New Year’s Resolution: Develop a Savings Plan

The following is a guest post. Enjoy! 

If you are looking for a great opportunity to start being more financially aware, the New Years is a great time to do so. Although in truth, it is always a good time to start saving and panning, often times people enjoy the idea of starting fresh when the year is new. However, if your New Year’s resolution is to start saving more money, you need to assure that you have an actual plan in place. Having a plan will allow you to keep on pace, while hitting milestones along the way. And if you keep on that pace for the entire year, you’ll be able to look back when the year is over and be proud of the financial savings that you made. Here are some ways that you can develop a savings plan for your New Year’s resolution, in order to have more money when the year is up.

Budget

The first thing that you can do to better prepare yourself for setting aside a savings plan, is to set up a budget. Setting up a budget in the middle of the year can seem intimidating, so at the beginning of the year, you have no reason to not set one up. For your budget, factor in all of your monthly expenses that you can’t avoid. This includes living costs, transportation and food. Then take a look at all of your extra costs, such as cable, clothes, going out with friends, or anything else that could be cut back on to save more money. Once you have everything laid out for what you spend monthly, subtract that from what you make from your job on a monthly basis. You can then adjust how much you spend, and where you spend it, accordingly to how much you want to save.

Have a Set Number

You should have a set financial number as a goal that you’d like to save by the end of the year. You can then break that down to a monthly goal, and then even as far as a daily goal. In doing this, you can have a better idea of how much money you can spend and save on a daily basis. Also with this, you can get an idea of how you may need to make up for days that you spend too much, by spending less on other days. It doesn’t hurt to overestimate this goal either, as you can then prepare for financial issues that may come your way. After all, things happen and you sometimes have no choice but to pay for them.

Avoid Pressure to Spend

If you get a tax return during tax season, it can be a great financial gain. However, don’t feel pressured to go out and spend that money. Instead, consider how you can put it aside so that it can add to your savings. This is the same if you get a raise at work or a bonus. You should consider the fact that if you can make it by on a certain amount each month, there is no need to change that number just because you get a break. Instead, consider how that money could be better added to your savings goals.

Stay Away From Credit Card Debt

One way that people try and save cash, is by taking out credit cards and using the money that is allocated on there. This can be a bit tricky, as you see your bank account start to rise and don’t comprehend the amount of money that you are actually racking up on your credit cards. Instead, try and stay away from spending tons on your credit cards. Instead, use them only when necessarily and try your hardest to pay them off as quickly as possible. Some credit cards can be beneficial, especially if they offer cash back rewards, it can add to even more savings, but if you don’t pay them off then you are looking at some serious interest rates that could cut into your financial plans.

Saving money can be hard and a challenge for some people. After all, if it was easy, then everyone would be doing it and they’d have a better idea of financial management. However, by simply planning out one year in advance, you can make some serious improvements in your own financial standing. And the best part is that after you make these changes for one year, you’ll be surprised to find out how quickly the habits become normal and become a part of your yearly routine. But in order to get on the right path, you have to get started now. Consider the tips listed here for better financial management and to develop a savings plan for the future.

Jacob’s 2014 Financial Goal Setting and Automation

Happy New Year Everyone! It is that time again. That’s right – time to set my financial goals for 2014. It’s hard to believe that 2014 is already upon us. Just one more year, and we’ll be to the year that they traveled to in the movie, Back to the Future II (one of my personal favorites!).

I do this once every year as part of my goal to create what author David Bach calls a Purpose Focused Financial Plan. The goal of this system is to employ money in your life in a way that matches your life values and dreams. It is a very cool idea!

You can read more about my journey to create this system at the following links – Creating a Purposed Focused Financial Plan and My Personal Finance Journey’s Investment Strategy.

As is the case with many things in life, a good portion of financial goals are long-term commitments requiring attention in each passing year. As such, you might see many similar goals that I was trying to or did achieve in 2013 listed for 2014. I am perfectly fine with having some of the same goals year-to-year, provided that I believe in the causes they represent (which I ponder each year, and all of the ones listed below definitely do meet that criteria!). 

2014 is looking like it will be a challenging year. Not in a bad/negative way, but just in regards to experiencing a lot of changes with me getting married, finishing my PhD and potentially moving if a job presents itself out of town, and potentially selling my condo. And, for someone like me who is accustomed to controlling my finances with an exacting hand, change requires me to take a significant amount of time to learn about new things before acting.

So, here goes, the unveiling of Jacob’s 2014 financial goals. In addition to the normal listing and associated commentary that I traditionally include in this type of post, I have also included the various automation steps that I take to maximize my chances of carrying out all of these activities. So, enjoy, and I look forward to reading any comments you all have!

Short Term (Less Than 1 Year) Goals

• Continue building, optimizing, and balancing a Three-Legged Stool for Retirement.
  • Since I am in the 15% tax bracket (and recently confirmed that I will likely be again for 2014 taxes), my strategy is to first finish off my individual Roth 401k contributions for 2013.
  • Normally, contributing to a Roth IRA would be the first priority since Roth IRA contributions can be taken out for any reason and at any time. However, since I only have a few more thousand $ to go, and Roth 401k contributions for 2013 are only accepted until April 2014, this step got bumped up in the priority order.
  • Anyhow, after that, I will move towards maxing out my Roth IRA contributions for 2014.
  • My next move will be to contribute an equivalent amount in an after-tax investment account in order to have money that is accessible for needs prior to retirement. This is particularly important this year since, if my fiance and I move after graduation, we will likely be looking to purchase a house and need at least a little bit of cash for a downpayment.
  • If I still have any money available for investing after the steps above, I will then focus on contributing to my Roth 401k account for the 2014 tax year.
  • Since my graduate school fellowship income does not count as “earned Income” for retirement plan contribution purposes, I have to make sure that my combined Roth IRA and 401k contributions for 2014 are less than my net blogging income minus the deductible part of self-employment taxes.
  • Automation Step: No automation needed for this specifically, since automation will be handled in steps below. 
    
• 1) Contribute maximum allowed for 2013 Roth Individual 401k. This amounts to me needing to contribute $1,819.08 more prior to the April 2014 deadline. 
  • Automation Step: Placed a monthly reminder on my Outlook calendar from now until April 2014 to  max out my 2013 contributions. The timing of this reminder is directly after I receive my monthly paycheck. 
• 2) Contribute $5500 (or ~$458 per month) to my Roth IRA with Vanguard this year (maximum allowed, which remained the same from last year. I was hoping it would keep increasing like it did from 2012-2013! ).
  • Automation Step: Placed a monthly recurring reminder on the 23rd of each month (day I get paid) to contribute $5.5k to Roth IRA for 2014 / a monthly minimum of $458.
• 3) After maxing out Roth IRA for 2014, contribute equivalent amount ($5,500) in taxable Vanguard mutual fund account.
  • Automation Step: Placed a monthly recurring reminder on the 23rd of each month (day I get paid) to invest money in this fashion after contributing to my Roth IRA for 2014.
• 4) If have additional funds available after completing #3 above, contribute >=20% of blogging income to Individual Roth 401(k) with Vanguard.
  • Automation Step: Placed an automatic monthly recurring reminder on my Outlook calendar for this purpose.
  • With this goal, I will need to keep in mind the maximum contribution allowed given the level of “earned” income I realize in 2014 (not including graduate school fellowship income).
• Reach short-term net worth target for this year (1.10X my current net worth).
  • Automation Step: Already have monthly reminder on Outlook calendar to calculate net worth each month. 
    
• Maintain target 6-9 months of expenses in cash reserve emergency fund in Dollar Savings Direct account.
  • Automation Step: Already have monthly reminder on Outlook calendar to calculate net worth each month, and the current level of my emergency fund is included in this.
  • However, with me getting married in September 2014 and then potentially moving and/or starting a new job shortly after, I added a reminder to re-evaluate my emergency fund level in the October 2014 time frame.
• Put together Purpose-Focused Financial Plan together with fiance, including long-term and short-term financial goals. Also read up on marriage/couples/family finance books as well. 
  • Automation Step: Placed a recurring monthly Outlook reminder on my calendar to tackle this item beginning in the late March time frame, when the 1st-of-the-year busyness and tax return preparations have calmed down a bit.
• Organize new joint / individual financial accounts for fiance and I. Integrate our two finances together.
  • Automation Step: Set up bi-weekly Outlook calendar reminders for this purpose so I can stay on top of this.
• Evaluate whether or not to rollover some of tax deferred retirement accounts to Roth status since tax bracket low.
  • Automation Step: Added a recurring Outlook calendar reminder every 2 months to evaluate whether this type of conversion is appropriate/feasible or not.
• Rebalance mutual fund portfolio to meet asset allocation target %’s (70% equity, 30% fixed income overall).
  • Automation Step: Already have monthly reminder on Outlook calendar to calculate net worth each month, and included in this is a check on asset allocation levels.
• Keep maintaining zero-based budget that I have set up to strategically manage my personal finances.
  
  • Automation Step: I already automatically do this every month, so no further automation step is required.
• Towards end of 2014/after get married, evaluate if need to obtain life, disability, and long-term care insurance.
  • Automation Step: Placed monthly recurring Outlook reminder on my calendar starting in November 2014 to evaluate this action.
• Have draft of my will + fiance’s will (which she needs to draft) reviewed by a lawyer. Also try to use same lawyer to create wedding contract for our wedding in September 2014. 
  • Automation Step: Placed recurring monthly reminder on Outlook calendar to follow through on the items involving a lawyer. 
• Create and keep updated a Google Document listing out all of fiance and I’s account types/locations in event either of us is injured. 
  • Automation Step: I just created this Google Document for my personal accounts and added a reminder to have fiance update the doc with her accounts in the next few months. In addition, I added a recurring yearly reminder to update the Google Doc as things change periodically.
• Continue to save $50 per month for trip to Grand Canyon or Niagara Falls as part of freedom life values account.
  • Automation Step: Created an automated monthly transfer from my checking account to a saving account set up for this purpose at Ally Bank.
    
• Invest $500 in Microloans with Microplace.com to support Latin American micro entrepreneurship. This equates to $42 to invest per month.
  • Automation Step: Placed recurring monthly reminder to process this investment on my Outlook calendar as well as added it to my monthly zero-based budget spreadsheet.
  • Recently, I shopped around for other international microloan providers to see if the 2-2.5% annual interest I am earning with Microplace is competitive, and was quite surprised to find out that Microplace.com was the only provider that offers an actual interest rate return on investment.
  • The majority of the other providers are set up where the money from individual lenders is a donation, not an investment. There are also several that offer return of principal, but not an interest rate. Interesting stuff!
  • In another twist of events, as of Jan 14th, Microplace has stopped accepting new investments. Thus, I’ll have to invest my money elsewhere.
• Invest $25 each month ($300 total for year) in Lending Club A Safety Grade Person-2-Person loans.
  • Automation Step: Set up monthly auto transfer to Lendingclub account for $25, starting Feb 3rd, ending Jan 5th, 2015. Also, placed recurring reminder on outlook calendar to select a lending note each month, day 15th.
• Donate $1,500 to Multiple Sclerosis Foundation in 2014 (5% of take-home pay in my graduate school research assistantship job).
  • Automation Step: I already have this money saved up and ready to donate, so all I need to do is to process the contribution. Pretty easy here! 
• Fund raise $5000 for MS 150 bike event in June 2014.
  • Automation Step: Fundraising is a pretty manual process, and I am pretty good about remembering to do it. Thus, no automation step is needed. 
• Save 3% of take home pay each month (after taxes) for Dream Account.
  • Automation Step: Set up automatic monthly transfer for the correct amount from my checking account to my Dream Account located over at Capital One 360. 
    
• $30 per month save for doing running races / bike rides as part of health life values account.
  • Automation Step: Set up automatic monthly transfer from Bank of America checking account to Ally Bank life values savings account.
    
• $20 per month save for buying fresh vegetables as part of health life values account.
  • Automation Step: Set up automatic monthly transfer from Bank of America checking account to Ally Bank life values savings account.
• Save ~20% of (blogging income minus amount of income deferred to Individual 401k with Vanguard plus untaxed graduate fellowship income from my research job) in a DollarSavingsDirect.com online savings account in preparation for 2014 taxes and to pay quarterly estimated taxes.
  • I just ran some predicted numbers, and it appears that even with me getting married and potentially starting a job later this year, I will very likely remain in the 15% marginal tax bracket. Therefore, saving 20% of my income for unpaid taxes / estimated tax payments still seems appropriate.
  • Automation Step: Evaluating my required unpaid income tax savings is already a part of my monthly business transaction consolidation, so no further action is required there. However, I just added a reminder to re-evaluate my 2014 tax bracket after I finalize the details/salary of the job I will start later this year. 
• $30 per month save for trips to visit friends/family in other states as part of friends/family and freedom life values account.
  • Automation Step: Set up automatic monthly transfer from Bank of America checking account to Ally Bank life values savings account.
• $10 per month save for purchasing food for backpacking trips in the Blue Ridge Mountains once a month as part of health life values account.
  • Automation Step: Set up automatic monthly transfer from Bank of America checking account to Ally Bank life values savings account.
• Execute any business tax deductions I can for 2013 taxes.
  • Automation Step: No automation needed, as I have secured a good accountant to help me with my 2013 tax return, and she is familiar with the types of business deductions I want to process. 
    
• Send out 1099-MISC for staff writers for 2013-2014 taxes.
  • Automation Step: Not needed since I am already in talks with accountant to send these out by the Jan 31st, 2014 deadline.  
• Use 1% home value home maintenance fund to fix various small things that are broken around my condo after 3.5 years of use. These things include a closet door off the hinges, the light-switch in the bathroom not working all the time, the bathroom towel rack holder coming unscrewed, and some pipes under the sink that need to be re-caulked. This will especially be important if we sell our condo this year in the event of a move. Once I get these things repaired, I will then need to replenish the depleted funds in the home maintenance account.
  • Automation Step: Placed a recurring monthly reminder on my Outlook calendar to look in to this item.
    
• Execute 4 estimated tax payments for blogging + graduate research fellowship income on the following dates – 1) April 15, 2014, 2) June 16, 2014, 3) Sept. 15, 2014, and 4) Jan. 15, 2015.
  • Automation Step: Placed reminder of calendar on each of dates above + a reminder 1 month before each date to allow lead time to send in payment. 
• Maintain a total of $1600 for health expenses for dogs we adopted (for annual health checkup, Frontline/Interceptor, and miscellaneous health emergencies/treatments needed.
  • Automation Step: Placed recurring monthly reminder on Outlook calendar to check that this account balance stays at $1600 (level it is currently as well).
    
• Help friends become debt-free.
  • Automation Step: Placed recurring monthly Outlook calendar reminders to follow up on their current balances, monthly payments, interest rates, and to advise them on best path forward. 
• Continue investing in long-term content growth of blog.
  • Automation Step: As part of my normal monthly zero-based budgeting process, I always check to make sure the correct amount of savings for staff writer payments is present, so no further automation steps are needed here.
• Determine if it is more efficient to file taxes jointly or separately once fiance and I get married in September 2014. Also optimize (minimize) tax bracket by balancing tax-free and tax-deductible/deferred retirement savings.
  • Automation Step: Added reminder on calendar to evaluate this in December of 2014.
• Save >50% of after-tax / take-home income. 
  • Automation Step: No additional automation step is needed for this goal since saving is incorporated elsewhere.
  • In 2013, I was able to save 55.38% of my take-home income, so I am hoping to continue this trend!
• Save $1 per day in Making Future Child a Millionaire Account, invested in the Vanguard Total World Stock Market ETF. 
  • Automation Step: Unfortunately, Vanguard taxable ETF brokerage accounts do not allow you to schedule automatic transfers. Therefore, I had to set this up manually. Each month as part of my zero-based budgeting efforts, I will manually initiate a transfer for $31 to my account. Next, I placed an automatic monthly reminder to invest the money in the Total Word ETF above several days after the deposit has been made.
• Save $10 per day as a sneaky trick to stash away even more money. 
  • Automation Step: Already have this automated. The way I do it is to set up automatic weekly transfers 5 days a week for $10-$20 to my Capital One 360 Savings Account. $10 per day on Monday, Tuesday, and Wednesday, and then $20 per day on Thursday and Friday to make up for no transfers on the weekend.

Mid-Term (3-5 years out) Goals:

• Continue contributing maximum allowed to Roth IRA and Individual Roth/Traditional 401k each year using dollar cost averaging.
• Reach intermediate net worth target (~2.2X my current net worth).
• Own a rental property by 2018.

Long-Term (greater than 5 years out) Goals:

• Obtain a net worth of $1,000,000.
• Own a home free of mortgage payments.
• Own a vacation home in the mountains or a ski resort.
• Accumulate enough funds not have to work, but will probably anyways because I would get bored. 

How about you all? What goals have you laid out for yourself in 2014? What technique do you find is most effective in holding yourself accountable for your goals you set?  

Share your experiences by commenting below!

***Photo courtesy of http://www.flickr.com/photos/pickinjim/525129498/sizes/l/

How To Make Your Own Luck With Your Finances

The following post is by MPFJ staff writer, Catherine Alford. Cat is a freelance personal finance writer who blogs at www.BudgetBlonde.com. 

I used to think that luck was just – well – luck! As in, isn’t is so lucky that those people won the lottery or picked the right stock at the right time?

However, what I’ve realized over time is that you can actually create your own luck when it comes to your finances. It might not be “lottery luck,” but with a few simple steps, you can ensure that you remain lucky throughout the course of your financial life.

Here are some common phrases that I hear with respect to money and luck.

There are a lot of misconceptions about finances and how people reach their financial goals. I’m sure you’ll be able to relate to hearing some of the comments below, and hopefully you’ll be able to see the same pattern as I did, which is that those who are “lucky” in terms of money actually worked hard to get there first!

 1. Mr. Smith is SO lucky that he got to retire at 55!

No, Mr. Smith isn’t lucky.

Mr. Smith lived below his means. He probably drove an old truck, didn’t upgrade his life when he has the ability to, and invested slowly over time. People like Mr. Smith are perhaps lucky that they aren’t prone to materialism or lucky that they have a knack for saving. The truth is, though, that people don’t retire early because they are lucky. They typically retire early due a lifetime of planning and hard work. I can’t tell you how many people reach retirement age and wish they had the ability to quit working. Don’t wait for luck or envy those who are able to. Everyone has the ability to do this. It just depends on how you plan.

2. They are SO lucky they get to go on vacation! I haven’t been on one in years!

People tend to go on vacations in two ways. They either put it on a credit card and have debt problems later or they save up for it ahead of time.

Sure, many of us are fortunate to get vacation time or fortunate to have a little bit of extra income to buy a plane ticket here or there, but is that really luck? I would say that “vacation luck” is self-created. We either get a break from work because we worked hard to earn it or because we saved up for it. The people who don’t take vacations over the course of several years make conscious decisions not to take one or not to make saving for one a priority. Remember, we can make our own luck when it comes to our money because we control what we do with it!

 3.    You’re so lucky you get paid to work from home.

This is one I’ve been hearing a lot lately, ever since I started working 100% for myself.

Every time someone says it to me, I vacillate between cringing and feeling grateful that I have the ability to do what I do. However, there is nothing “lucky” about getting paid to work from home. It’s hard and scary and challenging to break out on your own and become self-employed. I didn’t just wake up one day and decide to stay in my pj’s and write from the couch just because I’m a lucky girl. It happened because I worked for it. I always like to point out that there’s no magic formula to what I do. Anyone with enough discipline can do the exact same thing. They just have to want to. Again, there’s nothing lucky about it. To be honest, though, it is kind of lucky that I don’t have to wear blazers anymore.

 4.    They’re so lucky they started investing early.

Investing is one area where you can definitely make your own luck with your finances.

Sure there are people who pick the right stocks or inherit stocks that their grandparents owned. That’s fortunate for them. However, if you don’t have any sort of trust fund, it’s up to you to make your own luck. You can do this by being conservative with your investments, starting now if you haven’t started yet, and teaching the next generation about responsible investing. The truth is, information about investing is open to anyone and everyone. Regardless of your education level, there are free seminars, books, and blogs that can teach you about investments. No one is lucky because they started investing early. They were simply willing to take the time to learn about it and took action to make sure it was a part of their lives.

Ultimately, when it comes to your money and long-term wealth, there aren’t shortcuts for most of us. Yes, there is a small sect of people who come from very wealthy families or who inherit something they weren’t expecting. However, for the average person with a normal job, it’s up to them to create their own opportunities in life and finances.

So what will it be? Are you going to be lucky or not?

What steps are you taking to create your own financial “luck?”

Share your experiences by commenting below! 

***Photo courtesy of http://www.flickr.com/photos/timypenburg/5283231645/sizes/l/

Utilize January To Get Your Financial House In Order

January is a good time to recover from the hectic holiday season and get yourself on track for the financial year ahead of you.

Below are 3 good steps to take to help you get your financial house in order for the New Year:

1.      Organize Your Financial Filing System

If you’re like a lot of folks, the months of November and December always seem like one big blur. Everyone hurries to get all their projects and school exams completed before the Thanksgiving break. Then, after Thanksgiving rolls through, it seems like you’re half way to Christmas, which brings a whole new level of busyness in and of itself!

Essentially, what all of this hustle and bustle often results in is an Inbox full of receipts, financial statements, doctor visit bills, utility receipts, etc that need to be filed in your financial filing system.

Well, January is a perfect time to clear off that desk and get this stuff put away where it needs to be! Not only will this step improve your sanity, but it can ensure you know where all your records are in preparation for producing that data for tax return season.

2.      Implement an Effective Strategy for Credit Card Debt Payoff

Another good action item to embark upon in January is implementing an effective strategy for paying off any high interest credit card debt. For example, if you have a manageable level of debt that can be paid off within 6-12 months, it might make sense for you to look for a new 0% balance transfer offer credit card.

Or, if you are having trouble meeting your monthly payments, it is good to stay in communication with the credit card company to let them know your situation vs. just staying quiet and then surprising them with a default later on.

3.      Develop a Strategy for Investing Your Money

A last step to take during the first month of each New Year is to plan out your investment strategy for the year. For example, think about what tax bracket you will be in for the coming year. Once you have an estimation, you can then deploy a strategy for where to invest your money in tax-free (Roth IRA, Roth 401k), taxable (regular accounts), or tax-deferred (Traditional 401k, IRA) accounts. This will enable you to effectively manage your tax bracket both in the present day and also when you are in retirement.

First Comment Sharing Your Favorite Charity Gets The Organization $34.84 – Community and Charity 10% Monthly Blog Income Give Back # 28 – January 2014 Edition

The 10% give back giveaway fun rolls on for the month of January. Can you believe we’re already in to a New Year?!

In case you missed the first 27 editions of the 10% Blog Income Give Back, after doing some thinking at the beginning of October 2011 about what direction I want this blog to grow and evolve towards in the future, I decided that any income made from this blog would have more significance to me at a personal life values level if I knew that a portion were being given back to the following places:

• 1) The readers – Obviously, without you here to read my articles and interact with my ideas, there would be no blog in the first place (let alone blog income). As such, it is only fitting that you receive a portion of any blog income.
• 2) Charitable organizations – If you’ve read my blog before, you know that I’m a big believer in donating a portion of my money to charity. Each year, I donate between 5-10% of my income to the National Multiple Sclerosis Society as part of the Bike for MS fundraiser that I do. Beyond the good that is done by donating your money, getting used to contributing to charity is also a good practice to emulate the actions of affluent individuals (T. Harv Eker discusses this in his book, Secrets of the Millionaire Mind, which I would definitely recommend reading if you have a few hours).

Because of these considerations, I’ve decided that each month going forward, I’m going to give away 10% of my net (after-tax) blogging income/profit to My Personal Finance Journey readers (5%) and to charity (5%). Listed below is a summary of the results we’ve achieved together thus far through this give back effort:

• After each calendar month passes, I’ll tally up my net blog income and determine what Dollar value correlates to 10%.
• So far, I’ve been very happy with the success of the October 2011 – December 2013 give backs. Listed below is a summary of what we’ve accomplished so far with the give back effort.
  • Current total given to charity = $2,347
  • Current total given to blog readers = $1,078 

How to Give $34.84 to Your Favorite Charity Today!

Since business was a little slower in December with everyone getting ready to head out for the holidays, I’ve decided to throw a little variety in to how I do this month’s give back.

Instead of getting entries over a 2-3 week period, here’s how it will go:

The first person (and only the first person) to comment on this post stating the information below will have $34.84 donated to their favorite charity:

1) What their favorite charity is (my one requirement is that they have to accept online donations via PayPal or credit card), and

2) Why they like this charity

Let the fun begin!

***Photo courtesy of http://www.flickr.com/photos/a03575/3632344397/sizes/l/

Can Too Much Debt Keep You From Getting a New Job?

The following is a post by MPFJ staff writer, Kevin Mercadante, who is a professional personal finance blogger, and the owner of his own personal finance blog, OutOfYourRut.com. He has backgrounds in both accounting and the mortgage industry.

When it comes to hunting for a job, we tend to concern ourselves with factors that are most closely related to the search itself. This includes preparing the most effective resume, developing winning interviewing techniques, having the right experience and credentials, and a list of convincing references.

But with background checks becoming ever more comprehensive, our efforts to land a job can be materially affected by personal factors, such as credit profile. It’s even possible that too much debt can keep you from getting a new job.

Why would employers care how much debt you have, and why would it be a factor in determining whether or not to hire you?

High debt levels affect credit scores – negatively!

Many, perhaps most employers today are pulling credit before making a job offer. The quality and volume of debt that you have are factors. The amount of money that you owe does affect your credit scores. This is most commonly demonstrated through credit utilization – the percentage of outstanding debt to available credit.

A high level on this calculation, especially above 80%, can have a negative effect on your credit score. That could bring your score down low enough that an employer might do a deeper review of your report, rather than assuming all is well.

Credit reports indicate the reasons for the given credit scores. Credit utilization is one of the primary components of your credit score, and this will be indicated as a reason for the low scores. If the score is low, the employer might scan your credit report to see exactly how much that you do owe, and determine it to be unacceptable.

Ironically, current debt levels can be a bigger detriment than a prior bankruptcy or foreclosure. While major negative credit events are in the past, a high level of debt represents an ongoing problem. An employer may see it as a complication that could affect your performance if hired.

Depending upon the employer, either the low credit score or the high debt level could be an obstacle to an employment offer. Employers likely have a certain range within which they consider both acceptable credit scores and debt levels. If you exceed those parameters, you may be declined for employment.

Too much debt could interfere with your ability to do your job

An employer might decide that the amount of debt you have to be so high that it will interfere with your ability to do your job properly. This is not an unreasonable consideration either. If you have a substantial amount of debt, it is likely having an effect on other areas of your life. In fact, a very high debt level could easily become the dominant factor in your life. That would most certainly have an effect on your ability to do your job.

Worry causes stress, and stress can interfere with your ability to do your job properly and efficiently. An employer may decide that you are not the right candidate for the job, particularly if there other qualified candidates with less substantially less debt. It’s simply one of those factors that could get in the way of the job search in a tight market.

High debt could indicate inability to manage finances

Even without knowing the reasons for your high debt level, an employer could conclude that you have an inability to properly manage finances. This can be an even bigger problem if you’re applying for a job that will involve budget responsibilities. The employer may decide that you’ll bring the same poor money management skills from your personal life into the job and the budget you will oversee.

A lot of people are in debt for reasons beyond their control, including medical debt, business failures, or taking care of sick or incapacitated relatives. If you your high debt levels are attributable to any of these factors, you might want to let the employer know in the interview. Absent that information, the employer may conclude you’re simply bad with money. That is the usual conclusion absent evidence of the contrary.

High debt could make you vulnerable to criminal activity

This is the darker side of high debt levels. They may see your high debt levels as a potential incentive to participate in criminal activity in order to pay off your debt. This could include openness to bribery, participation in financial scams, or even outright theft from the company itself.

This does not mean that all employers will view a high debt level as the potential for criminal activity. Much will depend upon the employer’s previous experience. If they have hired people in the past with high debt levels who have gone on to commit criminal activity, they will understandably be reluctant to do so again in the future.

Once again it’s very important that you’re proactive if you have high debt levels. If you know that the employer will run a credit check, volunteer the information even if you’re not asked. You should be prepared to disclose the reasons why, but you should also be willing to share any documentation you have that proves your point.

***Photo courtesy of http://www.flickr.com/photos/debt-consolidation/

When is it Good to Consider Selling Your Structured Settlements?

The following is a guest post. Enjoy!

Before we go into the selling, let us first get a brief idea about structured settlements. Monetary reimbursements are quite common nowadays in the event of winning a legal case (accidental, occupational or personal) or in any other situation where the plaintiff can be entitled to compensation. Often the plaintiff’s legal counsel or the insurance company that is paying the compensation will recommend the amount to be paid in regular installments throughout a long span of time instead of a large lump sum amount straightaway. This is quite a good strategy as it provides for a regular income source. This modulated and periodic payment of money, either monthly or annually, over a span of around 10 to 20 years, or even in some cases, the rest of the beneficiary’s life, is called structured settlement.

Selling Structured Settlements

Though structured settlements are a good, dependable source of income, there might come up other situations which demand a large sum of money. It could be pending medical bills, hefty bank loans with the interest building up every day or any other kind of emergency. In times like this you can consider your structured settlement as a kind of financial asset. You can find enough buyers in the market to sell it off for a lump sum amount of cash. These buying companies will pay you a large amount of cash in exchange for the regular modulated income of the structured settlement, usually at some discount.

This discount is the percentage by which the amount they are paying you will be less than the total amount of the remaining settlements.

Why to sell?

• Suppose you have been engaged in a legal battle for years. After fighting for a long time, you do win it and the court gives you compensation in the form of structured settlements. But the legal bills have piled up high, there is already a mortgage on your house and all your savings are depleted. At this time, it would be greatly useful to have a lump sum amount of money in your hands so that you can get rid of all the bills and pay off all the loans and start afresh. You can get that by selling your settlement incomes. You will get YOUR money, IMMEDIATELY.
• In case of an elderly plaintiff, it is often a more profitable option to sell off your settlement, as, even with the discount, it is possible that you would get more money straightaway, than with all the settlements that you would receive for your remaining life.
• With the rate of the money going down due to inflation, it is better to sell off your settlement, as whatever monthly amount you are receiving at the moment, might not be worth as much after some years go by.

There are probably more reasons to sell off your settlements, but you should be the best judge of that. Get good legal advice and wisely choose the correct option, be it to sell or not to sell.

Year-End 2013 Blogging and Personal Goal Review

Back in January of last year, I laid out some personal goals for my life in general and blogging goals for My Personal Finance Journey for the 2013 year.

As I experienced in 2012, (click the following link to view my 2012 blogging goals and year-end progress updates) by tracking these goals periodically, it provides me with more accountability and visibility to what I am doing and where I want to go with this community/blog and in my life. As such, the purpose of this post is to review how I did in 2013 in reaching the aims I set up for myself.

As far as life goes from a personal and blogging perspective, 2013 was a mixed year, with both successes and moderate shortcomings on my goals.

• Personally, it went very well, with me making good progress in my PhD program, doing a lot of bike riding to stay in good shape, and getting engaged in March.
• From a blogging perspective, we had some great successes, with record levels of blogging income/charity give back, very consistent content from our staff writing family, and some great asset allocation and asset location (Three-Legged Stool for Retirement) analyses being conducted.
• However, as usual, graduate school has taken quite a bit of time/effort, and as such I wasn’t able to spend quite as much time on my blog (and we’ll most likely see this reflected by a good number of “Did not accomplish” status updates below). In addition, Google made some algorithm changes that I believe kept down my overall traffic levels. But, such is life I suppose, so I’m not too disappointed about it all!

So, here goes! An update on how I did in 2013 for my blogging and personal goals, with updates highlighted in bold text below. This should be fun!   

The blogging goals for 2013 were as follows:

• Read and interact with (comment) 25 partner blogs per week.
  • Did not accomplish.
  • For the first part of 2013, I had a great Virtual Assistant (VA) that was helping me with commenting. However, she went MIA about half way through the year, and I haven’t heard from her since.
  • I have since been trying to find another VA to fill this role so we can continue with this goal.
• Continue active participation as a proud Yakezie Personal Finance Blog Network member.
  • Done.
  • However, I could stand to do a little more interacting in the forums in the next few weeks.
• Publish 3-5 blog posts per week.
  • Done, thanks to MPFJ’s great staff writers! Thanks everyone! 
• Obtain 600 unique visitors per day average by end of 2013.
  • Did not even come close to accomplishing. 
  • I was hopeful at mid-year that moving to WordPress would magically increase my traffic since everyone had told me that it improves your SEO, etc.
  • In general, I have been very satisfied with the move, and I feel like my reader engagement has increased. I even recently got an increase in Page Rank as well.
  • However, I think that due to some Google Search Algorithm changes that were made in 2013, my search engine traffic decreased. Since that is the biggest driver to my overall traffic levels, I believe that’s what caused overall traffic to be lower.
• Host all personal finance blog carnivals (Festival of Frugality, Cav of Risk, Carnival of Personal Finance, Totally Money, Carnival of Retirement, Carnival of Financial Planning, Carnival of Passive Investing, etc).
  • Done. This was fun!
• Continue organizing Carnival of Passive Investing in 2013. Offer hosting of the 12 editions for 2013 to guest hosts. If you’re interested in hosting, shoot me an email! You can view the schedule by clicking here. Also for the Carnival in 2013, my goals are to a) continue getting passive investing authors involved and b) start reaching out to financial journalists (maybe from Kiplinger’s or Money Magazine, etc) and/or financial reporters on TV.
  • Done. Thanks to all of our guest hosts so far this year! We were able to fill up all of the slots. 
• Continue to spread word about benefits of passive investing over active investing. Get involved in BogleHeads forums as well.
  • Done.
  • I did pretty well on this one in the 1H2013, but ran out of time in the last half of the year. Hopefully, I can improve upon this next year.
• Write 1 guest post for another blog per month to expand reach of my ideas.
  • Did not accomplish.
  • I slacked badly this past year on the guest posting! 
• Create an eBook on one of the following topics – a) Ways to be Frugal, b) Investing Strategy, c) Steps to Buying a Home, d) Getting out of Debt, or e) Financial Prioritization / Account Hierarchy. Once create book, market it afterwards.
  • On track.
  • I made quite a bit of progress putting together an e-book on “31 Days to a Financial Revolution” over the 2013 Christmas Break.
• Possibly transfer blog to WordPress hosting. First, migrate Carnival of Passive Investing for practice before do My Personal Finance Journey.
  • Done.
  • I transferred MPFJ.com to WordPress self-hosted back in June 2013. It was quite a bit of work, but I am very satisfied with it so far. I may switch Carnival of Passive Investing at some point, but since it isn’t my main site, I don’t feel as big of a need to move it.
• Create and publish monthly newsletter – “Intelligent Financiers Newsletter.”
  • Did not accomplish/did not have time. 
• Attend blogging, marketing, finance, or real estate classes at local community college or nearby conference locations. Particularly, I would like to take a class or two to learn more about Search Engine Optimization (SEO) and also how to publish a book in hard-copy.
  • Done.
  • I attended a local blogging conference in the Spring of 2013 called BlogVille 2013. I learned a lot of cool things!
• Submit blog posts to blog carnivals every two weeks to expose my blog to new audiences and build links.
  • 1/2 Done / 1/2 Did not accomplish.
  • However, here lately, I have not been doing so well with this because my fiancé, who was helping me submit articles to blog carnivals, ran out of free time to help me. So, I have since found and have been training a Virtual Assistant to help with this activity. Has worked well so far!  
• Successfully execute Tour de Personal Finance in July this year. For 2013, plan further ahead of time to gather more entries (max = 64) and get some sponsors involved.
  • Done.
  • The event went amazingly well this year!
  • $1400 in cash prizes were doled out to the event winners and the charities they selected.
  • I was also very glad that we were able to get 64 participating blogs this year and also had Debt Free Direct on board as our platinum sponsor!
  • You can read all the details in the recap post by clicking here.
  • I look forward to hosting the event again this year in 2014!
• Do Easy Like Sunday Morning Roundup and Recap 1X per month minimum.
  • Did not accomplish.
  • Ran out of time for this one!
• Continue social media presence on Twitter and Facebook. I would also like to try to incorporate some use of Pinterest as well.
  • 1/2 Done / 1/2 Did not accomplish.
  • Similar to the blog carnival post submitting goal above, I haven’t been executing as well lately because my fiancé ran out of time to help me do this. However, I am in the process of screening a Virtual Assistant to help me with this promotion.
• Feature one Cheapskate Jake Frugal Ramblin’ per month.
  • Did not accomplish. 
  • Did not have time for this one.
• Run 10% Blog Income Give Back Project each month. Continue teaming up with local charities to build relationships. Focus on visiting the charity personally after each give back concludes. Try to get other sites interested in doing something similar and also begin to look for sponsors for 1-2 of the giveaways.
  • Done.
  • The current cumulative total given to charity = $2,298, and the current cumulative total given to blog readers = $1,028
• Start and grow personal finance group speaking service. Generate ideas for speaking topics. Offer to local community first and build from there. Create page promoting service on My Personal Finance Journey.
  • Did not accomplish/did not have time.  
• Continue to try to find other ways to help people with their finances away from the blogosphere. One thing I’ve applied to do is become a volunteer credit counselor with Credit Education.org. However, I have not heard back from them, even after submitting my application multiple times. Another option I could pursue is offering general advice on finances from a life coach perspective – lifestyle, frugality/money-saving tips, life values and dreams, etc. You have to be very careful in making it clear to not offer advice on specific financial instruments since you must have the correct certifications for that (which I do not have). This might be hard for me to resist delving in to the specifics, but it could be fun! I would definitely need to learn more about the legal aspects first though.
  • Did not accomplish/did not have time.  
• Start building my family’s genealogy as time allows (this is a lower priority goal).
  • Done. I was able to get several posts up on this site.
  • I decided that my day job is such that I don’t think I will ever have enough time to focus on building the content on secondary sites in any significant way (at least for now). As such, I want to just focus on MPFJ /Carnival of Passive Investing, and the family genealogy site as time allows.
• Network with other bloggers, with a particular focus on physically meeting them to build relationships. The bloggers I have met in person so far are really interesting people!
  • Done.
  • I attended a blogging conference in town earlier this spring, and got to meet some very interesting bloggers and social media / website experts.
• Incorporate affiliate resources in to posts where relevant.
  • Done. 
  • However, I still haven’t found a way to discuss affiliate-related content very often on this site, and to date, really haven’t made any money with this.
• Negotiate advertising deals for other sites.
  • Done.
  • I’ve been enjoying doing this quite a bit!

In addition, my personal goals for 2013 that I set were as follows:

• Get to bed at midnight or earlier.
  • Done.
  • Been doing very well at this! I don’t seem to have the energy to stay up until 2am every night anymore! haha
• Take 1 day off per week (Saturday or Sunday) completely from doing work on my blog or from my graduate research job to keep my mind feeling more “fresh.”
  • Done.
  • Instead of taking an entire day off each weekend, I’ve been focusing on getting out and doing a big bike ride or hike once per weekend. Afterwards, I generally am pretty tired, so even though I might answer a few blogging emails or do a few things, I don’t work all that much.
  • However, with the weather lately being colder, I haven’t been able to get out as much. But, that is pretty normal.
• Become better at following the Getting Things Done email/work flow management system to focus my time and energy on high value projects first and avoid distractions.
  • Done, but could always stand for some continuous improvement/reminder to do this. 
• Hike or bike ride 1 time per week with a group.
  • Done. 
• Do a bike race if my Achilles starts to feel better.
  • Did not accomplish/delayed.
  • At the end of the summer, my Achilles was feeling much better after getting a new custom foot orthotic made for my flat feet. I could ride for 6 hours a single day on the weekend and not have it hurt. However, I would feel it slightly the next day, and would have to take several days off before biking again.
  • Because of this, I decided it was time again to go in for another bike fit since I hadn’t had one done since 2006 in Boulder, CO (and after all, technology probably has improved since then!).
  • I was pretty satisfied with the bike fit, as the guy was able to confirm that I didn’t have any leg length discrepancies or other biomechanical defects except for a crookedly-healed dislocated shoulder I got back in 2005 at a college party.
  • After making some pretty big changes to my position during the bike fit, it took me a couple weeks to figure out that the position he prescribed would not work for me. Therefore, I set about changing my position to a point where I could ride again.
  • After making some changes again, I found a good position I could live with. However, the cold weather soon hit, and I haven’t ridden much since then.
  • Thus, all of this is to say that this goal will have to be pushed off to next year!
• Hike more with the Charlottesville Hiking Group.
  • Did not accomplish since I mostly did biking on the weekends during the nice-weather months.
• Read one personal finance book per month.
  • Done and surpassed.
  • I’ve probably averaged about 2-3 personal finance books per month over the course of 2013.
• Go backpacking one time per month in warmer months.
  • Did not accomplish since I was so involved with bike riding on the weekends this year.
• Take a trip out-of-town 1 time per month. Visit sister’s new home in Raleigh. Visit one of the beaches in Virginia.
  • Did not accomplish.
  • As usual with the biological/cell-based nature of my experiments in graduate school, it’s been hard to get totally out of town during the weekends.
• Learn how to build a group speaking business.
  • Did not accomplish.
  • However, I did recently purchase a book that discusses the ins-and-outs of building a group speaking business.  

How about you all? How did you do in accomplishing your personal/professional goals you set for yourself in 2013? 

Share your experiences by commenting below!

Start Your Christmas Club Now to Enjoy the Holidays Next Year

The following post is by staff writer, Sally. Sally is the blogger behind TinyApartmentDesign.com, a blog about interior design, money, real estate, good reads and general life thoughts. Enjoy! 

When the excitement of Christmas Eve and Christmas day are over, I get out of the holiday mode pretty fast and start looking forward to the new year, with the days getting longer and warmer and heading into my favorite season: sweet, sweet summer.

Christmas was never huge in our family, although we did celebrate it. But, in my fiance’s family, Christmas is a Really Big Deal (RBD for short). It’s an RBD for everyone to get together and enjoy baking and cooking together, and share plenty of gifts with each other.

I have to admit that every Christmas is hard for me. I always feel short on cash and can’t get gifts I really want to get for people who are wonderful and giving to us all year long.

So this year, even as I put our lovely Christmas memories away until next year, I am going to be thinking about Christmas for the next 11 months with a Christmas Club.

What is a Christmas Club?

A Christmas Club (or Hanukkah or any other holiday) is the simplest way to put away money for the holidays.

While you can do it electronically, the best way to put aside this money is using cash.

Why? Because this fund is totally different from your other savings goals, and even if you don’t spend the whole amount next Christmas, you can set aside that cash to get a head start on the next year’s Christmas Club. The best part is that when you start in January, you hardly have to save any money at all. I know that $800 is more than enough for me to get gifts for both of our immediate families, something special for my fiancé and still have some money left over a fun tradition like going to see the Nutcracker ballet. That’s only $73 a month for the next 11 months. By saving for 11 months, you’ll have your complete Christmas Club fund by December 1 and can start early on your holiday shopping, although some people might consider that a late start.

But Spending Money on Christmas Gifts is Stupid!

OK, I hear you.

You don’t have to get gifts at all or do anything special for the holidays and you can save that $800. That’s true. In the same reasoning, weddings are stupid, showers are stupid and celebrating birthdays and anniversaries is as asinine as it gets.

I’ve got some very anti-tradition people in my family who think all celebrations are for mindless sheeple and we should just enjoy and celebrate every day of our lives. I appreciate that view.  It’s helped me become the person that I am and I am not afraid to question traditions or rituals or the way things are simply because “it’s always been that way”.

But, I don’t hate traditions. I like that Christmas is an RBD in our lives. It’s not always going to be 100% perfect or super-happy-fun all the time, but we’re going to try, darn it! And from an anthropological perspective, these traditions and rituals reinforce our social circles, remind us of the people we value in our lives, including children, family and friends.

So, while it’s important to be an independent thinker and be able to assess the value of traditions and assumptions, it’s equally important to enjoy your life. And if giving gifts at Christmas is part of that, join the Christmas Club now to make it easier on your mind and wallet.

How about you all? Have you ever tried setting aside money periodically throughout the year to use for buying Christmas/holiday presents?

Share your experiences by commenting below! 

 ***Photo courtesy of freedigitalphotos.net

How an Emergency Fund Can Make You a Better Investor

The following is a post by MPFJ staff writer, Kevin Mercadante, who is a professional personal finance blogger, and the owner of his own personal finance blog, OutOfYourRut.com. He has backgrounds in both accounting and the mortgage industry.

When it comes to investing, talking about an emergency fund is just about the least exciting sub topic possible.

After all, an emergency fund mostly sits in the bank gathering interest – and not much of it at that. But few people realize the real importance of an emergency fund from an investment perspective, and how it can actually make you a better investor.

Better investor as a result of having an emergency fund? How is that possible? There are several ways…

Creating and maintaining a basic “grubstake”

We can think of an emergency fund as something like “seed money”. It’s the money that you would use to rebuild your finances if you lost everything you had. Until the 20th century, this was often referred to as ”hocking the family jewels”. Since most of us don’t have a treasure trove of jewels safely hidden away in a strongbox, an emergency fund is really the next best thing. Having it well-stocked is a way of making sure that there are “jewels” that can be sold in the event of an emergency.

The safest of all safe investments

Every investor should have a certain percentage of their portfolio sitting in safe assets. Exactly how much you will have will depend upon your age, your risk tolerance, and financial factors beyond your portfolio, such as income level, expenses and debt. But no matter what those levels might be, it’s absolutely essential to have at least some money sitting in safe investments.

Emergency funds have the advantage of being the safest of all safe investments. You typically will invest them in nothing more exotic than a savings account or bank money market fund, or in certificates of deposit. It’s not that you can’t invest part of your portfolio in money market funds or certificates of deposit – or even U.S. Treasury securities – but an emergency fund has certain aspects the make even safer than those.

For one thing, since an emergency fund is typically held a local bank, you actually will have physical access to the money in the event of an emergency. It will also be fully covered by FDIC insurance. Similar safe investments held in brokerage accounts have neither the easy access nor the FDIC insurance.

This isn’t to say that an emergency fund will satisfy the need for safe assets in your investment portfolio. You should have some such assets in your basic portfolio, in addition to your emergency fund. But your emergency fund is that “cookie jar” that you keep outside your portfolio, and well beyond the potential for risk investments of any kind.

That kind of safety gives you an extra margin of protection against market shocks and less-than-perfect investment decisions.

Keeping your head in a short-term crisis

One of the silent benefits that an emergency fund has for investors is that it can enable you to keep a clear head at a time when you may be facing financial difficulties on the home front. Imagine you lost your job, but had no short-term savings to cover bills until unemployment checks started coming in? You probably would make some panic moves that you would live to regret later.

Just having an emergency fund available enables you to avoid that panic. That will give you the ability to maintain your long-term investment plans despite short-term disruptions in your income, or sudden spikes in your expenses. An emergency fund acts as a psychological insulator between you and your investments. And that is exactly what you need in order to successfully invest over the long haul.

Avoiding disturbing your investment portfolio for living expenses

On a more practical level, an emergency fund can keep you from having to raid your investment portfolio in the event of a crisis. If a crisis were to occur, and you have no emergency fund, you might be tempted to tap your investments in order to raise cash for survival purposes.

If you’re mostly or entirely invested in equity investments at the time, it could force you to liquidate those positions at a bad time. That can result in taking investment losses that you will lock in permanently as a result of selling your positions.

An emergency fund can provide you with the ready cash that you’ll need to meet short-term emergencies and avoid having to disturb your investments at all. At a minimum, the emergency fund will provide you with enough money to enable you to make rational decisions about how you get through the crisis at least in the near term.

“Sleeping money”

There’s much to be said for having your savings and investments arranged in such a way that you can get a good nights sleep on most nights. An emergency fund will help you to do that. Not only will it provide you with a margin of safety in the event of an income disruption or a large expense, but it can also be a welcome safe harbor in the event of market slide that brings down your investment portfolio.

A good nights sleep will enable you to have a clear head, which will make it easier for you to develop a strategy to deal even with problems within your portfolio. It does this by removing the prospect of immediate threats from your life by providing you with a cash cushion.

The next time you get annoyed at the low return you’re earning on your emergency fund, stop and think about the many ways that the fund enables you to be a better investor then you would be without it. Even if it doesn’t provide a good return on your money, an emergency fund is still a perfect investment in so many other ways.

How about you all? How much of an emergency fund do you like to keep on hand?

Aside from the direct benefit of using it to pay for short-term expenses in the event of an emergency, do you feel that having an emergency fund has enabled you to be a better investor?

Share your experiences by commenting below! 

***Photo courtesy of http://www.flickr.com/photos/79818573@N04/8719057729/