting money in the bank to save for the trip. While just about everyone searches the internet to find a bargain vacation, far too many people pay for their trip with a credit card. If you tack 20% interest onto the price of the trip, your trip is no longer a bargain.

One you’ve booked your cruise, do some research on the ports of call before setting sail. Not all of the activities at these places are covered in the cost of a cruise. By doing some preliminary research, you can have a good idea of how to enjoy the local attractions without breaking the bank. Many of the major cruise lines have websites that include prices for the excursions offered at the various ports.

After you have identified the excursions that you think you want to take, do some web research and read the reviews from past visitors. If previous visitors enjoyed the ports of call and the sightseeing options, you probably will too. But be careful that the excursions you pay for aren’t simply activities you can do on your own for cheaper. For example, the cruise line may offer a trip to the beach for $45 per person when you could take a cab to the same beach for $10. Also be careful about paying for sightseeing tours that the cruise line offers. By doing a little upfront research, you can plan your own sightseeing tour for a fraction of the cost of the tour organized by the cruise line.

Set a Budget and Stick to It

If you’ve planned in advance – by buying your suntan lotion and other sundries before departure and knowing which excursions you want to take and how much those trips will cost – you should be able determine an on-board budget and stick to it. Extras to budget in advance for are spa services, food costs, beverages and souvenirs.

Sure the spa may be overpriced, but you’ll be on vacation and, if you know you can’t resist the allure of a massage, plan accordingly. When you go to the spa, be sure to ask about discount rates. Ships often offer special rates on various services at some point during the voyage.

Your extra food costs should be easy to control, since meals are generally included in the price of a cruise. There will be so much free food available on the ship at all hours of the day that it makes no sense at all to buy food at the add-on snack shops and restaurants requiring a fee. Many of those restaurants serve the exact same food you can get in the main dining rooms.

When it comes to beverages, if you just can’t survive on the free beverages – which generally include lemonade, juice, coffee, tea and water – look into the “bottomless” soda option available on most ships. If you like wine with dinner, consider purchasing what you think you might need for the trip on the first night. The wine steward will serve it by the glass and keep it refrigerated overnight.

Avoid the on board internet service or telephones. If you must make a call, wait until you reach a pay phone in the next port. (Keep in mind that you are on vacation. Do you really want to spend your vacation talking on the phone or checking your email?)

Finally, find out about your cruise line’s tipping policy, and plan ahead for the tips. The service staff works hard to give you the perfect vacation, and they don’t deserve to be short-changed because you didn’t budget appropriately.

The output of young family money

Are you parents that struggle month to month to stick to a budget? Are you stressed about being able to pay the bills even though your income is good? Are you wondering if there is a better way? There is and it starts with a philosophy. Here are the five steps to that philosophy of budgeting for young families.

Understand What You Need to Live On

Calculate how much money you need to live on. Your necessities include your utilities, rent or mortgage payment, groceries and gas for your car. For us it also includes diapers for the one-year-old and my wife’s new lighting equipment for her videography business. I think you get the picture. Write down how much you need by looking over your past expenses. Then add these up and see where you are. The total number may be smaller than you think, which will give you a more flexible budget. (For more, see: 10 Common Habits That Can Increase Wealth.)

Treat Savings As a Needed Expense

I encourage you to treat savings as a needed expense in your budget. My wife and I use this thinking and it has helped us make sure we are building up our emergency fund each month. I recommend 10% of your income to start with. And if you can’t do 10% then try 5%. I know it’s hard since you are wondering how you will have a social life, but think about what happens if your car breaks down or your toddler breaks your phone. By having cash on hand for the unexpected, you are able to still afford the necessities of life.

Don’t Forecast Income

If money is not in your account, you don’t have it, so don’t plan on using what you don’t have. It just doesn’t make sense. Something that I have learned recently from YNAB (You Need a Budget) software is that you should be using money that is aged. In other words, using money that you already have. This can be hard to do when starting out, as you may have to cut back on your fun expenses before your money is aged. But once it has, your stress drops significantly because you can be confident you have money for the next month’s expenses already. Saving consistently enough to build up a month’s worth of living expenses allows you to afford things like a new water heater without blocking your cash flow. (For more, see: How to Create an Effective Budget.)

Don’t Fool Yourself

Everyone knows that you may need to save for some house repairs, pay for a children’s museum membership or renew your Amazon subscription. Why not budget for these a little bit each month instead of trying to figure out how to pay for them when they surprisingly come up. This part takes a little bit of work but setting aside $20 bucks a month for Christmas presents starting in January prepares you for Christmas in December. Understanding your annual expenses allows you to do something about them and be proactive when it comes to planning for them.

Your Budget is Liquid Not Frozen

We all know that every month presents different needs financially. For me, one month we may eat out more and buy fewer groceries or my daughters may need new clothes. Because different months present different scenarios, we need to be adaptable within our budget to afford it. Having a flexible budget means finding an area in your budget where you may have wiggle room in one month but are maxed out the next. It is not saying we can splurge a little more. You just end up hurting yourself more if you do that.

 

Checklist of Financial Planning Anyone Can Use

Financial Fundamentals

Develop a budget and stick with it: When making a budget it is important to develop a realistic one and stick with it. You need to decide how much you can afford to spend and what you should be saving each month. To be financially independent, it is important to start making wise choices early on in order to develop a habit of staying within your budget.

Figure out your credit score: Do you know what your credit score is and how much it can affect you in various areas of your life? How do you build credit in a responsible way to make sure there are no surprises down the road? There are ways for you to check your credit score. Visit one of the three reporting agencies for more information.

Money Saving Tips

Employee benefits: What benefits do you currently have and what benefits are offered at your job? Are you contributing enough to your retirement plan to get the full employer match? What other savings can you get by participating in the other benefits offered to you? Speak to your human resources department to make sure you understand all the benefits available to you.

Emergency fund: Do you currently have an emergency fund? Have you thought about what would happen if your car broke down tomorrow? What if it was something bigger? Most financial professionals recommend three to six months of your monthly expenses to be saved in a liquid account that you can access when you need it.

Pay back loans: When creating a budget, make sure you include any loans that you currently have. When looking at the amount to pay each month try to allocate a slightly higher amount than the required minimum payments. This could possibly save you money by lowering the amount of interest you could be paying.

Set up a savings account(s): Do you have a large purchase in your future? Think about setting up a separate savings account to start saving for any dreams or goals you might have. This helps to separate your money so you can see the progress you are making towards your purchase without tapping into your emergency fund. This can be beneficial if you are looking at purchasing a house as you will most likely need a down payment. (For related reading, see: 10 Ways to Effectively Save for the Future.)

Establish relationships with various insurance and financial professionals: In your 20s it is important to start developing these relationships because you will need various types of insurance and guidance to help you manage the risk that will be encountering on your own. Insurance professionals will ensure you and your possessions are covered, while a financial professional will help you with various financial strategies to help you achieve financial independence.

Set Long-Term Financial Goals

Start saving for retirement: Retirement might seem like a long way away, but it is never too early to start looking at the various retirement options you have. Taking part in the retirement options you have at work are a great start but for some people, it might make sense to look at alternative investments outside of work, such as a traditional IRA. If you qualify based on your income, a Roth IRA can be a great way to start saving for retirement outside of the workplace because it offers tax-free withdrawals during retirement.* You should talk to your financial professional about the different options that are available.

Develop goals and write them down: In your 20s everything can be changing so fast that you don’t know where to start. A great thing to do is sit down and start coming up with some goals. Break these down into short, mid and long-term goals. This helps by giving you some direction in your life. Focus on your goals and make sure what you are doing every day is keeping you on the right track to achieve them.

Guidelines to Achieve Success

Consider saving 30% of your income: This might seem like a lot starting out, but it is important to save for the various aspects of your life. Consider saving 10% for retirement, 10% towards your emergency fund and 10% towards any large purchases you might have coming up.

Have an emergency fund: It is extremely important to set up your emergency fund and not touch it unless needed for an emergency. This fund will help give you the peace of mind that if something were to happen, you can take care of yourself. Try to get six months of your living expenses saved up.

Minimize credit card debt: Credit cards can have high interest rates that can really cost you a lot of money in the long term. Try to pay off your credit cards every month or, if you have to carry a balance, try to keep it under your credit limit.

Buying a vehicle: When buying a car consider putting down a significant down payment. When financing the car consider doing so for no more than four years and spending no more than 10% of your gross income on car payments. If you are buying a new car, consider driving it for 10 years to maximize the car’s value and to limit the loss due to depreciation.

Buying a home: Like buying a car, put down at least 20% as a down payment on a new home. This will help you to lower the monthly mortgage cost, help your chances of getting a favorable loan and also make sure you don’t spend more on your home than you can afford. Some financial professionals will advise you to keep the total cost of your home under two or three year’s worth of annual income.