Posts tagged 'budget'

The most common complaint I hear about money is “I don’t live an extravagant lifestyle. I don’t go on shopping sprees or luxurious vacations. Where is my money going!? There’s never any money left over to save.”

Most of us didn’t learn about personal finance in school, and that puts us at a major disadvantage. Even after we learn what we should do and want to be doing with our money, we often don’t do it. It’s much more tied to our emotions and habits than we give it credit for - just like with food.

The math around food and money is similar and actually quite simple. Dollars in minus dollars out equal saving, losing money, or staying the same. Calories in minus calories out equals weight loss, weight gain, or staying the same.

If it were actually that simple, there wouldn’t be a billion dollar dieting industry - and we’d be a lot less stressed about money!

One of the reasons it’s difficult to save is that we think about saving money all wrong. Most of us earn money, use that money to pay our bills and live our lives, and then wait to see what’s leftover at the end of the paycheck or month. The bad news is, there’s usually no money left over to save.

We think the answer is to earn more money. I’ve thought this many times. Then I got a raise and expected there to be money left to save but there wasn’t. The irony is that I couldn’t point to big meaningful changes in my lifestyle, but the money just got taken up with more of the same.

One of the reasons this happens is Parkinson's Law. It’s the idea that things take up as much space we give them. It’s why our junk drawer always fills up, meetings take exactly as long as is allotted in the calendar (even if there is only one agenda item!), and you guessed it - our expenses always fill what’s in our bank account.

Most of us will have to make some shifts in order to start meaningfully saving. The good news is that they aren’t hard, it just takes thinking about saving in a different way and setting up a system.

Here are three tips to finally start saving that no one tells us.

1. Get it out of sight, out of mind.
The first thing you want to do is create a separate space for our savings. You want it out of sight and out of mind. When we have a checking account linked to our savings account within the same bank, it’s all too easy to transfer the money over on a whim.

We also can’t help but notice it when we login to check our checking account balance. The money is available and for most of us, and that means it won’t stay in savings for long. There are a few unicorns who are able to keep their savings in the same bank connected with their checking, but for most of us, it just doesn't work.

I’m a big fan of online savings accounts for this reason. The money is available to us (transfers typically take 2-5 days) but it’s not top of mind. They also earn a much better interest rate than our accounts with brick and mortar banks. This means our savings will be growing! And they’re free.

So the first thing you can do to finally start saving is to open an online savings account.

2. Set it up to be automatic.
The next important piece of this is that you want to pay yourself first. What doesn’t work about how we typically save is that we pay everyone else first. We pay our bills, pay for our food and other lifestyle expenses, and even get other people gifts. By the time we’re ready to pay ourselves, there’s nothing left.

You can shift this paradigm by paying yourself first. You do this by setting up an automatic transfer to your online savings account each week, month, or paycheck. When something transfers out of your account automatically, you’re treating it like any other recurring expense or bill. You’re treating it like a top priority expense, which it should be!

We work for the money we earn, we deserve to get paid! It’s ironic that we always pay ourselves last.

3. Don’t be afraid to start small.
It’s really exciting and empowering to decide to pay ourselves first but next we have to figure out how. When we’re paying ourselves last, most of us aren’t saving. We’re living paycheck to paycheck or even if we’re not, we’re not putting aside money into savings.

Deciding to pay yourself first is like taking on another bill. It’s as if your taxes went up or you added a recurring subscription to your expenses. Those things tend to figure themselves out or you adjust for them in your spending elsewhere.

If you’re unsure of whether or not you’ll be able to save anything, don’t be afraid to start small. Set up an automatic transfer for five dollars per week or per paycheck. Then set a reminder to check in with the account after a few cycles. If you didn’t miss it, you can up the ante and increase your automatic transfer.

One of the most exciting parts of this process, no matter how small the amount, is the mindset shift that you are a saver. Once you have this transfer set up, you are someone who saves.

Sometimes we don’t start saving because we think the contributions we can make are too small to make a difference. But our progress isn’t linear. Small steps build momentum and exponential results. Don’t be afraid to start small and build from there.

In Conclusion.
How we traditionally try to save money isn’t working for the majority of us. We want to shift the paradigm and start paying ourselves first. You can do this by creating a space outside of your checking accounts in an online savings account, and setting up an automatic transfer each week, month, or paycheck. As this is a new habit and way of thinking for many of us, you'll want to start with something that feels very manageable and build from there.

For more, here’s a free guide on how to save $1,000 this month.

-Ashley Feinstein Gerstley

Managing and getting out of credit card debt is a topic that’s weighing on many of our minds. The average U.S. household has $6,829 in credit card debt - and that means we are paying $1,141 each year in interest charges.

Most of us aren’t getting the education we need and deserve to set us up for success with credit cards, and that’s a big problem. But even once we know what we want to and should be doing in order to pay them down and stay out of debt, we’re still not making the progress we want.

What I’ve found from my own experience and helping hundreds of people pay down their credit card debt is that we have to understand three secrets in order to make real, lasting progress. Once we understand these three things, we can get started tackling our debt for good.

We have so much working against us.

I got my first credit card when I graduated college and didn’t understand how they worked or all the ways they could get me in trouble. Way too many interest charges and fees later, I struggled to make on-time payments and ended up damaging my credit.

I studied finance in college and worked in finance and still didn’t really understand how credit cards worked or all the ways credit card companies make money.

We have so much working against us when it comes to money because it’s not something most of us learn about, yet we have to deal with it every single day. We also can’t really talk about it - even with our closest friends and family - because it’s still a really taboo subject.

Not to mention, companies prey on our lack of knowledge to separate us with our money. And they’re really, really good at it. Billion dollar marketing budgets tell us that if we just buy this one thing we’ll finally feel like we’re enough - beautiful enough, smart enough, belonging enough.

Women, and even more so women of color, have it worse. Not only do women have more debt than men (one of the many financial gaps they face), women are charged higher interest rates on credit cards and mortgages (even though they default on loans less frequently than men).

All this to say, it’s no wonder we’ve accumulated credit card debt! We have so much working against us. The point of sharing this laundry list of upsetting reasons we’re not flourishing in our financial lives isn’t to upset us (although it should!), it’s to help us muster up some compassion for ourselves for where we are in our financial lives.

It’s time we truly forgive ourselves for whatever mistakes we believe we made. Anyone with our experience and in our situation would have made the same financial choices we made. And only once we truly forgive ourselves and stop punishing ourselves for where we are, are we able to move forward.

SECRET #1: Let go of the shame and guilt surrounding your debt.

Debt, especially credit card debt, can come with so much shame and guilt. Society, including many financial experts, perpetuates that shame by judging our purchases and behaviors. We decide we’re just terrible with money or believe we have no self-control.

Take a step back and consider: what is debt, really?

Debt is just something we bought that we haven’t fully paid for yet. That’s it.

It doesn’t mean we’re bad. Or we will never pay for things. Or that we stole them. Or that we’re a failure. Credit card rates have gotten so absurd and astronomical that it should really be the credit card companies feeling all the shame and guilt.

Debt was a financial tool created to help us pay for things we don’t have enough money to buy yet.

That doesn’t mean we want it. But that’s really all it is.

It’s time we let go of the shame and guilt surrounding our debt.

SECRET #2: Find your motivation to pay down your debt and remind yourself of it often.

For many of us, paying down debt isn’t fun. It can feel like our money is going to a black hole that doesn’t seem to be going away. In many cases, we got the benefits of the things we bought in the past so they feel like they’re limiting our lives in the present.

You may feel angry when you see those hefty interest charges or even swindled if you didn't understand how credit cards worked, like me.

No wonder we don’t want to pay down our debt. And when we don’t want to do something, it makes it really hard to do it.

But when we take a step back, we can see that paying down debt creates more room for our lives in the present: for things we want to have, experience, and save for! Our goals.

Every little bit counts. Every time you pay off a credit card, that monthly payment is now yours to do something else with. If you add up each of your credit cards’ monthly payments and then multiply that by twelve months, that’s how much you could be putting towards other things each year.

Think about what you would do with that amount of money each year. How would that feel?

That’s our motivation. We all lose it time and time again (that’s normal!), but as long as we come back to it, we can get motivated and excited to pay down our debt. It’s a gift to ourselves.

To keep your motivation top of mind, you can carry a picture in your wallet or make an image the background of your phone. We want to remind ourselves of it often.

SECRET #3: Take inventory of your debt

Once we’ve forgiven ourselves, let go of the shame and guilt, and are feeling motivated, we are ready to move forward and do something about our debt.

The first and most important step to tackling our debt is to take inventory. Taking inventory means listing out each piece of debt and helpful accompanying details.

For many of us, this is a daunting step because it feels like it’s less stressful to be in the dark about our debt. We’re afraid of what we might find.

In my experience in my own life and with many people in my community, it’s actually a hugely liberating exercise because it’s most likely not as bad as we think. More importantly, we need to have a clear picture of our situation before we can do anything about it.

You’ll want to gather the current balance, interest rate, payment date, and minimum payment of each credit card.

If this feels too daunting, start by listing out the names of each cards. Don’t be afraid to break things down into small steps. Small steps lead to big results.

In Conclusion

Once we forgive ourselves, let go of the shame and guilt around our debt, and find our motivation, we are ready to tackle our debt. The first most important step is taking inventory. You can take inventory and track your progress with our Debt Inventory Tracker.

-Ashley Feinstein Gerstley

The holidays will be here before we know it. It’s a magical time of beautiful decorations and lights, gifts, parties... and money stress. Yes, you read that right. Almost half of us stress out about money during the holidays.

It makes complete sense. We take on a lot of extra expenses this time of year. There are expenses that come to mind right away like gifts, vacations, and hosting parties, but there are also expenses that are less obvious. We might purchase a sparkly dress for the office holiday party, take more Ubers than we normally do, or forget that we always give a cash gift to the mail person.

The crazy part is that while we know we’re going to spend more this time of year, very few people plan for it. Even if we set a budget, we’re probably not putting money aside in advance. That means we end up stressing out over how to make these expenses work and most Americans end up with more credit card debt.

Then we’re playing catch up going into the New Year, which makes it even more difficult to succeed in our financial goals.

The good news is, we can plan for our holiday expenses, and the sooner we do, the less pain we’ll feel financially.

Here are 7 easy steps to a financially stress-free holiday season:

Take a step back and think about what’s most important to you about the holidays. What are your favorite holiday memories? What made those memories special? These are the things you’ll want to prioritize spending money on this holiday season. When you prioritize what’s important and let go of the rest, a magical thing happens. Your lifestyle ends up feeling bigger and more meaningful, yet you end up saving more money.

What do you plan to spend money on this year? You can start with the things that are most important (from step #1 above), but there are probably other expenses to plan for. Make a list. For example, you may want to buy gifts, travel, host a party, account for extra dining out, purchase party clothes, or pay for additional transportation.

Get specific and add up the numbers. For example, if you listed gifts above, how many gifts do you plan to buy? What will you plan to spend on each gift? If you decide to buy five gifts and plan to spend $50 per gift, that’s $250 in total spending on gifts. You can make a spending estimate for each item on your list.

Is there any way to reduce the total above while maintaining the quality or making it better? Let’s continue with the gift example. Instead of getting five gifts, you might decide to do a Secret Santa where each person involved gets one person a $50 gift. This adds some excitement to the process. Now you’ve reduced your total spend from $250 to $50 in the gifts category.

Next you want to make the space for your holiday fund. I highly recommend creating a separate savings account for it so that it’s clear that this money is specifically for your holiday fund. I’m a big fan of using an online savings account so you can keep the fund out of sight and out of mind - in its own bucket - while also earning some interest. You can use this method for other larger, less frequent expenses as well.

Then, it’s time to account for your income. How many paychecks do you have from now until you plan to make your holiday purchases? If you don’t get a regular paycheck, break it up by time. How many weeks or months do you have until you plan to make the purchases?

It’s important to account for any expenses you plan to make in advance. For example, you may prefer to buy gifts the month before. That’s when you’ll want to have the money there and waiting for you.

From there, you can calculate it out. If you plan to spend $500 total on the holidays and you have five paychecks until you want to start spending the money, you will want to transfer $100 per paycheck into your holiday fund.

If you’re not sure how to find $100 per paycheck, here are six steps to save $1,000 this month.

Set this transfer up to be automatic. Automation ensures that we don’t have to depend on willpower or our memory to transfer the money over each paycheck. This gives us peace of mind because we can feel confident it’s going to happen.

Schedule the calculated per paycheck or per week amount to transfer to your holiday fund automatically. Continuing with our example above, you’d set up an automatic transfer for $100 per paycheck to go to your holiday fund. Then the cash will be there waiting there for you when it’s time to start your holiday spending. You can transfer it over in advance or put expenses on your credit card and pay them off immediately using the funds from your holiday fund.

The earlier we start planning for the holidays, the smaller our transfers can be and the less “pain” we’ll feel per paycheck. When we aren’t playing catch up after the holidays, we can start planning for next year and that will reduce our financial stress even more.

Let’s say you start right after the holidays and have 24 paychecks to put aside $500 for the holidays next year. You’d only have to transfer $21 per paycheck to your holiday fund to have $500 saved in time for next year.

Taking a step back and mapping out a conscious and intentional plan for the holidays allows us to prioritize what’s most important while decreasing our financial stress. If you walk through each of these seven steps, you’ll know exactly how to plan for your holiday expenses this year and get started early for the next.

Then get a head start on your New Year’s goals with our free 48 Hour Personal Finance Financial Makeover.

-Ashley Feinstein Gerstley

For more tips on budgeting your money, check out The 30-Day Money Cleanse>>

I had a money makeover some years back and, while that got me on the right track, I still stress about finances. So while the concept of money management is not new to me, I still continuously strive to learn more on the topic. Most of the books I’ve read about finance had some great tips that I’ve incorporated into my budget, but I’ve always felt like something was missing.

As it turned out, The 30-Day Money Cleanse provided more insight into what I needed to do. The ideas were simple and easy to implement. My first task was glaringly obvious, but something I had never done: calculate my annual expenses. While I knew what I spent each month, I never took the time to find out how much that equaled in a year. I was completely floored. Did I really spend that much money on eating out? Was all the money I spent on clothes worth what I didn’t spend on finally creating my home library? And what in the world did I do with all those tech gadgets I purchased?

I’ll admit that my first response to all of this was guilt and shame; I wanted to just give up right there. But I didn’t – I kept reading. And that was when I finally understood why knowing where all my money was going was so important – because now, I could choose where I actually wanted it to go. I wasn’t powerless after all.

It was exciting to think about how I really wanted to live my life. Once I understood what mattered, it didn’t feel like I was getting rid of anything. Instead, I saw money that I once wasted was now being funneled into things that are truly important to me. I want to spend time with friends and family, but there are much more interesting and “fabulously frugal” ways to do so than just eating out. And taking stock of all the things I bought but didn’t use made it easy to put that money into my library instead.

This is what I learned – don’t let the fear of guilt or shame get in the way of taking a closer look at your relationship with money. You may be shocked at first by what you find; but when you dig a little deeper, you’ll see that this awareness brings with it so much power to truly transform your life.

Morgan Vogt, Sourcebooks Employee

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