Posts Tagged Debt Free

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?

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?

 

What I’ve Learned After 2 Years As A Minimalist

Two years of minimalism has brought with it more lessons that I could have imagined. I’ve not only learned a ton in regards to the collection of physical items, I’ve also started to focus on other aspects of minimalism that may be a bit unexpected. Here are the lessons I’ve learned after two years as a minimalist:

Lessons After Two Years of Minimalism1.You Don’t Miss The Stuff

While I was decluttering, I second guessed 20% of the things I got rid of. I knew they were things that I didn’t love but didn’t need; I still thought that maybe someday I would miss them. Two years in, I haven’t missed anything yet, and I actually can’t even remember most of the things that I got rid of.

2. You’ll Start to Question Your Habits

Though I hardly buy clothes anymore, of course there still comes a time when I need to replace something in my wardrobe. Before minimalism, I would have simply headed to my nearest Target or shopping mall and got what I needed from the most convenient big box store. Now, I think more about the items that I buy. I strongly believe that every dollar I spend is a vote for what I believe in, and I don’t spend many dollars, so I want to make them count. I now try to buy my clothes second hand if possible, and if that isn’t possible, I opt for sustainable and fair trade clothing.

3. You’ll Start To Spend Your Time Differently

What I've Learned After Two Years of MinimalismPre-minimalism, I spent quite a bit of time at my local Target and shopping mall. After adopting the minimalist lifestyle, I gained all of that time back. At first I started to use my time doing things like hiking and reading books from the library. Then I decided to quit my job to travel the world. Minimalism allowed me the space to truly think about what I wanted out of my life, and the resources to create that ideal life.

4. Quality over Quantity Will Filter Into Other Areas of Your Life

Though I had more free time after becoming minimalist, I also decided that it was time to take back control of my schedule. I became much more intentional with the way I spent time. I no longer attended events just because I was invited to them. I spent more time with friends who truly lifted me up and inspired me, and much less time with friends who just wanted someone to go to happy hour with. I didn’t feel guilty anymore if I decided to read a good book instead of going to an event.

5. You May Become Even Richer

Once I decided to start traveling, I created a little website to keep track of my adventures. I spent my time writing and working on my photography, which has turned into a beautiful scrapbook, and even a small income over the last year. I have started to earn money from doing things I love, which I would have never thought possible before.

I’ve learned so much as a minimalist; these five lessons brought even more value to minimalism in my life. Minimalism has changed the way I live, and I could not be happier with the results.

Your Turn!

  • Do you consider yourself a minimalist?
  • What has minimalism taught you?

 

 

 

 

How To Get Out Of Debt

What would your life be like if you didn’t have any debt payments? How would your financial picture change if you weren’t tied to those payments month in, month out? Let’s break the cycle and finally get out of debt.

Three years ago, my family had close to $60,000 worth of consumer and student loan debt. I had been in debt since I got my first credit card at 19 years of age and after spending close to 20 years in the debt trap, never thought we could climb out of it.

After feeling fed up and tired of juggling nine different debt payments on top of the rest of our monthly bills, I knew we had to make a change. Using these 5 steps, along with focus and determination, we were able to pay off our consumer debt in 25 months. Here’s how we got out of debt, and you can too.

5 Steps to Debt Freedom

 

1. Stop Using Debt:

Seems obvious right? If you want to pay off your debt, you have to stop using debt. It’s time to cut up the credit cards or at the very least put them on ice (literally). In order to get out of debt you have to commit to using cash for your purchases from here on out. This means being patient, saving up, and planning your future purchases. If you’ve been relying on debt, this will be the hardest step, but this is the first step in finally freeing yourself from the mountain of bills.

2. Establish your Emergency Fund:

Inemergency fund order to have a bit of a financial cushion between you and life, and cut ties with the credit card or line of credit, you’ll want to make sure you have a starter emergency fund. For most of us $1000 set aside in a separate savings account will cover most emergencies that arise while getting out of debt. You must commit though to keeping this money in case of emergency only (and no, that pair of boots that you’ve had your eye on and have just gone on sale for 75% off are NOT an emergency).

3. Get on a Budget and Stick With It:

If you want to get out of debt, changes in how you behave with and manage your money are key. The biggest change you can make that will see the debt gone once and for all is to get on a written monthly budget and stick with it. If you’re new to the budgeting process, this article will help you get started.

4. Organize Your Debts:

Time to take out those debt statements and organize them in the order that you’re going to pay them off. There are two ways to organize your debt. Both work because they force you to focus your attention on one debt at a time, and the power of focus is key. 

Snowball: Organize your debts from the smallest to largest, regardless of interest rate. Pay the minimum payments on all of the debts, except the smallest, and throw every extra penny you can at that debt. Once the smallest one is paid off, you take what you had been putting towards it, plus the minimum payment, and start attacking the second smallest debt. By the end, you’re putting a significant amount of money towards your largest debt, making that disappear faster than you could have thought possible.

Avalanche: A second way you could organize your debts is by using the debt avalanche. In this method you are lining up your debts from the largest interest rate to the smallest interest rate. Like the snowball, you’ll keep making minimum payments on the other debts while you pay off the debt with the largest interest rate first and then keep working your way down the line.

5. Throw Every Extra Dollar at Debt:

In order to get that debt paid off as quickly as possible, you want to make sure that you are throwing every extra penny you can at the debt. This means revisiting the budget and seeing what can be trimmed in the short term so you can free up money to add to your debt payment. It may also mean making some extra income.

Getting out of debt requires making some short-term sacrifices, but they payoff is well worth it. Your paychecks become yours again so that you can save for retirement, help pay for your children’s education, and save up for that vacation you’ve always wanted to go on.

Once you start living a debt-free life, I promise you’ll never go back to using credit again.

You Turn:

  • What are you willing to cut from your budget to pay off debt?
  • What would you do with your income if you didn’t have debt payments?

Why I Have 7 Savings Accounts

In an effort to not overwhelm my budget every month, I have set up seven (yes, seven) savings accounts. I lovingly refer to these accounts as my sinking funds, and they quickly became my pride and joy (aside from my children of course).

jar for change

A Sinking fund is where you set money aside for expenses that you know will be coming up, those expenses that would feel like an emergency if you didn’t have anything set aside. Sinking funds allow you to save in smaller, monthly installments so that when the time comes you are prepared with money in the bank (think Christmas or those pesky car repairs).

What should you be setting aside money for?

Think about those larger expenses or special occasions that come up once a year that you wouldn’t likely be able to pay for in one individual month without going into debt. Your sinking funds can also include expenses that you know, eventually will happen.

saving for future needs

Our sinking funds include:

  • Car Maintenance
  • Home Maintenance
  • Christmas/Holiday
  • Taxes (my husband is self-employed)
  • Medical Expenses
  • Car Replacement
  • Other yearly fees

How much should you set aside each month?

Luckily this does not involve math that is too complicated. No fancy formulas required. All you simply have to do is consider how much you would like to spend and divide that by the number of months you are going to save up for.

My husband and I decided that we would like our total budget for Christmas to be $1200. That means that since January, I have been setting aside $100 into my Christmas sinking fund.

For something like Car Maintenance, take a look at what you spent on oil changes and repairs last year, divide that number by 12, and that will tell you what you should consider setting aside each month.

If your car is nearing the end of it’s life expectancy, setting aside money into a separate account will give you the ability to pay for that next car with cash. First consider how much you would like to spend on your next vehicle and divide that number by the number of months that you will be saving for. Instead of paying the bank or loan company car payments, plan ahead and pay yourself a car payment. Not only will you be avoiding debt when you have the money in hand, but you’ll be earning interest while you save rather than paying interest if you finance.

There are many ways that you can track the amount you are saving. One method would be to set the money into one savings account and then use a spreadsheet to track how much in that is set aside for each fund. The other option you have is to look into No Fee Online savings accounts where you can easily name and keep track of your sinking funds.

When looking for your savings accounts, you want to be sure that they are no fee. Be sure to avoid those banks that charge you a fee for withdrawing your money from your savings account. The other thing to be on the lookout for are the interest rates that your money will earn while it is in savings. Although the interest will not make you rich from these accounts, you want to look for the most competitive interest rate you can find.

How ever you decide to set aside your savings, you’ll feel great knowing that you’ll be prepared with money in the bank. The holiday season is so much more enjoyable when you know that it’s been paid for with cash.

Your Turn!

  • What are some big-ticket and not-so-big-ticket stuff that you are setting some money aside for?