Category Archives for Saving Money & Frugal Living

5 Little Habits That Are Ruining Your Budget

The following is a guest post by Richard Adams. Richard is a UK personal finance blogger and obsessive money-saver. His blog can be found at http://www.FrugalityMagazine.com. Enjoy!

Budgeting. It’s a critical skill for those of us trying to build a strong financial future. But for all the talk about budgets, controlling your spending can be a lot harder than you might first think.

I speak from personal experience.

Over the years I’ve tried to create one budget after another. I’ll be honest; my initial attempts for a dismal failure. But over time I found my budget getting more and more effective. So while it’s taken some time to reach “budget nirvana”, my own experience suggests it is possible.

The key is identifying those areas that keep on causing problems. Once you know the potential pitfalls you’re all the better prepared to deal with them. As a result you can create a budget that really works, and helps you to control exactly where your money goes.

But if you’re just getting started with a budget, what are those habits that derailed my plans time and again? In other words, what should you look out for if you want your budget to work?

Lack of Visibility

They say that you can’t manage what you can’t measure. Creating a budget is all well and good, but it’s not an end in itself. Instead, in order to control your spending you need constant feedback; both on how you’re doing and on what corrections are necessary.

When I first started budgeting I would create a monthly budget and then run with it. Then just a few weeks later I’d discover that the money had run out (again). The reason was that I wasn’t consistently tracking my progress. As soon as I started to track my money on a daily basis I found it easier to spot any problems, and to modify my spending to achieve my goals.

There are a number of ways to track your budget. Some people subscribe to the “envelope system”, using all cash that has been carefully divided up into categories. Others simply decide on a cash budget for the week, pop it in their wallet and try to make it last. Possibly the greatest threat comes in the form of credit cards and debit cards, because you’re not being faced with actual cash every time you spend.

Under such circumstances try to use one of the many budgeting apps available to track your spending, or install your bank’s app on your phone so you can monitor your balance over time.

The exact system you use isn’t critical, and the best solution will depend on your individual personality. What is critical, especially in the early days of budgeting, is to track your spending on a daily basis.

Someone should be able to stop you randomly in the street, and you’d be able to tell them your bank balance within a couple of dollars. Only when you get to know your money this intimately can you be certain of managing your budget properly.

“Tiny” Spending

We tend to pay a lot of attention to large purchases. That new cell phone or flat screen TV probably gets a lot of research and thought before you finally hand over your cash.

But smaller purchases tend to be treated entirely differently. Whether it’s a takeout sandwich, a newspaper or a packet of cigarettes, these “tiny” purchases are often made without a second thought. After all, how much of a difference is a couple of dollars really going to make in the grand scheme of things?

The honest answer is: quite a lot. The reason is that because many of us are happy to spend small amounts of money without too much consideration, we tend to do it regularly. That daily newspaper and coffee can quickly start to add up.

The key message here is that all spending matters, irrespective of how insignificant the sum really is. Pay attention to where your money is going, and make conscious decisions about how you’re going to spend (or save!) every last dollar.

Lack of Control

It’s no secret that budgeting your money can take a fair amount of self-discipline, at least in the early days. All too often I speak to people who start off with the best will in the world, only to give in to temptation a short while later.

Fortunately there are all sorts of ways to do this. One of my favorite examples is to think of money not in terms of dollars, but in terms of hours worked. Figure out your hourly income (after tax) and look at prices in terms of “4 hours of work”. Applying this principle I’ve found that spending my money looks rather less appealing.

Unexpected Expenses

One of the most frustrating aspects of carefully planning your spending is when an unexpected bill drops through the door, or your car suddenly needs some emergency work. In the space of a few minutes your whole budget gets blown out of the water.

The funny thing is that unexpected expenses don’t necessarily need to be so much of an issue.

There are two solutions I have used which make such expenses almost a non-issue.

The first of these is the creation of an “emergency fund”. This is a pool of money separate to your budget which sits in an instantly-accessible account exactly for situations like this. If a financial emergency arises you can simply draw money from this fund without needing to touch your budget. Then next month you can simply modify your budget to start rebuilding that fund.

The second solution is that most other unexpected bills can be planned for, if you base your budget on a long-enough period of time. For example I pay my car insurance once a year, and it would be all too easy to be surprised the next time it comes around. Instead I have planned out all these payments in advance, and put aside a small amount of money in my budget to cover them. When that insurance finally becomes due I’ve already put aside all the money over the preceding months.

In other words to avoid unexpected expenses derailing your budget take time to start an emergency fund, and to consider what big purchases you make only occasionally and plan for them well in advance.

Unnecessary Waste

The last factor which can ruin your attempts at budgeting is simply “waste”. One of the most common examples is the amount of food that people throw out each week because it is past it’s best. As a result they’re literally throwing money in the bin, then having to replace that food with yet more. If you budget $100 for groceries then throw $25 worth in the bin you better believe your budget is going to struggle.

So take the time to learn how to control the waste that comes out of your kitchen. In doing so you can be sure to use as much as possible. For example, consider freezing items like bread and milk to keep them fresh, only defrosting them when you really need them. Additionally, consider buying frozen vegetables rather than their fresh equivalent. They’re just as nutritious but won’t go off while your back is turned.

As you can see there are all sorts of ways that your budget can fail – but in almost every situation there are solutions. If you’re going to invest the time to actually create a budget, then these simple principles can make it all the more effective. Produce a budget that truly works and you’re well on your way to better times.

How about you all? What habits do/did you have that did a number on your budget? How did you fix the problem?

Share your experiences by commenting below!

***Photo courtesy https://www.flickr.com/photos/68751915@N05/6869762317/

How to Get Top Dollar When You Sell Your House

The following post is by MPFJ staff writer, Laurie Blank. Laurie is a wife, mother to 4 and homesteader who blogs about personal finance, self-sufficiency and life in general over at The Frugal Farmer. Part witty, part introspective and part silly, her goal in blogging is to help others find their way to financial freedom and to a simpler, more peaceful life.

Spring has arrived, which means the real estate market is hot right now. This CNBC video shows that existing home sales in the U.S. for March of 2016 surged much higher than expected.

Where we live, houses are popping up for sale like crazy. My family and I often talk about this surge in home sales in our area (in the Midwest) and why so many people are selling right now.

Are they feeling secure in America’s economic situation and upgrading?

Are they sensing economic doom and downsizing in order to pay off debt?

I can’t answer that question, but as someone who has a history of working in real estate and has sold two homes in the past, I can tell you that there are certain things a homeowner can do in order to get top dollar when they sell their home.

Read on for this list of suggestions on how to make sure that you get as much profit as you can when selling your home.

Do Your Research

Research is vital to a profitable home sale. What are similar houses selling for in your area? Are people eager to move into your area? If so, why? What does your neighborhood have to offer?

Use the Internet and the wisdom of a trusted realtor in order to get a clear picture of how much houses are selling for in your area. A good realtor will find comparable sales for homes like yours that have sold within the last six months so that you can get an idea of what “top dollar” means.

Check out the listings for houses in your neighborhood or area that are currently on the market. Look for houses with similar square footage and a similar number of bedrooms and bathrooms.

Look at the interior and exterior photos for the current listings. How do the houses compare to yours? Are they better? Worse? More upgrades? Less upgrades?

Doing your own research on how much houses are selling for in your area will help you to prepare your house to sell quickly and to get top dollar when it sells.

Neatness Counts

When we sell our houses, we always try to make them look like model homes. Not so much in features and decor, but more from a neatness standpoint. When potential buyers walk into a neat and clean home, they’re much more open to considering buying. Here are my tips for making your home feel warm, welcoming and attractive:

Clean out and/or organize closets, drawers, appliances and cupboards in every room
Remove personal effects such as family pictures and personalized items
Declutter each and every room, packing away or putting in drawers items that don’t add to the feel of the house
Deep clean each room. Vacuum well, wash baseboards and give the kitchen and baths a good scrubbing
Be sure that beds are made and that counters, desks and tabletops are clear of non-décor items
Add small touches such as matching bath towels, small artificial flower arrangements and other items that bring extra shine to your home.

Make Your Home Move-In Ready

Make sure needed repairs are done. Wash your windows. Have carpets cleaned and give your walls a fresh coat of neutral-colored paint if needed.

Be sure the yard is clean, mowed and trimmed and has great curb appeal. Set out a small welcome mat and maybe a pot or two of flowers at the door.

Be sure that your home is in such great shape that the new owners will have to do little or nothing when they move in. Many prospective buyers will walk away from a home if there’s a lot of work to do to before they can move in.

Put Special Focus on Your Home’s Best Features

What is it that you love best about your home and yard? Chances are that interested buyers will love those same things.

Do you have a great family room? If so, focus on giving that room special attention when you sell. Do you love the fire pit in your yard? Add some ready-to-be-burned logs to the fire pit and put a few chairs around it.

By putting a special focus on your home’s best features, you help potential buyers to adore the same things about your home that you love.

Following the tips above will help ensure that you can sell your house for every penny that it’s worth. Don’t miss out on valuable profit by not making your house shine before you put it on the market.

How about you all? Have you sold or bought a home in the past? What is it that attracts you to a home when you walk in the door?

Share your experiences by commenting below!

***Photo courtesy https://www.flickr.com/photos/39136843@N05/3709571684

How to Handle Irregular Expenses in Your Monthly Budget

The following post is by MPFJ staff writer, Melissa Batai. Melissa is a freelance writer who covers topics ranging from personal finance to business to organics to food. She blogs at Mom’s Plans where she shares her family’s journey to healthier living and paying down debt.

Every month, my husband and I were coming up short financially. Each month I carefully laid out a budget, and I followed it as well as I could. I say as well as I could because each and every month, I went over budget. One month it was because I had to pay our annual Costco membership fee. Another month it was because I had to buy stamps, new checks, and pay for our license renewal.

See, I was good at budgeting for monthly, regular expenses. I was even fairly good at budgeting for expenses that came every three months like our garbage bill or every six months like our car insurance. But there were a lot of expenses that came only once a year or erratically that I didn’t account for.

When you’re living on a tight budget, those unaccounted for expenses can ruin your budget and send you into credit card debt or make you raid your emergency fund.

However, there are two ways you can handle these expenses and keep your budget and your finances on track.

How to Calculate Your Irregular Expenses

The first step toward making your budget work is to consider ALL of the irregular expenses you paid in the last year. I’m not going to lie—this is going to take some time, and it won’t necessarily be a good time, but once it’s done, you won’t have to do it again.

Simply get out your credit card bills for the last 12 months as well as your checkbook. Keep track of anything you paid for that wasn’t part of your regular budget.

Just to get you started, here are some expenses you’ll want to look for:

Yard and garden supplies/maintenance
Pest/termite control
Home repairs/maintenance (remember, experts recommend you put aside 2 to 4% of your home’s value per year for this)
Maintenance agreements
Water softener
Emission inspection
License renewal/registration
Car repairs
Medical bills
Prescriptions
Dental bills
Optical exams and glasses
Vitamins/supplements/protein powders
Umbrella insurance
Donations (such as when the neighborhood kids needs to raise money for his school)
Professional dues/licenses
Warehouse club membership fees
Printer ink/paper
Online filtering
Magazines
Dry cleaning
Parties
Recital fees/outfits for kids’ activities
Yearbooks/class rings/letter jackets
College application fees
SAT/ACT testing
Pet food/toys/grooming
Vet expenses
Animal licenses
Tax preparation fees

The Slush Fund

The first method is the slush fund, and like its name implies, it’s simply one big pot of money for unplanned or irregular expenses.

Who Should Use the Slush Fund Method

The slush fund is perfect for those who feel bogged down by keeping track of every single expenditure all month long. These people don’t want to have to keep track of every penny like an accountant. They just want to make sure that when the time comes to pay irregular or unplanned expenses, the money is there.

How the Slush Fund Works

After you’ve calculated all of your irregular or unplanned expenses for last year, divide that number by 12. For instance, let’s say your irregular/unplanned expenses for last year came up to $14,500. You’d divide that number by 12 to give you approximately $1,208 a month that you would need to set aside in your slush fund. Then, you just dip into the slush fund when one of the expenses comes up.

Does your child need $80 for a college application fee? It’s right there waiting in your slush fund. Do you need to pay $95 for your annual vehicle registration? Just dip into your slush fund.

If you are disciplined with your money, you may want to leave this money sitting in your checking account. However, if you’re someone who will spend the money if it’s there, you may want to open up a separate account and have the money automatically deposited straight from your paycheck to your slush fund account. Then, as you pay the expenses the slush fund is to cover, simply transfer the money to your checking account.

The Separate Accounts Method

There is another, more detailed method that you can use besides the slush fund that I call the separate accounts method. Using this method, you create a separate category for each irregular/unplanned expense or group of expenses

Who Should Use the Separate Accounts Method

This method works best for those who would like a more detailed record of their expenses and spending. It also works well for people who are on a very tight budget and have to curb their irregular/unplanned expenses as much as possible. It’s also very good for those who like the envelope system as recommended by Dave Ramsey.

How the Separate Accounts Method Works

Rather than lumping all of the irregular/unplanned expenses in one category as you do with the Slush Fund Method, you instead separate them out and put a certain amount in each account. For instance, let’s say this year you know you’ll likely need to pay $800 total for your daughter’s SAT and ACT testing as well as college applications. You’ll divide $800 by 12, and then each month, you’ll put aside approximately $66 for this expense. You’ll write this in as a regular line item on your budget.

Similarly, if you pay $300 a year for pest control, you’ll put $25 a month in your budget and ear mark it for pest control.

When one of these expenses comes up, you simply pay out of the money you’ve accumulated in that category.

Drawbacks to Each Method

There are drawbacks to each method. With the slush fund method, you may overspend in one area because you see a large chunk of money sitting in the slush fund. For instance, if you budgeted just $400 a year for clothes, but you see $3,800 sitting in the slush fund, it’s easy to rationalize that the money is there to buy more clothes.

That can’t be done as easily with the Separate Accounts Method because you can see that you only have $165 in the clothing account after putting the required $33 away per month for clothes for five months.

On the other hand, the Separate Accounts Method also has its drawbacks. Let’s go back to the daughter who is applying to colleges. She may spend $100 in March to take the SAT and ACT, and then she may need $700 in October when she’s filling out college applications. Because you’ve budgeted $800 total, if you’re starting your budget in January, by October, when she’ll need all of the money, you’ll only have $660 saved, so you’ll be short in this category. You’ll then have to take the remainder of the money you need out of your regular budget or out of another category, neither of which is a necessarily good option.

The Slush Fund Method doesn’t have the same problem because you can use whatever money is in the account for any one of the expenses that you’ve accounted for whenever you need it as long as you don’t spend more than is currently in the account.

Irregular and unplanned expenses have the potential to wreak havoc with your budget. However, if you use one of these two methods, you can gain the upper hand and have better control over your finances.

How about you all? Do you use either of these methods to handle unplanned or irregular expenses? Which do you prefer?

Share your experiences by commenting below!

***Photo courtesy https://pixabay.com/en/office-tax-business-finance-620822/

Money Tips for High School Grads

April 18, 2016
/ Saving Money & Frugal Living
/ By J. Irwin

Graduating from high school often means taking that first step into adulthood and independence, and it’s the perfect time for graduates to learn how to handle the increase in income that will likely be coming their way.

When I was a teen, personal money management tips simply weren’t taught to the majority of kids. According to this Fox Business article, a full 83% of teens surveyed in today’s world also admit they know very little about money management.

I know that for me and my husband, our lack of education on how to manage money led to oodles of debt. Neither of us were taught anything about managing money, and that lack of knowledge led to many financial mistakes that cost us tens of thousands of dollars (in interest paid) and tremendous stress to boot.

As such, we’ve committed to teaching our kids the money tips we think will best benefit them as they enter the world of adulthood and independence. Here are the 7 money tips we’ll be teaching our kids by the time they graduate from high school.

Create Financial Goals

Many people mismanage their money simply because they haven’t determined what they want from it. When you create financial goals, you give your money a purpose, which helps you to avoid spending it on instant gratification items such as unlimited drive-thru runs and an excess of electronic gadgets.

Think now about what you want out of life from a financial standpoint, and write down a list of specific financial goals for yourself. Avoid blanket statements such as “I want to be rich”, and instead make measurable goals such as “I want to have $1 million in savings by the time I’m 40”. Then make a solid plan to achieve those goals.

By creating financial goals for yourself, you determine ahead of time how you want to make your money work for you.

Live Below Your Means

In simple terms, what this means is that you refuse to spend all of your money each payday. Decide on a portion that you can spend that will allow you to pay the bills and to achieve your financial goals, and leave the rest in the bank.

Automate Your Savings

As soon as you start earning a regular paycheck, set up a system – either through your bank or through your employer if it’s available – where a certain percentage or dollar amount of your paycheck goes directly into a savings account.

By developing the habit of automating your savings, you will easily grow a healthy savings account that can be the source of a home down payment, a plush emergency fund or an early retirement fund.

Start Retirement Investing Early

If you end up getting a job that offers a 401(k) plan, sign up early and start investing for your retirement years right away. If your job doesn’t offer a retirement plan, begin saving for retirement on your own by opening an IRA.

For young people, retirement investing often seems pointless as the retirement years seem so very far away. However, those early years of retirement investing will give you the advantage of compound interest in a big way, ensuring that you are set for a lush lifestyle during retirement should you want it.

Avoid Getting Caught up with the Joneses

The further along you get in your working years, the more you’ll see many of your peers spending money on the “big things” in life such as homes, cars, vacations and expensive clothing.

The thing that your parents and grandparents likely know from experience is that keeping up with the Joneses is like running on a hamster wheel – you work your tail off and never get anywhere.

Be sure that when you’re making purchasing decisions that you make them based on what’s best for you and your financial goals, and not based on gaining the approval of others.

Look for Money Mentors

If there are people in your life that manage money well, ask them if they would be interested in sharing their financial wisdom with you. Having a money mentor will help you to avoid many of life’s financial pitfalls and will allow you the benefit of learning from someone else’s money mistakes instead of having to learn from making your own.

Wait 72 Hours Before Making a Large Purchase

When considering a large purchase (anything over $100 is a good starting point), make a decision to wait 72 hours to see if that item is something that you truly want. Establishing this habit will help ensure you don’t blow big wads of money and then end up suffering with buyer’s remorse.

Earning an income is hard work no matter what type of job you have. By managing the money you’ve worked so hard to make in a smart manner, you’ll put yourself in a financial position down the road where you can have more choices about what you want to do in life.

How about you all? What is your best money tip for high school graduates?

Share your experiences by commenting below!

***Photo courtesy https://pixabay.com/en/girl-graduate-young-female-410175/

Parents Need to Know How to Teach Kids the Value of Money

The following is a guest post by Tina Roth. Tina is a personal finance blogger at Pro Finance Blog, who loves to write about money management and saving habits.

Children start learning from the age of 2 or 3; they learn from the environment they grow up. Responsible parents provide them with a healthy learning environment and instill an enthusiasm for learning into them.

But there’s something that even the most responsible of them tend to ignore, which is, teaching kids about money. According to child psychologists, kids should be taught about money from a very tender age.

A tabula rasa

Such is the mind of a child, and what’s intriguing is the initial scratch marks that disturb the blank state, stays there forever (Maybe not forever, but for a very long time). Whatever education a child receives, be it good education or bad education – stays with him.

If parents are extravagant or irresponsible with money, so would be their kids. The learning styles of children are unique, their learning circuits are more active than their parents could imagine. They learn from everything around them. So parents need to act responsibly with money, and follow the tips given below:

Play money games

One way to make kids responsible with money is playing games with them – games that are apparently silly but has a deep and sublime lesson to deliver, a lesson that relates to money.

One such game is coin identification. The game is played with toddlers, who learn to distinguish between nickel, dime and cents. Kids remember the names of the coins and the symbols on them. How can this game benefit them? By teaching them how to count money.

Games that involve savings are more helpful; those games should be played with 5-year olds. Kids should be given a target of savings. If they succeed in meeting the target, rewards should be handed to them. Rewards serve as motivation. Playing such games at an early age can turn kids into habitual savers when they grow up.

Affordability signals

Kids have an innate ability, they can sense anxiety, disapproval, anger and other negative emotions in adults. They even react to those emotions. If parents display negative emotions while dealing with money related matters, kids will learn it, which is why, parents should never give negative affordability signals.

What type of signal is negative affordability signal? Kids often ask for toys or superhero costumes, which are expensive; their requests meet with rejection. When they ask parents why are they not buying the stuff, parents reply they can’t afford it. Such replies are negative affordability signals.

Instead of giving such replies, parents should tell their kids that they can buy it, but choose not to buy because there are better and wiser ways to spend money. What are those ways? You may ask. This takes us to our next point:

Good and bad investment

Children should be taught about good and bad ways to invest money, so that they don’t take wrong investment decisions later in life. When conversing with an adult, you can describe an investment as good or bad investment in terms of the result it produces – profit or loss. But with kids, you need to take a separate route.

Describe safe investments as good investments and unsafe investments as bad investments. This is by far the most logical way to categorize investments. Tell stories to your kids and let them process those stories.

Tell them stories of stock market investments, how sloppy investors ended up broke overnight. Tell those stories to your kids painting risky investments as bad as safe investments as good. But there’s a risk that such stories will make them risk averse. How to eliminate the risk?

Struggle and wisdom

You can eliminate the risk if you connect money to struggle and wisdom. Teach your kids the truth about money, that earning money requires a lot of hard-work and wise investment decisions.

True, there are shortcuts, but shortcuts are either ethically wrong or legally wrong or both. Your kids may have a penchant for quick ways to earn money and the media and the pop culture may fuel it, but if you convince him that choosing shortcuts can never lead to financial freedom, then he might eventually suppress his proclivity for shortcuts.

Once again, tell him stories of successful people whose struggle and perseverance have led them to success. Such people are Warren Buffet, Bill Gates, Chris Gardener, Steve Jobs, etc. Buy your kids books that highlight on the motivational aspects of rich people, so not only their wealthy lifestyle but the ladders they climbed be known to your kid.

It takes time

The purpose of teaching kids about money is make them equipped to handle money-management in their adult life. This is a complicated process and will take time. Responsible parents need to act patiently and monitor the progress. The tips given above can be of help.

Raising Kids on the Cheap

April 15, 2016
/ Saving Money & Frugal Living
/ By J. Irwin

According to the latest numbers, the average cost to raise a child in the U.S. is just over $245,000. This is how much it costs just up until age 18, not including college costs. Or so the experts say.

But we’re raising our four kids on MUCH less than that. I’d be willing to bet that we spend less than half of the average to raise our kids. So, what’s our secret? Is it really necessary to spend a quarter million dollars to raise a kid?

Here’s how we reign in kid-raising costs and save more money to put toward building our future and our kids’ futures as well.

Keep a Lid on Grocery Costs

The average family of four spends a lot of money on groceries. Whereas the low-cost meal plan for a family of four is said to cost $786 a month, the liberal-cost meal plan for a family of four comes in at $1195 a month.

Our family of six keeps grocery costs to no higher than $450 a month. Here’s how we keep grocery costs low, thereby effectively reducing the amount of money it costs to raise our kids:

We meal plan. By mapping out a weekly meal plan each week and shopping only according to what’s on the meal planning list, we avoid the rush of take-out meals and restaurant trips that happen because “there’s nothing in the house”.
We avoid pop, chips and other processed foods. By purchasing mostly whole foods we avoid the costly purchase of pop, chips and the like and save those things for special occasions.
We avoid random trips to the grocery store. We get what we need for our weekly meal needs, and then stay out of the stores until the next week.
We cook from scratch. By planning meals that we can make from scratch, we save the extra cost that often comes with processed foods. We make many of our meals on the weekend and freeze them so that we can just pop a meal in the crockpot or oven to make for a quick dinner meal.

Learning to keep grocery costs low goes a long way in reducing the amount of money it costs to raise a child.

Be Choosy About Extracurricular Activities

Too many extracurricular activities can overwhelm your child and your pocketbook. In order to save both time and money, pick 1 or two extracurricular activities per year that your child really loves, and enroll your child in those activities only. By allowing your child to focus on a limited number of activities, you’ll give them the ability to focus on and learn what they truly like and don’t like to do. And you’ll save tens of thousands of dollars in the process.

Be Smart About Clothing Purchases

Yes, it’s important for kids to have name-brand clothing that’s “in”, especially in the junior high and high school years. However, that “in” clothing doesn’t have to break the bank. Work to find quality used clothing for your kids, and to pick one or two expensive items that are important to your child. Older children can be allowed to have more say in what clothing is purchased.

When I entered middle school, my mom started giving us kids a small yearly clothing budget. Whether we wanted to buy one item or a thousand items with that money, the choice was ours. This helped us to think carefully before we bought clothing and to find a balance between fashion and frugality.

Go Easy on the Gadgets

It wasn’t too long ago that I heard someone complain that their child’s $600 iPhone really put a strain on the family finances. Your kid may need a phone, but does he really need a $600 phone? Work to be frugal when deciding on electronic purchases for your kids. Set an affordable and reasonable budget for electronic purchases instead of buying your child “the best of the best”.

Or work out a plan where you pay half of the cost of a gadget but your child has to save up the cost of the other half so that you can spend less and help your child get a first-hand understanding of the value of a dollar.

Don’t Teach Your Child That Money Grows on Trees

Just because your child asks for X dollars a week so that they can have unlimited fun with friends doesn’t mean you have to give it to them. Even the ultra-rich Donald Trump gave his kids a minimal weekly spending allowance.

Assign your kids chores around the house for which they can earn spending money, or set a small weekly spending allowance for them so that they can learn to be choosy about purchases and to live within their means.

Consider Day Care Costs

Working doesn’t just bring in money – it costs money to work as well. Transportation, clothing expenses and oft-expensive lunches out can eat up a good chunk of one’s income. Another thing that can eat up a good chunk of one’s income is daycare expenses.

If daycare, transportation and other work costs are eating up too much of your income, consider having one parent stay home with the kids if it’s possible in order to avoid day care costs.

While staying at home doesn’t work for every family, in some cases it’s truly more cost-effective for one parent to stay home.

What kids need most from their parents isn’t a never-ending stream of cash; they need love, support and healthy boundaries. “The best” for your kids has very little to do with how much money you spend on them. And as a bonus, a financially healthy household will help ensure your child isn’t burdened with supporting you financially as you get older.

How about you all? How have you been able to save money while raising children? What other tips or tricks do you have on the subject?

Share your experiences by commenting below!

***Photo courtesy https://www.flickr.com/photos/calliope/1776265241/

My Saving Psychology

April 7, 2016
/ Saving Money & Frugal Living
/ By J. Irwin

The following post is by MPFJ staff writer, Marie. You can read more of Marie’s articles over at her own blog, Family Money Values. Enjoy!

I’m a saver. I have been for years. It is a habit I learned from Mom and Dad growing up and never lost.

But saving is hard, especially when you are first starting out. Persistent saving – year over year is very difficult. People get tired of saving, scrimping and wanting. How can you psych yourself up to continue to save? What steps can you take to make it easier to save than not?

I have used the few tips in this post during my many, many years of saving. My saving habit is now so ingrained that it is sometimes hard to spend!

Convince Yourself That Saving Is A Need, Not A Want

Make a list all of the reasons you need to save. Condition yourself to view saving as a way of life and not a short term ‘diet’. Think about how a relatively small and short period of time of saving will allow you the life you want in just a few years.

Make Saving Part Of Your Self-Image

You can be proud of your (future) ability to be financially stable and not reliant on the government, charity, family or friends to make your way. Knowing that saving is one of the steps to being financially self-reliant makes it psychologically easier to save.

Trick Yourself Into Saving

Close your mind to any overages in the budget you may have in one period. You didn’t spend as much as you thought on lawn care? Don’t spend the extra, save it.

Allocate money in the budget and your mind to meet those periodic bills (like insurance or Christmas gifting). When I first started out, I tried hard not to forgot about the non-recurring bills.

Subtract a little extra out for savings before you buy that extra bag of candy at the grocery.

When I was dirt poor and living paycheck to paycheck back in the late 1970’s, I used to pencil the expected bills into the check register and subtract out those amounts up front, when the paycheck was deposited. That way, I didn’t feel that we had all that money free to use. This helped me (and my spouse) psychologically realize that, no, I couldn’t afford that steak from the grocery store – get the hamburger and make it stretch instead.

In other words, make a budget! If you hate to budget, develop your own method as I did.

Automate Saving

Even if you can only afford to save $5 or $10 a payday, set up an automatic payroll deduction to your account Even a dollar a week over time is better than nothing. This is the tried and true, pay yourself first mentality.

Pay Yourself First. Period. Always.

When we have money we feel flush. Put away your savings first thing and you won’t feel so flush! Once you have that emergency fund built and your high interest rate debt paid off, start an automated investment program (sometimes called systematic investment) where in you set up an automatic payroll deduction to an investment account and an automatic investment into the fund or stock or bond of your choice each period.

Make That Savings Account Off Limits!

Train your self to consider that account sacrosanct. It is dead to you, you can’t spend it. What if the refrigerator breaks down you ask? Shouldn’t I use my savings to get a nice new one? Nope. Look for other alternatives. Alternatives would be to use that emergency fund; fix the old one (at least temporarily); set up a special fund for a new refrigerator; or find a free or inexpensive used one.

Maintain Your Standard Of Living When Your Income Increases

Put aside at least part of any raise you get as part of your saving program. Now is not the time to add to the cost of your lifestyle. Now is the time to make sure you can continue your chosen lifestyle by becoming financially free!

It is psychologically important to celebrate success. So instead of buying a new smart phone with your raise amount to celebrate, take the family on a picnic on a nice summer day and toast yourself with a bottle of local wine.

Set Goals And Check Progress Frequently

Track your savings account weekly or monthly so you can get satisfaction from watching it grow. Figure out your net worth at least yearly as well. Success breeds success. Knowing that your program is working will give you incentive to continue (and maybe even add to) your savings program.

I still do this, at least once a month.

Imagine Future Pleasure

Project what your savings can become in the future. For instance, saving your $1 a week for a year will get you $12 ahead, in 10 years you would have $120 you don’t have now. Of course, you are probably saving more than $1 a week (or will be), so your totals will be much more.

Think about all the different things that money can get you. As long as you have the money you can spend it many ways in your head! Once it is spent all you have is old stuff, worth less than what you paid and potentially a case of buyers remorse.

Set small savings goals and celebrate when you reach each.

Recognize yourself and your family with an inexpensive special celebration or reward. You will be at this for years, it is important to mark some milestones along the way.

You Don’t Need To Be A Dull, Boring Person

Putting aside every spare nickel can be tiresome. You may find a need for change, excitement or different activities.

I used to get really tired of our little house. Instead of re-decorating, I would re-arrange the furniture.

I used to long for fun activities. Instead of going to the movies and spending a bunch, I’d grab the kids and go to the public beach for the day with a friend.

Help Yourself So You Can Help Others

It is laudatory to donate money to causes you feel are important or to help friends or family out of a tight spot.

Many times life will present opportunities to you to help others with their problems. When those others are family or close friends it is tempting to share everything you have to help their situation. In fact, in some families and cultures there are strong expectations that you will do so.

In my opinion (and practice), it is often better to care for yourself and your immediate family before attempting to solve other people’s problems. Otherwise, you may become a problem for someone else!

Caring for yourself first can mean putting aside money for retirement BEFORE saving for your kids college. It may mean helping your grandparent find social aide rather than trying to pay for their Alzheimer’s nursing home yourself. It may mean saying no to a sibling or friend requesting financial assistance. Who will take care of you and yours if you don’t put yourself first?

How about you all? How have you developed your savings psychology?

Share your experiences by commenting below!

***Photo courtesy https://www.flickr.com/photos/68751915@N05/6736135095/

Why I Chose a Health Sharing Ministry over Traditional Medical Insurance

The following post is by MPFJ staff writer, Chonce. You can read more articles by Chonce over at her personal blog, My Debt Epiphany. Enjoy!

Landing my first professional job out of college was exciting. I was more than ready to work at a real full-time job and earn real money just like other adults. On the other hand, I wasn’t fully prepared for what came with earning real adult money – real big expenses. Healthcare was one of my huge expenses.

Normally, your employer offers a healthcare plan and they pay a portion of the premium while the rest of the payment gets deducted from your paychecks along with taxes. However, within the past decade, more and more employer sponsored health insurance plans have declined leaving employees with the responsibility of obtaining their own healthcare.

My first big job at a start-up paid decent money, but I quickly found out I’d be responsible for obtaining my own healthcare or facing a tax penalty.

The Burden of Medical Expenses

Medical expenses can be quite a burden. While the Affordable Care Act helped medical insurance plans become more accessible to everyone, the law didn’t help ensure that medical coverage would be affordable for everyone. Younger adults have the option of staying on their parent’s insurance plan until they turn 26. I didn’t have that option.

I was prepared to insure myself when my employer started offering health insurance plans a few months after I started working. The premiums were astronomical and would take a large chunk out of my check. I expressed my concerns with my boss and he advised me to look into the marketplace to see if I could get a tax credit, since the plans he offered employees were the best he could do since our staff was small.

The marketplace didn’t seem any better even with the tax credit. The only low rates were HMO plans with picky restrictions. Not being able to afford health insurance can put you in a tight spot. You’ll not only owe the federal government money the following year as a penalty, but you’ll risk getting sick and not having any coverage to reduce your medical bills. Unpaid medical bills can be one of the most crippling forms of debt in this country. With all the odds against me, I decided to do something untraditional and try a healthy sharing ministry.

I Opted out of the Affordable Care Act

I was talking to a co-worker about my frustration with obtaining medical coverage that I could afford and he ended up sending me a link to a popular health sharing ministry as an alternative option. Health sharing ministries are faith-based programs that are community driven and can help fund a member’s medical expenses by sharing monthly dues of other members.

Members of health sharing ministries pay a monthly fee or ‘premium’ which can go toward another member’s medical expenses. Then, when you have medical expenses that need to be covered, other members’ monthly payments will go toward your expenses.

Health sharing ministries are not traditional insurance, but they are often compared to insurance policies because they help provide coverage for various different medical expenses. There are several valid health sharing ministries to choose from including: Liberty HealthShare, Samaritan Ministries, Medi-Share, and Christian Healthcare Ministries. Most of these organizations have an annual unshared amount or ‘copay’ that each member is responsible for.

I choose to look into Liberty HealthShare and realized I would pay $131 per month for up to $125,000 in coverage per medical incident with a $500 annual unshared amount that needed to be met before Liberty shared or ‘covered’ my medical expenses.

After speaking with a rep on the phone, I decided to give it a try and opt out of the Affordable Care Act and the expensive premiums I was being matched up with.

Health Sharing Ministries vs. Traditional Health Care

I chose to give a popular health sharing ministry a chance because I figured it was better than having no type of medical coverage at all. I’ve been with my particular organization for over a year now and there are quite a few things I like about it:

I can join and leave at any time (there is no open enrollment period)
By choosing a health sharing ministry, I was able to avoid the penalty fee around tax time for not having medical insurance. Health sharing ministries fall in the gray area between being insured and being uninsured. Hospitals and clinics will still accept my membership card and bill the organization just like with traditional insurance.
I can visit any doctor I like and don’t have to worry about them being in-network.
The annual unshared amount I pay, which is comparable to a deductible is relatively low. It’s much easier to set aside $500 for medical expenses, instead of a $1,000-5000 deductible.

While my health sharing ministry allow me to see any doctor I want and protect me from accumulating thousands of dollars of medical debt through their coverage, there are quite a few aspects I don’t like.

Even though I can be seen at any hospital or clinic of my choice, that doesn’t stop the staff there from being reluctant to expect my health share membership card. Most clinics are super strict and picky about not dealing with patients who don’t have insurance that is in their network. I find it a little frustrating that more healthcare facilities don’t do their homework and become more flexible and accepting of patients who have a health share membership, but the alternative option I usually go with is to be a self-pay patient for the visit, then submit my receipt to Liberty HealthShare for reimbursement within 30 days.

With Liberty HealthShare I also like the fact that they are working on generating a list of providers throughout the country and if you have a particular doctor you would like to see, you can ask them to call their office ahead of time in an attempt to get them to accept your membership card for billing purposes.

Another disadvantage to choosing a health sharing ministry is that most of them do not share expenses for pre-existing conditions during the first year of membership. If you have any conditions or have been treated for something in the past, this could be a red flag.
You also can’t deduct the monthly payments from your taxes each year since it’s not actual insurance and you won’t be eligible for an HSA (health savings account) if you choose to use a health sharing ministry.

While there are clear pros and cons of this option, it’s safe to say that no solution for medical coverage in this country will be absolutely perfect so you need to determine your wants and needs so you can choose the best option for you.

As someone who’s pretty healthy and can’t afford to pay high premiums and deductibles right now, a health sharing ministry was worth it for me and the benefits outweigh the disadvantages.

How about you all? What do you think about health sharing ministries? What has been your experience with health sharing ministries?

Share your experiences by commenting below!

***Photo courtesy https://www.flickr.com/photos/130100316@N04/16161362110/

The History of Debt in America

March 26, 2016
/ Saving Money & Frugal Living
/ By J. Irwin

Although the idea of credit in some form has been around for centuries, never has America been in such a state concerning credit and debt as it has been these last ten years or so.

During pioneer days, credit would be given out by individual stores based on the debtor’s relationship with the proprietor and their history of repayment.

This type of debt was accrued most often by farmers who received most of their year’s income in a lump sum at harvest time. Farmers would “buy” things on credit with the local merchants in the nearest town, promising to pay the balance in full at harvest time.

Defaults were rare, as most merchants had a strict rule that any default on debt owed meant no credit would be extended again. As such, people worked hard to pay their credit balances due, no matter what they had to sacrifice to do it.

As farming jobs decreased with the industrial age, store credit at local merchants was offered to more people, but the rules were still the same: pay your bill in full or lose your option for credit.

It was in the mid-1940’s that different individual businessmen started dabbling with the idea of a credit “card”.

The first official credit card was the Diners Club card, which entered the scene in 1950. The Diners Club company’s target audience was traveling businessmen with the goal of making paying for meals and entertainment while on the road easier for them.

In 1960, Bank of America issued the first credit card that mimicked what we see today, called the BankAmericard. As with all things progressive, competitors soon opened up and the “big three” of credit cards – Visa, Mastercard and American Express – were running the show by the time we entered the 1970’s.

Consumers and Credit Card Debt

When credit cards first made an appearance on the scene, those who were approved for cards like the Diners Club card were few and far between.

I remember that in the 70’s my parents – and many other parents that I knew – simply didn’t own a credit card because they couldn’t get approved for one. One had to show a proven higher income and propensity for repayment in order to get approved for a credit card.

In 1977, the Equal Opportunity Credit Act was finalized, making it illegal for credit card companies to deny a credit card application based on gender, race, national origin and marital status. The act also required that applicants who were denied credit be told in writing the reasons why.

While this was a great law on many fronts, it also dramatically broadened the ability of the average person to obtain approval for revolving credit.

The Beginning of the Consumer Debt Boom

When the 1982 recession ended, interest rates plummeted, people started to feel more secure in their financial situations and the use of credit began to rise dramatically.

The chart below shows the history of outstanding consumer credit card balances in billions.

(Link for chart: http://www.mybudget360.com/credit-card-withdrawal-banks-pull-financial-plug-bankruptcy-on-rise-bankruptcy-up-credit-down/ )

The ease of getting a credit card, the increase of marketing and advertising, and America’s increasing love affair with instant gratification meant people were spending more – whether they had the money to do so or not.

It soon became “normal” to have credit card debt.

These three facts from Wikipedia give hardcore numbers showing the increase of America’s comfort with using debt as a way to fund life without the cash to do so:

Household debt as a percentage of disposable income rose from 68% in 1980 to a peak of 128% in 2007, prior to dropping to 112% by 2011
S. household debt rose from nearly zero in the 1950s to $13.8 trillion in 2008, before declining to $12.9 trillion by Q2 2012
Consumer credit outstanding includes credit cards, auto loans, student loans, and other types of household debt, but excludes mortgages. It rose from 14.0% GDP in January 1990 to 18.0% GDP by January 2009. It fell to a trough of 16.4% GDP in July 2010 and was back up to 17.5% GDP by January 2013

As is evident, in spite of economic scares in the last decade, America’s love affair with credit is far from over. Proof of this lies in the fact that the average credit card balance of those who carry a balance is over $15,000.

As long as we as Americans continue to be comfortable carrying large amounts of consumer debt, we continue to put ourselves at risk for financial trouble down the road. However, there are things that you can do to help protect yourself from future economic downfalls.

Get a handle on your true financial goals. Figure out what you really want from your money and begin thinking long-term about your future financial security.
Design a workable budget for yourself and/or your family that helps you to achieve your financial goals – and stick to it.
Cut spending wherever necessary so that you can dump your debt as soon as possible. Keep your long-term financial goals in mind as you work to get out of debt.
Persevere through setbacks and temptations to buy. Keep in mind that the more financially secure you are, the more choices you’ll have about how to live life and the easier it will be to handle personal and external economic downfalls.

Carrying consumer debt balances has now become an acceptable way of life for many people, but it doesn’t have to be that way for you.

Join the growing number of people working to become debt free once and for all. I’m willing to bet you’ll find the end result well worth the effort.

How about you all? What debt fact in this article surprised you most?

Share your experiences by commenting below!

***Photo courtesy https://www.flickr.com/photos/smemon/12696360474/

What is House Hacking and How to Start

March 24, 2016
/ Saving Money & Frugal Living
/ By J. Irwin

The following post is by MPFJ staff writer, Jeff. Jeff has been writing online about finance related issues since 2009, and after a lot of soul searching in 2015 has crystallized his goal of financial independence and blogs about his journey to freedom at zerotofi.com.

If you’re like most people, the biggest expense that you’ve got on a regular basis is your mortgage or rent. The standard rule of thumb on this expense is no more than 33% of your monthly gross income, but think about what it would do for your budget if you could reduce it to 15% of your monthly gross income or 7.5%, 0% or even turn what used to be an outflow of money to an inflow of money. If this sounds good to you, you might be interested in house hacking.

Note: House hacking is not for everyone, as it requires making some sacrifices. Read on to see where you fall.

What is house hacking?

House hacking is simply trying to get your rent or mortgage line item as low as possible or turn it into a positive number. You can do this in a handful of ways, but the most popular are done by purchasing a home and renting out your spare rooms, or purchasing a multi unit property and renting out one of the units.

Getting started house hacking

First, you’ll need to make sure that you’re comfortable with everything that house hacking requires. Being a landlord isn’t for everyone, and not everyone feels like living with roommates when they are almost 30. If you dont mind those things and are interested, read on.

Multi Unit Property House Hacking

If you’re looking to go this route, the basic premise is the following: you buy a duplex or tri-plex (both of which you can do on an FHA loan if needed). You’ll live in one of the units, and rent out the other of the units. The renter(s) will cover most or all of your mortgage and that will leave you with either a small amount to chip in to top off your mortgage payment, or potentially money left over. You can fix up the unit that you’re living in and then move into the other unit and fix it up and rent out your old unit or move into another place all together, and increase your cashflow.

Once you’re out of the first property, you can rinse and repeat, or just keep that for extra cashflow as time goes on. Let the renters build the equity in your home and you can use the profits to pay your own rent in a new place or for whatever you please.

The key here is to get a good multi unit that will have the renter(s) covering most/all of the mortgage when you are living in it, so when you move out that unit that you were occupying will be bringing in rents that are pure profit.

Lets take a look at some make up numbers here:

Duplex Purchase Price: 110,000
Loan Amount: 100,000
Interest Rate 4.25%
Monthly Payment (Including PMI) 575
Unit 1 Rent: 600
Unit 2 Rent: 0 – you will be living in it.

As you can see, once you move out of that second unit, you’ll be able to make some major progress in terms of free cash flow and really drive your housing costs into positive territory from the near 0 that they are while you’re living in one of the units.

Renting Rooms

This works the same as a multi unit, though it’s only one house. You buy a larger house than you need, and rent extra rooms out. If you price them well, you should be able to easily cover your mortgage payment with the rent income that you should be collecting.

Of course, this means that you’ll have to be living with roommates and not everyone is interested/willing to do that.

For the right person however, house hacking can really throw rocket fuel on any financial goals that you have such as paying off debt, saving extra money or anything that you want to do in the future financially.

How about you all? What do you think of house hacking? Are you willing to give it a try?

Share your experiences by commenting below!

***Photo courtesy https://www.flickr.com/photos/dejavu_/23189113561/

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