5 Smart Money Moves to Make After Graduation

There are so many decisions you need to make leading up to that first day. Here's what you need to know.

Starting your first job can be overwhelming. There are so many decisions you need to make leading up to your first day. Then there are all the decisions you need to make during the first week, so much so that you need to know the right questions to ask to avoid making any glaring mistakes.

I remember the weeks leading up to my first day. I was moving from Pittsburgh to Baltimore to work for a huge defense contractor, and I was a mess. It was my first real job, with a real paycheck. I was putting a huge deposit down on my first apartment. I bought a new car. I was overwhelmed by the huge employee manual, and my human resources rep asked if I wanted to contribute to a 401K. A 401—what?

I had no idea what I was doing.

Fortunately, I had a friend who had done this all before and he gave me some great advice. When I look back, I’m thankful for his guidance because he helped me avoid many headaches and build up an above-average net worth. Here’s what he told me.

1. Build Up Your Emergency Fund

An emergency fund is a crucial defense against financial disaster. Whether it’s an accident or something needing repair, an emergency fund helps you manage the problem without you having to go into debt. (Here are a few ways to turbocharge your emergency savings.)

When you don’t have a fund and your car breaks down, how will you fix it? You still need to get to work or you might get fired, which is worse than a broken-down car. If you don’t have the cash, your only choice is to put the costly repair on your credit card with its double-digit interest rate. Now you have a problem made much bigger by debt. (Debt can have a significant impact on your credit as well. You can see how by viewing two of your credit scores for free on Credit.com.)

Make the choice to start an emergency fund. At a minimum, have three to six months’ worth of expenses saved. Disaster will strike, so start saving today so you are ready.

2. Save for Retirement

When you start making real money, it’s time to start thinking about retirement. Retirement is a long way off, but your decisions today can have a huge impact on when and if you’ll be able to retire when you want.

If your employer offers a retirement plan, learn the details on how you can benefit. Many employers that offer a defined contribution plan, like a 401K, usually offer incentives for you to contribute. My first employer matched 50% of my contributions up to 4% of my salary. When I contributed 4% of my salary, they added an extra 2%.

With investments, time is your best friend and saving early is key.

If your employer doesn’t offer a 401K plan, you can still invest in a taxable brokerage account or turn to an IRA. In those accounts, you can take advantage of index funds, which are some of the cheapest and best ways to invest money.

3. Keep Housing Costs Low

Remember this important money ratio: Keep your housing costs less than 30% of your income. It’s easy to fall in love with an awesome apartment or house in a new area. And it’s easy to commit to a high monthly payment because you tell yourself it’s worth it. But don’t fall into that trap!

By keeping your monthly fixed costs low, the largest of which will likely be your housing, you can save more money or use it to pay down debt like student loans.

4. Get Enough Insurance

Insurance is something you pay for and hope you’ll never need to use. If you end up needing it, however, you’ll be glad you have enough.

How much is enough insurance? That depends on your financial and family situation. If you’ve had time to build up a sizable emergency fund, you can increase your deductibles. If you don’t have a big emergency fund, you can keep your deductibles lower for now. Once you build up those reserves, increase the deductible to something with which you’re comfortable.

5. Build Your Social Network

This may not seem like a financial decision, but it is. Work toward building a network of friends and professional contacts in your field. The vast majority of jobs are not filled by being listed on a job site but through referrals. I got my second job, and a 15% raise, because of someone I knew.

Building up a network doesn’t have to feel slimy. It’s as simple as maintaining existing relationships and finding places to meet new people. It will also help make life a little more interesting.

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3 Simple Steps to Starting an Emergency Fund

Buying a fancy dress for the big party on Saturday night is not an emergency (even though it feels like one). Here's how to prepare for the real fiascos in your life.

What will you do when faced with an unexpected expense of, say, $400? A 2016 study from the Federal Reserve found 46% of Americans didn’t have enough funds to cover an unexpected expense of that amount. So, how did they manage to pay for it? Possibly by using their credit card or doing the unthinkable and asking for money from friends and family, which is never fun.

The issue here is that emergencies are bound to happen, as they do to all of us. So, it’s best to be prepared because one of the easiest ways to get into debt unexpectedly, and damage your credit score in the process, is by paying for an emergency car repair or medical expense with plastic — and no plan to pay it off quickly.

If you have been working hard to repair, maintain and improve your credit score, one of the best ways to avoid destroying all your hard work is to have an emergency fund you can use for unexpected expenses. (You can see how your debt may be affecting your credit by viewing two of your credit scores for free on Credit.com.) Remember, it’s best to only use your revolving credit, or credit card, for planned expenses you know you can pay off.

With that in mind, here are three simple steps to get you started on building an emergency fund.

1. Know the Difference Between an Expense & an Emergency

Buying a fancy dress for the big party on Saturday night is not an emergency (even though it feels like one). So make sure you are budgeting correctly and planning for expenses that you know are coming up. For example, you should have your car tuned every year or your home painted every five years. These can be major expenses, but, again, they are not emergencies. So, you need to have a savings plan for them. Imagine how much less stress you will feel if you plan ahead and save accordingly, and when the time comes to paint the house, you can just write the check and be done!

2. Save Up $1,000

Most Americans can’t scrape together enough cash to cover an emergency, however, they all know emergencies will happen, because they have in the past. So, it’s key to have an emergency fund. To start, do everything you can to sell, scrape and cut from your budget so you can save $1,000 as quickly as possible that you keep in a separate account from all of your other funds. Truth be told, most emergencies — not all! — will cost you $1,000 or less, so it’s a good benchmark to work toward. With that $1,000 in the bank, you’ll be surprised how much better you sleep at night.

3. Build a Bigger Cash Cushion

Once you’ve got your $1,000 saved up, just keep going! Keep saving up and adding to your emergency fund until you have three months of your household expenses saved up. Once you’ve done that, make it your goal to save six months’ worth of expenses. Just imagine the relief you’ll feel at not having to worry if something happens to your job, or your child needs special medical care, or you get hurt and can’t work for a few months. You’ll be covered without getting yourself into deep debt or having to beg your friends and family for money.

Remember, start today on building your rainy day fund. Aim to save $1,000 first, then keep going. It’s the smartest, safest thing you can do for your family, your finances and your credit score.

Struggling to get your emergency fund started? There are some places where you may be able to cut back. For instance, here are 50 things you should probably just stop spending money on

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Why Even Full-Time Workers Struggle With Expenses

A new book based on extensive research of U.S. households says income instability is to blame.

Unemployment is low, inflation is historically low and even wages are perking up, leading many observers to believe the U.S. economy is humming along nicely. So why do many Americans say they are struggling?

A new book born of meticulous, years-long research offers a fresh insight into this burning question. Month-to-month swings in income, even for those with full-time jobs, are often the cause of Americans” financial anxiety, claim the authors of “The Financial Diaries: How Americans Cope in a World of Uncertainty.”

For a stunning number of American households, both income and expenses swing 25% or more in either direction on a regular basis, leaving many families scrambling on a month-to-month basis, even if things don’t look so bad annually, the authors argue in their book and a Harvard Business Reviews essay.

Economic data tends to examine broad movements; even at its most micro, it tends to identify years-long trends. Researchers Jonathan Morduch and Rachel Schneider had a sense government statistics were missing things, so they went nano. They spent 12 months getting 235 families to track every single dollar going in and out — 300,000 cash flow events in all. The product of their painstaking research offers perhaps the clearest view yet of why even middle-class Americans find themselves living with deep economic anxiety. The book even offers up a new term — “precarity,” or precarious economic volatility — to describe the plight of everyday Americans.

One of the more bold claims made in the book: Despite all the talk about income inequality, the authors say income instability has risen even faster and is the more immediate problem.

What’s Income Instability? 

Many readers are familiar with the idea that unexpected expenses — like a health scare or major auto repair bill — can derail many households. But the book establishes another reality that might be new to many: income volatility, even among those with full-time jobs.

The book’s opening anecdote cites a research subject who works as a truck mechanic in Ohio. While he works full time, his pay relies largely on commissions and can vary from $1,800 to $3,400 each month. In bad weather, trucks break down more often. That means in the spring and fall months, mortgage payments aren’t made, and the electricity bill goes unpaid. Later, for a fee, the family catches up. (You can see how any missed loan payments may be affecting your credit scores by viewing your free credit report summary on Credit.com.)

This same problem is repeated again and again among the families studied. Morduch and Schneider found that the term “average income” is a bit of a farce, as typical families lived through five months each year with income that swings either 25% above or below “average.”

“This is creating a lot of anxiety and uncertainty that is impossible to see in the usual data,” Morduch said in an interview. About five months out of each year, incomes “weren’t even close” to average.

“Often we see the (financial) problems as a discipline problem, a failure of personal responsibility. What we’re trying to say is there’s something else going on,” he said. “The underlying conditions are really hard. It probably isn’t just about self-discipline.”

Income swings are to be expected among families suffering job loss, the self-employed or those who rely on tips, like waiters. But the researchers found a stunning rate of income volatility even among those with traditional-sounding full-time jobs.

“This was the single biggest surprise (in the research),” Morduch said. “There’s insecurity that’s because you are going to lose your job, but that’s not what’s driving anxiety for these folks … What we see is that when paychecks bounce from month to month, people can be making good financial choices but are still struggling.”

As a result, even earners who are safely in the middle class spent a month or two living as poor or “near poor,” the book says. The problem for many is better described as a lack of liquidity — getting enough cash to pay the mortgage this month — than as insolvency, or a hopeless difference between income and expenses.

“Not balancing on a high wire, driving on a rocky road,” the book says. “(There’s a) distinction between not having money at the right time vs. never having the money.”

While economists might just be becoming aware of this month-to-month struggle, the financial industry has known about it for some time. That’s one reason there are more payday lending storefronts in America than McDonald’s restaurants. (You can find tips for escaping payday loan debt here.)

Trouble Saving for a Rainy Day

The volatility problem is closely related to Americans’ lack of emergency savings. Study after study shows a large percentage of Americans don’t have the recommended three months of living expenses stored in short-term savings. Some studies show even more dire data. A stunning 46% of Americans told the Federal Reserve in 2015 they could not cover an emergency $400 expense without selling something or borrowing the money. Income and expense volatility, combined with no savings, is a perilous combination.

“Households don’t have a big cushion. Into this mix is the reality that levels of income have not risen – the bottom 50% has seen no income growth since 1980 — then you are really squeezed,” said Morduch. As a result, even in good months, earners don’t have any extra left over to build a rainy-day fund – economists say their budgets have no “slack.”

“There is a knock-on effect of diminished slack so when the budget gets hit by a car repair or the house needs a new roof, it’s just that much harder,” Murdoch said.

How did this income volatility come to pass? The authors blame what they call “the Great Job Shift.” Employers are increasingly sharing risk with their workers. That means cutting back hours, often on the spot, when times are slow. Or basing a large portion of pay on commission, as in the case of the truck mechanic. In other cases, workers rely on tipping to top-up wages that otherwise aren’t livable. In one of the book’s more frustrating scenes, as casino blackjack dealer in Mississippi describes how her income relies on events as whimsical as the nearby college football team schedule.

The subjects in the book are anonymized. Their names changes and a few other personally identifiable data points have been obscured, but otherwise, their financial diaries are disturbingly real.

How Do We Fix it? 

When asked for policy recommendations, Morduch leaps to the defense of the Consumer Financial Protection Bureau, which he says is working hard to regulate many of the short-term lending products that have emerged to services workers with volatile incomes. He says there’s also been constructive conversations with large firms about making hourly wage worker schedules more predictable, and moving away from so-called on-call workers. The “Schedules That Work Act” that would have promised some workers two-weeks scheduling notices was considered but tabled by Congress under President Barack Obama.

Other changes would help, too. Many social benefits programs are cumbersome to apply for and don’t offer much help for families who are only occasionally “near poor,” and might need help one or two months per year.

Changes that could encourage saving for short-term events would help, too. Tax-advantaged products like 401K accounts help families plan for decades in the future, but families living on the margins are afraid to use them for emergency savings because of the severe early withdrawal penalties. (You can learn more about withdrawing from your 401K here.) More flexible rules would encourage greater use of retirement accounts, Morduch believes.

“A lot of Americans wisely don’t want to lock up their money,” he said. “There isn’t enough attention paid to shorter-term policies.”

In a larger sense, Americans should probably change the way they think about income and spending, Morduch said, and many could learn from research subjects described in the book.

“The families we got to know, they think a lot about liquidity. They have a lot to tell other Americans. Mainly, prepare for a life of ups and downs,” he said.

If you’re looking for ways to keep your finances in check, we’ve got a full 50 ways you can curb and stay out of debt here

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How to Create a Financial Emergency Plan

You may have an emergency fund, but you probably don’t have an emergency plan. And it’s time you created one.

My son recently brought home a homework assignment. He was supposed to write down a plan for what to do if there was a fire in our house. He’s not even 6.

That same week, our daughter told us about a fire drill in her daycare. She’s only 3.

Even at that age, it’s important to have a plan for the direst of circumstances. Fires are chaotic. To help cut through the confusion and the stress, we come up with plans and practice them. Without confusion, there will be less chaos and fear.

If we plan and practice a response to a fire emergency, why don’t we do the same for other emergencies?

Do you have plans for a car accident or a medical emergency that could leave you with four- or five-figure debt? You may have an emergency fund, but you probably don’t have an emergency plan. And it’s time you created one.

The key to a successful financial emergency plan is that it outlines the steps you would take if you ever had to face that emergency. It means you’ll walk through what you would do if the emergency were actually happening.

For example, the biggest financial emergency I can think of is losing my job.

In my emergency plan, here’s what I would do:

• Lower (or cancel) all nonessential expenses. I would immediately cancel Amazon Prime, my Netflix account and all the recurring costs that are completely discretionary. For services I couldn’t cut immediately, such as my two-year cable internet subscription, I’d downgrade the service to the lowest possible tier.

• Adjust my budget. Since I’d need to live off my emergency fund, I’d need to adjust my budget to be deliberate in my spending.

• Learn how to apply for unemployment benefits. I’d need to know the process for getting unemployment from my local state unemployment office. Learning it now would be easier than under duress.

• Decide how to tell my family. This can be one of the hardest things to do, but preparing for it in advance could make it far less painful.

• Establish a plan for finding a new job. Whether it’s setting up profiles on relevant job search sites or reaching out to my network, I’d establish that plan now so I could execute it later.

• Consider how to spend my downtime. Maintaining a positive attitude during a negative experience — one that could persist for many weeks — is crucial. So is planning for the greater abundance of downtime during the week. I’d need to find projects that would give me a sense of purpose to combat the frustrations I’d experience during a job search.

This is just a subset of the things I’d do if I was laid off. As you build your plan, you’ll want to expand on this list, but I wanted to provide a starting point. (Another good starting point: Checking your credit scores, which can impact your finances. You can view two of them for free, with updates every two weeks, on Credit.com.)

What Events Should You Plan For?

The big ones are a death in the family (including yourself), loss of your job or ability to do your job and catastrophic loss of a major asset like your home or vehicle.

Once those major emergencies are covered, you can expand to less-significant but important emergencies. What if your furnace or HVAC system fails? What if your oven, washer, dryer or other major appliance stops working? These are not as financially painful as losing a job or your car, but they’re still inconvenient and require research.

As you build out your plan, don’t be afraid to add to it. No emergency is too small, and taking the time now will pay off in the long run.

Hopefully you’ll get lucky and never need your plan at all.

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Got Extra Cash? Here Are 11 Smart Purchases Under $400

Here's a list of smart purchases you should never feel bad about buying.

There’s always a lot of talk about how to be financially responsible and increase wealth with very little money. Many Americans live paycheck to paycheck. But put some real numbers behind that generic statement. The Bureau of Labor Statistics Consumer Expenditure Survey of 2015 reports an average household income per consumer unit (think entire household of family members or single, financially independent people living alone or with other people) is $69,629. And the consumer’s unit average yearly expenses is $55,978.

Let’s say you dedicate those yearly expenses to standard things, such as food, housing, transportation and insurance. While the actual percentage breakdown per expense differs from household to household, depending on your family picture, you’ll still be dedicating a good chunk of your income to various necessities each month.

If we continue with this logic, the money you have left over — that unreasonably small portion of your salary that remains after paying bills — is what many would dub “play money.” The average consumer unit will have about $13,000 a year to play. (Speaking of “play money,” here’s how to stop buying stuff you can’t afford.)

With all that extra cash, what can we do? Of course, we could blow it on a steak dinner or splurge for the newest tech gadget. But what are a few smart items we should buy when we have the opportunity? We’ve compiled a list of smart purchases you should never feel bad about buying. And the best part? They’re all less than $400.

1. Student Loans

The average recent graduate has about $37,172 in student loan debt and pays about $351 per month toward the loan, according to Student Loan Hero. For those who are super strapped for cash, they might choose to defer their loans to a later date or skate by paying just the minimum. But the interest will kill you. One of the smartest things you can do with extra cash is to pay more into your loans when you can afford to do so. It’s a solid bet that added expenses will pop up eventually, and staying ahead of the curve means one less financial burden down the road. (Check out some tips for paying off your student loans here.)

2. An Interview Suit

Even if you’re not in the job market, investing in an interview suit is a wise decision. You never know when you’ll need a go-to outfit for networking events, conferences or a random “I’ve got someone I want you to connect with” meeting. Shopping for the perfect outfit is a lot more bearable when you’re not under duress or in a time crunch. Instead, you can browse for sales. You’ll find cheaper options in many locations, but a nice suit should put you right around that $400 mark. (What else can you do to get yourself ready for a job interview? Check your credit — many employers look at a version of your credit as part of the application process, so it’s helpful to know where yours stands. You can see two of your credit scores — absolutely free — on Credit.com.)

3. A Durable Mattress

What does anything matter if you don’t get a good night’s sleep? When you have extra cash at the end of the month, put it toward a high-quality mattress that will ensure you wake up ready to tackle each morning with spunk. High-quality mattresses come at a price. But they also last for years. You could spend thousands on a name-brand mattress, but a foam mattress from IKEA could work just as well.

4. Digital File Protection

External hard drives and online storage are perfect for backing up all those vacation shots, your wedding album and imperative side-business files. Hard drives are easy to find online, and they’ll run you about $82 for one with worthwhile storage capacity. Online storage pricing varies when it comes to options and personal preferences, but you can choose between services, such as Mozy, Dropbox or SugarSync. These cloud-storage providers charge a monthly fee but give discounts for yearly subscriptions. Expect to pay between $28.98 and $99.99 per year.

5. Online Classes

The most successful people will tell you learning never stops. As workforce trends continue to change, the need for specialized expertise grows. Devoting a few extra bucks to improving your knowledge is a practical expense. Maybe you want to become a better public speaker. Or pick up a new hobby to clear your head at night. And maybe you’ve heard tech gurus ramble about an increasing demand for coding professionals. Buy books, go online and enroll in a course. Do whatever you can to set yourself up for future success.

6. A Commuter Bike

Why spend what you could save? One of the smartest purchases you can make with $400 or less is a commuter bike. When considering what you’d also pay for gas, maintenance and car insurance, a commuter bike will pay for itself. There are definitely good, better and best when it comes to bikes, but you could find a quality road bike for around $300.

7. An Emergency Fund

It’s never a bad idea to start establishing an emergency fund. Experts say three months’ worth of expenses is a reasonable amount of cash to stash away just in case. A good trick is to make your savings automatic. Once you’re unable to see your money coming in, it’s easier to get by without it and find ways to work with what you have. Then, when you break your arm doing back flips off a boat or blow a radiator in your car, it’s covered.

8. Retirement Savings

Expanding on the previous point, try to accumulate as much wealth as you can for early retirement. Consider creating a moderately aggressive investment plan by opening IRAs, 401K accounts, brokerage accounts, etc. Take advantage of your employer opportunities and set up automatic contributions to your company’s 401K plan. Start at a respectable 3% contribution, and gradually increase it until you get to at least 10%. When in doubt, seek a fiduciary financial planner.

9. Solid Clothing

Some of us find it absolutely insane to buy a pair of jeans that cost more than $39.99. However, quality clothing items, such as boots and winter coats, hold up over time. And the money you shell out is worth it later. Reddit’s Buy It for Life adheres to this philosophy. This subreddit aims to “emphasize products that are durable, practical, proven and made to last.” It might seem insane to pay $219 for insulated L.L. Bean Duck Boots, but you’ll be grateful when they’re still keeping your toes warm and dry 10 years later.

10. A Coffee Maker

Does life really exist without coffee? Another smart purchase is to invest in a solid coffee maker. If you fancy those specialty drinks, you could buy a combination machine from DeLonghi for $162 on Amazon. Considering the price of specialty drinks from coffee shops — and our dependency on caffeine — this is a purchase that will pay for itself in a matter of weeks.

11. Various Fitness Programs

There’s no safer bet than to invest in your health. Health equals wealth, right? Whether you buy a treadmill for $399.99 or invest in various meal prep services popular for those always on the go, they’re all worthwhile expenses.

Depending on your employer, you might also be eligible to receive reimbursements for health-related expenses, such as gym memberships, fitness classes or playing in sports leagues. While you’re at it, look into other reimbursement programs you might be eligible for, such as cellphone plans, moving costs or professional-development classes.

This article originally appeared on The Cheat Sheet.  

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How to Spend (or Invest) Your Tax Return

Expecting a hefty check from Uncle Sam? Here's how to spend your tax refund.

If you’re expecting a hefty refund this year from Uncle Sam, you may be tempted to spend it all on something extravagant for yourself. But it’s important to resist temptation and use that money wisely — at least most of it.

Your tax refund may feel like a windfall, but you should treat this surplus cash just like your other earnings, says David Weliver, personal finance expert and founding editor of Money Under 30.

It’s all about your attitude and making sure you set realistic expectations.

“The biggest mistake I see people make … is treating [bonuses and tax refunds] as ‘found’ money instead of earned money. Research shows we’re more likely to spend a windfall frivolously than money we’ve earned. This is especially true of money we weren’t expecting,” he says.

While tax refunds are still earned money, “the fact that it comes all at once means we associate it less with our daily efforts,” says Weliver. If your refund is what you’ve expected, or even bigger than you expected, you could be triggered to spend more of it. It’s probably not a good idea to count on having a sizable refund every year, “because that can lead to spending it before you’ve received it,” he says.

What’s the Best Use of My Tax Refund?

Before you spend anything, first you need to take stock of your debt situation. If you have credit card or consumer debt, attack that first. That’ll help your bank account — and your credit score, since high credit card balances can affect your credit-to-debt ratio. (You can see how yours is doing by viewing your free credit report summary, along with two free credit scores updated every 14 days, on Credit.com.)

“Pay it off, or at least as much of it as you can. That’s true of any debt with double-digit interest rates,” Weliver says. (You can find more tips for paying off your credit card debt here.)

When it comes to paying down larger debts, like student loans or a mortgage, the decision is more personal, and could be a good move as long as your other long-term financial goals are being met.

Should I Invest my Tax Return? 

 

After addressing any applicable debts, make sure you have an emergency fund that will cover at least six months of expenses. That money, along with anything that will be going toward big purchases in the next three years, like a car, the down payment on a home, or a big vacation, should be kept in a savings account.

“It can be tempting to invest that money in a rising stock market, but if there’s a big market correction before you cash out, you could be forced to sell at a substantial loss,” Weliver says. “If, however, you’ve got the emergency fund and won’t need that cash in the next few years, you’ll want to invest in boring old index funds or with a robo-adviser. Invest it, forget it’s there, and go back to working hard.”

You can also make contributions to a Roth IRA or a 529 savings plan.

At the end of the day, your tax refund shouldn’t turn you into a Grinch (unless you’re digging out of credit card debt), and spending some on a splurge could be good for you.

Setting aside between 10% and 25% of your tax refund for something you really want is a great way to reward yourself and stay motivated, Weliver says.

Another option? Get involved with causes you’re passionate about and donate some of your refund to charity. There’s a bit of a bonus to that option, too: The donation could net you a tax deduction next year.

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3 Ways to Stick to Budget When You Don’t Have a Steady Paycheck

budget_on_irregular_income

It’s difficult enough to balance your budget with a steady income, but can be really stressful when you aren’t making one. Here are some helpful tips to manage your budget when you don’t have a steady paycheck.

1. Know Your Income-to-Expense Ratio

Understand how much money you have coming in and how much is going out. If you have to, sit down and gather all of your expenses from the past three months to help you get started. Write down your net pay (take home pay) and then how much you’ve been spending on essential and non-essential expenses. If you are spending more than you are earning, then you might want to cut back a little. If you stick to a steady budget and have a good financial balance, then you won’t ever find yourself scrambling for money when your bills come in and you’re between jobs.

2. Stick to the 50/20/30 Rule

The 50/20/30 rule consists of fixed expenses, goals and discretionary (flexible) expenses. You want to dedicate most of your take home pay to your fixed expenses – regular bills, groceries, car payments, etc. You might want to put the next 20% of your paycheck toward your future goals. Do you have any upcoming events that are costly? For example, you might be planning a wedding in the next year or two. You want to make sure your goals and budget run in parallel tracks. If your goals ever change, then you will find yourself going in and adjusting your budget. Don’t let both of these crash as it will only put a large dent in your wallet.

The golden rule is to put 30% of your net-pay towards discretionary or flexible expenses. This could be eating out, hobbies, going to the gym, entertainment, etc. I recommend trying your best to never reach that 30% mark. If you always are spending 30% or more of your pay on non-essential items, you may lose track of your spending and find yourself in debt in the future.

It’s also a good idea to keep your credit card balances low as higher debt ratios can have a negative impact on your credit scores. You can see how your spending is affecting your scores by checking your two free credit scores, updated every 14 days, at Credit.com.

3. Have an Emergency Fund

Maintaining a financially stable life on an irregular income can be difficult. You never know when you might be in transition or out of a job for a short time. Try to always have a back-up option. An emergency fund can help you stay prepared for unexpected expenses. Even if you know you will always have money coming in, you never know when a large, unexpected expense will come up. An emergency fund will help you stay on top of your finances and always prepared for the unexpected.

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Why Daniel Radcliffe Is Our Patronus

Daniel-Radcliffe-saving

Call him The Boy Who Saved.

Daniel Radcliffe has made an estimated £74 million (equal to about $94 million, based on the current exchange rate) since taking on the eponymous role in the blockbuster Harry Potter franchise. That probably doesn’t come as a surprise, given the eight movies in that series alone have raked in close to $8 billion worldwide.

But you may be surprised to learn that the 27-year-old British actor has, well, been hoarding his money in Gringott’s.

“I don’t really do anything with my money,” Radcliffe told the Belfast Telegraph in late September. He went on to put forth a compelling argument for why he decided to save it.

“I’m very grateful for it, because having money means you don’t have to worry about it, which is a very lovely freedom to have,” Radcliffe said. “It also gives me immense freedom, career-wise … For all the people who’ve followed my career, I want to give them something to be interested in, rather than them just watch me make loads of money on crap films for the rest of my life.”

Radcliffe may be talking specifically about movie projects, but, no matter what your role in life, he’s right that having some money socked away can afford you a certain amount of freedom and security. People with money in the bank can sleep a little easier at night knowing they could weather an unexpected financial setback (like job loss or major car repair), afford more home and pursue new job opportunities if their boss turns out to be a real He-Who-Must-Not-Be-Named.

But, despite these clear advantages, many people — and Americans, in particular — just aren’t saving enough. Survey after survey shows that we’re woefully underfunded for retirement, are ill-equipped to handle even a small financial emergency and carry more debt than is ideal.

Ways Mere Muggles Can Save

Of course, there are plenty of socio-economic reasons for that: Many folks are still recovering from the Great Recession, wage growth has been pretty stagnant and high levels of student loan debt are weighing down many Americans’ finances. (We don’t all have £74 million in the bank, you know?)

But even people who are on a tight budget can consider Radcliffe their financial Patronus (we do) and find some new ways to save. Here’s how you might be able to get some more Galleons in your vault. Accio, savings!

1. Automate Your Savings

You shouldn’t spend more than what you have. If this is a challenge for you, consider setting up an automatic transfer so at least some of your extra funds (after paying your bills) make it into your savings account. You can apply a similar strategy to your investments and up the money from each paycheck that’s going into your 401K.

2. Improve Your Credit

A good credit score can help you save on everything from mortgage rates to insurance policies, so if your credit is looking a little lackluster, it might behoove you to put in a little work. You can improve your scores by paying down high credit card balances, disputing errors on your credit report and identifying specific areas where you need to improve. (You can find out what these areas are and monitor your progress toward building great credit by viewing your free credit report summary, updated every 14 days, on Credit.com.)

3. Find Ways to Generate More Income

The gig economy is real, and, in many respects, thriving, so if you and your family aren’t saving because of lack of income, consider a side hustle. You might be able to make some extra dough selling your stuff online, blogging, running errands for others on the weekend or sharing your ride, among other things.

4.  Scrutinize Your Budget

Even if you’ve already cut back, there may be ways you can still reduce your expenses. Spending too much on coffee? Brew your own at home. Blowing your food budget? Switch from brand name to generic products at the grocery store. Paying too much for cable or other subscription services? Ask your provider if they can lower your rate. You can find 47 more ways to stay out of debt — and, as a result, save more — here.

Image: YouTube

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How to Keep Thieves From Stealing This $2,300 Car Part

catalytic-converter-theft

When you think about protecting your car from damage or theft, you probably run through a mental checklist of sorts. Doors locked? Check. Windows up? Yep. Catalytic converter secure? Um…

Most cars have catalytic converters as part of the exhaust system, but they’re notable for more than reducing emissions. Catalytic converters get their jobs done using precious metals like rhodium, platinum and palladium, and that’s what makes them vulnerable to theft. Thieves can scrap these metals for $20 to $240, according to the National Insurance Crime Bureau, and catalytic-converter thefts have been pretty common over the last few years.

In 2015, consumers filed 3,986 insurance claims regarding stolen catalytic converters, up from 1,058 in 2009, according to the NICB. The figures come from the Insurance Services Office ClaimSearch data, which NICB used to identify patterns of catalytic converter thefts from 2008 to 2015. Much of the rise in theft has to do with the values of precious metals, which tanked in late 2008 and have since increased. (Keep in mind this only includes insured vehicles — there are likely more thefts that don’t result in an insurance claim.)

“There was a spike of catalytic converter thefts in 2008, but likely due to the metal prices in 2008-2009, the number of these claims took a downturn. Since then, there has been a steady climb in catalytic converter thefts which is likely attributed to the growing popularity and ease of stealing them,” says an NICB report from Aug. 28.

Thieves often target trucks and SUVs for their catalytic converters, because they sit higher above ground, so it’s easier for a thief to get under them and cut out the part. (Vehicles that sit lower to the ground aren’t necessarily safe — it’s just more time consuming if the thief needs to use a jack.) Between 2008 and 2015, catalytic-converter thefts were most common in Chicago (980 thefts); Sacramento, California (850); Los Angeles (550); Atlanta (407); and Indianapolis (353). On a state level, thefts were most common in California (8,072), Texas (1,705), Illinois (1,605), Ohio (1,439) and Georgia (1,215).

Most important: It’s expensive to repair. Depending on what kind of car insurance you have, you could be on the hook for the whole bill.

“Installing a replacement catalytic converter may cost between $500-$2,300 depending on the type,” the report says. “Repair costs are driven higher since thieves work fast and often damage other areas of the car attempting to remove catalytic converters as quickly as possible.”

Ideally, you can keep your car in a garage — a significant obstacle to thieves — but there are other ways to deter theft and avoid the headache of replacing a catalytic converter. Here are some recommendations from the NICB:

  • Claim ownership. Look into etching the license plate number or vehicle identification number onto the heat shield of the catalytic converter. There are government programs that do it for free, or you may be able to pay to have it done at a dealer or local body shop.
  • Park strategically. If you don’t have a garage, park near a building entrance or somewhere near surveillance cameras. A well-lit parking area may also deter theft.
  • Lock it down. Consider adding a security system to your car, having the catalytic converter welded to the frame of the vehicle or having a cage added to protect the part. Before you make any changes, make sure you find out how it may affect any warranties you have on the vehicle.

Otherwise, you might find yourself out of a catalytic converter — and $500 to $2,300.

Situations like the theft of a catalytic converter is a good example of why it’s so important to have an emergency fund: Such large, one-time expenses are difficult to absorb into your regular budget and put people at risk of getting into credit card debt. In addition to the out-of-pocket costs and credit consequences, it’s important to note that making insurance claims can cause your premiums to rise. And on the topic of credit and insurance: In some states, insurers consider your credit history when determining your premium, so protecting your credit can be just as important as keeping your car safe from theft. (You can keep tabs on your credit standing by getting a free credit report summary every 14 days on Credit.com.)

Image: BanksPhotos

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