Easy Tips for Making Your Savings Goals Achievable

For many people, saving money in a bank account is a real struggle.  Everyone knows they should save, but many are confused on techniques to be successful.  Questions such as “should I save for retirement or an emergency fund?” or “how can I save in my already strained budget?” are common.  I will touch on a few roadmaps and strategies I have used to become successful at saving money.

The first technique I use seems pretty simple.  I just use my workplace 401(k) plan to scrape my retirement savings off the top before I even see my net pay.  Think of this like a tax payable to you at some point in the future.  While Social Security is somewhat of a safety net, it likely won’t provide enough for a comfortable retirement, especially with the rising costs of healthcare.  Saving something, especially in your younger years, will pay off big because the money has more time to grow.  If you start saving later, then you will likely end up having to more to retirement, with less time to let your investments compound.

There is no hard and fast rule about how much you should allocate to this, but the more the better.  Dave Ramsey’s retirement page suggests 15% of your gross household income, not including any company match.  While 15% is a great number to shoot for, this may be difficult for those just starting out in their field or those that have student loans weighing them down.  In addition to Dave Ramsey’s site, Fidelity also has a great set of calculators you can use for free to get an idea of what you need to save.  If your company has a match, contribute at least the minimum to receive the match because this is “free” money, or at least extra compensation that can grow and can be worth much more down the road.  If you are up to your ears in debt, then I would recommend stopping any retirement saving and putting every extra cent into paying down high-interest debt.  Another tip, don’t turn down your savings so that you can “afford” a new car with a high payment or a house that is too expensive.  The older you, at age 65 will thank you for having self-control!

The second technique is using a zero-based budget that includes a line item for saving.  Now that your retirement fund(s) are automatically accumulating, you don’t need to have a line item unless you have separate accounts that pull from your net paycheck or net income, if you are self-employed.  Start with your expected monthly net take-home pay and list out your expenses. 

You should have some room built in for savings.  I typically plan out my expenses for each paycheck and there is something left over.  Sometimes it is a small amount, other times it can be a good chunk of money.  Maybe you can’t save on some paydays but can save more on some others?  Either way, you should have savings for an emergency fund, then savings for other goals such as a new car, house down payments, college tuition, and so forth.  If you don’t have anything special to save for, really evaluate your future needs for big-ticket items and plan for something to need replacement.  There is always something that you can be saving for to avoid going into debt in the future. 

If you don’t have enough money for savings or extra debt payoff, you need to think about what you can cut to get more money in your budget.  If you have cut to bare-bones and are still coming up short, think about how you can grow your income.  Side hustles, or second jobs, are a good way to plug your budget holes, especially if the cash flow crunch is temporary due to paying off debt.  If the shortage is permanent, think about what you can do to increase your income permanently, whether applying for better paying jobs, or re-training for a more lucrative career. 

My last tip is to always be looking for “found” money, or windfalls.  These can be great ways to build up your savings faster than planned.  Income tax refunds, credit card cash back checks, birthday gifts, or refunds are all common and can boost savings quickly.  Also look around the house for items you no longer use and try to sell them on Craigslist, LetGo, NextDoor, or FaceBook Marketplace.  Social media makes it so much easier to sell things quickly while decluttering our homes.

Be sure to sock that money away in a safe, FDIC insured, high-yield savings account.  Some online banks are offering accounts with yields between 1.5% and 1.75% APR.  This is far better than the standard .05% paid by many large national banks.  You can visit NerdWallet.com for a review of the best savings accounts, plus ones with one-time bonuses for depositing larger amounts. 

Follow me on twitter or subscribe to my blog to keep up-to-date on all of my posts.

Why you should pay your rent or mortgage during the COVID-19 crisis

The health and economic ramifications of the coronavirus outbreak seem to get worse with each passing day.  Despite a massive stimulus plan passed last week, retailers announced the furlough or layoff of approximately 600,000 workers.  Top management at many firms are taking huge pay cuts for the time being and even corporate-level employees are getting laid off.  So it seems that paying rent for so many of these people should be the last thing on their priority list, right?

Wrong. 

Even if you don’t have the cash to make your April 1st, 2020 payment, on-time, whether for rent or mortgage, you should try to reach out to your landlord or mortgage servicer and let them know today, rather than in two weeks.  While the ramifications of the COVID-19 outbreak aren’t your fault, they also aren’t your landlord’s fault.  Landlords, and even the large companies that own apartment complexes, depend on rental income to pay their employees and put food on the table.  They are still obligated to fix your unit if something goes wrong and maintain the grounds whether that entails plowing snow or greening up the grass as spring arrives. 

But I lost my job and was living paycheck-to-paycheck before all of this happened!

This situation is totally understandable, and millions of Americans are feeling the pinch.  It is estimated that 78% of U.S. households live paycheck-to-paycheck.  However, you should have applied for unemployment benefits and with the increase of up to $600 per week in benefits, you should be able to make good on your rent between that and your stimulus check due in about three weeks if you received your last tax refund via direct deposit.  Sit down and make a budget.  The first thing you need to do is eat, second, pay utilities, and third, pay rent or your house payment.  If you are in a bad predicament, don’t be afraid to take advantage of food stamps or local food bank programs.  It may be a hit to your pride, but help is out there if your situation is so bad that you have to choose between food, heat, or paying to keep the roof over your head.

Turn your financial life around!

If you are scared and worried about your finances and cannot make good on your obligations, this is the best time to turn your financial life around.  Visit Dave Ramsey’s site to get tips on turning your finances around.  Not being able to pay your rent should scare the living daylights out of you and make you want to question how things got so bad, so quickly.  While it is nice that many governors and mayors have outlawed evictions, foreclosures, and late fees for the next 90 days, eventually, you will have to pay the piper.  I’m sure you have heard the saying “there’s no such thing as a free lunch.”  The same applies for rent.

Think about the big picture

When you don’t pay, you are contributing to the continued slowing of our economy.  Believe it or not, it’s not just big shots on Wall Street who have investments.  Most mortgages are securitized and managed by real estate investment trusts, or REITs, which have issued stock and are owned by little people through mutual funds in 401(k) plans.  Moreover, if the Fed buys mortgage backed securities to get more cash into the economy, it’s the taxpayers (you and me) who are on the hook when people don’t pay.  So do what you have to, but try to pay for your housing as soon as you can.  With dedication and perseverance, our situations will improve, and hopefully your financial habits will change for the better so you can weather the next economic storm with a healthy savings account.

Leave a comment!

If you lost an income stream or have seen a decrease in pay, what are you doing to keep your bills paid? 

Looking on the bright side of things: Unintentional savings during the COVID-19 lockdown

Another day of social distancing, self-quarantine, and isolation is in the books in hopes of curbing the spread of COVID-19.  The debate continues in Washington, D.C. on how the economy should be propped up, and the stock markets took a little more of a stumble today, which is seeming the new normal.  This prompted me to think about controlling my outgo as opposed to hoping for a government bailout.  This lockdown of society is helping me to spend less.  I thought about how my inability to go out to dinner with friends, shopping malls, or the movies has cut my spending in recent days.  My gasoline usage is down about 90% from normal.  Not to mention the fall of oil futures has impacted the price we are seeing at the pump, which is compounding the savings. 

I did go out on Saturday, sanitary wipes in-hand, so that one of my Great Danes could get her scheduled vaccinations, and happened to be near the Home Depot.  I stopped in for a few items needed to get some things done around the house.  Besides reading, homework, and intensive home sanitizing, I have been able to get outside and start some spring projects such as pruning and recovering the backyard from the dog-pee fest that gets left unchecked because of the cold weather.  One of the Items I picked-up at Home Depot was a Simple Green Outdoor Pet Oder Eliminator.  This was my cheap Saturday entertainment! 

Normally, I would be going out the get lunch and hit up multiple grocery stores for sale items and impulse my way over budget.  However, to reduce exposure to the outside world, I made a list and sent my roommate and friend out to execute my list, which saved me money because he is great at not adding extra items to my list.  I also didn’t get to go to other stores like Marshall’s, Target, or Kohl’s for the same reasons, or the fact they are closed.  To boot, I have been eating at home since I’m working from home, which is saving me at least $10 per day over going into the office.

Your savings could be growing! Image courtesy https://www.myfinance.com/how-to-save-money/

I also have been making due with what I have because it is more difficult to just pop out to the store.  Instead of shopping for a new rug for my office that was recently re-arranged to make it more work-from-home friendly, I remembered I had a rug shoved under my roommate’s bed.  Albeit, it is eventually going back to the living room when my roommate moves his stuff out, it’s better than nothing under my office chair, which has a tendency to mar the floor if not on a rug.  Quite often our propensity to easily go out and buy something new makes us forget about old things stored away in closets or the garage.  I am planning to use more of this time to go through and really assess what is needed and what can be donated when this all passes.  You may be surprised at how those clothes fit that you put away two years ago?  Maybe you’ll fall in love again with that pair of jeans or a shirt that you had forgotten about?

In this time of uncertainty, get your mind off the news and think about the bright side of things.  Maybe you are like me and working from home and saving all that commute time?  If so, make sure you are using that time productively.  Make more food at home, try to resist ordering out unless you are financially secure and just have those funds in your budget.  We will make it through COVID-19 and eventually, things will return to normal. 

Have you been able to save money on day-to-day expenses like food, gas, or groceries?  Have you been able to cut childcare expenses if you are working from home?  Reply to this blog post and let me know! 

The pain is only temporary! But how temporary?

If you’ve been anywhere near the news, whether on television, online, or social media, you have likely noticed the precipitous fall of the stock market over the last few days. Coronavirus fears are taking hold in the minds of investors, who are running for shelter, or perhaps a face mask. I have seen my retirement savings take a bit of a hit over the last several days after a seemingly long run of positive growth.

In addition to the stock market slide this week, my house seems to have dropped about $20,000 in value since last summer, according to Zillow and Trulia. Their pricing conclusion seems to be well-founded, as people have been accepting lower prices over the winter months, while a mile away, homes continue to sell for higher prices. I’ll talk more on that later, but all-in-all, it’s a bit discouraging to see my net worth decline so much after working diligently to grow my wealth.

Over the last year, my mom and I have chatted quite a bit about what we thought the economy would do.  This was mostly based on the talking heads on television, and we predicted 2020 would be the year things corrected.  Albeit, we didn’t predict the coronavirus would be a root-cause.  I do, however, think the selling is a bit irrational.  While the Coronavirus is potentially a big threat on a global scale, it’s less likely that the disease will disrupt our economy to the point earnings will slide, people will start losing jobs, and the self-fulfilling prophecy of an economic decline will take place.  Instead, I think this is a blip on the radar and unless some other negative economic news comes out, we will see this fade into history and stock prices will increase in the near term.  In other words, if you’ve been waiting to get into the stock market, now is a good time to invest some cash and earn some returns over the next several months.

As mentioned earlier, I am seeing a 5% price decrease on my home.  In my neighborhood, several pieces of land have started being developed into “multi-family” housing, or apartments.  At first glance, this may seem to devalue properties, but in all actuality, the apartments being built are for people with higher incomes.  Probably incomes similar to some of the homeowners in the area considering some bought at the low point from 2009-2011.  These new apartments come with heft rents of $1,400 for a decent sized one-bedroom unit.  I think that once built, people will again get used to a new apartment complex instead of a weedy cow field and prices will fall in line with those areas a mile away.

So, is it time to run for the exits and click the “sell” button? I really don’t think so, but I do not claim to have a crystal ball and see the future. What do you think? Leave your thoughts on whether 2020 will be a declining year for the stock markets, housing, the economy, or both.

Saving For The Big Things: If I can do it, you can, too!

As I sit in my living room, listening to John William’s composition, the Main Theme from the 1980’s film E.T. The Extra Terrestrial, I instantly gravitate to the bass line since I’m a seasoned tuba player of nearly three decades (gulp!). A tuba was the first big adult purchase I saved up and made during my high school days. It was the main reason I got my first job. I got that first paycheck and allotted $25 for gas and fast food (it was 1996 and gas was about a buck a gallon and the legendary 29 cent hamburger at McDonald’s was a real thing). I had focus. Focus on my goal to have the best playing tuba I could afford so I could make Honor band and All-State band. At 16, I felt the confidence of having a new horn would get me there. In less than six months, I had saved $3,500 making $5.25 an hour and I had my new horn!

Fast-forward in life and this focus got lost along the way from age 18 to 24. I had a career and stable paycheck by the time I was 20, but the focus was gone. Income was split up a bunch of different ways between rent, eating out, gasoline had tripled or quadrupled from those high school days, and although I earned nearly three times per hour what I did in high school, I was in debt and never able to accomplish much besides keeping my bills current. At the time, I just bought into the mentality that “the little guy just can’t get ahead.” Then something clicked a few months after turning 25.

I stopped making excuses for my poor spending habits and stopped accepting the high interest rates on my plethora of department store cards and low limit major credit cards. I took a leap of faith and sent a paper credit card application out to a credit union associated with my employer with whom I had a paltry $25 savings account. I also sent a letter asking the loan officer to please consider my change in attitude and transfer my balances from all of my high-rate cards, and promised to close them if the balances were transferred. I included a list with balance, account numbers and addresses for a total of $3,500, same as the cost of the tuba. A couple weeks later, I received a letter from the credit union with Xerox copies of checks sent out on my behalf to pay off all those cards and consolidate the debt.

I was dumbfounded. Sending that letter actually worked! In the past, I just received denial letters, so I had given up hope for a few years. My faith was restored and I decided to pay off that card as fast a possible. This started my habits in the direction of savings. I put every little $10 or $20 bit of found money at the debt.

A few months later, I moved back to Reno to be with my then significant other, and we started planning to buy a new house. Between us, we had a pretty decent income, but not much savings. We knew we needed to get a good down payment going, and fast! We were constantly driving around looking at houses with for sale signs in the front. We would talk about what we could do with each house we looked at from the car. Although we didn’t have a particular house picked out, we had a vision of what our life would be like in our own little piece of heaven. That was our motivation.

Goals are great, but why are you working towards something? Once you have a reason for sacrificing for your next big purchase, set your savings goal and work backwards, mathematically, and determine how fast you can get there. If you need to have a certain amount saved by a certain date, divide that out by the number of pay periods and see if you can save that much and keep up on your other bills. If not, what other side jobs can you do? Is your new goal worth selling some old stuff? Sites such as eBay, Craigslist, and other social media let you list from your smart phone in minutes.

So next time you have a lofty savings goal, don’t despair! Put a motivating reason behind your actions you can think of when you are making a sacrifice such as eating leftovers instead of ordering pizza or making due with last summer’s wardrobe. Sock away any found money from bonuses or birthday gifts! Find some side work, even if it’s just adhoc. I used to mow lawns and landscape yards on my days off for extra cash. Be creative and you can meet your goals year after year.

How do you stay motivated and what side jobs do you do? Leave me a comment explaining how you reach your savings goals.

Stick to Your Plan, Control Yourself, and We All Make Mistakes

I love building things around the house.  Home improvement projects can become addictive.  Once I start on one project, I start thinking about the next one while working on the current one.  Last spring, this was just the case.  After paying off all of my credit card debt since being divorced, I decided that it was time to stop being tight with money and make some home improvements for my enjoyment with the future in mind.  I wandered into Home Depot one cold, dreary, February Sunday and noticed a sign near the entrance boasting “up to 20% off counter tops”, and so it begins.

As I get older, I have learned to understand my impulses.  When I was in my 20’s, I would just do what I wanted, without thinking much about how I was going to get there unless it was a really big purchase, like a car or house. Nowadays, I tend to tell myself:  STOP!  I ask myself questions like:

  • Do I have the cash to cover this want?
  • How will I feel about spending $x,xxx six months after the purchase?
  • Would it feel better to have that money in my savings account?
  • Are there more important goals in my life and is this congruent with my goals?
  • What are my true motivations for wanting to make this purchase?

These are some of the questions that keep me out of financial trouble more often than not. Being able to identify these behavioral patterns in myself has allowed me to get ahead, which I measure by looking at my increasing net worth and my quality of life (not to mention increased sanity!).  I have the same tendencies, but I react to them differently. 

I admit that I am a spender, but the feeling of security gained from having a big pile of cash in the bank is a big reason why I don’t just buy what I want, when I want.  I can remember being 23 years old and always broke.  On payday, I paid all of my bills, which left me with almost no cash, but I did have available credit on my cards and was able to eat and buy gas on that.  Then something would go wrong and my life would become stressful.  This stress radiated into my career and my personal relationships.  I didn’t realize it then, but I felt out of control.  The lack of control was causing chaos not only in my financial life, but in all other areas.  I couldn’t sleep well when I was wondering how I would fix my car and get to work to keep up this rat race. 

Fast-forward about three years and I was advancing my career and financially.  I was ready to purchase a house with my significant other.  It was 2007.  Home prices were decreasing.  This seemed like the best time to buy since we had been in such a hot market.  The joke was on us!  Within a year of closing on the brand new house, prices dropped over $100K on our block from what we had purchased it for. I was, and still am, a firm believer that individuals should do what is ethical, even if the popular thing to do is not.  Many of those people kept their jobs and income and dumped their underwater homes rather that weather the economic storm. 

We stuck with it, paid our mortgage, and things are pretty good today.  It worked out and I’m moving on and up.  The moral of the story is to stick to your big plan.  Don’t let fads or impulses throw you off track. If you do, get back on track! Everyone will have obstacles with money, health, careers, and more.  You can plan for these obstacles and make incremental choices every day to move you closer to, or further from, those goals.