6 Bad Money Habits That Could Wreck Your Finances — and How to Break Them

Bad spending habits — everyone has at least one of them. Maybe for you it’s adding “just one more thing” to your shopping cart, or repeatedly getting slapped with overdraft or late payment fees.

These bad habits may seem innocuous at first but could easily turn into financial self-sabotage.

“Breaking a habit like these can be really difficult because these habits have developed over the years, and they provide us with psychological comfort and safety,” says Thomas Oberlechner, founder and Chief Science Officer at FinPsy, a San Francisco-based consulting firm that integrates behavioral expertise into financial services and products.

Oberlechner says the key to overcoming a bad money habit lies in knowing when you’re using the impulsive, right side of your brain — as opposed to the focused, concentrated left side — in financial decision-making.

“It’s really about psychological experience. It’s about behavior. If we understand the role of emotion, then we have a chance to fix it,” Oberlechner says.

Once you understand yourself and can identify your bad habit, Oberlechner adds, then you can create a plan “that turns your impulsive or unconscious behavior into the healthy financial behavior that [you] actually want.”

Of course, breaking any bad habit is easier said than done.

MagnifyMoney spoke to financial professionals to hear how they and their clients broke their bad habit. See if any of their hacks could help you break yours.

Bad money habit #1: Spending money as soon as you get it

The solution: Automation

If you’re constantly feeling broke just a few days after you receive a paycheck, you may be guilty of this bad money habit. One way to make sure you hold onto some of your cash is to use what the behavioral finance community calls a “commitment device” to lock you into a course of action you wouldn’t choose on your own, like saving your money.

In this case, the device is automation. Automating your savings won’t help you stop siphoning money from your checking account the same day your direct deposit clears, but it can make sure you save what you need to first. Check with your bank or the human resources department at work to have a portion of your paycheck automatically sent to a savings account instead of putting the entire sum in your checking account.

You should automate your bills and credit card payments for the pay period, too. Once your obligations are automated, “you can be impulsive with your play money,” says Oberlechner.

Bad money habit #2: Reaching for your credit card all the time

The solution: A cash diet

Paying for everything you buy with a credit card can be good practice if you pay off your card every month. If you’re chronically swiping your credit card for things you can’t afford to pay off by the next billing cycle, leave your card at home and use cash instead.

When you don’t pay off your card each billing cycle, you rack up interest charges on everyday purchases, and that may cost you a lot more money in the long run. If you’re using more than 30 percent of your total credit limit each month, you may also be harming your credit score.

To break your habit, leave your credit card at home and use cash or a debit card for your purchases.

“Take a certain amount of cash and say ‘I can spend no more than that,’” says Vicki Bogan, an associate professor at Cornell University in Ithaca, N.Y., who researches behavioral finance. “If you have a huge [spending] problem, try to limit yourself so that you only have access to a certain amount of money.”

If you really want to challenge yourself, you can try going on what’s called a spending freeze, where you stop spending any money on non-essentials for a period of time. On top of helping you save money, the freeze can help you notice how much money you may be wasting simply because you’re always pulling out your credit card. After your freeze ends, you may be less inclined to swipe your credit card.

Another rule that could help you break your swiping habit is the $20 rule. The financial rule of thumb is simple: Anytime your purchase is less than $20, pay in cash, not credit. The $20 rule forces you to think about whether or not a purchase is worth swiping your card for. Chances are, if what you’re buying costs less than $20, it’s not something you’d be OK paying interest on.

Bad money habit #3: Spending beyond your means

Solution: Budgeting

If you chronically spend beyond your means each pay period, you are likely digging yourself into debt. Get a handle on this habit by understanding how much money you have coming in and how much you can afford to spend on a monthly basis. You can use budgeting apps like Mint or YNAB to make that part easier. These tools can also help you identify the spending categories that are costing you more than you might realize.

Oak Brook, Ill.-based certified financial planner Elizabeth Buffardi tells MagnifyMoney that after examining one of her client’s expenses she found the client was spending a lot of money at drugstores picking up snacks and little things after work. So the client gave herself a budget of $10 per drugstore visit to save money.

“We’ve been seeing her spending at drugstores go down steadily over the last few months,” says Buffardi.

Buffardi had two other clients who struggled with overspending because they loved to shop online. They both created boundaries for themselves when it came time to pay for the items in their online shopping carts. One client decided to buy a certain amount of gift cards that she could use on a given site.

“If she spent all the gift cards in the first day, then she was done until the next paycheck. If she wanted something that was more expensive than the amount she had on the gift cards, she had to hold off on other purchases in order to purchase the more expensive item,” says Buffardi.

The other client simply removed her credit card number from her payment profiles so it would be more difficult to make thoughtless purchases. Her theory, Buffardi tells MagnifyMoney, was that if she was forced to stop and pull out her credit card before she could make the purchase, it might slow her down and give her time to think about the purchase she is about to make and — maybe — stop some purchases from happening.

Bad money habit #4: Always buying lunch from a restaurant

The solution: Plan your lunches a week in advance

If you’re losing $10-$15 a day to the local deli during the workweek, remember this: You don’t have to buy lunch if you bring it to work with you. However, organizing your day so that you actually have time to prepare and pack your lunch may be where you struggle.

Leave room in your busy schedule to pack your lunch in the mornings, or during the evening when you may have more time to yourself.

Melville, N.Y.- based certified financial planner David Frisch says he packs his lunches in the evening because he knows he runs late in the morning. He puts together everything but the dressings and sauces he plans to eat while making dinner, so lunch is already 90% done, then he adds the last 10 percent in the morning.

Frisch suggests setting a budget for how much you’d like to spend on food per pay period, then tracking how much money you typically spend on the convenience of frequently going out to lunch. Again, a budgeting app can be handy here to easily identify places where you spend the most.

Compare that amount to how much you spend on food for entertainment purposes, like going out to dinner with friends over the weekend and for your necessities, like eating lunch to fuel your workday.

“If you are spending so much money on convenience, you have that much less money to spend on everything else,” says Frisch. If you’re spending money from your food budget for convenience purposes, you may be more reluctant to go out on Saturday night for dinner.

If you’re already packing your lunch, but purchase a second lunch because you’re still hungry or you no longer want to eat what you packed, try packing a larger meal or having leftovers for a second lunch.

Bad money habit #5: Ordering out for dinner because you’re too tired to cook

The solution(s): Prep when you have time/energy; try meal delivery services

It’s easy to spend more than $50 getting dinner delivered three to four days out of the week, or buying groceries that go to waste because you’re too tired to cook. Oberlechner suggests doing some of the “work” of making dinner when you know you have more energy.

“If you’re too tired to cook in the evening, replace the spontaneous behavior by preparing dinner in the morning. So in the evening you don’t have the work of preparing anything,” he tells MagnifyMoney.

Another hack Oberlechner suggests is making a little extra dinner for the days you know will be especially long, when you won’t want to cook dinner. For example, if you know Tuesday is a really long day but Monday is not, cook a little extra on Monday and have those leftovers for dinner on Tuesday.

If cooking dinner simply isn’t a habit for you, you can try a meal kit service like Blue Apron, Plated, or HelloFresh to get interested in cooking, suggests Brooklyn, N.Y.- based certified financial planner Pamela Capalad. She tells MagnifyMoney she’s advised many of her clients to sign up for a meal kit service, then transition into grocery shopping and cooking at home regularly.

Generally, the services cost about $10 to $15 per serving and can serve up to four people.

Bad money habit #6: Letting your kids throw extra things in your shopping cart

The solution(s): Shop solo or lay ground rules early

Frisch says he and his wife solved this problem with their now 15-year-old triplets when they were four years old.

“Up until they were four we couldn’t bring them to a supermarket because it was impossible for my wife and I to watch three kids at the same time,” says Frisch. The easiest recommendation, he says, is to have somebody watch them at home while you go do the shopping. You may spend some money on a sitter, but you are also saving money without an eager child sneaking candy and toys into your shopping cart as well.

If an extra set of hands at home isn’t available, then try to set ground rules before you go to the store. For Frisch, that meant allowing the triplets to get one — just one — extra item at the store.

When a child wanted to add something “extra” to the cart, Frisch or his wife would say, “If you want this now, then you have to put the other one back.”

“Ultimately what happened was they kind of had to make a decision as to which one they would really get,” says Frisch.

The triplets quickly realized they could all benefit from working together.

“They actually started to communicate and say ‘if you get this and I get this, we can share,’” Frisch told MagnifyMoney. “They just figured out that if they all got one thing and shared, they ultimately all got more than they would have.

The post 6 Bad Money Habits That Could Wreck Your Finances — and How to Break Them appeared first on MagnifyMoney.

6 Bad Money Habits That Could Wreck Your Finances — and How to Break Them

Bad spending habits — everyone has at least one of them. Maybe for you it’s adding “just one more thing” to your shopping cart, or repeatedly getting slapped with overdraft or late payment fees.

These bad habits may seem innocuous at first but could easily turn into financial self-sabotage.

“Breaking a habit like these can be really difficult because these habits have developed over the years, and they provide us with psychological comfort and safety,” says Thomas Oberlechner, founder and Chief Science Officer at FinPsy, a San Francisco-based consulting firm that integrates behavioral expertise into financial services and products.

Oberlechner says the key to overcoming a bad money habit lies in knowing when you’re using the impulsive, right side of your brain — as opposed to the focused, concentrated left side — in financial decision-making.

“It’s really about psychological experience. It’s about behavior. If we understand the role of emotion, then we have a chance to fix it,” Oberlechner says.

Once you understand yourself and can identify your bad habit, Oberlechner adds, then you can create a plan “that turns your impulsive or unconscious behavior into the healthy financial behavior that [you] actually want.”

Of course, breaking any bad habit is easier said than done.

MagnifyMoney spoke to financial professionals to hear how they and their clients broke their bad habit. See if any of their hacks could help you break yours.

Bad money habit #1: Spending money as soon as you get it

The solution: Automation

If you’re constantly feeling broke just a few days after you receive a paycheck, you may be guilty of this bad money habit. One way to make sure you hold onto some of your cash is to use what the behavioral finance community calls a “commitment device” to lock you into a course of action you wouldn’t choose on your own, like saving your money.

In this case, the device is automation. Automating your savings won’t help you stop siphoning money from your checking account the same day your direct deposit clears, but it can make sure you save what you need to first. Check with your bank or the human resources department at work to have a portion of your paycheck automatically sent to a savings account instead of putting the entire sum in your checking account.

You should automate your bills and credit card payments for the pay period, too. Once your obligations are automated, “you can be impulsive with your play money,” says Oberlechner.

Bad money habit #2: Reaching for your credit card all the time

The solution: A cash diet

Paying for everything you buy with a credit card can be good practice if you pay off your card every month. If you’re chronically swiping your credit card for things you can’t afford to pay off by the next billing cycle, leave your card at home and use cash instead.

When you don’t pay off your card each billing cycle, you rack up interest charges on everyday purchases, and that may cost you a lot more money in the long run. If you’re using more than 30 percent of your total credit limit each month, you may also be harming your credit score.

To break your habit, leave your credit card at home and use cash or a debit card for your purchases.

“Take a certain amount of cash and say ‘I can spend no more than that,’” says Vicki Bogan, an associate professor at Cornell University in Ithaca, N.Y., who researches behavioral finance. “If you have a huge [spending] problem, try to limit yourself so that you only have access to a certain amount of money.”

If you really want to challenge yourself, you can try going on what’s called a spending freeze, where you stop spending any money on non-essentials for a period of time. On top of helping you save money, the freeze can help you notice how much money you may be wasting simply because you’re always pulling out your credit card. After your freeze ends, you may be less inclined to swipe your credit card.

Another rule that could help you break your swiping habit is the $20 rule. The financial rule of thumb is simple: Anytime your purchase is less than $20, pay in cash, not credit. The $20 rule forces you to think about whether or not a purchase is worth swiping your card for. Chances are, if what you’re buying costs less than $20, it’s not something you’d be OK paying interest on.

Bad money habit #3: Spending beyond your means

The solution: Budgeting

If you chronically spend beyond your means each pay period, you are likely digging yourself into debt. Get a handle on this habit by understanding how much money you have coming in and how much you can afford to spend on a monthly basis. You can use budgeting apps like Mint or YNAB to make that part easier. These tools can also help you identify the spending categories that are costing you more than you might realize.

Oak Brook, Ill.-based certified financial planner Elizabeth Buffardi tells MagnifyMoney that after examining one of her client’s expenses she found the client was spending a lot of money at drugstores picking up snacks and little things after work. So the client gave herself a budget of $10 per drugstore visit to save money.

“We’ve been seeing her spending at drugstores go down steadily over the last few months,” says Buffardi.

Buffardi had two other clients who struggled with overspending because they loved to shop online. They both created boundaries for themselves when it came time to pay for the items in their online shopping carts. One client decided to buy a certain amount of gift cards that she could use on a given site.

“If she spent all the gift cards in the first day, then she was done until the next paycheck. If she wanted something that was more expensive than the amount she had on the gift cards, she had to hold off on other purchases in order to purchase the more expensive item,” says Buffardi.

The other client simply removed her credit card number from her payment profiles so it would be more difficult to make thoughtless purchases. Her theory, Buffardi tells MagnifyMoney, was that if she was forced to stop and pull out her credit card before she could make the purchase, it might slow her down and give her time to think about the purchase she is about to make and — maybe — stop some purchases from happening.

Bad money habit #4: Always buying lunch from a restaurant

The solution: Plan your lunches a week in advance

If you’re losing $10-$15 a day to the local deli during the workweek, remember this: You don’t have to buy lunch if you bring it to work with you. However, organizing your day so that you actually have time to prepare and pack your lunch may be where you struggle.

Leave room in your busy schedule to pack your lunch in the mornings, or during the evening when you may have more time to yourself.

Melville, N.Y.- based certified financial planner David Frisch says he packs his lunches in the evening because he knows he runs late in the morning. He puts together everything but the dressings and sauces he plans to eat while making dinner, so lunch is already 90% done, then he adds the last 10 percent in the morning.

Frisch suggests setting a budget for how much you’d like to spend on food per pay period, then tracking how much money you typically spend on the convenience of frequently going out to lunch. Again, a budgeting app can be handy here to easily identify places where you spend the most.

Compare that amount to how much you spend on food for entertainment purposes, like going out to dinner with friends over the weekend and for your necessities, like eating lunch to fuel your workday.

“If you are spending so much money on convenience, you have that much less money to spend on everything else,” says Frisch. If you’re spending money from your food budget for convenience purposes, you may be more reluctant to go out on Saturday night for dinner.

If you’re already packing your lunch, but purchase a second lunch because you’re still hungry or you no longer want to eat what you packed, try packing a larger meal or having leftovers for a second lunch.

Bad money habit #5: Ordering out for dinner because you’re too tired to cook

The solution(s): Prep when you have time/energy; try meal delivery services

It’s easy to spend more than $50 getting dinner delivered three to four days out of the week, or buying groceries that go to waste because you’re too tired to cook. Oberlechner suggests doing some of the “work” of making dinner when you know you have more energy.

“If you’re too tired to cook in the evening, replace the spontaneous behavior by preparing dinner in the morning. So in the evening you don’t have the work of preparing anything,” he tells MagnifyMoney.

Another hack Oberlechner suggests is making a little extra dinner for the days you know will be especially long, when you won’t want to cook dinner. For example, if you know Tuesday is a really long day but Monday is not, cook a little extra on Monday and have those leftovers for dinner on Tuesday.

If cooking dinner simply isn’t a habit for you, you can try a meal kit service like Blue Apron, Plated, or HelloFresh to get interested in cooking, suggests Brooklyn, N.Y.- based certified financial planner Pamela Capalad. She tells MagnifyMoney she’s advised many of her clients to sign up for a meal kit service, then transition into grocery shopping and cooking at home regularly.

Generally, the services cost about $10 to $15 per serving and can serve up to four people.

Bad money habit #6: Letting your kids throw extra things in your shopping cart

The solution(s): Shop solo or lay ground rules early

Frisch says he and his wife solved this problem with their now 15-year-old triplets when they were four years old.

“Up until they were four we couldn’t bring them to a supermarket because it was impossible for my wife and I to watch three kids at the same time,” says Frisch. The easiest recommendation, he says, is to have somebody watch them at home while you go do the shopping. You may spend some money on a sitter, but you are also saving money without an eager child sneaking candy and toys into your shopping cart as well.

If an extra set of hands at home isn’t available, then try to set ground rules before you go to the store. For Frisch, that meant allowing the triplets to get one — just one — extra item at the store.

When a child wanted to add something “extra” to the cart, Frisch or his wife would say, “If you want this now, then you have to put the other one back.”

“Ultimately what happened was they kind of had to make a decision as to which one they would really get,” says Frisch.

The triplets quickly realized they could all benefit from working together.

“They actually started to communicate and say ‘if you get this and I get this, we can share,’” Frisch told MagnifyMoney. “They just figured out that if they all got one thing and shared, they ultimately all got more than they would have.”

The post 6 Bad Money Habits That Could Wreck Your Finances — and How to Break Them appeared first on MagnifyMoney.

Not-So-Free College: Oregon Changes Requirements for Free Tuition

Some college-bound students in Oregon won’t receive money for college the state promised them for this upcoming school year. In 2016, Oregon became one of the first states to offer to cover students’ community college tuition, setting a $40 million budget for the Oregon Promise Program. However, state funding missed that mark by about $8 million this year.

The funding shortfall and a high turnout of applicants has forced Oregon state legislators to change the program’s eligibility requirements and disqualify students from the highest-earning households.

What’s changing

The Oregon legislature has given authority to the Higher Education Coordinating Commission (HECC) to establish cost controls for the Oregon Promise Program. HECC made a new rule that caps grant eligibility at students whose families are able to contribute $18,000 or more toward the student’s post-secondary education, according to the expected family contribution (EFC) calculation students receive after submitting the Free Application for Federal Student Aid (FAFSA) or Oregon Student Aid Application (ORSAA).

As a result, the state will only be able to award grants to about 80% of eligible new applicants for the fall 2017 semester. More than 15,000 students have applied for the grant for the upcoming 2017-18 school year, starting in September, HECC tells MagnifyMoney. So far, about 8,300 have been told they are eligible for Oregon Promise grants. However, notification of eligibility does not mean a student will receive an award — HECC won’t have an official number of recipients until students enroll in community colleges.

In its first year, the program awarded a total of $4.4 million to about 6,800 students, or 5.4% of fall 2016 community college students. Between November 2015 and March 2016, more than 19,000 people applied, and of that group, 10,459 met GPA, residency, and FAFSA requirements. Among them, 1,091 enrolled in public universities, therefore they didn’t receive a grant, and 6,745 enrolled in community college and received grants.

If you’re one of 6,745 students who enrolled in the program last year, you’re safe. Last year’s participants won’t be affected by the new income criteria and will continue to receive the grant, according to HECC.

The commission says the new limit could change again. Moving forward, the HECC will check the program’s funding annually and may adjust or eliminate the EFC limit, depending on how much funding is available.

What the Oregon Promise covers

The grant covers the gap between what a student receives in scholarships and grants, like the federal Pell grant, and what they need to cover tuition at Oregon community colleges. Legislators set a $1,000 annual award minimum, so even students who have tuition fully covered with federal grant money or scholarships still receive funds. Applicants must be a recent Oregon high school graduate or GED recipient, have high school cumulative GPA of 2.5 or higher, be an Oregon resident for at least a year before attending college, and not have attempted or completed more than 90 college credits.

Students left without the money they need for school may be forced to turn to other borrowing options like taking out a federal student loan or personal loan to attend school this year.

Other states with similar programs

Oregon isn’t the only state that offers free tuition to its community college students. The trend, started by the Obama Administration in 2015, gained even more popularity during the 2016 election season, prompting states like New York, Tennessee and Rhode Island and cities like San Francisco to test drive free college programs. Here’s a rundown of some of these programs:

New York

New York’s Excelsior Scholarship Program allows students to attend a State University of New York or City University of New York college tuition-free. Beginning in fall 2017, New York state residents from households earning $100,000 or less are eligible to receive up to $5,500 per school year for college.

Tennessee

In Tennessee, any state residents who have yet to earn their associate’s or bachelor’s degree can attend community or technical college for free. Starting in 2018, the Tennessee Promise Program will offer scholarships that cover the gap in of tuition and mandatory fees after what’s covered by a student’s Pell grant, the HOPE scholarship, or the Tennessee Student Assistance Award.

Rhode Island

Residents — regardless of income — can earn their associate degree for free at the Community College of Rhode Island beginning in fall 2017. The Rhode Island Promise program (seeing a trend here?) applies to 2017 high school graduates or those 19 years old or younger who received their GED in 2017.

Louisiana

Louisiana’s TOPS, or Taylor Opportunity Program for Students, is a collection of scholarships that pays tuition and some fees for Louisiana residents attending any of the state’s community colleges or public four-year colleges or universities, as long as the student graduated from high school with at least a 2.5 GPA.

San Francisco

San Francisco became the first U.S. city to offer a free college tuition program by introducing its Free City program in 2017. Beginning fall 2017, city residents who have lived in the state of California for a year or longer as of the first day of school are eligible to receive free tuition for the City College of San Francisco. Some lower-income residents are also eligible to receive stipends up to $250 per semester to help cover things like books and other college related expenses.

The post Not-So-Free College: Oregon Changes Requirements for Free Tuition appeared first on MagnifyMoney.

Not-So-Free College: Oregon Changes Requirements for Free Tuition

Some college-bound students in Oregon won’t receive money for college the state promised them for this upcoming school year. In 2016, Oregon became one of the first states to offer to cover students’ community college tuition, setting a $40 million budget for the Oregon Promise Program. However, state funding missed that mark by about $8 million this year.

The funding shortfall and a high turnout of applicants has forced Oregon state legislators to change the program’s eligibility requirements and disqualify students from the highest-earning households.

What’s changing

The Oregon legislature has given authority to the Higher Education Coordinating Commission (HECC) to establish cost controls for the Oregon Promise Program. HECC made a new rule that caps grant eligibility at students whose families are able to contribute $18,000 or more toward the student’s post-secondary education, according to the expected family contribution (EFC) calculation students receive after submitting the Free Application for Federal Student Aid (FAFSA) or Oregon Student Aid Application (ORSAA).

As a result, the state will only be able to award grants to about 80% of eligible new applicants for the fall 2017 semester. More than 15,000 students have applied for the grant for the upcoming 2017-18 school year, starting in September, HECC tells MagnifyMoney. So far, about 8,300 have been told they are eligible for Oregon Promise grants. However, notification of eligibility does not mean a student will receive an award — HECC won’t have an official number of recipients until students enroll in community colleges.

In its first year, the program awarded a total of $4.4 million to about 6,800 students, or 5.4% of fall 2016 community college students. Between November 2015 and March 2016, more than 19,000 people applied, and of that group, 10,459 met GPA, residency, and FAFSA requirements. Among them, 1,091 enrolled in public universities, therefore they didn’t receive a grant, and 6,745 enrolled in community college and received grants.

If you’re one of 6,745 students who enrolled in the program last year, you’re safe. Last year’s participants won’t be affected by the new income criteria and will continue to receive the grant, according to HECC.

The commission says the new limit could change again. Moving forward, the HECC will check the program’s funding annually and may adjust or eliminate the EFC limit, depending on how much funding is available.

What the Oregon Promise covers

The grant covers the gap between what a student receives in scholarships and grants, like the federal Pell grant, and what they need to cover tuition at Oregon community colleges. Legislators set a $1,000 annual award minimum, so even students who have tuition fully covered with federal grant money or scholarships still receive funds. Applicants must be a recent Oregon high school graduate or GED recipient, have high school cumulative GPA of 2.5 or higher, be an Oregon resident for at least a year before attending college, and not have attempted or completed more than 90 college credits.

Students left without the money they need for school may be forced to turn to other borrowing options like taking out a federal student loan or personal loan to attend school this year.

Other states with similar programs

Oregon isn’t the only state that offers free tuition to its community college students. The trend, started by the Obama Administration in 2015, gained even more popularity during the 2016 election season, prompting states like New York, Tennessee and Rhode Island and cities like San Francisco to test drive free college programs. Here’s a rundown of some of these programs:

New York

New York’s Excelsior Scholarship Program allows students to attend a State University of New York or City University of New York college tuition-free. Beginning in fall 2017, New York state residents from households earning $100,000 or less are eligible to receive up to $5,500 per school year for college.

Tennessee

In Tennessee, any state residents who have yet to earn their associate’s or bachelor’s degree can attend community or technical college for free. Starting in 2018, the Tennessee Promise Program will offer scholarships that cover the gap in of tuition and mandatory fees after what’s covered by a student’s Pell grant, the HOPE scholarship, or the Tennessee Student Assistance Award.

Rhode Island

Residents — regardless of income — can earn their associate degree for free at the Community College of Rhode Island beginning in fall 2017. The Rhode Island Promise program (seeing a trend here?) applies to 2017 high school graduates or those 19 years old or younger who received their GED in 2017.

Louisiana

Louisiana’s TOPS, or Taylor Opportunity Program for Students, is a collection of scholarships that pays tuition and some fees for Louisiana residents attending any of the state’s community colleges or public four-year colleges or universities, as long as the student graduated from high school with at least a 2.5 GPA.

San Francisco

San Francisco became the first U.S. city to offer a free college tuition program by introducing its Free City program in 2017. Beginning fall 2017, city residents who have lived in the state of California for a year or longer as of the first day of school are eligible to receive free tuition for the City College of San Francisco. Some lower-income residents are also eligible to receive stipends up to $250 per semester to help cover things like books and other college related expenses.

The post Not-So-Free College: Oregon Changes Requirements for Free Tuition appeared first on MagnifyMoney.

6 Bad Money Habits That Could Wreck Your Finances — and How to Break Them

Bad spending habits — everyone has at least one of them. Maybe for you it’s adding “just one more thing” to your shopping cart, or repeatedly getting slapped with overdraft or late payment fees.

These bad habits may seem innocuous at first but could easily turn into financial self-sabotage.

“Breaking a habit like these can be really difficult because these habits have developed over the years, and they provide us with psychological comfort and safety,” says Thomas Oberlechner, founder and Chief Science Officer at FinSpy, a San Francisco-based consulting firm that integrates behavioral expertise into financial services and products.

Oberlechner says the key to overcoming a bad money habit lies in knowing when you’re using the impulsive, right side of your brain — as opposed to the focused, concentrated left side — in financial decision-making.

“It’s really about psychological experience. It’s about behavior. If we understand the role of emotion, then we have a chance to fix it,” Oberlechner says.

Once you understand yourself and can identify your bad habit, Oberlechner adds, then you can create a plan “that turns your impulsive or unconscious behavior into the healthy financial behavior that [you] actually want.”

Of course, breaking any bad habit is easier said than done.

MagnifyMoney spoke to financial professionals to hear how they and their clients broke their bad habit. See if any of their hacks could help you break yours.

Bad money habit #1: Spending money as soon as you get it

The solution: Automation

If you’re constantly feeling broke just a few days after you receive a paycheck, you may be guilty of this bad money habit. One way to make sure you hold onto some of your cash is to use what the behavioral finance community calls a “commitment device” to lock you into a course of action you wouldn’t choose on your own, like saving your money.

In this case, the device is automation. Automating your savings won’t help you stop siphoning money from your checking account the same day your direct deposit clears, but it can make sure you save what you need to first. Check with your bank or the human resources department at work to have a portion of your paycheck automatically sent to a savings account instead of putting the entire sum in your checking account.

You should automate your bills and credit card payments for the pay period, too. Once your obligations are automated, “you can be impulsive with your play money,” says Oberlechner.

Bad money habit #2: Reaching for your credit card all the time

The solution: A cash diet

Paying for everything you buy with a credit card can be good practice if you pay off your card every month. If you’re chronically swiping your credit card for things you can’t afford to pay off by the next billing cycle, leave your card at home and use cash instead.

When you don’t pay off your card each billing cycle, you rack up interest charges on everyday purchases, and that may cost you a lot more money in the long run. If you’re using more than 30 percent of your total credit limit each month, you may also be harming your credit score.

To break your habit, leave your credit card at home and use cash or a debit card for your purchases.

“Take a certain amount of cash and say ‘I can spend no more than that,’” says Vicki Bogan, an associate professor at Cornell University in Ithaca, N.Y., who researches behavioral finance. “If you have a huge [spending] problem, try to limit yourself so that you only have access to a certain amount of money.”

If you really want to challenge yourself, you can try going on what’s called a spending freeze, where you stop spending any money on non-essentials for a period of time. On top of helping you save money, the freeze can help you notice how much money you may be wasting simply because you’re always pulling out your credit card. After your freeze ends, you may be less inclined to swipe your credit card.

Another rule that could help you break your swiping habit is the $20 rule. The financial rule of thumb is simple: Anytime your purchase is less than $20, pay in cash, not credit. The $20 rule forces you to think about whether or not a purchase is worth swiping your card for. Chances are, if what you’re buying costs less than $20, it’s not something you’d be OK paying interest on.

Bad money habit #3: Spending beyond your means

The solution: Budgeting

If you chronically spend beyond your means each pay period, you are likely digging yourself into debt. Get a handle on this habit by understanding how much money you have coming in and how much you can afford to spend on a monthly basis. You can use budgeting apps like Mint or YNAB to make that part easier. These tools can also help you identify the spending categories that are costing you more than you might realize.

Oak Brook, Ill.-based certified financial planner Elizabeth Buffardi tells MagnifyMoney that after examining one of her client’s expenses she found the client was spending a lot of money at drugstores picking up snacks and little things after work. So the client gave herself a budget of $10 per drugstore visit to save money.

“We’ve been seeing her spending at drugstores go down steadily over the last few months,” says Buffardi.

Buffardi had two other clients who struggled with overspending because they loved to shop online. They both created boundaries for themselves when it came time to pay for the items in their online shopping carts. One client decided to buy a certain amount of gift cards that she could use on a given site.

“If she spent all the gift cards in the first day, then she was done until the next paycheck. If she wanted something that was more expensive than the amount she had on the gift cards, she had to hold off on other purchases in order to purchase the more expensive item,” says Buffardi.

The other client simply removed her credit card number from her payment profiles so it would be more difficult to make thoughtless purchases. Her theory, Buffardi tells MagnifyMoney, was that if she was forced to stop and pull out her credit card before she could make the purchase, it might slow her down and give her time to think about the purchase she is about to make and — maybe — stop some purchases from happening.

Bad money habit #4: Always buying lunch from a restaurant

The solution: Plan your lunches a week in advance

If you’re losing $10-$15 a day to the local deli during the workweek, remember this: You don’t have to buy lunch if you bring it to work with you. However, organizing your day so that you actually have time to prepare and pack your lunch may be where you struggle.

Leave room in your busy schedule to pack your lunch in the mornings, or during the evening when you may have more time to yourself.

Melville, N.Y.- based certified financial planner David Frisch says he packs his lunches in the evening because he knows he runs late in the morning. He puts together everything but the dressings and sauces he plans to eat while making dinner, so lunch is already 90% done, then he adds the last 10 percent in the morning.

Frisch suggests setting a budget for how much you’d like to spend on food per pay period, then tracking how much money you typically spend on the convenience of frequently going out to lunch. Again, a budgeting app can be handy here to easily identify places where you spend the most.

Compare that amount to how much you spend on food for entertainment purposes, like going out to dinner with friends over the weekend and for your necessities, like eating lunch to fuel your workday.

“If you are spending so much money on convenience, you have that much less money to spend on everything else,” says Frisch. If you’re spending money from your food budget for convenience purposes, you may be more reluctant to go out on Saturday night for dinner.

If you’re already packing your lunch, but purchase a second lunch because you’re still hungry or you no longer want to eat what you packed, try packing a larger meal or having leftovers for a second lunch.

Bad money habit #5: Ordering out for dinner because you’re too tired to cook

The solution(s): Prep when you have time/energy; try meal delivery services

It’s easy to spend more than $50 getting dinner delivered three to four days out of the week, or buying groceries that go to waste because you’re too tired to cook. Oberlechner suggests doing some of the “work” of making dinner when you know you have more energy.

“If you’re too tired to cook in the evening, replace the spontaneous behavior by preparing dinner in the morning. So in the evening you don’t have the work of preparing anything,” he tells MagnifyMoney.

Another hack Oberlechner suggests is making a little extra dinner for the days you know will be especially long, when you won’t want to cook dinner. For example, if you know Tuesday is a really long day but Monday is not, cook a little extra on Monday and have those leftovers for dinner on Tuesday.

If cooking dinner simply isn’t a habit for you, you can try a meal kit service like Blue Apron, Plated, or HelloFresh to get interested in cooking, suggests Brooklyn, N.Y.- based certified financial planner Pamela Capalad. She tells MagnifyMoney she’s advised many of her clients to sign up for a meal kit service, then transition into grocery shopping and cooking at home regularly.

Generally, the services cost about $10 to $15 per serving and can serve up to four people.

Bad money habit #6: Letting your kids throw extra things in your shopping cart

The solution(s): Shop solo or lay ground rules early

Frisch says he and his wife solved this problem with their now 15-year-old triplets when they were four years old.

“Up until they were four we couldn’t bring them to a supermarket because it was impossible for my wife and I to watch three kids at the same time,” says Frisch. The easiest recommendation, he says, is to have somebody watch them at home while you go do the shopping. You may spend some money on a sitter, but you are also saving money without an eager child sneaking candy and toys into your shopping cart as well.

If an extra set of hands at home isn’t available, then try to set ground rules before you go to the store. For Frisch, that meant allowing the triplets to get one — just one — extra item at the store.

When a child wanted to add something “extra” to the cart, Frisch or his wife would say, “If you want this now, then you have to put the other one back.”

“Ultimately what happened was they kind of had to make a decision as to which one they would really get,” says Frisch.

The triplets quickly realized they could all benefit from working together.

“They actually started to communicate and say ‘if you get this and I get this, we can share,’” Frisch told MagnifyMoney. “They just figured out that if they all got one thing and shared, they ultimately all got more than they would have.”

The post 6 Bad Money Habits That Could Wreck Your Finances — and How to Break Them appeared first on MagnifyMoney.

Why These 3 Families Chose to Live on a Single Income

Before they decided to live off only one income, Devra Thomas, 39, and her husband, Clinton Wilkinson, 38, brought in a combined $50,000 annually working in corporate retail. When their daughter, Sophia, was born, they struggled to find ways to juggle their work schedules with child care.

“Since we were both working at the time, we really had to supplement with a lot of funky child care between parents, extended families, after school care, and babysitters,” says Devra.

Then Clinton got an opportunity for a raise and a job relocation. The family moved from outside of Chapel Hill, North Carolina, to Morehead City, where their cost of living was lower and Clinton’s work commute was shorter. Devra, who was an arts administrator at the time, initially looked for work when they moved, but when she wasn’t able to find a job in her field in the area, she and Wilkinson changed their plan. They decided Devra would stay home so they could eliminate one significant expense: child care.

For the couple, deciding to live off one income was worth it if it meant they could simplify their lives. Still, choosing to live on a single income didn’t come without its own set of challenges.

Devra and Clinton, along with two other single-earner families, told MagnifyMoney why they chose to budget their lives on a single income and how they make it work. For this article, we define single-earner families as those in which one family member generates 80% or more of the total household’s income used to cover household expenses.

Devra Thomas & Clinton Wilkinson

Morehead City, North Carolina

Annual Income: $70,000 to $80,000

Clinton Wilkinson, 38, Devra Thomas, 39, and daughter, Sophia, 9. Source: Devra Thomas

Their strategy: Zero-based budgeting and constant communication

Devra and Clinton swear by a zero-sum budget.

“Every time we get paid, all of that money has a name,” says Devra. The couple sits together every two weeks to discuss and create their budget and make sure every dollar earned is fulfilling a purpose. They put each dollar they’ve earned in a spending category such as groceries, transportation, subscription services, utilities and savings.

Devra does some light freelance marketing and writing projects on the side, which helps supplement their income to the tune of about $10,000 per year. Any income she brings in from freelance work becomes what they call “play money.” It either gets added to savings or spent on something they want but haven’t been able to fit into their budget, like a date night.

For example, they’ve already earmarked funds for their anniversary in August. Every part of their date night is planned for, with money going into categories for the dinner, babysitter, hotel, someone to watch their dog, and other expenses.

Where they run into obstacles

Thomas and Wilkinson like their single-income lifestyle, but as their daughter, 10, gets older, the pressure to keep up with the Joneses increases.

“There are other things kids in school have that she says I wish I had … or it may even be an experience like going to Disney World,” says Wilkinson. When that happens they explain to her that those things are “not where [they] are choosing to put [their] priorities.”

They also advise their daughter to try making use of her community. If she wants to play with a toy a friend has, for example, she can borrow it from them, or vice versa.

Overall, making all of their financial decisions together has been a crucial element in making their strategy work. “That’s typically when we break our budget. When we weren’t communicating about spending,” says Thomas.

Sage & Emerson Evans

Salt Lake City, Utah

Annual Income: $50,000

Sage, 25, and Emerson Evans, 24. Source: Sage Evans

Salt Lake City, Utah newlyweds Sage and Emerson Evans chose to live on one income while Emerson focuses on applying to medical school. They have learned to manage their lifestyle on Sage’s $50,000 salary in digital marketing and public relations. Their hope is that investing in Matt’s education will pay off by way of a higher salary later.

Their strategy: deal-hunting and communication

Sage and Emerson, both in their mid-20s, don’t follow a strict budget but they try to add at least $500 to their savings account each month. The couple spends the bulk of their income on things like dinner, cultural events, movies, and travel. But they have no student loan debt and only one car payment to manage.

Emerson says he’s used to pinching pennies because he grew up being frugal. He was able to qualify for the Pell grant and other scholarships to help pay for college. Although he isn’t working full time, he takes odd jobs on the weekend to earn pocket money for minor expenses like gas for his car or lunch outside of home.

“I make it so that Sage never has to send money my way,” says Emerson. “I know I’m not the income and I know I’m not working full time. I try to make sure I’m not a financial burden.” For example, if he doesn’t have money for lunch, he’ll simply skip lunch that day.

“He almost takes it too far,” says Sage, “I had to force him to buy a new pair of shoes.”

Where they run into obstacles

For Sage, adjusting to married life on a single income was tough. “I definitely had to learn to think of money as our money and not just my income,” Sage says about the transition.

“Part of it was just a personal problem that I had to overcome. Realizing that when you get married, me becomes we,”  she adds.

The couple has learned to communicate about things such as what qualifies as a large purchase and whether or not Sage had to inform her husband of what she’s doing with what’s technically ‘her’ income.

Sage imagines their roles will flip once Emerson completes medical school and earns a higher wage than hers or if she elects to stay at home after having children.

“We get by, but it’s definitely not an income I want to spend the rest of my life on,” says Sage.

Matt and Brit Casady

Rancho Cucamonga, California

Income: $60,000 – $70,000

Matt, 28, and Brit Casady, 26, and 1-year-old son. Source: Matt Casady.

Matt, 28, and Brit Casady, 26, decided to live on one income to save on childcare, which doesn’t come cheap in their hometown of Rancho Cucamonga, California. They manage on Matt’s salary as an online marketer for a self storage company, where he makes between $60,000 and $70,000 a year.

“We were scared at first but we knew that we wanted to live on one income because we didn’t want to have to pay for child care,” says Brit, adding she’s always wanted to be a stay at home mom. “That money that I’d be earning from working would be paying just for daycare. So financially, one income makes more sense.”

Their strategy: thrifting and living two paydays ahead

The couple decided to transition to a single-income household when they were expecting their son, now 1. They started by reducing their monthly bills by paying off both of their car loans and cutting back on unnecessary expenses. The couple also got lucky: Within six months of having their son, Matt got a new job that paid a higher salary. But the new job also meant relocating the family from their hometown in Lehi, Utah to Rancho Cucamonga, a vastly more expensive area.

All of the furniture in their new house is either a hand-me-down or was purchased used. The Casadys bargain shop at discount retailers when they want nice, designer clothes.

“We’re very cheap people. We don’t feel like we live a restricted life,” says Matt. The couple also finds deals on things like furniture and decor for their baby’s room by joining yard sale or thrifting groups on Facebook.

They use a Google spreadsheet to keep track of the monthly family budget. When Matt’s paycheck comes in, the couple takes no less than 20 percent of his take-home pay and adds it to their savings. After paying for fixed expenses, they put the remainder of their funds to a spending category. When they spend money, they record the amount, place and description of the purchase in the spreadsheet and subtract it from the limit in the spending category.

“It’s more freeing than it is restrictive when you know that the money that you’re spending isn’t going to prevent you from paying rent next month,” Matt says.

Brit earns $2,000 to $3,000 annually freelancing as a graphic designer. She says about 90% of the time, the money she makes is added to the couple’s savings account. If Matt gets a bonus, or the couple receives an influx of funds in a tax return, it’s treated the same way.

Where they run into obstacles

Moving to a more expensive place has presented some challenges. Housing alone costs about 69% more in Rancho Cucamonga than in Lehi, Utah, according to Sperling’s Best Places cost of living calculator.

“It’s definitely been a sticker shock. Rent alone is significantly more money,” says Matt. The couple says they have adjusted to the rise by staying frugal.

“The activities that we do are mostly free, so we can create memories versus [buying] things that cost a lot of money,” says Brit.

The couple also tries to avoid keeping score on things like who has spent more money from the ‘fun’ category in their budgeting. For example, Matt, a fan of UFC foodball, may buy a ticket to a game for $150 and Brit may get her hair done for $90, but she doesn’t try to find another way to spend $60 afterward.

“Just because he spent more doesn’t mean I can spend more,” Brit says. “It helps us to stay in our budget and not compare [who spent what] so we are not constantly trying to level up.”

The post Why These 3 Families Chose to Live on a Single Income appeared first on MagnifyMoney.

It’s Now Easier for Millions of Student Loan Borrowers to Get a Mortgage

Student loan borrowers who are making reduced income-driven repayments on their loans will have an easier time getting mortgages under a new policy announced recently by Fannie Mae.

Nearly one-quarter of federal student loan borrowers benefit from reduced monthly student loan payments based on their income, Fannie Mae says. However, there’s been some confusion about how banks should treat the lower monthly payments when they calculate a would-be mortgage borrower’s debt-to-income ratio (DTI): Should banks consider the reduced payment, the payment borrowers would have to pay without the income-based “discount,” or something in between?

It’s a tricky question, because student loan borrowers have to renew their qualification for the lower payments each year, meaning a borrower’s monthly DTI could change dramatically a year or two after qualifying for a mortgage. The banks’ confusion over which payment amount to use can mean the difference between a borrower qualifying for a home loan and staying stuck in a rental apartment.

There’s even more confusion when a mortgage applicant qualifies for a $0 income-driven student loan payment, or when there’s no payment amount listed on the applicant’s credit report. Previously, in that situation, Fannie Mae required banks to use 1% of the balance or a full payment term.

As of last week, Fannie has declared that mortgage lenders can instead use $0 as a student loan payment when determining DTI, as long as the borrower can back that up with documentation.

That announcement followed another Fannie update issued in April telling lenders that they could use the lower income-based monthly payment, rather than a larger payment based on the full balance of the loan, when calculating borrowers’ monthly debt obligations.

“We are simplifying the options available to calculate the monthly payment amount for student loans. The resulting policy will be easier for lenders to apply, and may result in a lower qualifying payment for borrowers with student loans,” Fannie said in its statement.

Taken together, the two announcements could immediately benefit the roughly 6 million borrowers currently using income-driven repayment plans known as Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE), Income-Contingent Repayment (ICR), and Income-Based Repayment (IBR).
Freddie Mac didn’t immediately respond to an inquiry about its policy in the same situation.

What This Means for Student Loan Borrowers Looking to Buy

Michigan-based mortgage broker Cassandra Evers said the changes “allow a lot more borrowers to qualify for a home.” Previously, there was a lot of confusion among borrowers, lenders, and brokers, Evers said. “[The rules have] changed at least five or six times in the last five years.”

The broader change announced in April, which allowed lenders to use the income-driven payment amount in calculations, could make a huge difference to millions of borrowers, Evers said.

“Imagine you have $60,000 in student loan debt and are on IBR with a payment of $150 a month,” she said. Before April’s guidance, lenders may have used $600 (1% of the balance of the student loans) as the monthly loan amount when determining DTI, “basically overriding actual debt with a fake/inflated number.”

“Imagine you are 28 and making $40,000 per year. Well, even if you’re fiscally responsible, that added $450-a-month inflated payment would absolutely destroy your ability to buy a decent home … This opens up the door to a lot more lenders being able to use the actual IBR payment,” Evers said.

The Fannie Mae change regarding borrowers on income-driven plans with a $0 monthly payment could be a big deal for some mortgage applicants with large student loans. A borrower with an outstanding $50,000 loan but a $0-a-month payment would see the monthly expenses side of their debt-to-income ratio fall by $500.

It’s unclear how many would-be homebuyers could qualify for a mortgage with an income low enough to qualify for a $0-per-month income-driven student loan repayment plan. Fannie did not have an estimate, spokeswoman Alicia Jones said.

“If your income is low enough to merit a zero payment, then it is probably going to be hard to qualify for a mortgage with a number of lenders. But, with the share of IBR now at almost a full 25% of all federally insured debt, it’s suspected that there will be plenty of potential borrowers who do,” Jones said. “The motivation for the original policy and clarification came from lenders’ requests.”

The post It’s Now Easier for Millions of Student Loan Borrowers to Get a Mortgage appeared first on MagnifyMoney.

Why You Should Apply the 72-hour Rule to Your Tax Refund

Ka-ching! Your tax refund just hit your checking account. Time to apply the 72-hour rule.

Whether your refund is in the thousands or hundreds, the urge to spend the funds might instantly become overwhelming. Maybe you already had an idea of what you want to spend the money on and you’re all set to hand over your refund for it. Or, maybe the money means you finally have enough to make a large purchase you’d otherwise need to save for.

Whatever your reason, don’t spend your refund quite yet. If it’s not an immediate emergency (read: root canal, car accident, flood, etc.), let the cash burn a hole in your pocket for about 72 hours.

Journalist and money expert Carl Richards came up with the “72-hour rule” to kick his habit of buying every book he wanted on Amazon, ending up with a pile of unread books. Now, he says he lets a book sit in his shopping cart for at least 72 hours before hitting “buy,” and he’s saving money only buying books he will actually read. You can apply a similar practice to your spending habits.

Why wait 72 hours?

Our brains respond positively to instant gratification. It’s why so many of us find it difficult to save money or lose weight. We want the item or food now, and when there’s nothing stopping us, why wait?

You need the space between receiving the money and spending it to think. The shorter that space is, the less time you have to think and the more likely you are to spend the funds impulsively.

“People often look at their tax refund as found money like lottery winnings or inheritance. The temptation to spend surprise money on something fun or frivolous is strong,” says Denver, Colo.-based Certified Financial Planner Kristi Sullivan.

You want to avoid doing that. Your tax refund isn’t lottery winnings or an inheritance. It’s your hard-earned money being returned to you with no interest gained.

Tax refunds averaged $2,860 in 2016, according to the IRS. This year, a SunTrust survey found about 1 in 4 Americans already planned to spend their refund money on a large purchase before they even received the funds. That proportion rises to 36% among millennials and 40% among Gen-Xers, according to SunTrust.

That’s no bueno, considering the average citizen admits they can’t pull together $400 in case of an emergency.

Kinney says “hitting the pause button on spending impulses gives the rational brain time to think” of more practical ways to use the money like getting out of debt, contributing to a college savings fund, or adding to your savings.

Although he acknowledges when you’re living paycheck to paycheck, it’s a little harder to resist a sudden — albeit predictable — boost to this month’s budget.

“People feel constrained by their paycheck all through the year, then suddenly this windfall of money gives them the ability to splurge. The temptation can be hard to resist,” says Kinney.

Here are a few ways you can manage the temptation, and the time.

While you wait…

Weigh your wants vs. needs

The waiting period is supposed to help you to spend your tax refund responsibly, right? Consider all of the expenses the money could go toward. Should you buy the new iPad or pay off your credit card? How about that car loan? Time to weigh your options.

Sullivan says that means you should pit your “wants” against your “needs.”

“A need that you haven’t already bought is rare. Wants are everywhere. Time to reflect might have you making a more mature decision with your money,” says Sullivan.

Do some soul searching to see where your financial priorities lie. You might find your need to pay off your credit card this month to avoid paying more in interest outweighs how badly you want that new gadget. Think about it.

Review your finances

Since your tax refund might consume your every thought for three days, you might as well use the time to think about your overall financial picture.

“Sit down and think about other pressing financial issues, and how you plan on paying for them,” says David Frisch, a Melville, N.Y.-based financial planner. He suggests you review bank statements, brokerage accounts, long-term goals, and other financial considerations, then give some thought to whether or not you’re on track to achieve them.

For example, if you realize you don’t have enough in your emergency fund to cover three to six months of expenses, you might decide to put the money there instead of spending it. Or, if your refund could completely pay off a high-interest debt like a credit card, you might decide to free yourself from the debt burden.

Make sure you don’t get a huge refund every year

Most Americans receive a refund because the government withheld too much in taxes. The government uses information you gave them to decide how much of your paycheck to withhold each pay period.

“Changing your withholding will give you more of your money during the year so that you will not get a large refund that you might be tempted to spend frivolously,” says Alfred Giovetti, president of the National Society of Accountants.

You can change information on your withholding forms on your own if you’d like. Use this IRS calculator to determine your proper withholding and figure out what information you need to correct on your W-4 form. Then, contact your employer’s human resources department to turn in a new W-4 with the correct information.

If you’d rather have some assistance, you can contact a professional. Work with your accountant or financial adviser to change information on your W-4 and its equivalent withholding form for the state in which you reside.

“Plan with a good tax accountant to get a small refund or a small liability by changing your withholding, so that you do not rely on the refund as ‘mad money,’” says Giovetti.

Treat yourself

We admit, waiting sucks, but it doesn’t have to be complete torture. Sullivan suggests taking the edge off with a small reward for each day you wait.

“It could be an ice cream cone, a long phone chat with a friend, an hour reading a trashy novel, or whatever makes you happy,” she says.

Just make sure the reward you choose isn’t too expensive, and you should avoid getting into more debt. Your “reward” could serve as a break while you comb through your finances.

The takeaway

Take some time to think before spending whenever you receive unexpected income, and you might make better spending decisions. Maybe you need only 24 hours, instead of 72, or maybe you need a little longer to decide what to do with money, but the same lesson applies. If you’re considering a purchase that’s a “want” and not a “need,” think before you buy.

The post Why You Should Apply the 72-hour Rule to Your Tax Refund appeared first on MagnifyMoney.