Tag: savings

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Financial Savings

How Big Should Your Emergency Fund Be?

emergency fund

These days, things can seem a bit more uncertain than we’re used to. Pandemic shutdowns, market volatility, and more are causing millions of Americans to rethink their saving plans. People across the US are starting to save up an emergency fund, just in case. An emergency fund can save the day if you have one when you need it.

At most estimates, the average American should plan to have between 3 and 6 full months of living expenses at the minimum. Depending on your means and the circumstances, you may even want to sock away an entire year’s worth of money. Living expenses in our case means, all of your bills, mortgage or rent, food, discretionary spending, everything.

If this sounds like a lot of money, you’re absolutely right! That doesn’t make it impossible, but it does make it challenging. You may not need that much based on your particular situation, but we are going to help you figure it out.

The 3 To 6 Month Rule Of Thumb

Most experts say that keeping 3 to 6 months of living expenses based on your current pay is enough of an emergency fund. You might be able to get away with less than 6 months of expenses if:

  • You have minimal debt
  • Your cost of living is relatively low
  • Your rent does not fluctuate much, if at all
  • You have reliable transportation
  • Your job is stable
  • You have no kids or pets
  • You enjoy generally good health

While not all of these would have to be true, you can see how they give you an idea of the fluctuations and potential “surprise” expenses that may happen in some cases. This is often considered the best-case scenario for an emergency fund.

You may want to consider saving much closer to 6 months of expenses if:

  • You have some relatively low-interest debt
  • It would be difficult to replace your current job
  • You own a home
  • Live in a high cost of living area
  • You have children
  • You have any medical issues
  • Have dangerous or high-risk activities
  • Have no financial support outside yourself

6 To 12 Months Of Expenses

There are scenarios when you may want to have a much larger financial cushion. This is not just in case something happens to you or your source of income, but also to augment your potential retirement if you are not already retired. Consider saving up to a year’s worth of expenses if:

  • You provide solely for multiple dependents
  • You are approaching or at retirement age
  • Your job is highly specialized, a niche position, or may need you to relocate at some point
  • You are a high-income earner

Once you have decided how much you should save, be sure to set that goal and stick to it. Break it into milestones of one month worth of expenses each, this helps you reach smaller goals on the way to your eventual goal of an emergency fund.

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Financial Savings

Basic Budgeting Tips Everyone Should Know

Budgeting

Whether you are a million-dollar earner or one of the tens of millions of Americans living paycheck to paycheck, the foundation of every successful financial strategy is budgeting. You need to know where every penny you earn is going if you are going to become the master of your own financial future.

Despite what you may think, budgeting does not rely on strict spending control and eliminating all fun and enjoyment from your life. The biggest benefit to having a budget is to understand your own spending habits and being familiar with your unique financial situation.

The best decisions come from a place of education, so it is essential that you understand how you are spending and allocating your money. Let’s take a look at some of the most vital budgeting tips that everyone should be utilizing.

1.   Use A Worksheet

This isn’t the 1970s, so why create your budget as if it was? Use a spreadsheet that you can constantly keep updated, this will make it easy to stay current. There are also a number of resources for using premade budget templates that can be used with Excel or Google Sheets. These can have a number of categories, expense types, and more, to help you track your money with more detail than ever before.

2.   Understand Overspending

One of the many reasons that you may want to create a budget is to identify areas or categories where you may be overspending. Overspending can throw off your budget since it takes allowances from other categories. Once you know where your overspending tends to happen, you can understand your overspending habits, and begin to put a stop to them.

3.   Keep Your Goals In Sight

Budgeting can be hard without a goal to work on saving toward. This reward can be crucial to your success in budgeting and saving. Start with small goals, and work up from there. Maybe set a small reward for when you’ve managed to save your first $100, then another reward at $250, or even $500. Make sure you keep a mix of short-term and long-term goals so that you can budget for several things at once. Make sure you record your goals and maintain accountability.

4.   Automate Your Savings

This is another way that you can leverage technology to help you reign in your finances. One of the more challenging things about budgeting is saving, but now there are apps that can make this an effortless step. There are ways to not only automate savings deposits from your paycheck but also to deposit smaller amounts automatically.

For example, you can have $20 automatically sent to savings when your check is direct deposited. There are also apps that will round up a debit card purchase to the next dollar and put the rounded change in a savings account for you. This may not seem significant, but if you round up a dollar a day, that’s roughly $30 per month that can be saved without effort.

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Financial Savings

Saving Money: A Complete Beginner’s Guide

Saving Money

Volumes can be written about the psychology behind saving money, but if you’re just starting out trying to save you want real actionable steps to getting some savings built up. Each of these steps can be taken easily, quickly, and can also be expanded to larger scale savings.

1.   Every Little Bit Helps

People often get discouraged when they cannot seem to save money rapidly enough. If it were a race, slow and steady wins. Save a dollar here and there, even a few cents, just don’t touch it unless you absolutely have to. There are even apps that can help you save by rounding up purchases automatically and either saving or investing the spare change. This can be incredibly powerful for people who use their debit cards constantly.

2.   Know What You Should Be Saving

You know that you need to save, but do you know how much? Figuring out what you want to save for, and saving in small incremental goals, can boost your saving success. Save up for something small first, then add on to that, increasing until you have the savings and emergency funds you need for any rainy day.

3.   Make Saving Easy

Saving money shouldn’t be hard. It shouldn’t require you to live like a pauper. One of the easiest ways to save is to gamify it. When you set goals and reach those goals, be sure to reward yourself.

If you like ordering pizza but spend way too much on it, keep track of the times you’d order, and instead of ordering save that money. Once you’ve saved through 4 pizza delivery cravings, treat yourself to a pizza on the 5th. That way you’ve got a nice pile of savings, and a small reward.

4.   Clear Your Debt

Debt is frequently one of the more challenging things to overcome before you can begin saving. It can wipe out any progress that your savings and interest give you. If you have high-interest debt like credit cards, focus on paying that down quickly. While you do this, try to save a small amount, even $20-$30 per month, to help you break the cycle of credit card use.

5.   Pay Yourself First

This is one of the older methods for saving, but it’s one of the easier ones to implement and it helps change your saving behavior. It’s simple, establish a percentage of your pay that you will save and not touch. Many people set this at 10%. So for every hundred dollars you earn, stick ten in savings, and watch that pile up quickly.

6.   Generate Cash

Generating cash might sound crazy, but it’s a legitimate technique for saving. At the simplest, this can look like a credit card with a cash back bonus, where the cashback is dropped into a savings account and left there. More aggressive generation methods are running side hustles, getting a part-time job, or even selling extra stuff to make a few bucks that you don’t need for bills.

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Debt Financial

The Not-So-Secret Strategies To Find Debt Relief

get debt relief

The early 21st century has found an increase in the debt of individuals in developed, First World countries mostly as a direct result of the American economic recession around 2008. Personal debt rose from $2.71 trillion in 2008 to $3.76 trillion in 2017. Therefore, if you’re one of the many that have some form of personal debt, know that there are means to get help.

There are a lot of different versions of debt depending on who you are and what you owe. In this context, we’re referring to an individual’s debt. The early 21st century has found an increase in the debt of individuals in developed, First World countries mostly as a direct result of the American economic recession around 2008.

Management

Managing debt is where most people have to start. This all comes down to working out a budget plan. Unfortunately, this plan only works best on unsecured debt, like credit cards, personal loans and overdraft fees. The credit counseling and debt management companies can negotiate with the unsecured debt lenders to reduce the total owed or monthly payments, which can be a massive help if you’re living paycheck to paycheck.

There are a lot of different ways to look at debt management, because it basically includes all of the other strategies in one package. Managing the debt begins at the source, with you, and on how you plan to spend your money while making ends meet. Creating a budget plan as early as possible will help you get started with handling debt.

Consolidation

Debt consolidation is one of the first and smartest avenues to seeking out debt relief. If you’re in debt from a few different bills with high interest rates, like multiple loans or a few credit cards, it’s possible to consolidate all of the bills into one lower-interest loan. This option both reduces your overall debt and makes it faster to pay off.

Consolidation isn’t a magic cure-all and won’t work if you’re unwilling to stick to a budget. If the debt is less than 50 percent of your income, your credit isn’t enough to qualify for a zero percent credit card or you’re unable to consistently cover payments, consolidation may not be the best option. Of course, speaking with banks, credit unions, or other loaners may give you a better idea of how to reach consolidation with your personal situation.

Debt Settlement

Debt settlement is risky business. While this means that you can pay less than the original amount owed without fear, this option is still basically a last resort. Debt settlements can ruin your credit and be extremely expensive to reach, not to mention taking years to even establish.

The only way you can be eligible for a settlement is if you’re unable to pay any amount on your debt. Collectors will be willing to take some amount of money rather than nothing but at a strong cost to you. This is only applicable with some types of debt, as houses can be foreclosed and cars repossessed, but debt like student loans can be settled. Options like income-based repayment plans should be considered before deciding on debt settlements.

Tax Debt Relief

Tax debt is a bit different from your average debt. This is money owed to the IRS and can be serious stressor, especially if you have debt accruing from previous years. Every month tax debt is unpaid adds a 0.5 percent interest penalty, so things can add up fast. The IRS even has the power to put a lien or levy on your property, meaning they can take the proceeds if you sell or just take the property and sell it themselves.

There are a lot of companies out there and a lot of scams who say they’ll help you get out of tax debt. One of the best steps that can be made is to speak to a worker at the IRS directly to set up a payment plan. There will be penalties and interest to come with the plan but these are better than not paying at all. You can also seek out an office in compromise or OIC, which is similar to a debt settlement as it’s a way to reduce your payment if you can’t repay at all. As with the settlement option, the IRS suggests you try all payment plan options before considering the OIC.

Getting out of Debt

The idea of debt has been around since ancient historical times, even mentioned in the Book of Leviticus. So long as economy and debt has been around, so has debt forgiveness. Anyone can reach debt relief, but the stress coming with the trouble is a different problem.