The “Cashless” Cash Envelope System

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You have probably heard people talk about how to use a cash envelope budget to save money and help you get out of debt. But, what if you don’t want to use cash? Does that mean you can’t use envelopes? Nope. Not if you follow one of the cashless cash envelope methods available.

Cash Envelope system without cash

If you follow any money advice, you are usually taught about using cash and implementing the cash envelope system.  That is what I recommend here on our site.

As much as this is the perfect solution for our family (and one of the catalysts to help us kick-start our debt pay-off plan), I also understand this is not an option for everyone.  Even if you don’t use cash, you still should budget and spend as if you do.

If you are just learning about budgeting, you will want to check out our page — How to Budget. There, you will learn everything you want to know about budgets and budgeting.

The way to do this is by using a cashless envelope system.  It is how to use cash envelopes without using cash.  The idea is simple, but there different ways to track it.

 

HOW DOES A CASHLESS CASH ENVELOPE SYSTEM WORK?

The idea is the same as the regular cash envelope method.  You have a budget and need to ensure you don’t spend more than what you should.

Each pay period, you record the amount budgeted for each category onto your “envelope.”  As you spend, you keep track of it.  When you are out of money, you can’t spend anything else.

Using the cash envelope system without using cash can work – if you want it to.

 

WHY IS THIS METHOD BETTER?

When you are trying to get control of your finances, you need to know where you spend.  The best way to do this is to track your spending.  Not tracking after you spend – but as you purchase.

Most of the time, you swipe your card without worry.  This action can easily throw your budget out of balance.

While using cash has emotion attached to it, tracking every purchase requires awareness.  You are always watching what you spend and where.  There are no surprises that you spent $250 on groceries when the budget was $200.  You see it happening right in front of you.

The cashless envelope system works because:

  1. You don’t have to worry about carrying or getting cash.
  2. It forces you to track of your spending in real time.
  3. You can see exactly where your money goes and make budget adjustments as needed.

The cashless envelope system forces you to be more responsible for your spending without the hassle of carrying money.

 

CASHLESS CASH ENVELOPE SYSTEMS TO TRY

When you are ready to try a cashless system, you need to determine which is the best for you.  You can find one on your phone, or there is also a printable option.

 

CASHLESS CASH ENVELOPE APP

There are several apps that claim they can help you keep track of your spending with virtual envelopes. If you have found one that works well for you, then I say keep using it!  But, if you are new to this idea – or want something new – the one I recommend is Mvelopes.

Mvelopes has three different plan levels, starting as low as $4 a month.  You can use the one that best suits your needs.  If you are new to the platform, I recommend starting out with the basic plan.

To start, you will add the app to your phone  — or you can use their online site (which I love).  Once you do that, you sync your various accounts.  Make certain to include the cards you will use for your various categories.

For example, you may charge every purchase to your credit card to earn rewards or cash back.  If this is you, you will connect your credit card.  Some may use the debit card for some purchases and a credit card for others.  Those of you who do this will connect both cards to your account.

Once that is done, you set up your online envelopes and add budgeted amounts to each.  Then, you just swipe as usual.  Every time you make a purchase, the purchase amount is deducted from your online envelope.  With a couple of swipes, you see not only how much you have left to spend, but even where you spent your money.  There is no guessing.

This system helps you give every dollar a job.  You know where it will go even before you spend it.  Using Mvelopes puts you back in control.

If you want or need even more help, Mvelopes has other plans that you can purchase.  They offer the Mvelopes PLUS plan for $19 per month.  This service includes all of the services available under the basic plan but also helps you tackle your debt.  You even receive you a personal finance trainer who will visit with you once per quarter.  This plan helps you set and achieve your financial goals.

Should you need more one-on-one help, you may want to consider the Mvelopes Complete package instead.  You get all of the benefits of the Plus plan but receive your own, one-on-one finance trainer.  This coach works with you to help you achieve your financial goals.  You aren’t left alone to figure things out as there is someone right there, guiding you along the way.

As I said you don’t need to purchase one of the larger plans as the basic plan will meet most people’s needs. However, it is great to have these options available at your fingertips.

Related:   The Best Apps for Your Budget

 

CASHLESS ENVELOPE PRINTABLE

Apps are great, but there are times when you would rather have the simplicity of writing something down rather than having to pull it up on your phone.  That’s where the printable cashless envelopes come in handy.

These work in the same way as regular envelopes — just without cash.  Print them off and keep them handy.  Record the budgeted amount for that category at the top.  Then, as you spend, keep track of it.  Jot down every purchase and keep a running total of how much you have left to spend.

I get that it is a pain to keep track of “cents”, so I recommend you round up.  For example, if your grocery budget is $200 and you spend $105.74, record that you spend $106 and have $94 left to spend.  That is MUCH easier than keeping track down to the penny.  (Truth be told, this is what I do with our cash envelopes too).

Once you reach your spending limit, then you are done with that category!  If you budget $100 for dining out and there is just $5 left, don’t pick up that coffee and cake for $7 – or you will have just busted your budget!  If you find that you are always out of money for select categories, or often have money left over for others, then it may be time to make adjustments to your budget.

printable cashless cash envelopes

Grab your cashless envelope printables.  Now, I don’t recommend you print this onto regular paper, as that is really thin and will tear easily. Purchase card stock to use to print out your cashless envelopes as they will be more durable.

Related:  How to Figure Out How Much Money to Budget For Groceries

 

Even if you don’t want to use cash, it is still essential that you continue to track your spending, so you never exceed your budget.

cashless envelope system

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Source: pennypinchinmom.com

A Guide to Qualified Retirement Plans

woman on computer with notebook

Saving for retirement is an important financial goal and there are different options when it comes to where to invest. A qualified retirement plan can make it easier to build wealth for the long term, while enjoying some significant tax benefits.

Qualified retirement plans must meet Internal Revenue Code standards for form and operation under Section 401(a). If you have a retirement plan at work, it’s most likely qualified. But not every retirement account falls under this umbrella and those that don’t are deemed “non-qualified.”

So just what is a qualified retirement plan and how is it different from a non-qualified retirement plan?
Understanding the nuances of these terms can help you better shape your retirement plan for growing wealth.

What Is a Qualified Retirement Plan?

Qualified retirement plans allow you to save money for retirement from your income on a tax-deferred basis. These plans are managed according to Employment Retirement Income Security Act (ERISA) standards.

The IRS has specific rules for what constitutes a qualified retirement plan and what doesn’t. Public employers can set up a qualified retirement plan as long as these conditions are met:

•  Employer contributions are deferred from income tax until they’re distributed and are exempt from social security and Medicare tax
•  Employer contributions are subject to FICA tax
•  Employee contributions are subject to both income and FICA tax

Following those guidelines, qualified retirement plans can include:

•  Defined benefit plans (such as traditional pension plans)
•  Defined contribution plans (such as 401(k) plans)
•  Employee stock ownership plans (ESOP)
•  Keogh plans

Section 403(b) plans, which you might have access to if you’re a public school or tax-exempt organization employee, mimic some of the characteristics of qualified retirement plans. But because of the way employer contributions to these plans are taxed the IRS doesn’t count them as qualified plans. The same is true for section 457(b) plans, which are available to public employees.

Defined Benefit vs. Defined Contribution Plans

When talking about qualified retirement plans and how to use them to invest for the future, it’s important to understand the distinction between defined benefit and defined contribution plans.

ERISA recognizes both types of plans, though they work very differently. A defined benefit plan pays out a specific benefit at retirement. This can either be a set dollar amount or payments based on a percentage of what you earned during your working career.

This type of defined benefit plan is most commonly known as a pension. If you have a pension from a current (or former) employer, you may be able to receive monthly payments from it once you retire, or withdraw the benefits you’ve accumulated in one lump sum. Pension plans can be protected by federal insurance coverage through the Pension Benefit Guaranty Corporation (PBGC).

Defined contribution plans, on the other hand, pay out benefits based on how much you (and your employer, if you’re eligible for a company match) contribute to the plan during your working years. The amount of money you can defer from your salary depends on the plan itself, as does the percentage of those contributions your employer will match.

Defined contribution plans include 401(k) plans, 403(b) plans, ESOPs and profit-sharing plans. With 401(k)s, that includes options like SIMPLE and solo 401(k) plans. But it’s important to note that while these are all defined contribution plans, they’re not all qualified retirement plans. Of those examples, 403(b) plans wouldn’t enjoy qualified retirement plan tax benefits.

What Is a Non-Qualified Retirement Plan?

Non-qualified retirement plans are retirement plans that aren’t governed by ERISA rules or IRC Section 401(a) standards. These are plans that you can use to invest for retirement outside of your workplace.

Examples of non-qualified retirement plans include:

•  Traditional IRAs
•  Roth IRAs
•  403(b) plans
•  457 plans
•  Deferred compensation plans
•  Self-directed IRAs
•  Executive bonus plans

While these plans can still offer tax benefits, they don’t meet the guidelines to be considered qualified. But they can be useful in saving for retirement, in addition to a qualified plan.

Traditional and Roth Individual Retirement Accounts

Traditional and Roth IRAs allow you to invest for retirement, with annual contribution limits. For 2020 and 2021, the maximum amount you can contribute to either IRA is $6,000, or $7,000 if you’re over 50.

Traditional IRAs allow for tax-deductible contributions. These accounts are funded using pre-tax dollars. When you make qualified withdrawals in retirement, they’re taxed at your ordinary income tax rate. IRAs do have required minimum distributions (RMD) starting at age 72.

Roth IRAs don’t offer the benefit of a tax deduction on contributions. But they do allow you to withdraw money tax-free in retirement. Unlike traditional IRAs, Roth IRAs do not have RMDs, meaning you don’t have to withdraw money until you want to.

A self-directed IRA is another type of IRA you might consider if you want to invest in stock or mutual fund alternatives, such as real estate. These IRAs require you to follow specific rules for how the money is used to invest, and engaging in any prohibited transactions could result in the loss of IRA tax benefits.

Advantages of Qualified Retirement Plans

Qualified retirement plans can benefit both employers and employees who are interested in saving for retirement.
On the employer side, the benefits include:

•  Being able to claim a tax deduction for matching contributions made on behalf of employees
•  Tax credits and other tax incentives for starting and maintaining a qualified retirement plan
•  Tax-free growth of assets in the plan

Additionally, offering a qualified retirement plan, such as a 401(k), can also be a useful tool for attracting and retaining talent. Employees may be more motivated to accept a position and stay with the company if their benefits package includes a generous 401(k) match.

Employees also enjoy some important benefits by saving money in a qualified plan. Specifically, those benefits include:

•  Tax-deferred growth of contributions
•  Ability to build a diversified portfolio
•  Automatic contributions through payroll deductions
•  Contributions made from taxable income each year
•  Matching contributions from your employer (aka “free money”)
•  ERISA protections against creditor lawsuits

Qualified retirement plans can also feature higher contribution limits than non-qualified plans, such as an IRA. If you have a 401(k), for example, you can contribute up to $19,500 for the 2020 and 2021 tax years, with an additional catch-up contribution of $6,500 for individuals 50 and older.

If you’re able to max out your annual contribution each year, that could allow you to save a substantial amount of money on a tax-deferred basis for retirement. Depending on your income and filing status, you may also be able to make additional contributions to a traditional or Roth IRA.

Making Other Investments Besides a Qualified or Non-Qualified Retirement Plan

Saving money in a qualified retirement plan or a non-qualified retirement plan doesn’t prevent you from investing money in a taxable account. With a brokerage account, you can continue to build your portfolio with no annual contribution limits. The trade-off is that selling assets in your brokerage account could trigger capital gains tax at the time of the sale, whereas qualified accounts allow you to defer paying income tax until retirement.

But an online brokerage account could help with increasing diversification in your portfolio. Qualified plans offered through an employer may limit you to mutual funds, index funds, or target-date funds as investment options. With a brokerage account, on the other hand, you may be able to trade individual stocks or fractional shares, exchange-traded funds, futures, options, or even cryptocurrency. Increasing diversification can help you better manage investment risk during periods of market volatility.

The Takeaway

While a qualified retirement plan allows investors to put away pre-tax money for retirement, a non-qualified plan doesn’t offer tax-deferred benefits. But both can be important parts of a retirement saving strategy.

Regardless of whether you use a qualified retirement plan or a non-qualified plan to grow wealth, the most important thing is getting started. Your workplace plan might be an obvious choice, but if your employer doesn’t offer a qualified plan, you do have other options.

Opening a traditional or Roth IRA online with SoFi Invest®, for example, can help you get a jump on retirement saving. Members can choose from a wide range of investment options or take advantage of a custom-build portfolio to invest.

Find out how an online IRA with SoFi might fit in to your financial plan.


SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC Registered Investment Advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).
2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.
3) Digital Assets—The Digital Assets platform is owned by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.
For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, http://www.sofi.com/legal.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
SOIN20257

The post A Guide to Qualified Retirement Plans appeared first on SoFi.

Source: sofi.com

6 Fun, Inexpensive Ways to Revamp Furniture

FunInexpensiveWaystoRevampFurniture

Dresser Storage

If your country kitchen is running out of room, consider a dresser. Even though you’re used to bureaus being only for bedrooms, it can be a valuable addition to a kitchen for storing napkins, utensils, and more. Repaint the dresser in colors to match your kitchen and you’ll have guests asking where you got your newest piece of kitchen furniture.

Don’t Discard Dingy Dressers

If your furniture is weathered or out of style, that’s not necessarily a reason to replace it. There are plenty of ways to spruce up old dressers, chairs, and tables. Everybody loves quilts, so why not drape one over that old chair that needs re-upholstering? You can also try using colorful fabrics on the fronts of nightstand and dresser drawers. Just get some scrap cloth from your last project or from a fabric store, and attach it to the dresser drawers with a staple gun. To have even more fun with it, we like to paint part of the piece and color-coordinate it with the cloth we’re using.

Handled With Style

If your cabinets are getting old and worn, you can revive them just by replacing the knobs and handles. A good variety should be available inexpensively at your local hardware store. They’ll make your kitchen or bathroom look brand new!

A Gift for Decoration

Dress up an inexpensive set of plastic drawers by covering them in wrapping paper. Choose some paper you love (you can even pick several coordinating designs), and cut the pieces to fit the size of the drawers. Then spread a crafting glue/sealer, such as Mod Podge, on the plastic and smooth the wrapping paper onto it, being careful to eliminate bubbles. Allow to dry, and apply a coat of sealant on top. Not only does the paper look beautiful, but it also hides the contents of the drawers, making everything appear neat and tidy.

Matching Not Necessary

You’ve probably noticed this at the restaurants you frequent, but it’s becoming more and more acceptable nowadays—even hip—to eat your meals on vintage, mismatched chairs. Instead of spending a fortune on a dining-room set, go for the mismatched look and hunt for your chairs at thrift shops and used furniture stores.

Brighten Up the Bookshelf

If you’re looking for an easy, inexpensive way to add a pop of color to a room, look no further than the bookshelf. You can paint the interior back “wall” of the bookshelf a color that either contrasts or coordinates with your decor. It will add a modern touch for not a lot of money! 

Get more great tips on our podcast by subscribing on iTunes or Stitcher! You can also sign up for our newsletter and follow us on Facebook for our daily tips!

Image courtesy of Shutterstock.

Source: quickanddirtytips.com

9 Ways to Support Small Businesses Without Breaking the Bank

We all have our favorite small businesses, including our go-to date night restaurant and favorite thrift store. These places serve more than great food and looks — they build jobs in the community, put children through school, and are the realization of your neighbor’s dream. 

These stores are built on hard work and love, and supply some of the best quality products you can find. Small businesses are a great sign of a thriving economy, but they’re also the first to suffer from economic downturns, like 2020’s COVID-19 recession. This is why it’s more important than ever to find ways to support your community’s businesses.

There are many reasons why small business success is vital. Not just for the economy but for our communities. That’s why Small Business Saturday (November 28) is one of our favorite times of the year, and why we collected these ways you can support small businesses without breaking the bank (or leaving the house!).

Shop Small Businesses

Shopping small is the easiest way to support community businesses and clear your holiday list. Shopping locally doesn’t have to drain your wallet, either.

Small businesses generate 44% of U.S. economic activity.

1. Skip the Hallmark Card and Support a Local Artist

Cards are a classic gift for any and all celebrations. They’re small, affordable, and easy to personalize. This year skip the grocery store and see what artists you can support while still getting beautiful and unique gifts for your family and friends. 

Most cities will have galleries, boutiques, and even tourist shops that display locally printed and designed cards to choose from. If you don’t have a shop near you, you can browse thousands of creators on Etsy to find the perfect design for each of your loved ones. 

2. Send Gift Cards

Gift cards are perfect for acquaintances, long-distance giving, and little acts of kindness every now and then. Instead of collecting Amazon and Starbucks cards, see what your local spots have to offer. 

Most restaurants and stores offer a gift card option, and you don’t have to waste the plastic! Send your gift via email to anyone, anywhere. So go ahead and thank your first mentor for their glowing reference with a gift card to their favorite coffee shop. 

3. Shop Throughout the Year

It’s true that handmade products can get pricey, but you’re ultimately paying for quality. If you’re already pinching pennies for the holiday season, start thinking about next year. Buying gifts for loved ones as you find them throughout the year is the best way to collect beautiful gifts without using credit. Plus, small businesses can use the boost year-round. 

Show Support From Home

Mockup showing someone fill in an instagram story template with favorite shops.

Download button for instagram story template.

Most of us have a budget that prevents us from buying a new wardrobe every month and eating out every weekday, so it just isn’t feasible to buy from all of our favorite local artisans all of the time. That doesn’t mean you don’t love them, you’ll just have to get creative to show your support from home. 

4. Share Your Favorite Products

When you do buy something new, take a photo! Sharing your favorite finds online and tagging the store is a great way to promote their products and quality to your friends and family. Even if you’re not buying, sharing a wishlist or their newest product could earn them another sale or new followers. 

“I think people forget that their voice has influence, whether they are a huge celebrity or a humble stay at home mom. It’s amazing just what one post can do for small business.” — Autumn Grant, The Kind Poppy

5. Write a Review

You should let the world know when you find a shop you love. From Google and Yelp to a company Facebook page, leave a review to let others know they’re in good hands. Positive reviews are some of the best tools businesses have to convert sales. 

“These types [local] of businesses live and die by word of mouth. Their reviews are everything to them. Now that everyone can look up the average rating of a business or service, it’s vital for businesses to collect positive, honest reviews.” — Dan Bailey, WikiLawn Lawn Care

If you do leave reviews, detailed thoughts and photos perform the best. These give the consumer plenty of information and help your review seem authentic. Plus, reviews can help platforms like Etsy and Google know the business is valued. 

6. Refer a Friend

Tell your friends when you find a new shop or service and share the love. Your friends trust you and likely have a lot of shared interests, so this word of mouth is a great way for businesses to earn customers. 

“A referral is the single best compliment to a business owner. Trust me.” — Brian Robben, Robben Media

If you have friends and family from out of town you may also want to keep your favorite businesses in mind for when they visit. Keep a list of local restaurants, cafes, services, and shops that they can’t get anywhere else and take your friends on a local tour. 

Keep in Touch

Businesses have more ways than ever to keep you in the know, so make sure you’re subscribed to keep in touch! Newsletters and social media are a good way to keep your local faves and their promotional offers top of mind. 

Mockup showing someone filling in their wishlist on instagram.

Download button for holiday wishlist instagram template.

7. Sign-up For Newsletters

Most businesses send regular emails to notify you and other customers of their store details and deals. Newsletters are great ways to find coupons, sales, and new items you’ll adore. Just subscribing isn’t enough, though. Make sure you actually read their news and whitelist the email so you never miss a thing. 

8. Follow and Interact With Their Social Channels

Social media is another easy way to stay in the know; it can also organically promote a business. When you follow a business, platforms learn more about who else may be interested in their offers. Stay active and like and comment on their posts, too, to increase their visibility and trust with other shoppers. 

9. Swing By the Shop

Ultimately, the best way to support a business is to stop by and visit. You never know when something will catch your eye, and it’s a great way to share your find with friends. You may also get the chance to talk with the owner and learn more about the business while sharing your support. 

“Drop a note to them of encouragement. Tell them why you love them and what they mean to you and the community…We’ve been absolutely floored when people have taken time out of their day to write us a note, telling us how much they like us/our product.” — Meaghan Tomas, Pinch Spice Market

No matter the product or service, small business owners will appreciate hearing that you love their shop and can benefit from your support. Tag a friend, buy a gift card, or write a review to help your favorite stores without busting your budget. 
Small Business Administration | G1ve 

The post 9 Ways to Support Small Businesses Without Breaking the Bank appeared first on MintLife Blog.

Source: mint.intuit.com

Dear Penny: Will Social Security Be Broke by the Time I Retire?

Dear Penny, I’m a 34-year-old man who just started saving for retirement last year after getting married. My husband is 39 and has been saving for some time. My question is about Social Security. Should someone in our age group expect to receive it at all? I’m always hearing about how Social Security is going […]

This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.

Source: thepennyhoarder.com

5 Reasons Why Your Budget Is About More Than Money

The post 5 Reasons Why Your Budget Is About More Than Money appeared first on Penny Pinchin' Mom.

budget is about more than money

It’s true.  Your budget is about more than money.  In fact, money is just one piece of the puzzle when it comes to learning how to create a budget.

I’ve helped countless people learn to budget over the years.  The one thing that I hear them say repeatedly is how their budget helped them in more ways they ever realized.

Read More:

  • How to Create A Budget (Even if you Suck at Budgets)
  • Why You Need to Use the Cash Envelope Method
  • How to Budget When Your Income Always Changes

WHY A BUDGET IS ABOUT MORE THAN MONEY

IT PUTS YOU IN CONTROL

When you struggle with money, it feels as if your money is always telling you where it needs to go.  There is a sense of losing control.

The minute you create your budget, you are saying “ENOUGH!”  Your budget swings the pendulum from the money taking over to you taking over.

Now, when payday rolls around, you no longer feel like you are chasing the money trail trying to pick up anything that is left over.  Instead, when the check hits your bank account, you direct where it will go and instantly take control.

 

YOU UNDERSTAND YOUR FINANCIAL SITUATION

This is a painful, but helpful, part of having a budget. When you see your finances in writing, it can strike a nerve and in fact, make you physically ill.

However, the up side of this is that you finally see and understand the bigger picture.  There is power in knowledge and understanding what you need to change financially.

Sure, it would be simpler to run and hide from it.  However, once you can accept the reality of your finances, then you can move forward.

 

YOU MAKE BETTER DECISIONS

There is a saying that many of us have heard before “Follow the money.”  While this usually means corruption, it can apply to your life as well.

When you follow where you spend your money, you learn how you are wasteful.  It helps you figure out where you need to cut back and control your spending.  Your budget helps you do that.

Once you know that you have only $100 a week to spend on groceries, you think twice before you buy anything.  Your budget helps you make better money decisions.

When you are more informed, you begin to make better decisions – not only with your money, but in all areas of your life.

 

YOU FINALLY HAVE FINANCIAL GOALS

Once you see how you much money you have available to spend and where you need to spend it, you decide on what is most important to you.  If there is just $100 left over, would you rather go have a fun evening out, or save for your next family vacation?

Your money can finally help you set those goals you want to achieve. The great thing is that your goal is unique to you and your family.  No one else will have one just like yours.

Once you can set those goals, it gives you more purpose when it comes to money. One you can finally achieve your goal, it is truly liberating.

For example, my husband and I recently paid cash for a new car.  Never in my wildest dreams, did I ever think that could be a reality.  But, we set the goal to save and do it and achieved it.  I have so much pride in that car.  Not because it is newer, but because there is not debt following me wherever I drive.

 

YOU FEEL BETTER ABOUT YOURSELF

This is the one that surprised me the most. Even though our first budget was grim (made me cry), I somehow felt better.  For us, it was that we had a problem and sat down to determine how to solve it.  We were struggling to make ends meet and the budget was the first step in doing that.

Once we had our budget in place, we began to make smarter spending decisions.  We began to eat better.  Both my husband and I slept better at night.

It was an odd experience, but our budget truly changed our negative outlook into a positive one.

Your budget is about more than money and once you have yours in place, you too will have these life changing experiences.

The post 5 Reasons Why Your Budget Is About More Than Money appeared first on Penny Pinchin' Mom.

Source: pennypinchinmom.com

Financial Considerations When Getting a Divorce

In a recent episode, I shared that I would be doing a 4-part series on divorce.  I’ve been divorced for 5 years now and wanted to share what has worked for me, my ex-husband, and our 8 kids during this time. While divorce is not easy, time does help heal, and when your focus is putting your kids first, it is absolutely possible to maintain a healthy, happy family relationship.

My first episode in this series was 5 Expert-Approved Ways to Talk to Your Kids About Divorce.  My second episode in this series was 5 Ways to Co-Parent with Your Ex-Spouse. 

There really isn’t anything easy about divorce. Thankfully, as I discussed in the first two episodes, there are strategies and thoughtful ways to navigate through some of divorces issues, especially if the two parents are willing to put their personal differences aside and focus on their kids. In addition to the emotional turmoil that encompasses divorce, there is also another difficult component that couples must deal with and that is the financial aspect. 

After 25 years of marriage and 8 kids, Mighty Mommy had to get her financial house in order and make some significant adjustments going from a two-income household to a single income.

Here are four financial considerations, as backed by the experts, to keep in mind if you are thinking of or getting a divorce.

1. Get Your Financial Documents in Order

The entire divorce process is completely overwhelming, and when you begin to delve into the financial ramifications, the stress is taken to a whole new level. Once we began having our small tribe of kids, we decided I would leave my career to be home with our family. During the last 10 years of our marriage I went back to work part-time as a freelance writer but by no means was I contributing significantly to our income. My ex-husband managed the majority of our financial affairs so when the reality of our divorce settled in, I knew the first thing I had to do was get a handle on every aspect of our financial status. I honestly wasn’t sure where to begin, but my divorce attorney recommended I start by gathering all my financial documents.

Maryalene LaPonsie, contributor to USNews.com writes in 7 Financial Steps to Take When Getting a Divorce that “as soon as you know you’re getting a divorce, collect all the financial documents you can.” She continues, by stating that these include:

  • “Bank statements”
  • “Credit card statements”
  • “Tax returns”
  • “Retirement account balances”
  • “Appraisals for valuable items, if available”

In addition, other documents to consider are:

  • Mortgage Statement, including any Home Equity Loans and purchase information
  • Checkbook Registry for the last year
  • Any other long-term debt account statements you may have, including car loans

2. Know Your Income and Expenses

When we began our divorce proceedings, I admit I was far more focused on my emotional state than my finances. 

When we began our divorce proceedings, I admit I was far more focused on my emotional state than my finances.  Because my ex was the one who paid all the bills and the sole provider for most of our marriage, I never worried much about the details of our 401(K) plan, life insurance policies or what our overall assets and debt totaled.

One piece of advice I received many times over was that I needed to know what our budget was so I could begin to realistically know what my living expenses would be. 

Jason Silverberg, CFP at Financial Advantage Associates, Inc. and author of The Financial Planning Puzzle, told me via email: “If there was one singular, most important piece of financial advice that I could offer someone going through a divorce, that would be to understand where everything is and what everything’s worth. Without knowledge of what you own and who you owe money to, you really are going to have a hard time moving forward. You’ll also want to understand all of your sources for income and all of your monthly expenses as well. This will help you have a good handle on your budget to provide you critical understanding, so you can make smart financial decisions.”

He went on to say, “This exercise should be done both prior to as well as after the divorce. This way you can get a sense for how your household budget will operate on one income.” To help divorcing couples realize these figures, Silverberg has created the Personal Financial Inventory (1 page worksheet) inside the Picking up the Pieces eBook.

This exercise was extremely enlightening as I realized exactly where every penny (and then some) was going on a monthly basis. I was also able to gauge how much income I would need to start making in order to support these bills in addition to the child support and alimony payments I was receiving. One important factor to consider with child support is that it will decrease as your children get older, so I had to continually modify my budget based on this decrease. At first, it was overwhelming to see how much money I would need to keep our household running, but when you are armed with the figures and you pay attention to your monthly cash flow, it becomes easier to make adjustments. The fact of the matter is that some of the extra splurges such as frequent trips to the hair salon or buying my kids their usual top-of-the line items like sneakers or sports equipment had to be adjusted to what I could now afford. My kids have had some disappointments in this department, but they appreciated how we were trying to work together as a family-unit so that their lifestyle wasn't affected as drastically as it could've been which balanced everything out.


3.  Consider What Professionals Will Represent You

There are important considerations to keep in mind when choosing which divorce professionals will represent you. Adrienne Rothstein Grace writes on the Huffington Post, 3 Steps to Prepare for Your Divorce, that you must align yourself with the right professionals.  She explains “First, think about the divorce process you and your spouse will want to undertake and ask yourself the following questions:

  • “Is this going to be an acrimonious divorce? Or will my spouse and I cooperate?”
  • “Do I already know about all of our household and personal finances? Or do I suspect that I may be out of the loop on some assets, debts or income sources?”
  • “Do I trust my spouse to be cooperative and forthright?”
  • “Do I have any reason to believe that I will feel intimidated by my spouse during these proceedings?”
  • “Are we both focused on the wellbeing of our children?”

Grace says that “If you believe that you and your spouse will cooperate and will have joint best interests in mind while negotiating, then you might want to choose a divorce mediator or embrace a collaborative divorce. Those options are less costly, more private, and usually result in a more peaceful settlement process. However, if you’re not certain about finances, or cannot trust your spouse to be completely above-board and cooperative, then you might hire a traditional divorce attorney, who will only have your interests in focus while they help negotiate the complexities of your divorce.”

My ex-spouse and I decided to retain individual divorce attorneys. In addition, we also hired a Certified Divorce Financial Analyst, (CDFA) at the recommendation of each of our lawyers, who met with us jointly to give us a complete overview of what our financial future was going to look like. It's a huge wake-up call when you see all the numbers in front of you on paper.  At our first meeting with the CDFA I learned quickly that I was going to have to go back to work, full-time to sustain the home we lived in as well as the upkeep, taxes, insurance, and basics like groceries for our large family. 

It's a huge wake-up call when you see all the numbers in front of you on paper.

If you surround yourself with competent, caring professionals who will guide you through this very delicate journey, you will have made an important investment in your family’s future, financial well-being.

4.  Stay in the Financial Know Throughout Your Divorce

Throughout your divorce, you’re bound to get all kinds of advice from friends, family, co-workers and other concerned individuals that will be looking out for you and have your best interest at heart.  This can be both helpful and draining depending on your relationship with these people.  When I began divorce proceedings, I too received lots of comments and suggestions from well-meaning folks, but I also decided I wanted to be armed with my own facts so I began reading lots of articles and books as well as listened to informative podcasts about divorce, particularly financially-related pieces.

My QDT colleague, Laura Adams, Money Girl, recently did an wrote about divorce in Getting Divorced? Here's How to Protect Your Money. She interviewed Stan Corey, a divorce expert and author of a new book, The Divorce Dance. This podcast had some terrific insight and some of the topics she and Corey cover in this interview include:

  • Different types of divorce proceedings that you can choose
  • The biggest mistakes that can cost you financially in a divorce
  • Why relying on a single family law attorney can be a bad idea
  • Tips for dividing up financial assets the right way—especially when you’re not so financially savvy
  • How to get divorced when you don’t have much money to pay for it

As you continue down the path of your divorce, surround yourself with as much information as you can, so that you will be able to make the best decisions possible for you and your children.

Five years later, I am still watching my financial picture very carefully.  I work full-time and do freelance work on the side in order to maintain my home and other living expenses.  I am extremely grateful that my ex-husband is very supportive of many of our 8 children’s extracurricular expenses, but the reality is I’m responsible for my own financial future so I have learned to be extremely careful with purchases and expenses.

The final topic in this divorce series will revolve around putting your kids first after the divorce.

How have you managed your finances during a separation or divorce?  Please share your thoughts in the comments section at quickanddirtytips.com/mighty-mommy, post your ideas on the Mighty Mommy Facebook page. or email me at mommy@quickanddirtytips.com. Visit my family-friendly boards at Pinterest.com/MightyMommyQDT.

Be sure to sign up for the upcoming Mighty Mommy newsletter chock full of practical advice to make your parenting life easier and more enjoyable. 

Images courtesy of Shutterstock.

Source: quickanddirtytips.com

Zero-Based Budgeting: The Ultimate Guide

When you create a budget that works for you, you gain a sense of peace and freedom that comes with taking ownership of your finances. Although there are many approaches to budgeting, certain systems prove to be more effective than others. Zero-based budgeting is an easy and reliable method to achieve your financial goals. The concept of zero-based budgeting is simple: When you create your budget, you assign a role for every single dollar of your income.

By knowing exactly where your hard-earned cash is going, zero-based budgeting eliminates uncertainty and increases confidence in your financial decisions. Could a zero-sum approach to budgeting be the key to helping you regain your financial freedom? We’ll walk you through the specifics of this detail-oriented budgeting method so you can decide if it’s the right choice for your situation.

What Is Zero-Based Budgeting?

In short, zero-based budgeting is when you allocate every dollar you earn so that your income minus your expenses equals zero. If you earn $3,000 a month, the entirety of that $3,000 is accounted for in a zero-based budget. The goal is to avoid having extra money at the end of the month so you make wise spending choices.

Your budget should allow for spending money on monthly expenses like groceries and utilities, as well as “fun money.” Rather than waiting to see what’s left over after taking care of bills and other essentials, a zero-based budget forces you to make financial decisions in advance. If you truly want to align your actions with your financial goals, you’ll realize that every penny needs a purpose to make the most of it.

zero based budgeting

By forcing you to decide how much of your income will go towards goals like paying off debt or saving for a house before you even receive your check, zero-based budgeting encourages you to stick to your goals.

Is Zero-Based Budgeting Right For You?

Zero-based budgeting can be for everyone. A damaging myth of budgeting is that it’s only for people who lack the discipline to hold themselves accountable. No matter how much you’re struggling or thriving financially, you can benefit from taking control of your money with a zero-based budget. If you’re still skeptical about zero-based budgeting, take a look below at how it compares to the four other most popular budgeting alternatives, including the 50/30/20 method:

  • Zero-Based Budget: Make sure your expenses match your income each month so that your earnings minus your costs equal zero.
  • “Pay Yourself First” Budget: Dedicate money to savings and then the remainder is free to be spent how you choose.
  • Envelope Budget: Divide cash into physical envelopes filled with the exact amount of money you can spend on that category.
  • 50/30/20 Budget: 50% of your income is for essentials, 30% is for personal expenses, and 20% goes towards savings.
  • Value-Based Budget: Calculate the monthly cost of each need based on your values, then choose how to stretch your income to meet those needs.

When you don’t know exactly how you intend to divide your money each month, it’s easy to fall into spending traps. A zero-based budget using a digital budgeting tool is a great way to set yourself up for success and stick to your plan.

How to Create a Zero-Based Budget

Develop a zero-based budgeting plan by making it as simple as possible. Your main objective is ensuring your expenses match your income during the month. Don’t overcomplicate the process by stressing about making the “perfect” plan. The best part about creating a zero-based budget is that it’s easy to adjust month-over-month.

how to create a zero based budget

1. Record Your Monthly Income and Expenses

Write down every single monthly and seasonal expense to set yourself up for success. If you don’t know where to start, you know you’ll always have to factor in the cost of housing, utilities, transportation, and groceries.

Next, consider expenses you’re saving for, like a new car, a birthday or anniversary gift, etc. With a little bit of forethought, there shouldn’t be any surprises. It’s wise to set aside cash for unexpected or one-off expenses so you’re not immediately dipping into your emergency fund.

2. Adjust Your Budget Until Income Minus Expenses Equals Zero

When you’re new to zero-based budgeting, don’t worry if your income and expenses don’t balance each other out at first. It’s likely that you’ll have to reduce recurring costs or increase your earnings to reach a zero-sum. Canceling unnecessary subscriptions, packing your own lunch, skipping Starbucks, and starting a passive income-generating side hustle are all helpful.

Using an app with a budget categorization feature is particularly useful when you’re in the trial and error phase. Otherwise, it can be tedious and discouraging to manually re-adjust your budgeting strategy.

3. Track and Optimize Your Monthly Spending Accordingly

A zero-based budget is rarely flawless the first time around. Thankfully, you can optimize your spending by reallocating your funds as often as you need to during the month. Be sure to set yourself calendar reminders to have budget check-ins on a weekly or bi-weekly basis, especially if you’re working on budgeting as a family.

There are countless ways to increase and decrease your dollar allocations according to what makes the most sense for your circumstances. Oftentimes, three to six months are required to master zero-based budgeting. Once you get the hang of it, chances are that you’ll enjoy reaping the rewards so much that you’ll wonder why you didn’t start sooner.

Pros and Cons of Zero-Based Budgeting

There’s no right or wrong answer to how you choose to manage your finances, but the key is that you need some kind of systematic approach to handling your money. Budgets are essential to help you build an emergency fund, save for retirement, pay off loans, or grow wealth through investing. If you aren’t sure that zero-based budgeting is the best strategy for you, we’ve outlined the pros and cons below.

pros and cons of zero based budgeting

Business management expert Peter Drucker is well-known for saying, “you can’t improve what you can’t measure.” If you want to make progress towards your financial goals, you need a way to define and track where your money will go. If you’re not convinced that a zero-based budget will work for you, don’t force it. You can always give it a try for a month or two and fall back on a different budgeting solution.

In Summary…

Zero-based budgeting is an easy and effective method to help you achieve your financial dreams. Don’t miss the chance to get the most value from your money by budgeting. We’ve summed up our main points below.

  • Zero-based budgeting is when all of your income minus all your expenses equals zero. Every dollar of your hard-earned cash has a specific, purpose-driven role.
  • Having a zero-based budget allows you to make your income go further by proactively allocating your funds to different areas of spending and saving.
  • Using a digital budgeting tool like Mint helps to set yourself up for success and hold you accountable in your zero-based budgeting goals.

 

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Source: mint.intuit.com