budgeting · Managing Money · money challenge

August Money Challenge

Oops, I did it again. I spent waaaay too much money on groceries last month ($291.11 to be exact) and my food hoarding stash is getting out of control again. I decided it’s time for another pantry challenge.

You may recall my April Pantry Challenge that I tried out earlier this year. I didn’t exactly pass the challenge, but I didn’t do too badly either. With a few little tweaks and some newfound motivation, I’m sure I can achieve my goal this month. This time around, I will not be including cat-related items or wine in my budget. Hey, I don’t need to starve myself for my cats’ sake. As for the wine, we’ll make that another challenge for another month, but summertime is not the time nor the place to skimp on a nice, cold pinot grigio.

My goal this month is to spend only $50 on groceries. I have plenty of the staples in my pantry, a plethora of frozen fish and shrimp in my freezer, plus my herb garden has been growing like crazy this year. Realistically, I should only need to spend on produce and protein.

We’re currently 4 days into August, and I did go grocery shopping today. I spent $16.91, which leaves me with $33.09 for the rest of the month. Let’s just hope the ice cream and fish taco stuff I bought today lasts me a while!

budgeting · Earn Money · Lifestyle

Easy Travel Hacks Anyone Can Use

We’ve all heard about those people that travel the world for free or next to nothing using a ridiculous amount of airline mileage and hotel points. But if you’ve actually looked into it, it can be as complicated as trying to figure out your own taxes or calculating the next digit in pi. Even so, there’s still plenty of ways to travel hack that the common non-mathematician can easily do without having to spend hours reading or watching online tutorials.

Everyone that knows me knows that my favorite thing on the planet (next to cats and wine, of course) is traveling and exploring new places. In fact, I side-hustle and work several extra jobs just so that I can afford to travel (read my previous article about side-hustling here). Even though I haven’t figured out how to completely beat the travel system like those crazy awesome travel hackers, I’ve still managed to earn plenty cash back and even fly to Hawaii twice for free.

My favorite way to get free flights is by signing up for credit cards that offer airline miles. Seattle is Alaska Airlines’ home city, so naturally Alaska Airlines is my airline of choice. I signed up for their credit card several years ago when they were offering 40,000 miles just for enrolling mid-flight. That got my Hawaii trip #1. I regularly use my Alaska Airlines credit card as my debit card (paying it off every month, of course) so that I can earn one mile with every dollar I spend. It’s an easy way to rack up frequent flier miles without doing a damn thing.

I signed up for a credit card with Delta Airlines once when they were offering 50,000 miles after spending a certain amount within x number of months. They also waived the annual fee for the first year, so it didn’t cost me anything. Because I used the credit card for my every day purchases, I easily hit that mark and earned free Hawaii trip #2. Side note, just remember to cancel your credit card after your trip but before your year is up so that you don’t have to pay an annual fee.

Most recently, I’ve been saving to splurge on a big family vacation for my mom, brother and I. (I won’t say where though, because it will be a Christmas surprise for them). Once I had the money saved up, I looked online for cards offering airline miles with purchase, and found the American Airlines AAdvantage card with Citibank which was offering 60,000 miles when you spend $3000 in the first three months. (Again, please keep in mind that I will pay the balance off in full once I receive the statement in the mail.) So while I paid full price for my tickets this time, I’ll be able to take another free trip again in the near future. I’m sorry to say there won’t be a free Hawaii trip #3 though…I’m ready to explore somewhere new!

In addition to earning miles, most airline credit cards offer other perks for travel, simply for participating in the program. For example, many airlines will give cardholders and their travel companions free checked bags, complimentary travel insurance, complementary auto insurance for car rentals, and discounts on food and drinks while on your flight. Make sure you check your card’s website so you don’t miss out on any awesome perks like these!

I also will never book any type of travel online without using Ebates. I just go to the Ebates website, then click on the link to Expedia or hotels.com, my two favorite websites to purchase travel on, then it reroutes me to those websites. The websites look exactly how they would look if I had instead typed in the URLs, but somehow Ebates keeps track of my purchases and gives me a percentage of cash back. For example, I spent around $4000 purchasing this big trip on Expedia yesterday, and Ebates gives me 10% cash back on purchases made at Expedia. Voila! I just earned $400 for booking a vacation. The only downside is that they won’t send me the check until after I’ve completed the travel, but I’m still totally OK with that!

So there you have it! Super easy ways to earn free trips and extra money without doing anything too crazy. Happy travels!

budgeting · Clarity Money Articles · Managing Money

4 Budgets You Can Actually Use

This article first appeared on May 26, 2017 on the Clarity Money Blog

 

Let’s take a minute to talk about the “B” word. No, not that B-word. I’m talking of course about a “budget.”

For most people, living on a budget is synonymous with sitting at home alone on a Friday night and eating Top Ramen—while your friends hit up the hot new sushi spot in town.

In actuality, a budget is a sound financial tool to carry you from where you are to where you want to be.

When you’re in control of a budget, you’re telling your money where to go, instead of wondering where the heck it all went.

But before you attempt to go it alone, here are four different types of budgets you can try on for size before sticking to one. Here are the four budgeting methods to try:

Zero-Based Budget

In a zero-based budget, the goal is to take the money you earn during a specific time period, say a month, and then subtract your expenses until you end up at zero.

Start by subtracting all of your fixed monthly expenses such as your rent or mortgage, car insurance, Internet service, minimum payments on credit cards, and any other fixed payment monthly bills.

Then, subtract all of your variable expenses that change each month, such as your phone bill, groceries, and gas.

Anything left over should go toward debt repayment or savings.

Cash Envelope Budget

cash envelope budget describes the physical management of allocating cash spendings across labeled envelopes. For this type of budgeting system, you would only use your debit card or automatic withdrawal for fixed monthly expenses, such as your rent or mortgage, utilities, or your car payment.

For everything else, create separate envelopes for expenses such as groceries, gas, and eating out, and place your monthly budget for each in the corresponding envelopes (in cash, of course).

If you exceed your budget in one category, you’re out of luck,  or you’ll have to take the money out of another envelope’s budget for that month. Any cash left across your envelopes at the end of the month means you’ll have a little extra to really treat yourself the next month, pay toward debt, or give your savings a boost.

While this method may require more manual, hands-on involvement, the tangible act of spending only what you physically have may help prevent you from going overboard with buying on plastic.

50-30-20 Budget

The 50-30-20 budgeting system is as straightforward as it sounds. For this method, you would allocate 50% of your earned income on needs, 30% on wants, and 20% on savings or repaying debt.

This method is fairly cut-and-dry, but can give you a baseline for prioritizing actual needs versus wants, while also helping to boost savings.

A tip on establishing needs versus wants: Imagine you need a pair of sensible nude pumps. You may want the designer label, but you exert control by acknowledging the difference between what you need versus want, and you end up buying a great quality shoe from a more affordable designer.

If you find it difficult to categorize between needs versus wants, the 50-30-20 budget can be especially helpful to remove the emotions associated with choosing.

Once you’ve identified your wants, challenge yourself to spend half of what you would normally spend, or if you’re feeling super motivated, spend even less. Nailing this strategy can not only boost your savings or your debt repayment potential, but also provide a practical approach to budgeting.

The Savings Snowball Method

Personal finance expert Dave Ramsey coined the debt snowball method as a debt payoff strategy, where you would pay the minimum due on all of your debts while throwing anything extra at the debt with the lowest balance until paid off. Then, move on to  the next lowest debt balance, pay it off, and repeat.

You can use this same theory for budgeting. Create your list of monthly fixed and variable expenses, paying those first, then throw anything left over toward a savings goal, for say, an emergency fund of three months of your monthly rent or mortgage.

Once you’ve met this savings goal, move toward a second aspirational goal, such as a dream vacation for the family, or a down payment toward a new home. The savings snowball is highly effective reverse method on the debt snowball, and an excellent way to gain momentum as you see your savings increase.

Tips to Get Started

Before you attempt to establish a budget, get a sense of your current spending habits.

Budgeting apps are much easier than tracking everything in a spreadsheet. You can link all of your accounts and track your spending in real time.

Following a good budget practice doesn’t have to be frustrating, nor should you have to suffer and neglect yourself from having any fun. Rather, it’s a learning opportunity to prioritize areas of your life so that you have more resources to experience or have the things you love most. If you resolve to give it a shot and stick with it, you won’t look back in regret. And who knows, you may even have a little fun in your newfound financial empowerment.

 

This article first appeared on May 26, 2017 on the Clarity Money Blog

budgeting

Paying Yourself First: What, How, and Why

Don’t forget to pay yourself first. You’ve likely heard this old adage, but have you ever wondered what it actually means? And more importantly, why it’s so important? Paying yourself first essentially means placing money into savings before spending it, and there are two very easy ways to accomplish this.

Direct Deposit

If you have a direct deposit option in regards to your paycheck, take advantage of it and have a portion of your earnings deposited into a savings account while the remainder is deposited into a checking account used for paying bills. You could choose to have a percent of your earnings deposited into savings, or you could choose a set amount.

Along those same lines, having a percentage of your earnings deposited into a 401k retirement account is another great way to pay yourself while saving for your future. Trust me, your RV travel-loving 70 year old self will thank you.

 

Writing Yourself a Check

OK, physically writing a check to yourself is definitely a dated way of paying yourself. You could choose to withdraw cash from an ATM and either deposit it into a separate savings account or stash it under your mattress (which is definitely not advisable). You could also choose to transfer the money to a separate account via computer or smart phone. In order for this method to be successful, you will need to discipline yourself to transfer or withdraw the money as soon as your paycheck hits the bank. Otherwise, you’ll have spent your monthly savings budget on a new Summer wardrobe before you even realize what you’ve done.

 

Why Bother?

Have you ever looked at your bank statement at the end of the month and wondered where all of your money went? That is exactly the reason why paying yourself is vital to financial independence. It is far too tempting to overspend when you have extra money burning a hole in your checking account. It is also far too easy to mindlessly spend that extra money on lattes or margaritas if it isn’t already accounted for.

Paying yourself and not allowing that money to ever sit idle in checking is a surefire way of bulking your savings or getting yourself better prepared for retirement. Figure out which of these two methods works best for you, then start envisioning all those exotic vacations or that dream house you’ll be able to afford!

budgeting

Why I Use Budgeting Apps

Have you ever had someone tell you all about how much they love spreadsheets? Maybe they’ve told you what a great tool they are when comparison shopping. Or maybe they love to use them to track their spending and budgeting. Perhaps you’ve listened to someone tell you how much spreadsheets have simplified this person’s life and how organized they are because of of this very precise type-A hobby of theirs.

If you’re like most people, you’ve probably rolled your eyes and wondered how someone could actually enjoy that level of structure in their life. I have personally tried to enjoy creating budget spreadsheets, but to no avail.

I created my budget for the month, went on spending as normal, then added all of the numbers together from my online banking statement at the end of the month and plugged them into my spreadsheet. That was not only time-consuming, but because I couldn’t see my spending in real time it didn’t help me spend any less.

Then I tried keeping track of my spending by taking the numbers every few days and adding them into my spreadsheet. That was just plain confusing, since I couldn’t remember which transactions I’d already added and which I hadn’t.

Then I discovered the wonderful world of budgeting apps.

Apps that budget for me

I have three budgeting apps that I use every day to track my spending. Personal Capital, Clarity Money, and Mint. The best thing about these apps is that they are ridiculously easy to use, and make budgeting a breeze. They are all free to download, which is a great perk. All of my online banking accounts are connected to these apps: checking accounts, savings accounts, credit cards, and investment accounts. I can sign in to any of these apps during the day and track my overall spending or my spending in a certain category.

Clarity Money keeps track of my credit score, which is extremely helpful to know. It also keeps track of any recurring payments it finds in my account and makes me aware of them, in case I’ve forgotten and want to cancel old accounts. Additionally, it tells me when it finds credit cards that would be better suited to my needs than the one I’m using.

Personal Capital is helpful because it tracks my net worth. I have my mortgage and student loan accounts, plus my home’s worth according to Zillow attached, so it really does show me the whole picture of my financial well-being. Not to mention the fact that I enjoy watching my net worth slowly increase each month as my debts get paid down, I beef up my savings, and the value of my house rises. It’s also quite easy to compare my spending this month on this date to my spending last month on this date, so it really helps to keep me in check and figure out where I can cut corners.

Mint is unique in all of the resources that it offers to its users. It has a robust collection of articles to browse on various money topics. It shows me credit card or loan offers that better suit me and my situation, and it also tracks my spending in all categories quite easily.

Apps that save for me

The other type of app that I’m obsessed with saves money for me. Yes, you heard me right. These apps connect to my bank account and save money little-by-little for me so that I don’t have to think about doing it myself. I have two that I use daily: Digit and Acorns.

Digit connects to my checking account and analyzes my spending. It somehow knows how much money I will have coming in at any certain point in the month and how much will be going out. Then it skims a few dollars here and there that it knows I won’t really miss and deposits it into a separate savings account for me. I can also set up recurring payments or make extra payments at any time.

One of my favorite ways to use Digit is to deposit money into my Digit account whenever I’ve saved anything. For example, whenever I go to a grocery store the receipt always tells me how much I saved by using coupons or by getting the club member discount. Before throwing the receipt away I always deposit that amount into my Digit account. So if my receipt tells me I saved $7.38 during my shopping trip, I add $7.38 to my Digit account. Or if I really practice my self control and brew my own coffee at home instead of buying a mocha on my way to work, I deposit $5 into my Digit account. I never really miss the money because I would have spent it anyway.

The other savings app that I absolutely adore is called Acorns. It also connects to my checking account, but rather than skimming a little money here and there, it rounds all of my transactions up to the nearest dollar and invests the difference. Let’s say I had a transaction that cost $10.45. Acorns would round that up to $11 and deposit the 55 cents into my Acorns account. Once I get $5 in that account, it invests it into ETF’s. I can also set up recurring payments to give myself a little boost. I definitely won’t be able to retire off of this account, but in the last 13 months I’ve invested $997.78, which definitely isn’t bad.

What’s the point?

The point I’m trying to make here is that budgeting (or saving) doesn’t have to be as hard as some people make it out to be. Sure you can tediously pore over your monthly transactions and add them into a spreadsheet. Or you can do it the lazy way and have your phone track it all for you in real time. The choice is up to you. But if it were my choice, I’d rather use that extra time to watch some Forensic Files or catch up on my sleep.

budgeting

Let’s Talk About the B Word: 4 Common Budgeting Methods

Let’s take a minute to talk about the “B word.” A word that makes grown women and men alike cringe. A word with an undoubtedly negative connotation. A word most people never want hurled at them. I’m, of course, talking about the word “budget”. I suspect most people would prefer the other B word, to be honest.

I’m not so sure why budgets get such a bad rap. I suppose most people think of budgets as restricting and a surefire way to sit at home on a Friday night with nothing to do. But in all actuality, budgets are a vessel designed to carry you where you want to be and allow you to do more of what you want to do.

Essentially, a budget is just you telling your money where to go. Many people earn their monthly paychecks, spend their money, then wonder where the heck all of their money went. But simply by paying attention to where your money goes and directing it to the right places, you can give yourself freedom that you probably never imagined was possible.

The most important piece of budgeting is obviously sticking to it month after month. But the only way to do that is to find the budget that works best for you. Below are the four most common budgeting methods.

The Zero Sum Budget

With the zero sum budgeting system you take the total amount of money that you will earn during a month and simply subtract your expenses until you end up at zero. The easiest way to do this is to start by subtracting all of your fixed monthly expenses. By fixed expenses, I mean monthly bills that cost the same each month. Your rent or mortgage, car payment, car insurance, phone bill, and minimum payments on credit cards are all fixed expenses. Then you subtract all of your variable expenses (expenses that change every month) until you get to zero, which leaves no wiggle room for those “Where did all my money go?” moments.

Cash Envelope Budget

With the cash envelope budget, you hide your credit and debit cards away and pay for everything in cash. Obviously you can pay your fixed expenses with your debit card or by automatic withdrawal, but you will only spend cash for your variable expenses. Create separate envelopes for each of those variable expenses (groceries, eating out, entertainment, clothing, etc.). Figure out your budget for each of the categories, then put that amount in your envelope (in cash, of course). If you mess up and go over in one category, you’ll have to take that money out of another envelope, thus forcing you to spend less in whichever category you’ve taken it from. If there’s any cash left in your envelopes at the end of the month, that means you’ll have a little extra for the next month to really treat yourself, or to give your savings account a little boost.

50-30-20 Budgeting

The 50-30-20 budgeting system suggests that 50% of your income should be spent on needs, 30% on wants, and 20% on savings or repaying debt. This isn’t necessarily a system I agree with, as I think 30% on wants is too high, but it could be a great jumping point if you aren’t ready to totally scale back or you don’t have very much debt to repay.

The Snowball Method

The snowball debt repayment method, which was made popular by personal finance expert Dave Ramsey, means paying the minimum on all of your debts, then throwing anything extra into the debt with the lowest balance. Once you pay that off, that minimum payment plus anything extra goes towards the next lowest debt, and so on and so forth. It’s a highly effective method and is an excellent way to gain momentum and confidence as you see the balances on your debts decrease each month.

You can take the same theory and use it for budgeting. Create your monthly budget with all of your fixed expenses, do your best at minimizing your variable expenses, then take everything that’s left over or any extra earnings and put it towards savings or debt repayment. Pretty simple.

Tips to Get Started

Before even putting a budget into place, I think the easiest way to start is by tracking your current spending habits. It is also imperative that you continue to do the same after you’ve started budgeting. For a long time I kept a spreadsheet which indicated every dollar I earned and every dollar I spent, but that was just too difficult and time consuming. Now I use budgeting apps. Personal Capital, Mint, and Clarity Money are my favorites. I have all of my spending accounts (including my credit card) linked, and at the beginning of every month I go in and check on my spending in each category. Before I began budgeting, I thought I had everything under control until I realized I was spending $300 on going out to eat, $300 on clothes, plus all sorts of other frivolous expenditures every month.

Once you’ve started tracking your spending and have a general idea of what you have coming in each month vs. your output each month, you can start to sift through what your wants and your needs are. Your wants are those things that you don’t need in order to survive. Once you’ve identified your wants, challenge yourself to spend half of what you normally spend, or even less than that if you’re feeling super motivated. If you only glean one piece of advice from this entire article, it should be to treat your savings and your retirement savings (yes, those should be separate) as a fixed monthly expense. This is what is meant every time you hear someone say “pay yourself first.”

Extra expenses, whether unexpected or planned, are a fact of life. Incorporate those into your budget as well. If you know your 6-month car insurance premium is due this month, write that into your budget and tighten the belt in other areas. If you know you’re going to attend a fancy dinner for your best friend’s birthday, by all means include that in your restaurant budget. Just make sure you take that out of your vacation or clothing budget that month.

Budgeting isn’t a way of making you needlessly suffer, as so many people seem to think. Rather, it’s a way for you to learn to prioritize areas of your life so that you have more resources for you to do or own the things you love most. If you resolve to give it a shot and stick with it for even just a few months, I can guarantee you won’t look back and regret it.