In most cases where there is a decision to be made about which spouse should be the stay-at-home parent, the choice favors the wife/mother. Instinctively, this seems to be the best choice, particularly when it comes to parenting. But there may be some objective factors that should be closely examined before making a snap decision.
There are even situations – increasingly common these days – where it might be better for the man/father to be the stay-at-home parent. Here’s a list of considerations.
The Spouse With Better Parenting Skills
For the benefit of the child or children, the spouse who should be the stay-at-home parent is the one who has the better parenting skills. Often, that’s the wife, but not always.
The couple should carefully consider who likely has the greatest amount of patience (an absolute requirement with children), the greater attention span (because kids have limitless energy), the best nurturing capabilities, and even the greatest ability to teach.
The complication is that most of us have all of these qualities to one degree or another, and while one spouse may be strong in some of them, the other may be equally strong in others. If that’s the case, then it may come down to personal preference – which spouse wants to be the stay-at-home parent more?
One major caveat though. There is another consideration that requires self-examination and complete honesty. Sometimes the spouse who wants to be the stay-at-home parent more is the one who hates their job the most. In this situation, the stay-at-home parent option becomes an exit strategy from the career world. This should never be considered a viable criteria, since the primary purpose will benefit the parent who wants out, and not the children in any way.
The Lower-Earning Spouse
It might be more accurate to say that the higher earning spouse is the one who should continue working outside the home. This will be an obvious benefit to the entire family, since not only will it result in higher income for the household, but it probably also means more generous benefits, particularly in regard to life insurance and retirement investing.
Another factor that may not be so apparent with income level is income potential. For example, if the lower-earning spouse is earning less because they recently came out of medical school, it might be best for the other spouse to be to stay-at-home parent, since the earning potential of the medical school graduate will be substantially higher.
The Spouse Who Has the Better Eye for a Bargain
While we tend to think of the stay-at-home parent as primarily being a caregiver to the children, budgetary responsibility tends to be thrust on the spouse by default. After all, not only does the stay-at-home parent have more control over their time (to pay bills and deal with financial complications), but they are also put into more situations that require making purchase decisions.
That being the case, you should also consider which spouse has a better eye for a bargain. It probably is not a good idea if a spouse who is a spendthrift is the one who becomes the stay-at-home parent. There will be dozens of purchase decisions to be made every week with children, and it will require a real eye for a bargain.
In a very real way, the stay-at-home parent becomes the guardian of the family’s finances. That should never be taken lightly. The increased financial responsibility by a spendthrift spouse could destroy the couple’s entire attempt to raise their own children at home.
The Spouse Who Has the Greatest Ability to Work from Home
This is an often overlooked consideration when it comes time to decide who should be the stay-at-home parent. It is a factor that can mitigate other considerations, particularly the question of who can earn the most money outside the household.
Let’s look at this question by example. Let’s say that Spouse A has a $50,000 job, and Spouse B earns $40,000. On the surface, it may look as if the logical choice is for Spouse B stay home with the children, and for Spouse A to continue working. But if Spouse A has the ability to earn $20,000 working from home (and Spouse B doesn’t), the family’s financial situation will be helped if Spouse A becomes the stay-at-home parent, and also earns money working from home.
Let’s say that Spouse B will continue to work earning $40,000 per year, but Spouse A will contribute $20,000 working from home. This will produce a combined income of $60,000 per year, versus just $50,000 per year if Spouse B comes home, and Spouse A continues working outside the home.
Some serious consideration of this potential should be given. And it’s not just a matter of producing a higher income. A family living on a single income is more at risk today than they have been in generations, due to the fact that employment is far less stable than its ever been. An arrangement that would allow both spouses to continue earning at least some income will provide a form of income diversification every family needs today.
Have you considered some of these issues in deciding which spouse will be the stay-at-home parent? Leave a comment with your situation!
Medical costs for people aren’t the only healthcare costs rising. Veterinary care for our pets is rising too. Not only can large veterinary bills strain a household budget, but they can also force us into making tough choices. Do we go ahead with a life-saving surgery for our beloved pet, or do we decide that the cost is simply too high?
We don’t have to make such choices when it comes to people. After all there’s health insurance, and even if you can afford it, there’s the Hippocratic Oath that requires that you be given at least life-saving medical treatment even if you can’t afford it.
But what do you do if you’re faced with a large medical bill for your pet, and don’t have the money to pay for it? And perhaps more important, what do you do keep yourself out of a situation that may require you to make such a difficult choice?
There are at least three ways that you can deal with medical costs for your pet, but the catch is that you need to do something about it right now – before you have the need.
1. Pet Insurance
There are different insurance companies providing a variety of policies for pets. I checked out pet health insurance through a company called Healthy Paws. The quote that I got for my dog was about $50 per month, or $600 per year, for a plan that included a $250 annual deductible, and 80% reimbursement on any expenses above that.
The policy covers illnesses and injuries, as well as emergency care and genetic conditions. It will cover hospitalization, surgeries, diagnostic testing, and prescription medications for your pet. Unlike health insurance for people, reimbursement for services does not go to the healthcare provider. Instead, you will pay the vet out-of-pocket and be reimbursed by the insurance company, generally within two weeks.
There are certain exclusions. The policy will not cover pre-existing conditions, preventative or routine care, spaying or neutering, or office visit fees for routine exams. The policies are also limited to dogs and cats, so if you have other types of pets (for example, we have pet rats) they will be ineligible for coverage.
On the upside, there is no network of providers – they will cover services with any licensed veterinarian. There are also no limits on benefit payments, or on the number of claims that you file (according to the company’s website).
2. Dedicated Savings Account for Bills
If the idea of having health insurance on your pet doesn’t appeal to you, you can also set up a dedicated savings account that you can use to handle unanticipated healthcare costs.
We’ve already seen the how the insurance policy costs in the neighborhood of $600 per year. But should you decide to go without health insurance, you can put an equivalent amount of money into a dedicated savings account for your pet. This will be a form of self-insurance, so that you’ll have the money available when needed.
The advantage of this method is that if you don’t spend money, you can keep it and use it for other purposes. In fact, over the course of your pet’s lifetime, it could be a significant amount of money. For example, if you save $600 per year for 15 years, you’ll have $9,000 saved – plus interest. Of course, this assumes that your pet will be completely healthy during that time, and never have need for medical attention. Either way, it would give you complete control over the money that you have allocated and budgeted for potential medical expenses.
The downside of using the savings method is in timing. Let’s say that your pet needs to have a certain procedure will cost $2,000. But you only had your pet for two years, and in that time you saved up $1,200. You’ll still need an additional $800 to cover the medical costs.
Still another limitation is the fact that medical treatment costs for your pet can easily exceed the amount of money that you have set aside for that purpose. Much will depend upon how much you are prepared to spend on any given procedure that you might have done to your pet.
3. Care Credit
You may have heard of this company, either through TV or Internet ads, or you may have been offered a medical line of credit from a healthcare provider. The surprise here is that the credit line also extends specifically to veterinary care.
Care Credit is actually a trade name for a credit line program that is offered by GE Capital Bank. They have made this program available to healthcare providers so that patients can use the line to cover the deductible portion of a medical procedure. The most attractive benefit of this program – other than having a ready credit-line available specifically for healthcare purposes – is that it comes with an interest-free payback period, that can extend as long as 24 months. That makes it “as good as cash,” particularly when you don’t have the cash.
Of course, it’s always best to have money saved in advance of contingencies, but a credit line like Care Credit is the next best thing.
We had a line with Care Credit that we got as a result of my wife’s shoulder surgery about a year and a half ago. A couple of months ago, I got a promotional email from Care Credit that had some language referring to veterinary care buried in the fine print.
I called the company to verify this to be true, and it was. Then I called our vet to see if they participate in the plan, and they do.
You don’t want to use a credit line like this for routine veterinary care, but it can come in handy if you have a major expense, such as a surgery or multiple treatments. It’s one more option that you have to pay your medical bills for your pet. And best of all, unlike pet health insurance, you can use Care Credit to cover expenses on any type of pet that you have – including ones like our pet rats.
What is your contingency plan in case your pet needs high-cost medical treatment? Leave a comment!
Married couples can face financial stressors on various fronts. Maybe this isn’t even a stress – but a preference – but what do you do if you’re a saver and your spouse isn’t?
It’s actually a serious dilemma though, even if many would not consider it to be an actual problem. Some people have a deep emotional need to have savings. Others could care less. If you are in the ‘deep emotional need to save’ category, and your spouse isn’t, what can you do?
1. Give your spouse the lion’s share of household expenses.
This is the game of divide-and-conquer, applied to your household finances. Essentially what you do is allocate the bulk of households expenses to your non-saving spouse. This will ensure that the majority of their income goes to pay common and necessary expenses. At the same time, it will free up your paycheck to concentrate more heavily on savings.
While your spouse is tied down paying household bills, you can allocate money into short-term savings, long-term savings, and even a greater share in retirement.
On the surface this may sound unfair. But if your spouse has no inclination to save, this could reshuffle your budget allocations to make sure that common household expenses are paid and free you – the saver – to save money.
This will be a benefit to your non-saving spouse as well. They will benefit from the fact that household savings are increasing. In addition, the non-saving spouse will be participating in the savings process by freeing up more of your income for capital accumulation.
2. Have your spouse direct deposit money into savings.
One of the best ways to get a non-saver to save money is to take the savings decision out of their hands, and automate the process. You can do this through direct deposit payroll savings. You can establish or increase the amount of money that the non-saver direct deposits into savings, investment accounts, and retirement accounts.
Those savings vehicles will then continue to grow virtually unnoticed by the non-saver. I’ve actually seen non-savers accumulate tens of thousands of dollars through direct deposit savings. It really works!
3. Set up accounts that require both signatures.
One of the basic issues of non-savers is that they have little regard for savings, even beyond the dislike for the process of saving money itself. For better or worse, some people view money as something to be spent, which opens up the possibility that any savings accumulated might be raided for some other purpose.
The best protection against this outcome is to set up joint accounts that require both signatures for withdrawals. This will mean that you’ll be alerted anytime the non-saver might want to access one of the accounts.
Also, if you give your non-savings spouse the lion’s share of household expenses, while you act in the role of designated saver, joint ownership will eliminate the fear your spouse may have that you are accumulating assets while they are “stuck with the household bills”.
Of course, you won’t be able to do this with retirement accounts as they are strictly individual vehicles. But that’s what you have direct deposit for. And as we all know, withdrawing money from a retirement plan is a lot more complicated than pulling it out of a savings account or even a non-tax-sheltered mutual fund.
4. Have your spouse max out retirement contributions.
Some non-savers will never be converted into savers. It may be too much to ask for them to fund multiple savings and investment accounts. You can get around that by picking just one account that the spouse can focus on funding. If you have to make a choice, that should be their personal retirement account.
There are numerous reasons why this is a natural choice – and why it will probably work:
- Since it is funded by payroll deductions, it will be almost effortless to carry out.
- Part of the funding will be covered by lower payroll tax withholding.
- The account will specifically be in the name of the non-saving spouse (an example of “paying yourself first”).
- They will be providing for your common retirement (most people – even non-savers – don’t want to get this wrong).
- If the non-saving spouse is covering a greater percentage of retirement savings, it will free you up to concentrate on the rest.
- Funding even one type of savings is better than none, and a real victory for a non-saver.
5. Create a goal that will make saving attractive.
Some non-savers simply lack the motivation to save. But you may be able to fix this problem by creating a goal that will make the process of saving money attractive. That might best be accomplished by making the savings goal something that’s fun.
For example, you can set the savings goal as something like one of the following:
- Saving for your next family vacation.
- Saving for a new car.
- Saving for new furniture.
- Saving for the children (braces, college education, summer camp).
- Saving for your second honeymoon.
No, none of these goals will accomplish anything more practical, such as saving money for a new roof, a new paint job on the house, replacement of the furnace or air conditioner, or even building an emergency fund. But we can never have all in life, and you probably can’t push a non-saver too hard.
If you can get a non-saver to at least fund their own retirement, and one or two common savings goals, you might just have to declare victory and call it a day. Change, after all, comes one step at a time. And for a non-saver, any of these changes just might be a revolutionary act.
Do you have a spouse who is a non-saver? What are you doing to get them to save at least some money? Leave a comment!
It’s a time-honored tradition: When summertime comes around, it’s time to go on vacation. However, vacations can get expensive if you aren’t careful.
When I was growing up, most of our summer trips revolved around the great outdoors. With five kids, my parents weren’t too keen on flying us around. Instead, we did a lot of camping and short road trips – all relatively inexpensive vacations.
However, there was one summer that we took a serious vacation: A three-week trip traveling through the midwest. That trip took serious planning, since our 15-passenger van required a great deal of gas, and there were hotels to stay at and food to buy. My parents saved up for that trip for months.
As a result, I learned that the time to start saving for your summer vacation is in January or February.
How Much Will It Cost?
The first step is to estimate your costs. Will you fly? Will you drive? Where will you stay, and how much will that cost? How much will you pay for food?
My parents saved on food costs by buying a five-day cooler for perishables and bringing sandwich stuff and other items for us to eat. They replenished the cooler along the way by going into town to shop at grocery stores (less expensive than buying at convenience stores).
There are trip cost estimators that can help you estimate gas costs, based on your car and your route. You can save money by planning to buy your airplane tickets at certain times and by looking for discounts on hotel rooms. I also like to book airfare on Orbitz if I book in advance, since you can get a price guarantee. If the price drops lower than what you paid, you get a refund of the difference.
My parents estimated their costs – and then added 15 percent to the total. That way, they could be prepared for incidentals and the reality that everything costs more than you think it will.
How Much Time Do You Have?
Now you need to figure out how much time you have to save up the money. If you plan to take your vacation in July, and you start saving in February, you basically have five months to save up (going until the end of June). Take your total and divide it by five to figure out how much you need to set aside each month to get there. If your vacation is going to cost $1,000, you will need to save $200 a month to make it work.
Remember that in some cases you might need to pay earlier. If you are buying airline tickets or booking hotel rooms, you might need to stagger your planning, and spend some of the money as you get it.
Another strategy is to use a credit card to pay for things like airfare – since that is the most expensive thing to pay for up front for many families – and then pay off the card as you go along, hopefully paying it off before you start your vacation. If you can swing it, open a 0% APR card so that you don’t pay interest on your vacation-related purchase.
If you are planning on a great summer vacation, start saving now. You’ll avoid the debt trap, and you’ll have peace of mind as you travel.
Where are you going this summer? How much will it cost? Will you be able to adequately save for this vacation? Leave a comment!
This is the season of resolutions, as in New Year’s resolutions. But resolution is mostly just a fancy word for goals that we trot out at the beginning of each year as a way of raising our commitments to achieve them.
If you’re like most people however, you have more than a little bit of difficulty in translating your resolutions – goals – into reality. If that’s the case, it may be that you need to set smaller goals in 2014. Smaller goals are simply more achievable, and it’s only when you can achieve small goals that you’re ready to take on the bigger ones.
Here are some examples of smaller goals that might put you on a path to achieve larger ones as the new year unfolds:
1. Pay off one debt.
Paying off debt is a pretty typical goal for just about anyone who has debt. We tell ourselves this will be the year that I will become debt free so that I can get on with my life. But becoming debt-free may be too tall a proposition to accomplish in a single year. A better approach may be to set a smaller goals, like paying off just one debt.
Pick any debt you like – the largest, the smallest, or the one with the largest monthly payment – and make a goal to pay it off this year. It may seem like a relatively small act, but it is a form of the divide-and-conquer strategy, in which you breakdown a large task into smaller parts. You may not be able to pay off all of your debts this year, but you can almost certainly pay off one.
2. Don’t join a gym – yet.
Getting in shape is another typical goal for a lot of people, and the onset of a new year is often a catalyst. Unfortunately, many plans to get in shape end up being abandoned, and fairly early in the year.
What makes it worse is that this resolution is often accompanied by a gym membership. And since those typically come with a contract that runs anywhere from one to two years – complete with monthly payments – you could be wasting a lot of money if you sign up and stop using it after few months.
This may be a classic example of setting a goal that’s too high. If your past track record on getting in shape is kind of spotty, you might be better off setting a more achievable goal. Rather than taking out a gym membership, thinking that it will motivate you, you may be better off starting with some low-impact workouts.
Walking or jogging are good starts. Biking and in-line skating can take it up a notch. Start with a light exercise program that won’t cost you any money. The idea is to prove to yourself that you’re committed to getting in shape, and only adding a gym membership once that becomes the obvious next step.
3. Increase your retirement or savings contributions by just $20 per week.
If you haven’t been on top of this up to this point, there may be a desire to go-for-broke to try to make up for lost time. But retirement contributions are a drain on your budget, which may be a large part of the reason why you haven’t been so conscientious with this in the past.
It might be better to set the more doable goal, such as increasing your retirement savings by an affordable amount, such as $20 per week. With just that small contribution, you can add an additional $1,000 per year to your retirement savings. That won’t bring overnight retirement success, but it will get you moving in the right direction. Next year, and the year after that, you can make similar increases.
4. Read one new book.
Books can truly be life transforming – if you’ve ever read Tim Ferris’s The Four Hour Workweek then you know what I’m talking about. There may be several such books that you would like to read, but simply don’t find the time to get to.
Rather than having a list of books, pick just one new book to read this year – even on a limited schedule you can probably get that much done. Just make sure that whatever the book is, it’s one that has the potential to make a real difference in your life. Just one influential book read each year for 10 years could help put you on a different course in life.
5. Improve one relationship.
Conflict seems to be a built-in part of the human condition, and most of us have one or more troubled relationships in our lives. It could be with parents, siblings, aunts or uncles, cousins, long-term friends, or even with your spouse or adult children.
While it may be noble think you can improve all of your relationships this year, that could also be overwhelming. But pick one troubled relationship – one that’s particularly important – and resolve to improve it this year no matter what. The upshot is that if you can improve one relationship, you’ll probably feel empowered to fix a couple more.
6. Pick the dirtiest, most dreaded task you have and get it done it now.
Okay, I’ll admit this probably is not a goal on most people’s New Year’s resolutions list. At the same time, most of us have a project or task – one that’s particularly intimidating – that we’ve been putting off for as long as we can remember. Decide to get that task completed and behind you this year. Now will be even better!
Here’s the point: The dirtiest, most dreaded task that confronts you is probably interfering with other areas of your life. For example, let’s say that you need to make a job change. You know it, and you’ve actually known it for a long time – maybe for a year or longer. But you’ve been putting it off because the job hunting process makes you feel uncomfortable. However, while putting it off you’ve been accepting an undo level of stress that’s affecting everything else that’s going on in your life.
While it won’t be pleasant, make that your first goal to be accomplished this year. By putting it behind you, you will free up your mind and your emotions, and that will make it easier to do just about anything else that you want to do from now on.
Do you have large goals for 2014 that you are worried about accomplishing? Do you see how breaking them down into smaller parts can be an advantage? Leave a comment with your thoughts!
Credit scoring has become big business. There are a number of scoring algorithms that can impact the way financial service providers see you. Your credit score influences decisions about whether or not you should get a loan, as well as whether or not you should have favorable terms when you are approved for a loan.
Not only that, but there are instances when your credit score can impact your insurance premiums and other aspects of your financial life. As a result, it’s important for you to do what you can to keep your score in good shape. Unfortunately, we’re all prone to blunder. Here are some of the mistakes that can drag down your credit score:
1. Missing Non-Credit Bill Payments
Most of us know that missing credit payments, like those for credit cards and mortgages, will result in lower credit scores. However, some consumers don’t realize that even their non-credit accounts can have an impact. If you miss utility payments, or you don’t pay your medical bills, those accounts can be turned over to collections and reported to credit bureaus.
2. Maxing Out Your Credit Cards
It seems as though it wouldn’t matter how much you have on your credit cards, as long as you pay at least the minimum on time, and you don’t go over your credit limit. However, this isn’t the case.
When you carry high balances, you are causing severe damage to your credit score. Many credit scoring models use your credit utilization – the percentage of available credit you are using – as one of the top three factors that influence your score.
You’re better off keeping your credit card balances to below 50 percent of your available credit, and it’s even better if you can keep it to under 30 percent of your available credit. Best of all, though, is if you pay off your card each month to avoid falling into the debt trap.
3. Canceling Credit Cards
Some consumers get excited about canceling credit cards, especially as they pay down debt. Unfortunately, this can affect your credit score in a couple of ways.
First, you are reducing your available credit. If you still have balances on other credit cards, your total credit utilization has just been impacted.
Second, you are reducing the length of your credit history. Many credit scoring models look at how old your accounts are. Canceling an account, especially one you’ve had for awhile, can lower your credit score.
4. Assuming All Loans are Created Equal
A credit card is a credit card, right? Not exactly.
Most credit scoring models take into account the type of credit account you have. A credit card issued by a retailer, and not usable outside that retailer, is considered less positive than a credit card issued by a major bank. Likewise, a payday loan can actually negatively impact your score in some cases, while a car loan (if you make all your payments on time and in full) can be good for your credit score.
Pay attention to the type of account you are getting, and where the debt comes from. You’ll be able to better protect your credit score.
What are some other mistakes that can drag down your credit score? Leave a comment!
One of the most difficult situations to overcome is bankruptcy. When you declare bankruptcy, it can be difficult to recover – and to convince creditors to lend to you again.
While it might be difficult to find lenders after you file for bankruptcy, it is possible to borrow money even in this dire situation. Getting to that point might require some hard work on your part, though.
You Can Borrow as Long as Someone is Willing to Lend
Understand that anyone can borrow any amount, as long as a lender is willing to take a chance. Even if you are bankrupt, you might be able to find lenders willing to work with you. Realize, though, that if you are in an open Chapter 13 bankruptcy, you will need to get permission from the bankruptcy court to borrow.
Consider looking for lenders that specialize in poor credit loans and after-bankruptcy loans. Understand that you will likely have to accept the following conditions if you borrow money following a bankruptcy filing:
- Much higher interest rate
- Willingness to secure the loan with some sort of asset
- Smaller loan amount
Because you have shown yourself a credit risk, lenders want to protect themselves, and this means that you will pay a higher price in order to borrow money. As you make your payments on time and in full, though, your credit should improve, and you will have access to better terms.
Improve Your Credit First
In many cases, it makes sense to improve your credit before you try to borrow after a bankruptcy. The first step is to make all of your payments – from utilities to insurance premiums to credit cards – on time. One tactic many use following bankruptcy is to apply for a secured credit card to help rebuild credit by showing responsible habits. You can use alternative credit scoring, like that offered by eCredable and PRBC to establish a positive payment record with non-credit accounts.
Overcoming a bankruptcy is not something that can be done overnight. You will have to show responsible behaviors for 12 to 24 months if you want to be considered by many more traditional lenders, especially if you want to try to qualify for a mortgage. Work to boost your credit score, and you’ll be more likely to be seen as an acceptable risk moving forward.
Add a Statement to Your Credit Report
It’s also possible for you to add a statement to your credit report. If your bankruptcy was the result of circumstances beyond your control, such as a major medical catastrophe, a messy divorce, or a job loss followed by a long period of unemployment, you can add a statement to your credit report. This statement tells your side of the story, and might help some lenders decide to take a chance on you after all.
In some cases, a lender might require you to create a statement for submission with your loan application. Your statement should concisely describe the conditions that led to your bankruptcy, as well as outline what you have done to improve your situation, and your plans for improving your financial management in the future. There are lenders that understand extenuating circumstances, and a well-written statement can go a long way toward helping you qualify for a loan.
You can borrow money if you are bankrupt. However, you need to be willing to pay a higher price, and take extra steps to show that you are capable of meeting your obligations this time around.
Have you gone through bankruptcy? Tell us your story and if you can still borrow money. Leave a comment!
This article was originally published January 23, 2013.
When you are trying to do something big and life-changing, you often need support. It’s difficult to make the big changes in your life if you feel that you are on your own. One of the biggest changes you are likely to make is the decision to get out of debt. Without support, though, you can quickly fail in your efforts.
Creating a ‘get out of debt’ support group can really help you improve your financial situation and keep you on track with your goals. As you put together your plan for getting out of debt, don’t forget about your debt support group.
Family and Friends
The first people you should turn to are your family and friends. Your immediate family is especially important.
If you are trying to get out of debt, you need the help of your life partner as well as your children. If you have a life partner, your first task is make sure that you are on the same page. You both need to be on board with getting out of debt if you want to live a debt-free life. Once your immediate family is on board, you can let your parents, siblings, and other family members know about your debt reduction efforts.
You should also let your friends know what you are doing, and what you are trying to accomplish.
True friends will want to help and encourage you. When you let your friends know that you are trying to get out of debt, they will understand if you want to enjoy frugal alternatives, like having a game night at someone’s home, rather than going out and spending a lot of money. They will also understand if you are not interested in big gift exchanges and other expensive activities.
Online Support Groups
If you are having trouble finding support from those that are closest to you, it can make sense to look for support groups online. There are a number of websites with forums designed to help you get out of debt. ReadyForZero and CareOne are communities that can help you find like-minded people who can give you the encouragement you need to stay on the right track.
Finding those who understand your efforts and interests can be integral to your success in getting out of debt.
Accountability and Encouragement
One of the reasons that it’s important to have a get out of debt support group is that it provides you with accountability. When you tell others about your plans, you are putting yourself out there – asking others to help keep you accountable for your actions. When you know that you will have to face your family, friends, and online support group, you are more likely to stick with your plan and try to make it work. You will work harder to succeed when you know that you will have to face those you respect and love.
Your get out of debt support group can also help you find encouragement. They can provide you with helpful tips and hints, as well as encourage you to keep with your efforts. When you are discouraged, and thinking of giving up, a kind and helpful word from someone in your support group can renew your resolve. Additionally, your support group gives you people who can work with you. If you are all doing something together, and working toward the same goal, you feel less alone, and you know that you have help when you need it.
Few of us can succeed at something as big as paying down debt on our own. Finding a support group can keep you focused. They’ll help encourage you to build the characteristics you need to get out of debt.
Do you have a get out of debt support group? How have they helped you? Leave a comment and tell us where you’re at in your debt reduction plan!
This article was originally published January 7, 2013.
At times, it’s all too easy let financial matters slip through the cracks. However, you need to make sure that you are on top of your finances in order to make the most of your money – you know that!
Here are some of the problems that you can encounter if you don’t take the time to address your finances:
Overdrawing Your Account
This is a problem that comes if you don’t track your spending. Humans are bad at estimating how much they have spent, and how much they have left in their accounts. This is especially true if you use a plastic card (debit or credit) to pay.
If you want to stay on top of your finances, you need to know where your money is going. Make a plan for your spending, and then track where the money goes.
You don’t have to make a draconian spending plan where you plan out where every penny goes, but you should keep track of your spending, and know where you stand in terms of your account. That way, you are less likely to overdraw your account and end up paying hefty fees.
Wrong Asset Allocation
One of the most important things you can do for your investing portfolio is to make sure that you have the right asset allocation. Over time, many portfolios tend to experience drift.
If you are invested in funds, sometimes the natural turnover in the funds means that the asset allocation changes a little bit. If you have your portfolio funded by automatic investments, it’s possible that sometimes you might end up with more of one type of investment.
Whatever the reason, it’s a good idea to check your portfolio once to three times a year to make sure that your asset allocation is what it should be. If your asset allocation has drifted, you can rebalance your portfolio. Don’t ignore your portfolio and end up with an unsuitable asset allocation.
Over time, it’s easy to let something slide, and to end up with money leaks. You might have a subscription to a magazine that you never read, or you might be paying a higher price for certain services. Perhaps you aren’t shopping around. These money leaks can add up over time. Every few months, really look at your expenditures and identify money leaks to plug.
This step includes shopping around for better prices on existing services. Double-check your insurance rates. Many people don’t realize that a little shopping around could save them between $20 and $100 a month on insurance.
Additionally, it doesn’t hurt to shop around for a better-priced cable package (or cut the cable and switch to Hulu and/or Netflix). Take a look at where your money is being wasted and plug those leaks.
Pay Attention to Your Finances
While you don’t need to obsess over every single dollar, you should pay attention to your finances.
Look for inefficiencies in your personal economy, and then find ways optimize them. Know where your money is coming from, and where it is going. Over time, many of us start to become a little bit lax with our finances. Set aside a specific time every quarter to review your finances and make sure that you are getting the best possible results for your situation.
So, are you paying enough attention to your finances? What are some other reasons you might want to? Leave a comment!
This article was originally published January 14, 2013.
When it comes to investing, it’s too easy to just sort of decide on an asset allocation and then stick with it for the next 30 years. While asset allocation is an important part of investing, it’s also important not to take the lazy approach to investing in your future. One way you can change the way you think about investing is to divide your investments into “buckets.”
The idea behind the bucket approach is to recognize that you have different goals for your money. When you need the money, and what you use it for, depends on a couple of factors:
- Risk tolerance: How much can you afford to lose? What do you stand to gain? How much money goes into each investment bucket depends on your risk tolerance, financially and emotionally.
- Timeframe: Another issue is when you want something to happen. The investment bucket that your money goes into depends on when you plan to retire, or whether you want to use investing as a way to reach a short-term goal.
As you build your investment strategy, consider using a bucket list approach, and divide up your money based on what you can afford to lose, and when you are going to need to use the money. Here are some investment options to consider as you create your strategy:
1. Cash Bucket
Into this bucket goes the portion of your portfolio that you want kept as secure as possible. These are FDIC-insured products, like high-yield savings accounts and CDs. You won’t earn a great deal of interest on cash, but it will be safe, and fairly liquid (make sure that you have some of your cash bucket in savings accounts, since the CDs aren’t as liquid without penalties).
Use your cash bucket for things like your emergency fund, or for money that you know you are going to need at a specific time. You can use a CD ladder approach if you want to know that money will be available at regular intervals, but still want to try to maximize returns.
2. Income Bucket
Are you looking to produce regular income? If you want your investments to contribute to your cash flow, the income bucket is the way to go. It takes time to build up a good revenue stream from income investments, so be prepared to take between 10 and 20 years to fill this bucket.
You can use bonds and dividend stocks, as well as P2P loans (if you have the risk tolerance), to put together an income portfolio that makes sense for you.
3. Growth Bucket
This is about building your nest egg. It’s about portfolio growth, often for the really long haul. This is the money that you invest in retirement accounts, and that you don’t plan to touch for 20 to 40 years. This is a bucket where the asset allocation is likely to change as you get older and closer to retirement, and shift from the accumulation stage to the shoring up stage.
4. Medium-Term Bucket
If you are planning a medium-term goal, such as sending your child to college, or saving up to buy a house (goals that take between three and 10 years), you can create a bucket for that. Carefully consider how to balance reasonable growth with some level of security for your money. Using an online discount brokerage can be a good way to build up for your medium-term goals.
5. Short-Term Bucket
Do you have short-term goals you want to reach? Dreams that you want to see become reality in the next one to two years? This is the bucket for you.
You can use an online discount brokerage, or even use tools like the Betterment gift registry to reach your goals. Putting a certain amount toward your short-term goals can help you reach them faster, and you can even use social strategies to get help from your friends and family.
How are you planning to invest your money? Leave a comment!
This article was originally published December 21, 2012.