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Staying Motivated While on a Budget

Regardless of whether you have just started budgeting, or have been budgeting for a while, staying motivated to make and stick with a budget month in and month out can be tricky.  Let’s be honest, putting self-imposed limits on our own spending isn’t always as glamorous as the vacations we see people taking and posting on social media. Not to mention we live in a society that is filled with temptations and surrounded by impulse purchase items that are strategically placed to part us with our hard earned money. achieving success

We always start budgeting with the best of intentions – securing our financial future. But keeping the big picture in mind can be difficult. Let’s look at some strategies that you can use to stay motivated to stick with that budget.

Track your Progress:

Paying off debt? Saving for a vacation? Paying off your mortgage early? There are plenty of printable charts and graphs that are available online that you can use as a visual reminder of just how far you’ve come, which in turn will motivate you to go even further.

Take it a step further and put that chart or graph somewhere where you will see it everyday. Watching the debt that you owe go down or your savings go up is a great reminder as to why you started budgeting in the first place and will motivate you to stick with it.

 

Treat Yourself Every Once in Awhile:

Now I’m not talking about going out and blowing the bank, you do want to keep it modest, but set an increment where once you’ve reached it you’ll give yourself permission to go out and treat yourself to something nice. So maybe after every $1000 of debt that gets paid off, you can pick up your favorite specialty coffee or treat yourself to a nicer cut of meat on your next grocery trip. The key here is that no matter what modest treat you choose, you are rewarding yourself for a job well done.

Read Some Financial Blogs, Watch Financial Vlogs, or Listen to Some Financial Podcasts:

Even though my husband and I have finished paying off all of our consumer debts and student loans, we still listen to Dave Ramsey podcasts to help keep us on track. There’s nothing I’ve found more motivating than listening to hard working people scream at the top of their lungs, “WE”RE DEBT FREE!!” While cooking dinner, I’ll also hop onto YouTube and see what my favorite financial YouTubers are up to and what financial progress they are making.

When trying to stay motivated, I’ve found that it always helps to surround yourself with like minded people who are also working diligently at either paying off debt or saving for their future. If you can’t find people in your everyday life who are motivated and sticking with a budget, we are lucky in this day and age to have such a great virtual community of financially like minded people that can motivate us.

Create a Vision Board:

Remind yourself of your budgeting why by creating a vision board of what your financial goal looks like. If you are saving up for a big vacation, find pictures of your destination and create a collage and post it somewhere where you’re going to see it on a regular basis. If you’re looking to pay off debt, create a collage of what your debt free future looks like. Having a visual reminder will help you keep the bigger picture in mind as you work towards reaching that goal.

Don’t Get Down on Yourself:

We are all going to have setbacks. Life is going to happen and sometimes that will mean that you have to go over budget or dip into that savings that you’ve worked hard to build. The important thing is that you don’t let it get you down to the point where you feel like giving up altogether. Yes it’s painful when you are faced with expenses that you weren’t anticipating, but don’t let that stop you from keeping your head up. Keep moving forward knowing that it will get better and that the end goal is still achievable, even with the occasional setback.

Your Turn!

  • How do you keep yourself motivated while on a budget?

3 Easy Ways to Pay off Your Mortgage Early

My husband and I have been following Dave Ramsey’s Baby Steps for the last 3 years. We have worked diligently at paying off all of our consumer debt, building our emergency fund, saving money for both our children’s college education and our retirement, and now it is time for us to also look at ways that we can pay off our mortgage early.

Because we have sacrificed a lot of the “fun” stuff to make the progress that we have, we want to be sure that we leave some wiggle room in our budget. As a result, we wanted to look at three simple and painless strategies that we can use so that we can still reach the goal of paying off our home early while leaving some money for “fun” as well.

Throw Found Money at Your Mortgage:

Found money is that money that you may not have anticipated or put into your monthly budget. A tax return, overtime pay, extra income, or inheritance is often money that is outside of your regular budget and therefore is not needed for your monthly expenses. Since it’s money that you weren’t really counting on, why not consider throwing it at your mortgage?

Refinance with a Shorter Term:

Another simple way to make sure that you pay off your home early is to consider refinancing it at a shorter term. According to our latest mortgage statement, we currently have 16 years remaining if we follow our scheduled payment plan. When our mortgage term ends in the next year, we are going to be looking at refinancing on a 10-year amortization schedule.

With no debt payments, we have the extra cash flow to afford the slightly larger monthly payments. It will also ensure that we are shaving at least 5 years off our mortgage repayment plan. With this move, our mortgage is guaranteed to be paid off 5 years before we retire, meaning that we’ll have 5 years with a full income to continue to stockpile cash before we bid our careers goodbye.

Switch to a Bi-Weekly or Weekly Mortgage Payment:

Another way to ensure that you pay off your mortgage early, without much effort needed, is to consider switching to a bi-weekly or weekly mortgage payment, rather than making one monthly payment.

If your monthly mortgage payment is $1200, your bi-weekly payment would be $600. The magic is that instead of making 12 mortgage payments for a total of $14,400 per year, you would now be making 26 payments for a total of $15,600. Without even thinking about it, you end up making an extra mortgage payment every year.

We currently live in our forever home and are looking forward to the day when we can say that we own it outright. Living without a mortgage payment would not only give us tremendous peace of mind, since we would no longer owe anyone anything, but it would also mean that our incomes are completely freed up to build wealth and give generously.

Your Turn!

  • What would motivate you to pay off ALL of your debt?

Prepare to Invest

Whether you want to save for retirement, pay for your children’s college, or buy a new house, making the right investment choices will allow your money to make you even more money in order to fund your goals.

Now that my husband and I are on a solid financial footing, we are ready to start investing. There are times when this process has seemed intimidating, but thanks to a great, and patient, advisor we feel more prepared and sure that we are going to be making the right decisions.

Set Your Financial Goals:

You’ll want to sit  with your investment adviser and review a list of your financial goals. Based on your prioritized list and the time frame that you have to meet that goal, your adviser will then begin the work of coming up with some investment options and be able to give you a monthly amount that will need to be invested.

Learn About Your Investment Options:

There are many options available when it comes to investing. The long list of possibilities includes stocks, mutual funds, savings bonds, annuities, exchange-traded funds, money market funds, and U.S. Treasury securities. You may also be interested in investing in real estate, precious metals, or commodities.

With so many options available, it is important to educate yourself on the risks of each type of investment and make sure the risks are appropriate for you. We all love the idea of our money working for us, but it’s also important that you can sleep easy at night knowing that you are comfortable with the investment strategy that you have selected.

Gauge Your Risk Tolerance:

How much risk you are willing to take on depends, for the most part, on how much time you have before you’ll need the money. If you are not retiring for another 30 years, it would make sense to take a riskier approach and perhaps consider investing in more aggressive funds or forms of investment. Time is on your side, and you are in a better position to weather the ups and downs that the market presents.

If you need the money in 5 years or less, you would be looking at a less risky investment such as a bond or a money market account. Although these don’t have the high rates of return that a more risky investment would have, you are much less likely to cash out at a loss if the market takes a tumble.

Diversify Your Investments:

We’ve all heard the phrase, “Don’t put all of your eggs in one basket.” By diversifying your investments you are safeguarding your money. The idea of course being that if one investment loses money, the other investments make up for those losses. In the case of a down market, although your investments may suffer, they won’t suffer as much as they would if you weren’t diversified.

don't put all your eggs in one basketI had a former co-worker learn this lesson the hard way. When the tech bubble was going strong, he invested all of his money earmarked for retirement into tech stocks. When the tech bubble burst, so did his dreams of retirement, and as a result had to continue in the workforce past his original retirement age.

Be on a Solid Financial Foundation:

Before you start investing, you want to make sure that your financial foundation is set. You want to be on a monthly budget with a positive cash flow so that you know how much you have to invest each month.

You also want to make sure that your consumer debts and student loan debts are paid off, freeing up even more cash flow to save and invest with. Last but not least, you want to also ensure that you have an emergency fund with three to six months worth of expenses in place so that if the unexpected happens, you are not pulling money out of your investments.

Don’t Forget to Ask Questions and Educate Yourself:

With the internet and Google, it has never been so easy to find information, but sometimes that information can be as overwhelming as the thought of investing if you are just getting started. The Securities and Exchange Commission has a lot of great information if you are in the beginning stages of investing.

Also consider asking for referrals to a trusted financial adviser. Ask family, friends, and colleagues if they work with someone that they trust and recommend. My Dad’s advice when it came to looking for a good financial adviser: Don’t invest with anyone who has a smaller net worth than you.

Your Turn!

  • What is your biggest financial goal?

Protect Your Wealth

You’ve worked hard and have been financially responsible. You’ve lived on less than you’ve made and saved those extra dollars. Let’s safeguard what you’ve built and look at four things that you can do to protect your wealth.

protecting wealth

Make sure you have the proper insurance in place:

Having proper insurance in place plays a critical role in protecting your wealth in the event of the unexpected. You want to make sure that you regularly review your health, homeowners, and auto insurance to ensure that you have the proper protection that is needed.

You also don’t want to forget to insure yourself and your family against any possible loss of income that may occur. Although not pleasant to think about, having a proper amount of life insurance is necessary in protecting your family’s financial picture.

Most experts recommend having enough life insurance to cover 10 times your annual income. This ensures that your family will be taken care of in the event of your death. My husband and I each have 20-year term insurance. We get the coverage we need, at a price we can afford.disability insurance

If your employer does not already offer it, you may also want to look into disability insurance so that an illness or injury will not destroy the savings that you’ve worked hard to build. Disability insurance will not replace your income, but it will provide a buffer, paying out 60% of what you would normally be making.

It might not seem likely that this type of insurance is something that you would need, but the Social Security Administration estimates that one in four 20-year olds will become disabled and be unable to work before the age of 67, so it’s better to be safe than sorry and make sure that you’re protected.

Have an emergency fund:

Setting aside 3-6 months of your living expenses will serve as insurance for the wealth that you have built and are continuing to build. The money is there when you truly need it, without having to go into debt or withdraw from your retirement savings.

We often think of our emergency fund in the case of job loss. Another good use for your emergency fund is to use it for any home, auto, or medical insurance deductible. We have enough to cover all of our deductibles. This meant that we could raise the deductibles on our various insurance policies and thus lower the premium payments freeing up some extra money each month.

Have an estate plan:

I have many friends who have avoided this step, because planning for your death is not the most glamorous of topics, but having a current will in place is a critical step in your financial plan.

Your estate plan will allow you to reduce administrative expenses and legal fees upon your death. It will also mean that you preserve and leave a lasting legacy for your loved ones. Finally, your will allows you to control, manage, and allocate who receives your assets upon your death.

estate planning

Name your designated beneficiaries:

As important as it is to have a current will in place, it is equally important to name your designated beneficiaries to ensure that your assets are distributed according to your wishes. Be sure to name beneficiaries on any assets that will allow it such as your life insurance, pension plan, IRAs, or 401 (k)s.

Your Turn!

  • What steps have you taken to protect your wealth?

7 Ways to Prepare for Retirement

Financial independence doesn’t just happen once you turn 65. It takes planning and living on less than you make so that you can save and invest. Regardless of your age though, it’s good to know that it’s never too late to prepare for your retirement.

Retirement on beach

1. Pay off Your Debt and have an Emergency Fund

If you have not finished paying off your consumer debt or do not have a fully funded emergency fund in place, you want to focus on these things first before you start setting money aside for retirement. You want to set up a debt payment plan that would see you free from your consumer debt within 2-3 years and then very quickly move your focus to getting that emergency fund filled.

When you’re dealing with a reduced retirement income, the last thing that you want to be doing is still devoting income to your debt repayment or emergency savings. The goal here is to make sure you’re on a solid financial footing and are in a place where you can enjoy your retirement income that you’ve worked so hard for.

2. Start Saving and Stick To Your Goals

The sooner you’re able to start saving for retirement and able to stick to your monthly savings goal, the better off you’ll be. Ideally you’ve put yourself in a place where you can begin setting aside 10-15% of your monthly income into your retirement account. If you’re debt free including your home feel free to put in more than this.

In your monthly budget, make sure that you have a line for retirement savings and that you are sticking to your savings goal each and every month.

3. Know Your Retirement Needs

What you’ll need to save is dependent on the type of lifestyle that you would like to have when you retire. Most financial experts suggest that in order to retire comfortably you should aim to cash flow 70-80% of your peak pre-retirement income.

This amount is not written in stone. Many couples can retire on 60-70% of their pre-retirement income providing that they are debt free and their children are financially independent. There are many retirement calculators that you can use to help you determine how much is enough when saving for your retirement.

4. Contribute to Your Employers Retirement Savings Plan

If your employer offers a 401(k) plan, you want to make sure that you take advantage of it. Not only will you be able to take advantage of compounding interest, but your taxes will be lower, your employer may offer a match to kick in extra money, and automatic deductions make saving easy.

If your employer offers a traditional pension plan, you want to make sure that you ask for an individual benefit statement (if one isn’t sent to you automatically every year) to see what your benefit is worth. If you are planning on a career change or changing employers, you also want to find out what will happen to your pension benefit.

5. Put Money into an Individual Retirement Account

Don’t just stop your retirement planning with your company’s 401(k) option or pension. You also want to make sure that you take advantage of the tax benefits that an Individual Retirement Account (IRA) offers.You can put up to $5,500 a year into an IRA and you can contribute even more if you are over the age of 50.

There are two different types of IRAs to choose from. If you go with a Traditional IRA, the yearly contributions you make are tax deductible on both your state and federal income tax while any withdrawals are taxed at your income tax rate. The Roth IRA provides no tax break on the contributions, but earnings and withdrawals are generally tax-free.

6. Find Out About Your Social Security Benefits

Social Security pays benefits that are on average 40 percent of what you earned before retirement. You can use a retirement estimator to see what your expected benefit may be as you get closer to your retirement age.

7. Ask Questions

When preparing for retirement, the most important thing you can do is ask questions. Not only ask, but make sure that you understand the answers that you are given.

Be sure to ask your employer and union about retirement planning that is available through work. You also want to talk to a financial advisor when setting up your investments to make sure that your investments are diversified and you are taking the appropriate risk level for your age, goals, financial circumstances, and your personal comfort level.

Your Turn!

  • What are your retirement goals?
  • What steps have you taken to help reach them?

 

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