6 Things Everyone Should Be Doing to Build Wealth

The idea of “building wealth” isn’t just for rich people.

In fact, if the word “wealth” has you envisioning fancy people spending summers in Cinque Terre on their private yachts, it might be time to reconsider what wealth really means. Wealth, in general, can mean ensuring that you have enough to adequately cover what you need and to keep you happy while also possibly providing you with a little extra on the side for what you just plain want.

The best part is you don’t have to be a financial planner to build wealth — there are some easy things everyone can start doing.

1. Know Your Net Worth

To build wealth, you need to start at the beginning. If you haven’t already, take stock of your net worth (your assets minus your liabilities) and try tracking it for at least a couple months (the longer, the better) to see how it’s trending. (You can view two of your credit scores for free on Credit.com.) Obviously, it’s ideal for your net worth to be getting larger rather than smaller, but if it isn’t, step two will be important.

2. Keep Track of Your Spending

You can’t really build wealth if you aren’t sure where you’re spending your money. Whether you use an aggregate site to track where your money goes out, an Excel spreadsheet, an old-fashioned checkbook or regular old pen and paper, it might seem silly to pay attention to every purchase you make, but only when you start to notice patterns in your spending can you really make cuts where and when you might need to.

For example, if you determine you’re spending more than you’re making, look for adjustable costs you could potentially reduce or eliminate immediately (cable, gym memberships, extraneous spending, etc.). If the problem is your larger costs — student loans, how much you pay in rent or your car payment — it could be time to consider reconsolidating your loans or potentially moving to a more affordable apartment, getting a cheaper car or opting for public transportation, if possible.

3. Make the Most of Free Money

Very few things in life are free, so when something is, it’s foolish not to take advantage. If your company offers a 401K match that you aren’t taking advantage of, you are leaving free money on the table. Talk to your human resources representative about your company’s policy, and adjust your allocations if there is a match you aren’t currently getting.

It also might be worth making sure your savings and checking accounts are the best options for you. If you’re paying extraneous fees or think you could be earning more interest elsewhere, it’s worth researching the best place to help your assets grow.

4. Get a Card With Rewards That Suit You

If your current credit card isn’t cutting it, find one that is. There are great options out there for any type of reward that would be best for your lifestyle, whether for travel, groceries or cash back. Use this guide to help find a credit card that’s right for you, or check out our roundup of the best credit cards to help you build credit.

5. Think Ahead

It’s not always easy to plan for the future when you’re trying to scrape by day by day, but if you can think of any large expenses that might be happening later this year or next, you’ll be ahead of the game. When you start planning for large expenses with enough time to save up, you’ll be less likely to put them on your credit card and potentially have to pay interest on them.

You might want to consider any upcoming travel plans, plans to potentially buy a house or get married, health insurance deductibles for any planned medical procedures, potential taxes you’ll owe, etc. (See more about paying taxes here.)

6. Save, Save & Save Some More

You need to have an emergency savings account. Experts recommend keeping three to six months of expenses in an easy-to-access account, just in case something pops up.

If you have started saving and you’re serious about increasing your net worth, consider putting any tax refunds or pay raises directly into savings, or split them between savings and retirement accounts. If you already did your research from step three and found a good savings account, your pay raise will be even more meaningful when it’s compounded daily with interest.

Image: Geber86

The post 6 Things Everyone Should Be Doing to Build Wealth appeared first on Credit.com.

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.

Image: sturti

The post How to Create a Financial Emergency Plan appeared first on Credit.com.

5 Signs You’re Not Ready to Be a Stay-at-Home Parent

It's a big decision to stay home after having a baby — but doing so isn't an option that is right for every mother.

Sometimes new mothers have a hard time deciding if they want to return to work after their baby is born, especially after bonding with their child during maternity leave. Sometimes there is no choice — like if you’re a single parent or your family can’t afford to live solely on your partner’s salary — and there’s not much left to do but head back to the office.

Women who have the option to stay home with a baby may have trouble weighing the pros and cons. As hard as it is to decide, there might be some fairly obvious signs that you’re actually not ready to be a stay-at-home mom. Of course, these tip offs apply to all those prospective stay-at-home dads, too.

Here are a few signs you’re not ready to be a stay-at-home parent.

1. You Have a Budget But Don’t Follow It 

Having a budget is one thing, but following it is something entirely different. Just because it looks like you have your finances under control on paper, if your credit card statements tell a different story, you might need to reconsider staying home, at least until you can get your spending under control. (Curious how your credit card debt is affecting your credit? You can see a free snapshot of your credit report here.)

Having a baby is bound to bring in even more expenses (according to the Department of Agriculture, the current cost of raising a child through age 17 is a whopping $233,610), so if you already have trouble following a budget — or you haven’t updated your budget yet to include everything your baby will need — you may want to consider seeing what following an updated budget would be like for at least a month before deciding if you can afford to live on one salary.

2. You Haven’t Saved for Retirement Yet/You Have No Retirement Savings Plan if You Quit

It’s no secret that Americans are worried about retirement. In fact, one recent survey found that 56% of Americans lose sleep over saving for retirement, while another found that 38% of millennials find retirement to be a significant financial stressor. Even if you have started saving but it’s been a few years since you’ve checked in on your progress, it may be time for a bump in how much you put away … something that will be much more difficult to do if you decide to leave your job.

Of course parents who decide to stay at home do have options when it comes to retirement (spousal IRAs, self-employed retirement funds and rollover accounts, to name a few). But if you don’t qualify for them, don’t care to look into them or can’t afford to put anything else away if you leave your job, it’s probably best to reconsider leaving until you can. You can read this guide to learn more about IRAs.

3. Your Partner’s Health Insurance Options for You & Your Baby Are Subpar at Best

While the future of healthcare is a little shaky right now, there’s one thing you can safely assume no matter what happens — you and your baby will need some. Newborns spend the first six months of their lives visiting a pediatrician at least once a month (often much more frequently in their first few weeks), and new moms, in particular, will have plenty of check-ups with their OB as well. These aren’t things you’ll want to do without health insurance, so if your partner’s options for you and your child don’t stack up, staying on yours until something better comes along is a good idea.

4. Your Emergency Savings Account Is Minimal

You might think having three months worth of bills covered in an emergency account is great — and it is — but it might not be enough if you’re considering leaving your job. Experts recommend having at least three to six months’ worth of bills covered in an emergency savings account, and that doesn’t really take into account all the extras that come along with having a baby. If you’ll be moving into a house from an apartment for more space, assume that you’ll have random projects pop up that will start draining that emergency fund quickly. If your partner can afford to keep funding the account to cover for any withdrawals you take or to provide you with more of a cushion that’s one thing, but if the account has been stagnant for a while and your family can’t afford to put anything else away right now, maybe a better idea is to stay at your job and slowly build up the emergency account a bit more so that when/if the time comes that you leave your job, you’ll feel more secure knowing your emergency funds are all there.

(And, if you don’t have a savings account at all, you’ll want to start socking away dollars ASAP. No need to panic, though: This piece will help you create an emergency fund in 30 days or less.)

5. You Struggle Spending All Day Alone with the Baby During Work Leave

Let’s be honest — babies are tough to take care of. So if you find it difficult to stay positive while on maternity or paternity leave, that might be a sign that you’re not quite ready stay home full time with a baby. Working is about a lot more than just a paycheck — it’s about having some time to yourself (funny how commutes suddenly become a wonderful thing) and with other adults, and it’s about having a job to do that both stimulates and fulfills you. If you don’t think staying at home with a baby will do all of those things for you, it’s probably best for you, and your family, if you head back to work.

This story is an Op/Ed contribution to Credit.com and does not necessarily represent the views of the company or its partners.

Image: g-stockstudio

The post 5 Signs You’re Not Ready to Be a Stay-at-Home Parent appeared first on Credit.com.

6 Tips for Managing Money in a Same-Sex Marriage

Here's what same-sex couples need to know about financial planning.

Like Cinderella before midnight, in June 2015, when same-sex marriage was finally legalized in the U.S., many in our queer community tied the knot without knowing if our wedding shoes fit.

It wasn’t until these couples said, “I do,” that many asked, “And what about money, retirement, children, career and life goals?” Unlike in fairytales, happily ever after isn’t the end of the story.

If there’s anything we learned from The Knot’s 2016 LGBTQ Weddings Study, it’s that between June 2015 and June 2016, Prince Charming and Prince Charming’s marriage looked similar to Snow White’s.

By avoiding the money talk like a poisonous apple, are same-sex couples casting their marriage in a spell destined to “mirror mirror” their straight peers? Will money be a main cause of divorce?

By following these six steps, same-sex couples can make their marriage a fairytale.

1. Hope for Fairy God Mothers, Plan for Big Bad Wolves

It’s an unfortunate fact that in 28 states, queer people can be fired for being queer. While it’s legal for us to get married in all 50 states, those who live in these 28 states without LGBT workplace protections risk losing their jobs if they put a picture of their spouse on display.

This risk reaffirms the age-old advice of having an emergency savings account of enough cash to cover between three to six months’ worth of living expenses. When we were living paycheck to paycheck, this seemed impossible. What’s more impossible is surviving without a paycheck when you’re living paycheck to paycheck.

Even by putting just $10 of each paycheck into an emergency savings account, you’re replacing a house of straw with a house of bricks.

2. Be Transparent Like a Glass Slipper

Before two become one, make sure the math works. With escalating student loan and consumer debt, it’s important that each person knows the financial benefits and burdens they’ll adopt when they get hitched.

Not until we talked honestly about each of our financial situations did we have clarity on where we stood. When we learned that we had $51,000 in credit card debt between the two of us, it made sense why we were living in a friend’s basement apartment.

Both people should disclose the good, bad and ugly about their pre-marriage financial condition. This includes student loan debt, credit card debt, bankruptcies, liens and other financial infractions. This also includes credit scores and credit history, annual income and tax brackets. (You can view two of your credit scores, updated every 14 days, on Credit.com.) Don’t forget health and life insurance coverage, retirement and other savings.

With a clear picture of what each party brings to the marriage, both ensure they’re making wise decisions. The likelihood that either would terminate an engagement because of the other’s financial situation is low, but at least neither will feel they were deceptively given a poisonous apple.

The best scenario is that with clarity they can come up with a plan to fix their financial problems.

3. Whistle While You Work … Together

Successful marriages are a team effort. It’s helpful to divide and conquer in some parts of marriage. Money is not one of them. The best reason of all to talk about money is because couples that talk about it are often happier.

We’ve tried dividing and conquering our money management, but we’re never as successful as when we collaborate on it. Even just a 15-minute monthly meeting to assess income and expenses keeps both parties aware of their financial progress. As they make progress, they’ll see the value and the fun.

As Mary Poppins said, “In every job that must be done, there is an element of fun.”

4. Learn From Your Past

Unlike the future of cars, it’s never good to put one’s finances completely on auto-pilot. All too often, most people avoid ensuring they’re staying within budget or their retirement contributions and investments are keeping up with their goals.

With our own finances, we usually feel these emotions of avoidance when we think we’re off track. When we know we’re off track, we feel compelled to make corrections.

As with many in the queer community, we were afraid that adjusting our financial plan meant we couldn’t maintain the appearance of having a fabulous life. Many of us grew up in a time and a place when it wasn’t OK to be queer. Therefore, we spend our adult lives making up for lost time and seeking validation through outward appearances.

The most memorable movies have great endings. Make sure you have one with frequent checks and balances on your financial progress.

5. Be Like Ohana

Ohana means family, and family means no one gets left behind or forgotten.” — Lilo and Stich

Family members, even same-sex partners, don’t need to have the same financial goals, but they do need to support each other.

If one partner tries to save money while the other spends, it won’t be long before a disagreement happens. Likewise, it shouldn’t be the sole responsibility of one partner to achieve a mutually beneficial goal.

The fact that we can support each other’s financial goals has made all the difference in our ability to pay off our credit card debt and achieve our mutual and individual financial and life goals. Neither of us antagonizes the other.

6. Plan for a Visit From the Stork

Unlike our straight peers, having children in same-sex relationships is never a surprise. Building a family in a same-sex relationship can be exorbitant. Because the cost of having a child can range from free (foster adoption) to the hundreds of thousands (gestational surrogacy), it’s important to determine why you and your spouse want children. With this information and your budget, you can then determine how you want to have children. When planning a visit from the stork, it’s never wise to bury your head in the sand like the proverbial ostrich.

With same-sex marriage being relatively new, many of us are only just now learning of the unique financial nuances of our same-sex marriages, such as employment protections and family planning. Our advice is to understand the nuances before walking down the aisle, otherwise you’ll just be happy for the moment.

This story is an Op/Ed contribution to Credit.com and does not necessarily represent the views of the company or its partners.

Image: svetikd

The post 6 Tips for Managing Money in a Same-Sex Marriage appeared first on Credit.com.

These Americans Are Still Having a Hard Time Saving for an Emergency

saving-for-an-emergency

Americans are doing a little bit better at saving money in an emergency fund — but women, some minorities, young adults, and the less educated are still woefully unprepared for a financial emergency, according to a new study.

Overall, there have been marginal gains in the number of Americans who say they could come up with $2,000 to cover a surprise expense “in the next month,” according to the study published by the Financial Industry Regulatory Authority (FINRA), the financial industry’s self-regulatory board.

In 2012, 40% said they probably or certainly could not so do. In 2015, that number had fallen to 34%, FINRA says. Similarly, in 2012 some 35% said they were certain they “could come up with the full $2,000.” That number is now 39%. The improvements, while narrow, suggest the “financial fragility” of Americans is slowly easing.

Wide gaps among different demographic groups tell a far more pessimistic story, however. Here are some of the findings.

  • Gender: Women are in a much more fragile position. While 28% of men said they probably or definitely could NOT cover a $2,000 expense, fully 39% of women said they could not.
  • Age: Those over 55 are in a far stronger position. While only a quarter of that group said they probably/certainly could not raise $2,000 in a month, 43% of those under 34 said they couldn’t.
  • Ethnicity: Whites are better off than Blacks or Hispanics, but Asians are most prepared. While 30% of Whites said they probably/certainly could not come up with $2,000, only 24% of Asians said so. Hispanics (39%) fared worse than both groups. Most alarming however, is that nearly half of African Americans (48%) said they probably/certainly could not, making them the most fragile ethnicity. In fact, among demographic groups of all kinds, only those with incomes under $25,000 fared worse.
  • Income: Not surprisingly, income levels tracked tightly with financial fragility. Still, 11% of those earning more than $75,000 annually said they probably/certainly could not deal with a $2,000 emergency. One-third of those earning between $25,000-$75,000 said they could not, while 63% of those earning less than $25,000 said they couldn’t.
  • Education: School attainment levels were also a solid predictor of financial fragility. Only 18% of those with a college degree or more probably/certainly could not deal with a $2,000 emergency; but 45% of those with only a high school degree or less said they could not.

“Consistent with previous years, the 2015 NFCS finds that measures of financial capability continue to be much lower among younger Americans, those with household incomes below $25,000 per year, and those with no post-secondary educational experience,” FINRA said in its report. “African Americans and Hispanics, who are disproportionately represented among these demographic segments, also show signs of lower financial capability, making them more vulnerable.”

It’s important to note many of the demographics that appear to be having a harder time saving for emergencies have been found in various studies to earn less income than their counterparts.

Overall, the findings are consistent with plenty of other studies showing Americans are poorly prepared for financial emergencies. In March, for example, the Associate Press-NORC Center for Public Affairs released poll data with even bleaker numbers. Two-thirds of consumers in that study told the center they would have trouble coming up with funds to cover a $1,000 emergency.

Analysts have long wrestled with the problem of understanding Americans’ lack of savings. While the recession clearly made it harder for Americans to save, Americans weren’t great savers back in the boom years, either. In fact, by some measures, America’s overall savings rate fell below zero — the nation was spending more than it was earning — back in 2005.

Saving isn’t sexy, and it isn’t lucrative, either. Most traditional savings accounts offer barely perceptible interest rates, and even most Internet-only banks offer less than 1% returns.

The tax code is at least partly to blame, too. While tax-advantaged retirement accounts like 401K plans heavily encourage saving for the long term, there is no similar nudge to convince U.S. consumers to save for the short or medium term. Both Canada and the U.K. permit 401K-like accounts that encourage saving money to be used before retirement.  Lower-income Americans can participate in “Individual Development Accounts” designed to encourage savings, but no such tax-advantaged plan is available to the general public. The idea has been floated several times in the U.S – President George W. Bush proposed something similar, called Lifetime Savings Accounts, back in 2003 — but the idea has not taken hold.

Remember, spending more than you’re saving — or, worse, earning — could ultimately land you in debt, which can wind up further taxing your bank account and damaging your credit score. You can see how your current debt levels are affecting your credit by viewing two of your credit scores, updated each month, for free on Credit.com. You can also find some tips for getting out of debt here.

Image: Pamela Moore

The post These Americans Are Still Having a Hard Time Saving for an Emergency appeared first on Credit.com.

5 Things to Do on New Year’s Day to Start Your Financial Year Right

happy_resolution

For many, New Year’s Day is time to take stock in the year that was and focus on how to make the coming 12 months even better. One way to do that is take a few minutes from the day and examine your finances. Here are five tips that can help you do the most to ensure a happier financial new year.

1. Make a Plan Pay Down Debt

If you’re among those carrying a balance on your credit cards, you may want to increase the amount you pay each month — especially if you’re only paying the minimum amount due. Credit card interest can add up quickly.For example, if you’re carrying a $5,000 balance on a credit card with a 16% annual rate and make only the minimum payment required to get out of debt eventually ($117 in this case), you will be debt-free in April 2021, paying $7,541 over the life of the debt. But by kicking in an additional $25 a month to that payment, you can be debt-free 1 year and 4 months earlier and pay roughly $750 less in interest (a total of $6,802 vs. the aforementioned $7,541). You can see how your current credit balances are affecting your credit scores by viewing your free credit report summary updated each month on Credit.com.

2. Review Your Retirement Savings Plan

If you have a 401(k) plan through your employer, consider increasing the percentage of your income you’re setting aside each pay period — especially if you recently received a raise. A 1% increase could help speed you toward your savings goal, and you won’t likely miss the funds. Also, take a look at how your funds are invested. If they’re in mutual funds with a high expense ratio, consider a lower cost option, such as an index fund or target date fund. If your employer doesn’t sponsor a 401(k) plan, consider opening a traditional or Roth IRA through a low cost provider. If you contribute to a traditional IRA before April 15, you may be able to deduct the amount of the contribution from your 2015 taxes.

3. Boost Your Emergency Savings

Scrambling to find cash when your car breaks down or the roof springs a leak is no one’s idea of fun. One way to alleviate the stress is to automate your savings. Ideally, you should have about six months’ worth of household expenses set aside, but, at first, you can start with a less lofty goal, say, $1,000. Then, set up an automatic transfer from the account where your paycheck is deposited into a savings account specially designated for emergencies. Alternatively, many employers allow you to deposit your pay into different accounts on payday, eliminating the need to set up a transfer. However you do it, you can start small and then increase the amount incrementally as you’re able.

4. Assess Your Regrets

Have a few? While it doesn’t pay to dwell in the past, taking few minutes to see how you could’ve better managed your money in the past year can help you think about better ways to manage your money in 2016. Changes could be something as simple as being better organized when you go grocery shopping. Compiling a list and searching for coupons, for instance, could help eliminate needless trips that waste both time and money.

5. Plan, Plan, Plan

We all have projects we’d like to complete in the new year, and now’s the time to think about which ones to get done. The beginning of the year can be a good time to find deals on any Do-It-Yourself supplies you may need for spring or summer projects. And it’s also a great time to reach out to home-improvement contractors for those plans that are beyond your skills — in a few months, they may be too busy to return your calls.

More Money-Saving Reads:

Image: warrengoldswain

The post 5 Things to Do on New Year’s Day to Start Your Financial Year Right appeared first on Credit.com.