Love it or hate it, many Americans are spending more time at home. The coronavirus pandemic not only accelerated the work-from-home trend to warp speed, but it also shuttered schools and summer camps, scratched travel plans and canceled brunch and dinner reservations across the country.
Jen Dawson, a certified financial planner and managing director in Chicago, found that the uncertainty and stay-at-home lifestyle created by the pandemic prompted her clients to look at their financial situations in a new light.
âI think it just gives opportunities for people and families to reflect,â Dawson says. ââWhat do we want out of life? What do we want from our money?â Those conversations are really valuable.â
As Dawsonâs clients reflect on their goals, they (and many others) are also wondering, âHow should I adjust my household budget if weâre spending more time at home?â
How to optimize your budget for the stay-at-home economy in 4 steps
Ellen Rogin, a former wealth advisor and now a speaker, author and entrepreneur, notes that people across the country were affected by the pandemic in very different ways. While many workers were able to keep their jobs as they transitioned to working from home, many were not.
âThere are people who have lost their jobs and are being forced to make difficult decisions,â Rogin says. âAnd there are people who are still employed and earning the same income they did before, who have more options as they decide how they’re spending their money now.â
Even if youâve been spared serious financial challenges, you should still consider updating or creating a household budget or spending plan. This will allow you to determine how to save more money in the stay-at-home economy.
Rogin and Dawson encourage you to use this opportunity to ensure youâre at least staying on track to meet your savings goalsâand at best, shortening your savings timelines. Itâs also a chance to make sure that your spending habits, which have likely changed as youâve spent more time at home, are maximizing your happiness.
Below, we break down insights from Rogin and Dawson into four actionable steps you can take to save money in quarantine while living the best life possible. It all starts with taking an objective look at how your spending habits changed as you transitioned to a more domestic lifestyle.
Read on to see how to save more money in the stay-at-home economy by creating a new household budget:
1. Compare your spending trends before and during quarantine
As you set about creating a household budget for an at-home lifestyle and determining how to save more money in the stay-at-home economy, start by reviewing your spending.
âMost people donât really know how much money theyâre spending, whether times are good or bad. But it can really make you feel calmer to know what it takes to run your lifestyle.â
Dawson encourages you to refer to your debit and credit card statements to analyze the differences between your spending before staying home became the norm, and after. âYou can compare it and contrast and have observations and discussions around what changed,â she says. âWhat do you like that you want to keep going, and what do you not like about it?”
All you need, Dawson says, is a spreadsheet to total up your major expenses, such as housing, utilities, transportation, food and dining, travel, shopping and entertainment. Then, subtract the sum of those costs from the money you earned (aka income) over the same timeframe.
Do this exercise for three months of spending before quarantine and then again for three months of spending during quarantine. Youâll be able to compare the data to see whether you have more or less disposable income as a member of the stay-at-home economy.
Rogin notes that it can be a little scary to examine your finances like this, but thereâs no reason to feel anxious.
âMost people donât really know how much money theyâre spending, whether times are good or bad,â she says. âBut it can really make you feel calmer to know what it takes to run your lifestyle.â
If you see that your disposable income decreased while in quarantine (or that you no longer have disposable income at all), then youâll need to find ways to cut back on spending if you want to keep your savings goals on track. If your extra cash increased and youâre actually saving more money in quarantine, then you can start to consider how you might hit some or all of your savings goals more quickly.
Either way, you still have work to do as you consider how to save more money in the stay-at-home economy. Rather than focusing on external factors that are out of your control, Rogin and Dawson recommend that, as a next step, you ask yourself what matters most to you.
2. Ask yourself how your spending habits impact your happiness
Rogin considers the distanced, more remote way of life as a chance to reflect on whatâs really important in order to create your household budget. One example she points to is how many people have been cooking at home far more often than they once did.
âMaybe youâre spending more on groceries, but thatâs less than you were spending on eating outâand you enjoy it,â she says. âYouâre spending more time with your family. Youâre eating more healthily. So it gives you the opportunity to really assess your budget in a different way.â
Another example is travel. Rogin says that some people have told her that they really miss it, but others have been surprised to find how happy they are to pump the brakes on their jet-setting ways. In addition to saving money in quarantine from reimbursed travel and no more expensive trips, itâs allowed them to slow down and enjoy their time at home with family.
For her part, Rogin found that she wore the same two pairs of shoes during quarantine because theyâre comfortable, and no one can see them when sheâs video conferencing during work. As a result, Rogin cut this expense from her stay-at-home budget.
Whether youâre facing a cash shortage or surplus from more time spent at home, Rogin says that extending this line of thinking into a âvalues-based spending planâ for the stay-at-home economy will allow you to direct your money to what matters most to you, while diverting funds away from what doesnât.
Once you add up the expenses that are no longer necessary in your stay-at-home budget, itâs time to put that money to work.
Tip: When looking at quarantine spending, donât get too granular
Dawson underscores that evaluating spending patterns can be an emotional exercise. If youâre reviewing your finances with a family member, partner or spouse, try to resist the urge to nitpick every purchase. The trends should be easy enough to spot from a birdâs-eye view.
3. Put your stay-at-home savings toward your financial goals
Dawson and Rogin recommend having a plan when youâre trying to figure out how to save more money in the stay-at-home economy. That plan should include what youâre saving for, as well as where youâll keep the funds as they add up.
Rogin recommends framing your financial goals from a positive angle. For example, when you create a household budget, instead of focusing on cutting spending, you can set a goal for how much extra money you want to save.
If you have children or live with a partner or spouse, Dawson notes that this goal-oriented approach can help get them involved. The objective might be to start an emergency fund to ride out unexpected headwinds. Or, the focus could be on saving up for a big vacation to look forward to when travel restrictions ease.
When deciding where to keep your savings, a standard checking account wonât allow your money to grow like a high-yield online savings account will. Rather than pooling the money youâve saved in quarantine into one account, Dawson suggests opening multiple savings accounts, one for each of your savings goals.
âBe really clear about what each savings account is for,â she says. âThen youâre more likely to fund it.â
Of course, luxury savings goals like a vacation should not take priority over your long-term savings goals, such as retirement or college funds.
4. When saving money in quarantine, remember to support those in need if you can
If you are saving money in quarantine, Rogin suggests considering all the benefits of earmarking extra cash for philanthropic causes. It could go directly to the local small businesses you love that are hurting for revenue. Or it could go to any number of nonprofit organizations that are doing good in the world.
âSo many people are in need now,â Rogin says. âThere are so many beautiful ways that can help you feel like youâre making a difference for people by reallocating some of that money towards causes and people that you want to support.â
How will you start saving money in quarantine?
The stay-at home lifestyle may not have been in your plans, but you have the opportunity to gain control of your finances inside your home by creating a household budget that works for you in this new reality.
When you analyze, assess and optimize your spending and consider how to save money in quarantine, youâll be in as strong a financial position as possible when life gets back to normal.
If youâve been fortunate enough to save money in quarantine, consider starting or adding to your emergency fund. Not sure where to store your savings? Check out the four best places to keep your emergency fund.
Articles may contain information from third-parties. The inclusion of such information does not imply an affiliation with the bank or bank sponsorship, endorsement, or verification regarding the third-party or information.
The post How to Save More Money in the Stay-at-Home Economy by Focusing on What Matters Most appeared first on Discover Bank – Banking Topics Blog.
No space to bring outdoor furniture inside in bad weather? Make sure to keep them covered during the winter months. But instead of buying pricey furniture covers, protect lawn chairs and tables by covering them with large plastic bags. If you have metal deck furniture, apply a bit of petroleum jelly to areas where they've been known to rust to prevent them from rusting during the winter—and beyond.
Skip the Rock Salt
Icy sidewalk? Throw cat litter down instead of rock salt. It won’t harm your grass, stain your clothes, or hurt the environment, but it will provide plenty of traction for safe walking and driving.
Guard Outdoor Light Bulbs
While you have that petroleum jelly out, apply a thin layer to the threads of all your outdoor light bulbs. It will prevent them from rusting and make them much easier to replace when they blow out.
How to Get Rid of Drafts
According to the Environmental Protection Agency, a well sealed home can be up to 20 percent more energy efficient. Most leaks occur in the basement or attic—look where you feel a draft or around wiring holes, plumbing vents, ducts, and basement rim joints. You’ll be able to seal lots of leaks with a simple caulking gun, but for instructions on how to plug larger holes, check out these tutorials from EnergyStar.gov.
Clean a Fireplace With Cola
Try an old masonry trick to brighten up soot-stained brick. Mix a can of cola with 3½ fluid ounces all-purpose household cleaner and 3 ½ quarts water in a bucket. Sponge onto sooty brick and leave for 15 minutes. Loosen the soot by scrubbing with a stiff-bristled brush. Sponge with clean water. For a stronger solution, add more cola.
What are your favorite tips of taking care of your home in the winter? Share them with us in the comments section below!
Could logging in to your computer from a deluxe treehouse off the coast of Belize be the future of work? Maybe. For many, the word freelance means flexibility, meaningful tasks and better work-life balance. Who doesn’t want to create their own hours, love what they do and work from wherever they want? Freelancing can provide all of thatâbut that freedom can vanish quickly if you don’t handle your expenses correctly.
“A lot of the time, you don’t know about these expenses until you are in the trenches,” says freelance copywriter Alyssa Goulet, “and that can wreak havoc on your financial situation.”
Nearly 57 million people in the U.S. freelanced, or were self-employed, in 2019, according to Upwork, a global freelancing platform. Freelancing is also increasingly becoming a long-term career choice, with the percentage of freelancers who freelance full-time increasing from 17 percent in 2014 to 28 percent in 2019, according to Upwork. But for all its virtues, the cost of being freelance can carry some serious sticker shock.
“There are many hats you have to wear and expenses you have to take on, but for that you’re gaining a lot of opportunity and flexibility in your life.”
Most people who freelance for the first time don’t realize that everythingâfrom taxes to office supplies to setting up retirement plansâis on them. So, before you can sustain yourself through self-employment, you need to answer a very important question: “Are you financially ready to freelance?”
What you’ll find is that budgeting as a freelancer can be entirely manageable if you plan for the following key costs. Let’s start with one of the most perplexingâtaxes:
1. Taxes: New rules when working on your own
First things first: Don’t try to be a hero. When determining how to budget as a freelancer and how to manage your taxes as a freelancer, you’ll want to consult with a financial adviser or tax professional for guidance. A tax expert can help you figure out what makes sense for your personal and business situation.
For instance, just like a regular employee, you will owe federal income taxes, as well as Social Security and Medicare taxes. When you’re employed at a regular job, you and your employer each pay half of these taxes from your income, according to the IRS. But when you’re self-employed (earning more than $400 a year in net income), you’re expected to file and pay these expenses yourself, the IRS says. And if you think you will owe more than $1,000 in taxes for a given year, you may need to file estimated quarterly taxes, the IRS also says.
That can feel like a heavy hit when you’re not used to planning for these costs. “If you’ve been on a salary, you don’t think about taxes really. You think about the take-home pay. With freelance, everything is take-home pay,” says Susan Lee, CFPÂ®, tax preparer and founder of FreelanceTaxation.com.
When you’re starting to budget as a freelancer and determining how often you will need to file, Lee recommends doing a “dummy return,” which is an estimation of your self-employment income and expenses for the year. You can come up with this number by looking at past assignments, industry standards and future projections for your work, which freelancer Goulet finds valuable.
“Since I don’t have a salary or a fixed number of hours worked per month, I determine the tax bracket I’m most likely to fall into by taking my projected monthly income and multiplying it by 12,” Goulet says. “If I experience a big income jump because of a new contract, I redo that calculation.”
After you estimate your income, learning how to budget as a freelancer means working to determine how much to set aside for your tax payments. Lee, for example, recommends saving about 25 percent of your income for paying your income tax and self-employment tax (which funds your Medicare and Social Security). But once you subtract your business expenses from your freelance income, you may not have to pay that entire amount, according to Lee. Deductible expenses can include the mileage you use to get from one appointment to another, office supplies and maintenance and fees for a coworking space, according to Lee. The income left over will be your taxable income.
To set aside the taxes you will need to pay, adjust your estimates often and always round up. “Let’s say in one month a freelancer determines she would owe $1,400 in tax. I’d put away $1,500,” Goulet says.
2. Business expenses: Get a handle on two big areas
The truth is, the cost of being freelance varies from person to person. Some freelancers are happy to work from their kitchen tables, while others need a dedicated workspace. Your freelance costs also change as you add new tools to your business arsenal. Here are two categories you’ll always need to account for when budgeting as a freelancer:
Joining a coworking space gets you out of the house and allows you to establish the camaraderie you may miss when you work alone. When you’re calculating the cost of being freelance, note that coworking spaces may charge membership dues ranging from $20 for a day pass to hundreds of dollars a month for a dedicated desk or private office. While coworking spaces are all the rage, you can still rent a traditional office for several hundred dollars a month or more, but this fee usually doesn’t include community aspects or other membership perks.
If you want to avoid office rent or dues as costs of being freelance but don’t want the kitchen table to pull double-duty as your workspace, you might convert another room in your home into an office. But you’ll still need to outfit the space with all of your work essentials. Freelance copywriter and content strategist Amy Hardison retrofitted part of her house into a simple office. “I got a standing desk, a keyboard, one of those adjustable stands for my computer and a squishy mat to stand on so my feet don’t hurt,” Hardison says.
Start with the absolute necessities. When Hardison first launched her freelance career, she purchased a laptop for $299. She worked out of a coworking space and used its office supplies before creating her own workspace at home.
There are a range of digital tools, including business and accounting software, that can help with the majority of your business functions. A big benefit is the time they can save you that is better spent marketing to clients or producing great work.
The software can also help you avoid financial lapses as you’re managing the costs of being freelance. Hardison’s freelance business had ramped up to a point where a manual process was costing her money, so using an invoicing software became a no-brainer. “I was sending people attached document invoices for a while and keeping track of them in a spreadsheet,” Hardison says. “And then I lost a few of them and I just thought, ‘Oh, my God, I can’t be losing things. This is my income!’”
Digital business and software tools can help manage scheduling, web hosting, accounting, audio/video conference and other functions. When you’re determining how to budget as a freelancer, note that the costs for these services depend largely on your needs. For instance, several invoicing platforms offer options for as low as $9 per month, though the cost increases the more clients you add to your account. Accounting services also scale up based on the features you want and how many clients you’re tracking, but you can find reputable platforms for as little as $5 a month.
When you sign up for a service, start with the “freemium” version, in which the first tier of service is always free, Hardison says. Once you have enough clients to warrant the expense, upgrade to the paid level with the lowest cost. Gradually adding services will keep your expenses proportionate to your income.
3. Health insurance: Harnessing an inevitable cost
Budgeting for healthcare costs can be one of the biggest hurdles to self-employment and successfully learning how to budget as a freelancer. In the first half of the 2020 open enrollment period, the average monthly premium under the Affordable Care Act (ACA) for those who do not receive federal subsidiesâor a reduced premium based on incomeâwas $456 for individuals and $1,134 for families, according to eHealth, a private online marketplace for health insurance.
“Buying insurance is really protecting against that catastrophic event that is not likely to happen. But if it does, it could throw everything else in your plan into a complete tailspin,” says Stephen Gunter, CFPÂ®, at Bridgeworth Financial.
A good place to start when budgeting as a freelancer is knowing what healthcare costs you should budget for. Your premiumâwhich is how much you pay each month to have your insuranceâis a key cost. Note that the plans with the lowest premiums aren’t always the most affordable. For instance, if you choose a high-deductible policy you may pay less in premiums, but if you have a claim, you may pay more at the time you or your covered family member’s health situation arises.
When you are budgeting as a freelancer, the ACA healthcare marketplace is one place to look for a plan. Here are a few other options:
Spouse or domestic partner’s plan: If your spouse or domestic partner has health insurance through his/her employer, you may be able to get coverage under their plan.
COBRA: If you recently left your full-time job for self-employment, you may be able to convert your employer’s group plan into an individual COBRA plan. Note that this type of plan comes with a high expense and coverage limit of 18 months.
Organizations for freelancers: Search online for organizations that promote the interests of independent workers. Depending on your specific situation, you may find options for health insurance plans that fit your needs.
Speak with an insurance adviser who can help you figure out which plans are best for your health needs and your budget. An adviser may be willing to do a free consultation, allowing you to gather important information before making a financial commitment.
4. Retirement savings: Learn to “set it and forget it”
Part of learning how to budget as a freelancer is thinking long term, which includes saving for retirement. That may seem daunting when you’re wrangling new business expenses, but Gunter says saving for the future is a big part of budgeting as a freelancer.
“It’s kind of the miracle of compound interest. The sooner we can get it invested, the sooner we can get it saving,” Gunter says.
He suggests going into autopilot and setting aside whatever you would have contributed to an employer’s 401(k) plan. One way to do this might be setting up an automatic transfer to your savings or retirement account. “So, if you would have put in 3 percent [of your income] each month, commit to saving that 3 percent on your own,” Gunter says. The Discover IRA Certificate of Deposit (IRA CD) could be a good fit for helping you enjoy guaranteed returns in retirement by contributing after-tax (Roth IRA CD) or pre-tax (traditional IRA CD) dollars from your income now.
Prioritize retirement savings every month, not just when you feel flush. “Saying, ‘I’ll save whatever is left over’ isn’t a savings plan, because whatever is left over at the end of the month is usually zero,” Gunter says.
5. Continually update your rates
One of the best things you can do for yourself in learning how to budget as a freelancer is build your costs into what you charge. “As I’ve discovered more business expenses, I definitely take those into account as I’m determining what my rates are,” Goulet says. She notes that freelancers sometimes feel guilty for building business costs into their rates, especially when they’re worried about the fees they charge to begin with. But working the costs of being freelance into your rates is essential to building a thriving freelance career. You should annually evaluate the rates you charge.
Because your expenses will change over time, it’s wise to do quarterly and yearly check-ins to assess your income and costs and see if there are processes you can automate to save time and money.
“A lot of the time, you don’t know about these expenses until you are in the trenches, and that can wreak havoc on your financial situation.”
Have confidence in your freelance career
Accounting for the various costs of being freelance makes for a more successful and sustainable freelance career. It also helps ensure that those who are self-employed achieve financial stability in their personal lives and their businesses.
“There are many hats you have to wear and expenses you have to take on,” Goulet says. “But for that, you’re gaining a lot of opportunity and flexibility in your life.”
The post Everything You Need to Know About Budgeting As a Freelancer appeared first on Discover Bank – Banking Topics Blog.
A pay cut, whether big or small, can catch you off guardâand throw your finances into disarray. While a salary cut is different than a layoff, it can leave you feeling just as uncertain.
How do you deal with a pay cut and deal with this uncertainty?
There are strategies to help you navigate both the emotional and financial challenges of this situation. One key element? A budget. Whether you need to create a budget from scratch or adjust the budget you already have, doing so can help you get back on your feet and set yourself up for success.
Hereâs a rundown of budgeting tips to survive a pay cut to keep your finances intact:
Ask your employer for the parameters of the income reduction or salary cut
First, keep in mind that a pay cut typically isnât personal. According to Scott Bishop, an executive vice president of financial planning at a wealth management firm, businesses often cut salaries to preserve their cash reserves while they stabilize their cash flow or weather some larger economic impact, like the coronavirus pandemic.
Secondly, make sure you understand the full scope of the salary cut. Bishop suggests you ask your employer questions like:
What is the amount of pay being cut?
Why is pay being cut?
When will the reduction begin, and how long will it last?
Will any of the following be affected?
Healthcare or insurance costs
Employer-sponsored training or continuing education opportunities
Hours or job responsibilities
What are the long-term plans to improve the companyâs financial situation?
Once youâve painted the full scope of what and why, you can determine how to handle the pay cut.
âFor some people who are big savers, it might not be a big deal,â Bishop says. âBut for some people who live paycheck to paycheck, itâs going to be significant.â
Settle any anxieties that might come with a salary cut
If you are dealing with financial stress, try settling your mind and emotions so you can make decisions with a clear head.
âThe emotional and mental toll can be one of the hardest parts,â says Lindsay Dell Cook, president and founder of Budget Babble LLC, which provides personal finance and small business financial counseling. âIt gets even harder if there are others depending on your income who are also financially stressed.â
When sharing the news with family members who may also be impacted, Cook suggests the following:
Find the right time. Pick a time of day during which everyone will have the highest mental capacity for the conversation. âFor instance, I am a morning person, so if my husband told me at bedtime about a pay cut, I would have a much harder time processing that information,â Cook says.
Frame it as a brainstorming session. Bring ideas of what you can do to handle the pay cut, such as a list of expenses you can cut or a plan for how you can make extra income.
Empathize with the other person. âReduced income is not easy for anyone. Everyone responds to financial anxiety differently,â Cook says.
“If youâre unable to maintain your previous level of saving after a pay cut, try to save at a smaller scale for goals like retirement and your emergency fund.”
Create or adjust your budget to handle a pay cut
Once you understand the salary cut and have informed your family or roommates, itâs time to crunch the numbers. Thatâs the first step to figuring out how to save money after a pay cut.
If you donât have a budget, find a budgeting system that fits your needs. Learning how to effectively budget takes time and practice, so be patient with yourself if youâre new to this. Cook suggests reading up on how to create a budget.
One system to consider is the 50-20-30 budget rule, which has you break your spending into three simple categories. If you prefer the aid of technology when determining how to handle a pay cut, there are many budgeting and spending apps that can help you manage your money.
Whether youâre handling a pay cut by creating a new plan or modifying an existing budget, Bishop suggests taking the following steps:
Add up your income. Combine your new salary with your partnerâs pay, and factor in any additional income streams like from dividends or savings account interest. Tally up the total.
List your expenses. Be sure to include essential expenses (e.g., housing, food, clothing, transportation) and nonessential expenses (e.g., entertainment, takeout, hobbies).
Look through your bank statement online and your past receipts so all expenses are included.
Account for infrequent expenses such as gifts, car maintenance or home repairs.
Track the amount you save. Note any regular savings contributions you make, such as to an emergency fund or retirement account.
Get your partnerâs buy-in. What needs do they have, and what is nonnegotiable in the budget for each of you?
Cut expenses with budgeting tips to survive a pay cut
If youâve crunched the numbers and found that your expenses add up to more than your new income, youâll need to find ways to cut back. Here are some tips on trimming your spending to survive a salary cut:
Cut back on takeout meals and stick to a strict grocery list or food budget, Cook suggests.
Avoid large discretionary purchases like a car during the duration of your pay cut, Bishop says.
Negotiate with your utility companies or ask if theyâre providing forbearance options, Bankrate suggests. You can also ask your car insurance provider if it has additional savings for customers who are driving less, according to Bankrate.
If you think you might fall behind on rent or mortgage payments as youâre handling a pay cut, both Cook and Bishop agree that early, proactive communication is key. Be honest with your landlord or mortgage company. âDonât wait until youâre past due,â Bishop says.
The same applies for other financial obligations, such as your credit card bill. Youâll likely find those companies are willing to work with you through the rough patch.
Cook also suggests you look into municipal assistance programs as a budgeting tip to survive a pay cut. âMany cities have established rental assistance funds to help taxpayers meet their obligations during the pandemic,â she says.
Continue to save money after a pay cut
As you consider how to cut costs, take time to think about your long-term savings goals and how to save money after a pay cut. By cutting discretionary spending through your new budgetâwhat Bishop calls âcutting the fatââyou may have freed up income to maintain your good saving habits during this time. He says itâs important to do that before slowing down on savings.
If youâre unable to maintain your previous level of saving after a pay cut, Bishop suggests you try to save at a smaller scale for goals like retirement and your emergency fund.
As you work to save money after a pay cut, Cook recommends setting up automatic transfers to your savings account every payday based on the amount youâre able to put towards savings in your new budget.
âIf your savings account is at the same bank as your checking account, you can transfer those funds fairly easily,â she says. âSo the worst-case scenario is that you put too much money in savings and have to bring some back to checking. The hope, however, is that some or all of those funds transferred to savings remain there since that money is no longer in your checking account just waiting to be spent.â
Seek extra income sources after a salary cut
You should explore additional sources of income if you need more cash to cover essential expenses or if youâre looking for ways to save money after a pay cut.
Determine if youâre eligible for benefits based on the reason for your pay cut. Cook recommends applying for unemployment if you think you may qualify. For example, some workers who experienced pay cuts due to the coronavirus pandemic were eligible for unemployment benefits. The details vary by state, so visit your stateâs unemployment insurance program website to learn what benefits may apply to you.
If you or your partner have some extra time on your hands, you can consider bringing in income through a side hustle to help you handle your pay cut. Bishop suggests using free or low-cost online video tutorials to boost your existing skills to make your side hustle more effective.
Cook also recommends getting creative. âAre there things you could sell to make some extra cash?â she says.
If you are unable to find additional sources of income, but you have an emergency fund, consider whether you should dip into that. “Your savings are there for a reason, and sometimes you need to use it,” Cook says. “That is okay.”
Stick to your updated budget to navigate how to handle a pay cut
Making your budget part of your daily routine is a budgeting tip to survive a pay cut, and it will help you save money after a pay cut.
âBuild rewards into your budget, such as ordering out every other week if you successfully saved money after your pay cut.â
âIf youâre checking it daily, there are no surprises,â Cook says. You can do this by logging into your bank account and making sure your spending and expenses align with your digital or written budget document.
âIf you see that your spending is high, your mind will typically start thinking through [future] transactions more thoroughly to vet if those expenses are really necessary,â Cook says.
Donât forget the fun side of accountability: rewards for meeting your goals. Build rewards into your budget, Bishop says, such as ordering out every other week if you successfully saved money after your pay cut.
Lastly, donât try to go it alone. Enlist others in your budgeting journey, Cook suggests. Make up a monthly challenge to cut spending from a specific category in your new budget and ask your partner or a friend to do it with you. For example, see if you and the other participants can go a full month without buying clothes or ordering takeout. Compare notes at the end of the month and see how much youâve saved.
Another idea? Try connecting with a budget-minded community on social media to get inspired.
Take these steps after the salary cut is over
Once youâve handled the pay cut and your regular pay is restored, donât give up on your newfound budgeting discipline. Instead, focus on building up emergency savings before you go back to your normal spending.
Bishop recommends starting with enough savings to cover three to six months of expenses. âIf you spend $3,000 a month, that means you need to have $9,000 to $18,000 saved.â
This might also be the time to revisit your budget and build a more extensive financial plan with a CPA or financial advisor to account for all of your future goals. Bishop says that these can include a target retirement date and lifestyle; your estate planning, such as a will, trust and power of attorney; saving for a childâs college; and purchasing a home.
Bishop says reminding yourself why youâre budgeting and focusing on your financial goals can be similar to motivating yourself to stay physically fit. Goal-based motivation can keep you accountable.
Remember: You can survive a salary cut
Handling a pay cut is never easy, but you can get through this time. While youâre in the thick of it, focus on budgeting tips to survive a pay cut and staying positive. Seek help from others and follow up with your employer to make sure you are aware of any changing details regarding the pay cut.
Most of all, try to keep a long-term outlook. âRemember that it will not always be this way,â Cook says.
If youâre considering whether or not to tap into your savings to handle a pay cut, read on to determine when to use your emergency fund.
The post How to Handle a Pay Cut: Budgeting in Uncertain Times appeared first on Discover Bank – Banking Topics Blog.
Working from home has its perks. Thereâs the money saved from skipping the commute, and just think about all of that time you get back by avoiding crowded freeways or public transit during rush hour. As far as workplace attire goes, few employees would trade âwork-from-home casualâ for dress slacks.
But while working from home affords some new freedoms, it also creates new challenges. One of your biggest tasks is to create a productive, ergonomically correct workplace in your home without breaking the bank. If this sounds familiar, youâre probably asking yourself, âHow can I set up a home office on a budget?â
Whether youâve always worked from home as a freelancer or started during the pandemic, these expert tips will help you get started as you design your home office on a budget:
Strive for an ergonomically correct home office
Being home all day creates an unexpected obstacle: pain. Many workers find that transitioning from a well-equipped office to a makeshift setup at home leads to discomfort. Thatâs because many of them go from having a spacious desk, comfortable chair, and monitor and keyboard in their office building to working from a laptop in their living room.
If you suffer from neck pain or eye strain when working from home, you may be feeling the effects of poor ergonomics. Ergonomics, commonly known as the science of work, aims to optimize productivity and health in a workspace.
As a physical therapist with more than 25 years of experience, Karen Loesing, owner of The Ergonomic Expert, knows this issue all too well. Loesingâs company performs ergonomic assessments for businesses and home offices. Over the years, she has seen countless clients suffering from neck, back or other health issues due to poorly designed workspaces. But it doesnât have to be that way, Loesing says.
âHaving an ergonomically correct workstation enhances productivity and generally overall happiness at work.â
There are relatively easy ways to transform an ergonomic nightmare into a well-functioning home office on a budgetâeven if youâre stationed at the kitchen table, she says. And the investment is worth it.
âHaving an ergonomically correct workstation enhances productivity and generally overall happiness at work,â Loesing says. âFor those who are able to designate a certain space in their home where they can work without distractionsâmaybe even a window with a view and the flexibility to work at your own paceâit has been proven this makes for a happier employee.â
Who doesnât want to boost their health, productivity and happiness in one fell swoop?
Find the optimal location for your at-home workspace
When setting up a home office for remote work, location should be your first decision, says design consultant Linda Varone, author of âThe Smarter Home Office.â Depending on your living situation, there may be an obvious answer, such as that spare room youâve always thought could become an office space.
If you donât have a dedicated office, donât despair. While you design your home office on a budget, think creatively about where it can be.
Varone once visited a clientâs home to help reconfigure her workspace. The client was running a business from a table in the hallway. âAt the end of each workday, she had to pack everything up and store it in the closet in the guest room,â Varone says.
But as Varone learned, guests only stayed over two weeks a year, leaving the room empty the rest of the time. It hadnât occurred to the business owner, but turning the guest room into a home office for most of the year was the perfect solution.
âThere are some simple, simple ways that people can rethink their home office without a big investment and make that space really work for them,â Varone says.
In addition to using a guest room, a dining or living room can also function as a home office on a budget.
Establish the ideal setup for your workstation
Once youâve decided on the room, determine the location for your workstation, Varone says. As you plan your home office, consider placing your desk or table near a window, allowing for natural light and an occasional glimpse of nature. Donât face directly outside; instead, aim for a line of sight thatâs perpendicular to the window, Varone says. Thatâs because, even on an overcast day, youâd be looking into too much bright light if youâre facing the window.
âWhatâs happening is your eyes are adjusting back and forth between the bright sunlight that youâre facing and the darker light of your computer screen,â Varone says. âAnd that ends up being really fatiguing for the eye.â
If you live with others, the biggest challenge will be privacy. Try to clearly define the boundaries of your âofficeâ if you can, such as with an area rug, she says. Then ask your roommates or family members not to enter your space while youâre working, apart from an emergency.
If you use a multipurpose space, be sure to tidy everything up at the end of the day, Varone says. Taking the 10 minutes or so to clean up your âofficeâ will reduce clutter. Ultimately, a clutter-free space can reduce your stress and boost your productivity.
âThat also has a benefit of becoming a little ritual and helping you say, âAll right, my workday is over,ââ Varone says. ââNow I can focus on my personal life.ââ
Choose your furniture wisely
Now that youâve found the perfect location for your home office on a budget, focus on finding the perfect work surface. Maybe itâs a traditional desk. Or it could be your dining room table or kitchen counter.
If you do need to buy a desk or chair, donât feel like you need to spend a fortune. Try looking for a used office furniture store or liquidator in your area, Varone recommends. You could even try searching online marketplaces for a gently used model.
When planning a home office and considering your work surface, what matters most is the height.
The average desk is 29 inches high, Loesing says. This will likely accommodate someone whoâs 5â8â, she acknowledges, but for everyone else? It will take some adjusting to make it fit for them.
Thatâs where your chair comes in. Most people donât need a high-end office swivel chair to work comfortably. As long as you can adjust the height of your chair to fit you and your desk, youâll have a comfortable setup.
Itâs important to adjust the height of your chair to achieve a neutral position, Loesing says. If you donât have the instructions from the manufacturer on how to adjust your model, try searching for videos online, she adds.
One more chair takeaway from Loesing?
âIf you canât spend a dime, at least get as comfortable as you can where youâre sitting, and sit all the way back in your chair,â Loesing says. âWhen you donât sit so your back is against the backrest, youâre using your back muscles all day long instead of them being at rest.â
Adjust your furniture and equipment
As you continue planning a home office, youâll likely find that your computer is your most important piece of equipment. But it can also lead to neck strain. Whether itâs a laptop or an external monitor, Loesing says screen placement is key. In fact, she says itâs the single most important feature to addressâas well as the most commonly disregarded one.
While you plan your home office, Loesing recommends keeping the following ergonomic guidelines in mind to help avoid neck strain:
Align your monitor so your eyes are level with the screen. (Thatâs typically about 4â from the top of the monitor.)
Place your feet flat on the floor and your knees at about a 90-degree angle with the ground.
Place your arms at about a 90-degree angle from the writing surface so your shoulders are relaxed.
If you only have a laptop, and no monitor, you still have options for raising your screen to eye-level. âThere are budget-friendly laptop risers on the market,â Loesing says. âIf you donât want to spend any money, you can place books or reams of paper to bring the screen up to eye level.â
When setting up a home office for remote work and thinking about your arm placement, note that Varone is a strong advocate for an external keyboard. If youâre working at a desk that has a keyboard tray built into it, thatâs a great way to keep your arms at about a 90-degree angle, she says. If you donât have a built-in tray, she says you can improvise by placing your keyboard on an inexpensive laptop table situated directly under your desk.
While the exact adjustments will vary depending on your equipment, height and budget, the focus is on acquiring a neutral position or a position where thereâs no strain on anything, Loesing says.
âWith the addition of standing desks, which encourage movement, employees often find they have significantly more energy at the end of the day.â
Stand if it suits you
If youâre intrigued by the idea of a standing desk, youâre not alone. Standing desk sales have soared over the last decade, buoyed by reports of the dangers of too much sitting.
âStatic postures (e.g., sitting all day in front of a computer) present more fatigue than dynamic working,â Loesing says. âWith the addition of standing desks, which encourage movement, employees often find they have significantly more energy at the end of the day.â
You donât have to buy an official standing desk to reap the benefits when planning a home office. âThe least expensive way would be to take a laptop and place it up high on a built-in high counter using a compact wireless keyboard and mouse,â Loesing says.
Even if you donât have a standing deskâmakeshift or otherwiseâyou can still incorporate movement and circulation into your workday. Set a timer to remind you to stand up and stretch every 20 minutes, Loesing suggests.
For an even better boost, combine this with a popular guideline known as the 20-20-20 rule. Every 20 minutes, give your eyes a break by looking out a window at something at least 20 feet away, and do so for at least 20 seconds.
Donât forget the ambience and accessories
Your desk, chair and computer are the major players when youâre setting up a home office for remote work. But there are a few additional items to consider, like lighting, plants and sound.
Your overhead light fixture likely isnât enough, as it will create shadows and can be too weak by the time it reaches your workspace, Varone says. She recommends investing in a table lamp that creates a wider spread of light in your area. Pick one with a translucent shade that will softly diffuse the light and make it easier on your eyes.
As youâre planning your home office, Varone also recommends incorporating a potted plant or flower into your workspace. Not only can it help purify the air and boost your mood, a natural element can contribute to a restful atmosphere.
Working from home means working with home noisesâespecially if youâre in an environment with roommates, a partner or little ones. To keep the noise down, consider noise-canceling headphones for a quieter workspace and clearer meetings. Other budget-friendly options? Try placing a towel under the door to block out noise from other rooms, Loesing says. Consider curtains instead of blinds, since theyâre better at blocking out sound. Even pillows or large cushions can help reduce noise, she adds.
After youâve taken care of the essentials and if you have the space and money, think about adding a reading chair to your home office. You can use this as a space to review documents or do some deep thinking, Varone says. It can be a welcome respite from your desk while keeping you in the office area, she adds.
One last tip? Add a personal touch, whether itâs a framed family photo or a souvenir from your travels. Itâs your home office, after all. Let your personality shine.
Set up a home office for remote work that allows you to thrive
Now that you know how to create a home office on a budget, youâre ready to make a space that works well for you. Whether youâre an experienced remote worker or a newbie, you can apply these expert tips to set up an office thatâs functional and keeps you motivated day in and day out.
Ready to break in your new home office? Keep that motivation going by learning how to increase your earning potential this year.
The post Planning a Home Office? Check Out These Budget-Friendly Tips appeared first on Discover Bank – Banking Topics Blog.
Heating and cooling is easily the most energy intensive system in your home. According to the U.S. Energy Information Association, heating and cooling is to blame for almost half of all the energy expenditure in the average American household, beating even the growing energy consumption of appliances and electronics. Thus, by properly maintaining your HVAC system, you can improve its efficiency and reduce heating and cooling costs dramatically. If you want to reap the savings of an efficient HVAC, here’s how.
8 Tips for Improving HVAC Efficiency
Close Up Your Home
Consider a Home Warranty
Calibrate Your Thermostat
Check Your Economizer
Control Your VFD
Cut out Your BAS
Clean Your Coils
Here they are in more detail.
1. Close Up Your Home
If you have cold or hot air pouring into your home from outside, your HVAC unit needs to work harder than it should to keep your home the right temperature. Therefore, one of the most basic ways to improve HVAC efficiency is to seal and insulate your home. First, you should keep doors and windows closed whenever your HVAC is running; then, you should check that the insulation in your walls and attic (if you have one) is still doing its job. By doing this, you can reduce your heating and cooling costs by up to 20 percent.
2. Consider a Home Warranty
If you’ve ever wondered how to compare home warranty vs. home insurance, now is your chance to learn. Home warranties guarantee the systems of your home, like your HVAC, against the ravages of time. If your HVAC breaks down for any reason, you can contact your home warranty provider, who will send an HVAC specialist to diagnose and fix the problem for a low, flat fee around $70. Though a home warranty won’t keep your HVAC in tip-top shape, it will secure you against total HVAC failure.
3. Calibrate Your Thermostat
You shouldn’t just trust that your thermostat knows what temperature it is in your home. It is easy for thermostats to be anywhere from a percent of a degree to five whole degrees off from the true temperature, and that seemingly small difference will cost you over time. To be certain your thermostat is reading true, you need to purchase a trustworthy thermometer and keep it on the wall a few inches from your thermostat. Then, using that tool, you can calibrate your thermostat appropriately.
4. Check Your Economizer
Economizers are machines attached to your HVAC to ensure high efficiency, but they don’t always work as expected. Often, economizers slip their links or contain faulty controls—or else someone in the past tinkered with them improperly. You should pay a visit to your HVAC economizer and give it a once-over; look specifically for open dampers (which should be kept closed) and any signs of quick fixes, like string or unfinished wood, that could indicate issues.
5. Control Your VFD
A variable frequency drive (VFD) controls the speed of the motor in your HVAC unit, providing energy savings proportional to the rotations per minute. However, like economizers, VFDs can malfunction and/or can be interfered with, causing efficiency-related problems. You should peer into your VFD and ensure that it isn’t running on bypass mode, so you can reap appropriate energy savings.
6. Cut out Your BAS
A building automation system (BAS) provides centralized control of HVAC as well as lighting and other systems. Such systems usually only exist in larger structures with more complex energy and control needs, but if your home is in an apartment or condo building, you might be subject to a BAS. You should either try to remove a BAS that is impeding the proper use of your HVAC or else contact your building manager to express concern over the BAS functionality.
7. Clean Your Coils
On the same day you clean your refrigerator coils, you should also clean your HVAC coils. Because HVAC units are typically placed in out-of-the-way areas that are rarely cleaned – like your roof, your basement, your attic or a corner of your yard – it doesn’t take long for them to accumulate dirt and grime. Debris on your HVAC coils forces the machine to work harder to produce the same effects, and it can reduce indoor air quality. Thus, you should schedule a coil cleaning at least once per year.
8. Connect Timers
There is no sense in heating or cooling an empty home. When you are away – at work or on vacation – you should consider setting a more lenient temperature on your thermostat, so it doesn’t need to work so hard for no benefit. You can also connect timer switches to your most energy-hungry devices, like gaming consoles, desktop computers and appliances, for a similar effect.
Over time, your HVAC will become less efficient—unless you do something about it. By participating in preventative maintenance, you can reduce your home energy costs and avoid the high expense of repairing or replacing your equipment.
Prepping for a new baby’s arrival might kick your nesting instinct into high gear, as you make sure everything is just right before the big day. One thing to add to your new-baby to-do list is figuring out how to financially prepare for maternity leave if you’ll be taking time away from work.
Lauren Mochizuki, a nurse and budgeting expert at personal finance blog Casa Mochi, took time off from work for the births of both her children. Because she had only partial paid leave each time, she says a budget was critical in making sure money wasn’t a source of stress.
“The purpose of budgeting for maternity leave is to have enough money saved to replace your income for your desired leave time,” Mochizuki says.
But the question “How do I budget for maternity leave?” is a big one. One thing’s for sureâthe answer will be different for everyone, since not everyone’s leave or financial situation is the same. What matters most is taking action early to get a grip on your finances while there’s still time to plan.
Before you get caught up in the new-baby glow, here’s what you need to do to financially prepare for maternity leave:
1. Estimate how long you’ll need your maternity budget to last
To financially prepare for maternity leave, you need to know how long you plan to be away from work without pay.
The Family and Medical Leave Act (FMLA) allows eligible employees up to 12 weeks of job-protected, unpaid leave from work per year for certain family and medical reasons, including for the birth of a child. Some employers may also offer a period of paid leave for new parents.
When estimating how long you’ll need your maternity budget to last, Mochizuki says to consider how much unpaid leave you plan to take based on your personal needs and budget. For example, you could find you’re not able to take the full period offered by FMLA after reviewing your expenses (more on that below) and how much you have in savings.
Even if your employer does offer paid maternity leave, you may decide to extend your time at home by supplementing your paid leave with unpaid time off, Mochizuki says.
Keep in mind that despite all of your budgeting for maternity leave, your health and the health of your baby may also influence how much unpaid time off you take and how long your maternity leave budget needs to stretch.
As you’re financially preparing for maternity leave, make sure your spouse or partner is also considering what benefits may be available to them through their employer. Together you should know what benefits are available for maternity or paternity leave, either paid or unpaid, and how to apply for them as you jointly navigate the budgeting for maternity leave process. You can then decide how to coordinate the amount of time each of you should take and when that leave should begin.
Contact your HR department to learn about your company’s maternity leave policy, how to apply for leave and whether there are any conditions you need to meet to qualify for leave. Ask if you’re able to leverage sick days, vacation days or short-term disability for paid maternity leave.
2. Babyproof your budget
When budgeting for maternity leave, make sure you review your current monthly budget to assess how budgeting for a new baby fits in.
In Mochizuki’s case, she and her husband added a category to save for maternity leave within their existing budget for household expenses (e.g., mortgage, utilities, groceries).
“We treated it as another emergency fund, meaning we had a goal of how much we wanted to save and we kept working and saving until we reached that goal,” Mochizuki says.
As you financially prepare for maternity leave, consider the following questions:
What new expenses need to be added to your budget? Diapers, for instance, can cost a family around $900 per year, according to the National Diaper Bank Network. You may also be spending money on formula, bottles, wipes, clothes and toys for your new one, all of which can increase your monthly budget. And don’t forget the cost of any new products or items that mom will need along the way. Running the numbers with a first-year baby costs calculator can help you accurately estimate your new expenses and help with financial planning for new parents.
Will any of your current spending be reduced while you’re on leave? As you think about the new expenses you’ll need to add when budgeting for maternity leave, don’t forget the ones you may be able to nix. For example, your budget may dip when it comes to commuting costs if you’re not driving or using public transit to get to work every day. If you have room in your budget for meals out or entertainment expenses, those may naturally be cut if you’re eating at home more often and taking it easy with the little one.
3. Tighten up the budgetâthen tighten some more
Once you’ve evaluated your budget, consider whether you can streamline it further as you financially prepare for maternity leave. This can help ease any loss of income associated with taking time off or counter the new expenses you’ve added to your maternity leave budget.
Becky Beach, founder of Mom Beach, a personal finance blog for moms, says that to make her maternity leave budget workâwhich included three months of unpaid leaveâshe and her husband got serious about reducing unnecessary expenses.
Cut existing costs
As you budget for maternity leave, go through your existing budget by each spending category.
“The best tip is to cut costs on things you don’t need, like subscriptions, movie streaming services, new clothes, eating out, date nights, etc.,” Beach says. “That money should be earmarked for your new baby’s food, clothes and diapers.”
Cutting out those discretionary “wants” is an obvious choice, but look more closely at other ways you could save. For example, could you negotiate a better deal on your car insurance or homeowner’s insurance? Can you better plan and prep for meals to save money on food costs? How about reducing your internet service package or refinancing your debt?
Find ways to earn
Something else to consider as you budget for maternity leave is how you could add income back into your budget if all or part of your leave is unpaid and you want to try and close some of the income gap. For example, before your maternity leave starts, you could turn selling unwanted household items into a side hustle you can do while working full time to bring in some extra cash and declutter before baby arrives.
Reduce new costs
As you save for maternity leave, also think about how you could reduce expenses associated with welcoming a new baby. Rather than buying brand-new furniture or clothing, for example, you could buy those things gently used from consignment shops, friends or relatives and online marketplaces. If someone is planning to throw a baby shower on your behalf, you could create a specific wish list of items you’d prefer to receive as gifts in order to offset costs.
4. Set a savings goal and give every dollar a purpose
When Beach and her husband saved for maternity leave, they set out to save $20,000 prior to their baby’s birth. They cut their spending, used coupons and lived frugally to make it happen.
In Beach’s case, they chose $20,000 since that’s what she would have earned over her three-month maternity leave, had she been working. You might use a similar guideline to choose a savings goal. If you’re receiving paid leave, you may strive to save enough to cover your new expenses.
As you make your plan to save for maternity leave, make sure to account for your loss of income and the new expenses in your maternity leave budget. Don’t forget to factor in any savings you already have set aside and plan to use to help you financially prepare for maternity leave.
Once you’ve come up with your savings target, consider dividing your maternity savings into different buckets, or categories, to help ensure the funds last as long as you need them to. This could also make it harder to overspend in any one category.
For instance, when saving for maternity leave, you may leverage buckets like:
“The purpose of budgeting for maternity leave is to have enough money saved to replace your income for your desired leave time.”
Budgeting for maternity leaveâand beyond
Once maternity leave ends, your budget will evolve again as your income changes and new baby-related expenses are introduced. As you prepare to go back to work, review your budget again and factor in any new costs. For example, in-home childcare or daycare may be something you have to account for, along with ongoing healthcare costs for new-baby checkups.
Then, schedule a regular date going forward to review your budget and expenses as your baby grows. You can do this once at the beginning or end of the month or every payday. Take a look at your income and expenses to see what has increased or decreased and what adjustments, if any, you need to make to keep your budget running smoothly.
Budgeting for maternity leave takes a little time and planning, but it’s well worth the effort. Knowing that your finances are in order lets you relax and enjoy making memoriesâinstead of stressing over money.
The post What You Need to Know About Budgeting for Maternity Leave appeared first on Discover Bank – Banking Topics Blog.
If you have an irregular income, you know how great the good times feelâand how difficult the lean times can be. While you can’t always control when you get paid or the size of each paycheck if you’re a freelancer, contractor or work in the gig economy, you can take control of your money by creating a budget that will help you manage these financial extremes.
Antowoine Winters, a financial planner and principal at Next Steps Financial Planning, LLC, says creating a budget with a variable income can require big-picture thinking. You may need to spend time testing out different methods when you first start budgeting, but, âif done correctly, it can really empower you to control your life,” Winters says.
How do you budget on an irregular income? Consider these four strategies to help you budget with a variable income and gain financial confidence:
1. Determine your average income and expenses
If you want to start budgeting on a fluctuating income, you need to know how much money you have coming in and how much you’re spending.
Of course, that’s the basis for any budget. But it can be particularly important if you’re trying to budget on an irregular income because you may have especially high- or low-income periods. You want to start tracking as soon as possible to build up accurate data on your average income and expenses.
For example, once you have six months’ worth of income and expenses documented, you can divide the total by six to determine your average income and expenses by month.
Many financial apps and websites can help with the tracking, including ones that can connect to your online bank and credit card accounts and automatically pull in your transactions. You may even be able to pull in previous months’ or years’ worth of data, which you can use to calculate your averages.
If you’re budgeting on a fluctuating income and apps aren’t your thing, you can use a spreadsheet or even a pen and notebook to track your cash flow. However, without automated tracking, it can be difficult to consistently keep your information up to date.
2. Try a zero-sum budget
“There are several strategies you can use to budget with an irregular income, but one of the easiest ones is the zero-sum budget,” says Holly Johnson. As a full-time freelance writer, she’s been budgeting with a variable income for over seven years and is the coauthor of the book Zero Down Your Debt.
With a zero-sum budget, your income and expenses should even out so there’s nothing left over at the end of the month. The trick is to treat your savings goals as expenses. For example, your “expenses” may include saving for an emergency, vacation or homeownership.
“There are several strategies you can use to budget with an irregular income, but one of the easiest ones is the zero-sum budget.”
Johnson says if you’re budgeting on a fluctuating income, you can adopt the zero-sum budget by creating a “salary” for yourself. Consider your average monthly expenses (shameless plug for tip 1) and use that number as your baseline.
For example, if your monthly household bills, groceries, business expenses, savings goals and other necessities add up to $4,000, that’s your salary for the month. During months when you make over $4,000, put the extra money into a separate savings account. During months when you make less than $4,000, draw from that account to bring your salary up to $4,000.
“We call this fund the ‘boom and bust’ fund,” Johnson says. “By building up an adequate amount of savings, you will create a situation where you can pay yourself the salary you need each month.”
3. Separate your saving and spending money
Physically separating your savings from your everyday spending money may be especially important when you’re creating a budget on an irregular income. You may be tempted to pull funds from your savings goals during low-income months, and stashing your savings in a separate, high-yield savings account can force you to pause and think twice before dipping in.
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An easy way to put this tip into action when creating a budget with a variable income is to have all of your income deposited into one account, then disburse it into separate savings and spending accounts. “Transfer a set amount on the first of every month to a bill-paying account and a set amount to a spending account,” Winters, the financial planner, says.
“The bill pay account is used to pay for all of the regular expenses, like rent, insurance, car payments, student loans, etc.,” Winters says. These bills generally stay the same each month. The spending account can be used for your variable expenses, such as groceries and gas.
When considering your savings accounts, Winters also suggests funding a retirement account, such as an Individual Retirement Account (IRA).
If you’re budgeting on a fluctuating income as a contract worker or freelancer, you may also want to set money aside for taxes because the income and payroll taxes you’ll owe aren’t automatically taken out of your paychecks.
4. Build up your emergency fund
“The best way to weather low-income periods is to prepare with an adequate emergency fund,” freelancer Johnson says. An emergency fund is money you set aside for necessary expenses during an emergency, such as a medical issue or broken-down vehicle.
Generally, you’ll want to save up enough money to cover three to six months of your regular expenses. Once you build your fund, you can put extra savings toward other financial goals.
When you’re budgeting on a fluctuating income, having the emergency fund can help you feel more at ease knowing that you’ll be able to pay your necessary bills if the unexpected happens or when you’re stuck in a low-income period for longer than anticipated.
A budget can make living with a variable income easier
It can be challenging to budget on an irregular income, especially when you’re first starting. You might have to cut back on expenses for several months to start building up your savings and try multiple budgeting methods before finding the one that works best for you.
“Budgeting requires a mindset change regardless of which type of budget you try,” Johnson explains.
“The best way to weather low-income periods is to prepare with an adequate emergency fund.”
However, once in place, a budget on an irregular income can also help free you from worrying about the boom-and-bust cycle that many variable-income workers deal with throughout the year.
The goal is to get to the point where you can budget with a variable income and don’t have to worry about when you’ll get paid next because you set your budget based on your averages, planned ahead during the high times and have savings ready for your low times.
The post 4 Tricks for Budgeting on a Fluctuating Income appeared first on Discover Bank – Banking Topics Blog.
What if you could pay for your next date night or trip to the grocery storeâwithout having to dip into your budget? If you use cash back to your advantage, these benefits could become a reality.
In the past, you had to swipe a credit card to earn cash back. But with Discover Cashback Debit, you can earn cash back by spending with your debit card (you read that right: debit card), allowing you to reach your financial goals without the risk of going into debt.
To best use this budget bonus, you might be wondering, âWhat should I do with my debit card cash back?” According to Eric Rosenberg, financial consultant and founder of the website Personal Profitability, âYou could put [your cash back] into savings or treat yourself to something from your wish list.”
Read on for things to do with cash back to help you achieve the right balance of responsibility and fun:
1. Save for a rainy day
Sometimes it seems like everything goes wrong all at once: You get a flat tire. The sink starts leaking (ugh, again!). You get a parking ticket. Since life can throw unexpected, costly curveballs your way, it’s important to have an emergency fund. Also known as a rainy day fund, an emergency fund is cash that’s set aside to cover unplanned, yet crucial, expenses.
âSo many people can’t afford the cost of an emergency from their savings,” Rosenberg says. If you don’t have this type of fund to fall back on, starting an emergency fund (or adding to an existing fund) could be a top priority when evaluating what to do with your cash back from a debit card.
When thinking about building an emergency fund as a thing to do with cash back, note that experts typically recommend putting aside at least three to six months of living expenses for this purpose. To maximize your emergency fund, you may want to consider moving these savings (and the cash back you’re putting toward this fund) to a high-yield savings account. That way, your emergency fund can steadily grow with interest until you need it. (P.S. More to come on how to automatically move your cash back into savings.)
2. Pay down your debt
If you owe, it can be tough to climb your way out of debt. Whether it’s from credit cards, student loans or a mortgage, interest is accruing and costing you money. Learning how to use your debit card cash back to offset debt can help you save on those interest payments down the road.
According to consumer money-saving expert Andrea Woroch, when you’re focusing on paying off debt, “It’s natural to cut back where you can. But you may eventually hit a wall where you can’t find ways to tackle expenses any further,” she says. That’s where learning how to use debit card cash back comes into play. Since a debit card with a cash back feature can allow you to earn for your everyday spending, those earnings can become a new source for paying down debt, Woroch adds.
3. Shore up for those special moments
You know you’d like to have more nights out, but they don’t come cheap. What to do with your cash back could include spending on special outings, Woroch says. Is there a restaurant you and your significant other have been dying to try? Is there a concert the whole family is super eager to see? There may also be larger events with family and friends to think aboutâplanning a milestone birthday or anniversary or that getaway with college buds. You can set aside your debit card cash back and earmark it for your relationships to create memories that will last a lifetime.
âYou could put [your cash back] into savings or treat yourself to something from your wish list.”
4. Support your children’s allowance
If you have kids, you’ve probably heard this one before: âMom, Dad, can I have some money?” Sometimes it can feel like you’re a walking ATM. One thing to do with cash back is to set aside an allowance for your kids. You can then use this cash to teach your children good savings habits and how to manage money on a monthly basis for the things they need and want, says Rosenberg of Personal Profitability. The best part: The money isn’t really coming out of your budget since you’re earning it for your everyday expenses and from money you’d be spending anyways. Win-win.
In thinking about what to do with your cash back, spending it on gift-giving and holiday expenses may be a good goal. “Some people go into debt during the holidays. To help avoid that circumstance, use your cash back to get ahead,” Woroch says.
And, really do think ahead if holiday spending is on your list of things to do with your cash back. The earlier you stash your cash back away for the holidays, the longer it will have time to accrue if you put it in a savings account for safekeeping. Season’s greetings may be the last thing on your mind while you’re flipping burgers on the 4th, but planning ahead could really impact your end-of-year festive spending.
How to maximize your cash back
Now that you know what to do with your cash backâwhether it’s going to work for your emergency fund or funding emergency holiday giftsâconsider steps you can take to get the most out of your extra dough. For example, find a rewards program that matches your spending style. With Discover Cashback Debit, you can earn 1% cash back on up to $3,000 in debit card purchases each month.1 That’s up to $360 a year. Not too bad for just going about your daily debit card spending.
Get 1% cashback on Debit from Discover. 1% cashback on up to $3000 in debit card purchases every month. Limitations apply. Excludes Money market accounts.Discover Bank,Member FDIC.Learn More
To make the process of saving that extra cash even easier, consider opening a Discover Online Savings Account. If you sign up for Auto Redemption to Savings, your cash back will be automatically deposited into your savings account every month.
âThe hardest part about saving for many people is remembering to make a transfer or take the cash to the bank,” Rosenberg says. “If you can automate it, you are setting yourself up for success. It’s like saving while you sleep.”
If you’re still considering how to use your debit card cash back to the fullest, Woroch suggests paying for group purchases when you’re out with family or friends. “Whether you’re going to dinner or renting a condo, cover the entire expense on your card and ask friends and family to pay you back with cash or [via mobile payment],” Woroch says. “This way you can benefit from earning more rewards.”
When it comes to how to use your debit card cash back, the key is to make sure you have enough in your account and aren’t spending too much if you offer to temporarily foot the bill. You don’t want to overextend in order to earn, as you could be hit with overdraft fees or not have enough in your account to cover bill payments, Woroch says.
“Whether you’re going to dinner or renting a condo, cover the entire expense on your card and ask friends and family to pay you back with cash or [via mobile payment]. This way you can benefit from earning more rewards.”
Get ahead with a combination of strategies
If you’re looking for things to do with cash back, using these tactics can help you improve your financial foundation and have some fun along the way. Understand your needs and goals to help you create a cash back plan, and then maximize your strategy with tools to help you automatically direct your cash back to savings to limit the temptation to spend the money elsewhere.
“We are all so busy these days, and managing money is often pushed down on the to-do list,” Woroch says. Learning how to use your debit card cash back can help you put money management front and center. Start earning!
1 ATM transactions, the purchase of money orders or other cash equivalents, cash over portions of point-of-sale transactions, Peer-to-Peer (P2P) payments (such as Apple Pay Cash), and loan payments or account funding made with your debit card are not eligible for cash back rewards. In addition, purchases made using third-party payment accounts (services such as VenmoÂ® and PayPal, who also provide P2P payments) may not be eligible for cash back rewards. Apple, the Apple logo and Apple Pay are trademarks of Apple Inc., registered in the U.S. and other countries.
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