Before You Set Another Financial Goal, Figure Out What YOU Want

Before You Set Another Financial GoalFigure Out What YOU Want

This year, I’m doing something a little unorthodox. I didn’t set any personal goals for the new year — and that includes financial goals. Instead of setting goals for this year, I’m calling this my “year of exploration.”

You don’t have to spend a whole year trying to figure out who you are and what you want, but before you set another money goal, take the time to figure out what you hope to make of your life. Too often, we set financial goals because they are the “right” financial goals, not because they actually help us achieve anything meaningful in our lives.

Do I really need to put more money toward retirement, just because that’s a common goal and I haven’t maxed out every possible account yet?

Are Your Financial Goals Helping You Reach Your Life Goals?

One of the issues with finances is that, too often, we disconnect money from what’s happening in our lives. We know we have to pay bills and get rid of debt, and save for retirement and a rainy day, but we don’t think about why we do these things, or how money can be a means to an end for living a more fulfilling life.

A lot of the things we do with our money are “automatic” and follow a prescription for what we “should” be doing, even if we don’t really care for that the prescription. Over time, I’ve decided that I have no problem financing my cars, and I don’t want to buy a house again. And I’m not paying off my student loans early. These decisions go against the accepted rhetoric about how I should manage my money.

But none of these choices will keep me from reaching my own life goals. This year, with my divorce less than a few months final, I’m taking a look at what I want out of life. I’m simply maintaining the current status quo with my money, and exploring what I want my life to look like going forward.

How can my money choices help me reach those goals? Well, I won’t know until I figure out what I want. For now, I know that I want to be able to do the following things, in addition to paying my bills and living costs:

  • Prepare for retirement
  • Contribute to charity
  • Provide worthwhile experiences for my son
  • Travel

I already have mechanisms in place to help me accomplish these goals. Setting aside more for retirement isn’t a goal that makes sense for me. I already set aside slightly more than what an online calculator tells me I need. What might make more sense for me, though, is putting more money into my travel fund, or even changing the way I run my business so that I have more time for community service. I don’t know. I’m exploring what I want to do with my life moving forward, and once I know that, I can make financial goals that will help me accomplish that.

Before you make your next financial goal (and you can make financial goals anytime you want — not just at the start of a new year!), take a step back and figure out what kind of life you hope to create. Then, acknowledge how your finances can impact the outcome. What can you do with your money to help you reach your definition of success?

Wherever you are in your life, and whatever your finances look like right now, don’t just make goals to make goals. Honestly evaluate what you want, and figure out which financial habits are holding you back. Decide how you can change those habits to change your life. Then set financial goals that will move you a little closer to your long-term goals.

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I Took Out a Higher Interest Rate Loan and I’m So Glad I did

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About a few months ago, my condo building had a leak that damaged several units including mine. The total damage came out to be over $11,000. Although I had homeowners insurance, the process to file a claim would’ve taken over two months. If you’ve ever experienced anything like this, I’m sure you understand the dire need to get contractors out to fix the damage ASAP.

This is when I looked into getting a personal loan to cover these expenses until the insurance company finalized the claim. I started my research on LendingTree and Credit Karma by looking at customer reviews, and started to apply for personal loans through their sites.

The good thing about these two sites is that you can check your rates without impacting your credit score. They’ll automatically find the best interest rate and terms for you by matching you with several lenders, but I soon realized one thing that most people overlook: getting the lowest interest rate is not necessarily the best option for you.

My Initial Findings: Origination Fees

I was pre-approved by most lenders, including: Prosper, LendingClub, and Upstart. Each offered a fair interest rate and monthly payment that I could afford. As I started to complete the application for LendingClub, it wasn’t until the very last page that caught my eyes.

The exact loan amount for $11,000 that I requested wasn’t the amount I’d be receiving. Their origination fee of 6% is taken right out of the loan. So let’s do some simple math:

$11,000 x 6% = $660. My final loan amount: is $11,000-$660 = $10,340.

See the dilemma here? In order to get the full $11,000 that I needed for the home repair, I’ll have to take approximately $12,000. To make matters worse, I’ll have to pay interest on the $12,000 that I “borrow”, not the actual amount that I receive.

But here’s the Bigger Issue…

Since the insurance company is expecting to finish the claim in a few months, what happens if I want to payoff the loan? Although almost every single lender out there claims that they don’t charge a prepayment penalty, aren’t these origination fees basically the same thing?

According to the Examiner, “Experts argue that high loan origination fees act as prepayment penalties in disguise”.

I couldn’t agree more. If I paid back the loan within 4-6 months, my APR would skyrocket.  If you want to take a closer look at how loan origination fees impact your loan, you can view a chart that compares your loan with and without origination fees.

Your Loan Should Be Tailored Towards Your Needs

If you’re taking out a loan and expect to pay it back earlier, you might be better off taking out a higher interest rate loan. The origination fees may seem small at first, but you’ll end up paying more if you decide to pay it back faster.

If you’re thinking that you’ll need the entire length of the loan to pay it off, getting a lower interest rate loan will be more beneficial for you.

Origination fees can seem like a small fee especially if you’re in dire need of cash, but in reality, these fees can end up costing you a lot more in the short term. Always figure out a game plan to see when you can pay off your loan. This will help you make the best decision to make sure you’re getting the best deal.

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7 Last Minute Things to Get Done Before The Start of Summer

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I love the summer and getting extra time off, but there always seems to be something that gets overlooked. We all know Summer is coming but we allow procrastination to get the better of us. While not bad, per se, it can hinder us in the long run.

The Summer time is when your expenses can skyrocket out of nowhere. Vacations, BBQs, and outdoor activities can consumer a lot of your disposable income. Getting ahead of your finances and taking pro-active steps can help you prepare for what’s ahead. Here are some last minute things to tackle before the start of summer.

Make A Debt Payoff Plan

Do you have any consumer debt you’re currently paying off? More than half of Americans feel insecure about their finances, most often about their debt. If you have debt, you don’t have to feel ashamed or uncertain about your efforts to pay it off. You can take control of your debt with a payoff plan.

Write down all of your debts and figure out what’s needed to pay off each one. That may mean getting a personal loan to consolidate the debt, or it could mean finding a way to make extra money to throw at the debt. Form a plan and take action on it. You’ll be that much closer to becoming debt free as a result.

Start Working on an Emergency Fund

Would you be able to handle an emergency if one happened tomorrow? The Federal Reserve reports that 48% of people would have to sell something to cover an emergency of $400. That’s not really that much money when you think of it.

I know it seems silly to build an emergency fund when interest rates are so low, or if you’re paying off debt. That’s not the point. You never know what will happen in life, so you want to be prepared. Start small, even if it’s $50 per month. Begin there and build on that to amass a respectable emergency fund.

Use Your FSA Money

A FSA, or Flexible Spending Account, provides a way to save money on healthcare costs. There is one catch with FSAs though, it’s a use it or lose it system. In most instances, you lose any money you have in your account if left unused at the end of the year.

If you have a FSA through your employer, there are many ways to use those funds. Visit the doctor, make that trip to the dentist you’ve been avoiding or see the optometrist. Just make sure to verify the expense qualifies before using the money.

Invest Your Money

Investing may be the last thing you’re thinking of as you celebrate the holidays. Don’t let the hustle and bustle of the holiday season hold you back. Instead, look for ways to start investing if you’re not already doing so. If you’re looking for the best online brokerage account to begin your investing journey, always take into consideration the number of trades you’ll be making as well as the commission amount.

Will you receive the full match in your company’s 401(k)? If not, adjust your withholdings to receive it all. Have you opened an IRA account? It’s not too late. Don’t listen to the excuses not to invest, instead find a way to get started in the last few weeks of the year.

Prepare Your Taxes

Like it or not, tax season will be here soon. Now is the time to start planning for it, not April. There are many things you can do to start planning for tax time, such as:

  • Getting all your financial records in order
  • Making charitable donations
  • Taking advantage of business expense reimbursements

Not only will getting everything together save you time in the spring, but it can potentially save you some money.

Think Back over the Past Year

I don’t know about you, but this year has been a busy one for me. While I’ve accomplished some of the goals I had in mind at the beginning of the year, other things have fallen by the wayside.

I like to take some time before the year is over to review my progress toward my goals. You want to be honest with yourself here so as to truly see where you did well and where you fell short. Use those findings to take action and complete the next step.

Start Planning for the Next Three Months

The takeaway from these last minute things is to take action. We will greet summer in a few months.  Don’t let debt and a lack of financial preparation set you back for the last half of the year. If you start planning ahead, you’ll be able to enjoy life without overstretching yourself.

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How to Break the Paycheck-to-Paycheck Cycle

How to Break the Paycheck-to-Paycheck Cycle

We often think of people living paycheck-to-paycheck as those who earn a lower income or struggle with debt. It makes sense as living paycheck-to-paycheck results in little to no money left in the bank at the end of each month. Surprisingly, the former issue isn’t always the case. A recent survey conducted by CNBC reports that 25 percent of those making over $100,000 a year are living paycheck-to-paycheck.

I know income is somewhat relative, but $100,000 is a good salary. Remembering back to my days of this lifestyle, I wasn’t making anywhere near that amount. Ultimately, it doesn’t come down to income. It’s the mindset that matters. If you’re currently living from paycheck-to-paycheck, here are some ways to break that cycle.

Know What’s Going On

This is the foundation of breaking the cycle of having little money at the end of the month. You need to know what your money is doing. You need to know where it’s coming from and where it’s going. Without this knowledge, you’re unable to make your money work for you. You must change that in order to live freely.

I know this sounds a lot like a budget. In many cases it is. Don’t let that scare you away. Budgeting, when done right, breeds freedom. If you don’t want to make a budget, then track your spending. All of it. You want to know where each and every cent is going. That knowledge creates power – power you can use to better manage your money. Without that, you can’t make your money work for you.

Cut Unnecessary Spending

Once you track your spending, you will find things to cut. Some of the likely big-ticket candidates include:

All of those bills can be cut, in some cases significantly so. You can go without cable, find a cheap cell phone plan, reduce food waste and instantly add several hundred dollars to your budget each month.

This is not to say you have to cut everything. What I am saying is you need to look at the value you receive from each item and cut where necessary. In most instances, you’ll find you won’t even notice the cuts and may even get more enjoyment out of life.

Make More Money

You can only cut so much from your budget. At some point, you won’t get good value back and you want to enjoy life. This is where making extra money comes into play. There are many ways to make extra money. You can either add a part-time job, start a side hustle or monetize a skill.

Don’t just spend the extra money you earn. It’s ok to do that, to a certain extent, but you want to use this extra money to beef up your financial standing. If you have debt, you can use it to get out of debt quicker. If you don’t have an emergency fund, you can grow that. If you have those covered, you can invest in the stock market to begin saving for retirement.

Determine Your Why

This is the key to breaking the paycheck-to-paycheck cycle in my opinion. You need to know why you’re working. You need to know your goals. That is what should drive you. Instead of focusing on the short-term reward of spending, focus on the long-term freedom you will have when you gain control of your finances.

I know that seems difficult, if not impossible. It really isn’t. It does require discipline, knowing yourself and being aware of your spending triggers. Simply put, you need to know the why behind your work in the first place. Once you determine that, you start down the path of breaking that paycheck-to-paycheck cycle that handcuffs so many.

Living paycheck-to-paycheck is no way to live. With work and discipline, you can break free and move towards financial freedom.

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4 Ways Frugality Is A Fool’s Errand

The One Major Mistake You're Making When Getting Out of Debt

I discovered the wonders of frugality when I was paying off debt. In my previous life, I spent money on any whim that surfaced. Whether it was large or small, I made the purchase with little thought to how I could pay for it. After a few years, my spend crazy ways forced frugality into my life.

All of a sudden I had to live by a budget. I had to find ways to save money on virtually everything. While a shock at first, I learned to embrace frugal living and all the benefits it brings. What I’ve learned over the years is that frugality can often be a fool’s errand. Here’s why.

You Can Only Cut So Much

Frugality, at its core, is being economical or sparing. That sounds great. I like to save money like everyone else, but you begin to learn something along the way – you can only save so much money. At a certain point, you’re unable to save anything of significance.

The value received begins to deteriorate, and your return is minimal. This is not to say you shouldn’t find ways to save money on your bills but realize it is possible to have a happy balance.

You Give Up Too Much of Your Time

This is something I learned early on in my new life. Frugality, when taken to an extreme, takes a lot of time. You become consumed with finding the cheapest price or best value. Saving money is great, but when you give up too much time to get that savings you end up losing.

You Sacrifice Quality

This is a commonly overlooked area of frugality. You need to buy an item and find two possibilities – one is significantly cheaper than the other, so you choose that item. To your dismay, the item you bought breaks down within a few months, not lasting the expected duration, forcing you to buy a replacement. This is not a guarantee, of course, but often times the cheaper item is of lower quality and does not last – costing you more money in the long run. I know it hurts to spend more at the outset, but the quality of the item must come into question in many cases.

Growth is Overlooked

This is the key argument against frugality. You spend so much time finding ways to cut back and save money you forego finding ways to earn extra money and grow your wealth. This is the “big win” mentality that so many promote in the personal finance world. These individuals want to save money but they also realize you don’t become rich by cutting your spending.

Cutting expenses has its place and time, but it should take a backseat to growing wealth. By no means should you spend aimlessly, but combine efforts to save money with wealth production to get to the next level.

Balance is Possible

This is something I learned after a few years of frugal living. Saving money and wealth production can live together if you seek balance. This is when the pursuit of financial independence becomes clear.

Frugal living is noble to pursue. There are many ways to save money that take little effort. Pursuing it to an extreme, however, will only take you so far.

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I Just Axed My Final Budget Killer and It Feels Amazing

I Just Axed My Final Budget Killer

Last month my wife and I finally got rid of our final budget killer – our DirecTV subscription. At $105 per month, I’m glad to see that bill go by the wayside and am dreaming of the ways we can better use that savings each month.

We can all be guilty of budget leaks on occasion though this was a budget killer. Although the number of cord cutters is on the rise, a recent study reveals that 83 percent of American homes still have some form of pay television. As has been our experience over the past month, you don’t need to spend much to enjoy quality content. The benefit of cutting the cord on cable TV for us is that it brings our family one step closer to a major goal we want to reach.

How Much We’re Saving

As I mentioned, our monthly DirecTV plan was $105. We did have a number of price reductions but eventually those all ran out. We also have Netflix at roughly $10 per month. The grand total…$115 for television programming each month!

We now spend $25 per month since cutting the cord, or a savings of $90 per month. We kept our Netflix plan and added HBO Now so we can still see some of our favorite shows.

The Behavior is the Issue

A savings of $90 per month may seem like nothing, especially given the fact that we can “afford” the expense. However, how many times have you wondered at the end of a month why you don’t have the money you’d like to do something?

The problem? It’s our behavior. We’re guilty of short-term thinking, which hurts our financial livelihoods in the long run. We don’t stop to realize that aimless spending on items that return no value holds us back. Aimless spending may make us feel good; maybe that’s why we do it. It allows us to keep up with the Joneses. But the sad result is that aimless spending holds us back from accomplishing the things we really want in life.

Spend on What Returns Value

Since I’ve become debt free, I’ve had the conviction of spending on items that only return value. Any other spending holds you back. You do need to have balance, of course, but a careful analysis is needed to make sure your spending is on things that provide value.

Personally speaking, we want to buy a new home in the next year. By analyzing our budget, we discovered two significant budget killers that were holding us back from that goal – our cell phone and DirecTV subscriptions. We were hemorrhaging $190 per month we had no business spending. Thus, we switched to a cheap cell phone plan and got rid of the pay TV subscription. The extra savings will go towards our house fund each month.

Your situation will likely be different, but the value aspect is just as important. If you’re paying off debt, for example, the value in cutting is debt freedom. That should be motivation enough.

The Purpose of Cord Cutting

Streamlining a budget has one clear goal in mind – financial independence. Financial independence means lots of things to different people. It might mean the ability to retire in your 60s and travel around the world. For some it may mean early retirement or starting a business.

To me financial independence means the ability to take opportunities when I want and as they present themselves. It also means being free from financial worry. It’s exercises like killing off needless expenses that get us one step closer to that goal.

 

We can all be guilty of having budget killers. It pays, literally and figuratively, to be cognizant of the value your spending creates so as to not be wasting money you shouldn’t be.

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When Do You Cut The Cord on Your Adult Children?

When Do You Cut The Cord on Your Adult Children

As a parent of three young children, I want to do all I can to provide for them. That’s as simple as providing food and shelter to more long-lasting needs. In every case, we want to do all we can for our kids, which includes sacrificing our own needs or wants as parents. There comes a point, however, when you need to let your children fly solo.

A recent study from a professor at North Carolina State University reveals 40 percent of adult children (those aged 25-32) still receive some kind of financial assistance from parents. While not really surprising, given the recent economic climate, it begs the question of when to cut the cord on your adult children. This is an issue far larger than a single blog post, but consider some of the following as you think about when your adult children need to be on their own.

You Need to Start Earlier Than You Think

I’m a big proponent of teaching children about money at home. It’s one of the most loving things you can do for a child. Putting off financial responsibility for your adult children will have the opposite effect. It can make them more reliant on you, not less. In short, it does not set them up for future success.

You may think it’s unloving to start once they move back home (assuming they do) or when they first start out, but that’s the exact time you should start – if you’ve not done so already. It can be as simple as charging them rent to live at home, or some other financial contribution. If they’re on their own, you can give them a deadline for when they’ll be financially on their own. Wisdom is needed, of course, but you need to start as soon as possible to help them become independent.

You Need to Be Selfish

As a parent, it feels contradictory to be selfish. It’s not. I would argue it’s very much needed for the long-term financial health of you and your child. Just as with the saving for retirement vs. saving for college debate, it’s not an easy choice but one you need to make.

Think of it this way. Your desire to help your adult child is noble. However, are you putting yourself at risk to depend on them later in life because you were not prudent in previous years? I want to help our children, but the last thing I want is to be a burden on them later in life. Thus, selfishness is needed, to a certain extent. It sounds harsh. It isn’t. It’s prudent while also causing them to find ways to develop the kind of life they want and need.

You Can Have Balance

While I believe you need to have a healthy level of selfishness when adult children are concerned, balance is necessary. The last thing you want is to embitter your child. You can help them prepare for their adult lives in many ways that aren’t strictly financial in nature.

Some of those ways can include dealing with student loans, helping them reduce bills and keeping more money in their budget. It can also include helping them out financially when they have need. As an adult child who benefitted from that several times, sometimes this is the best option. Again, use wisdom and seek a healthy balance for both you and your child.

Cutting the cord on an adult child is rarely an easy decision. There are many factors at play. The key is to find ways to set them up for long-term success.

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New Years Resolution: Stop Living Paycheck to Paycheck (and How to Do It)

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Scraping by between paydays is a common way of life for a huge portion of the population – even among segments you wouldn’t suspect.

A recent survey found one third of households earning at least $75,000 per year are living on the edge financially. One fourth of those earning at least $100,000 per year find themselves without much left over at the end of the month.

The reasons for the discrepancy in income vs. expenses are varied. Some cite overspending as the culprit, others point to student loan debt or astronomical medical bills. Many found their savings depleted during the Great Recession and they haven’t managed to regain their financial footing.

While living paycheck to paycheck is clearly a huge financial burden, it also creates an endless cycle of stress that is extremely hard to shoulder.

If you know this struggle all too well, here are a few ways you can turn it around and make 2016 a year for building a financial cushion.

Get a grasp on what your financial obligations are.

 When the end of the month is fraught with stress because the money never quite seems to stretch that far, you know there’s a problem. While low income may be one of the culprits, understanding exactly why you are living paycheck to paycheck starts with the numbers.

So the first step is to get acquainted with the numbers of your specific situation – how much you’re bringing in, what’s going out and to where. It sounds simple, but we often never take a full-picture look at our finances. We simply bring money in, send payments out and hope there’s something left over afterwards.

Once you have broken down your financial picture number by number, you can start to recognize where the problems lie.

Find ways to live on less and save the difference.

How much of your money is allocated to bare bones necessities each month? How much of your current expenses are simply masked as necessities?

Creating a balanced budget and a cushion should unexpected emergencies arise means being discerning about what expenses your current income level can support.

Go through your budget items one by one with the mindset that virtually anything could be on the chopping block. Some expenses might need to be scaled back temporarily, others might need to be cut entirely.

Next, take your income, cut of a percentage – say, 10% — and work to divvy up the remainder between the expenses you have deemed necessary. Lowering your own income and learning to live off of what’s left means you can slowly build up a cushion for the unexpected emergencies that exacerbate the paycheck-to-paycheck lifestyle.

Finally, make a plan to save unexpected or expected monetary windfalls, like tax returns. That money isn’t usually accounted for in a budget, so keeping it untouched is relatively painless.

Don’t forget about financial obligations you don’t pay monthly.

Not taking into account expenses that must be paid yearly, quarterly, etc. can be a huge financial burden that ruins budgets for months to come. One of the simplest, yet most beneficial changes you can make to your budget in the upcoming year is to plan for these expenses by divvying them up amongst all 12 months.

Not only is this huge for planning purposes, but it can have a money-saving impact as well. For instance, many car insurance companies will offer a lower premium if it’s paid in full every six months. If you’ve planned ahead, this could finally be an option for you.

Make a list of the expenses that fall into this category, and determine how much extra needs to be saved each month to cover these in full when they arise.

Know when to automate and when not to.

If you’re living paycheck to paycheck, automating all of your bills might not be a convenience you can currently afford. When every dollar counts, you need to be aware of where it’s going and this ensures you don’t keep unnecessary spending – like subscriptions, for instance – on autopilot when they should be axed altogether.

However, there is one thing that should be automated: your savings. Those living the paycheck-to-paycheck lifestyle put savings last on the list of financial obligations, and that money often goes elsewhere. Instead, treat your savings like a bill and create a system that pulls it from your account at a designated time each month.

Systems like automatic withdrawal often lessens the financial pain we would feel if we were simply relying on willpower to aid in the change process.

How do you plan on getting out of the paycheck-to-paycheck lifestyle this year?

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3 Money Tasks to Get Your New Year Started Right

3 Money Tasks to Get Your New Year Started Right

Every New Year, there’s an overabundance of hope that the turning of the calendar will create a significant divide between the old and the new. We like to believe this year will be markedly better than the last, but often times the how of this belief is vague, to say the least.

Come the first of January, we’ll suddenly feel the pressure of all these vague goals: eating healthier, spending less, earning more – the list goes on and on.

That’s a lot of pressure, right?

Instead of strictly looking at your end goal and being seriously overwhelmed as a result, why not start the New Year with specific tasks to get the ball rolling?

If you want your finances to look better January 1st than they have in awhile, start with these tasks.

#1: Perform a spending audit.

This might seem like a monumental task if you haven’t already been tracking your spending for the 2015 calendar year, but it’s oh so necessary if you want to really understand where the leaks are and how to repair them for good.

If looking back over the entire year seems way too cumbersome, try looking at the last three months, or a time frame long enough to understand what your fixed and variable expenses are, as well as where your discretionary income is going.

While there are plenty of apps to help with the process of tracking your spending, don’t discount the added mental benefit of going the old school route and tracking/categorizing your spending manually. According to a reporter for The New York Times, taking this approach allowed him to really reflect on his spending habits and how they were serving him.

“Last week, Psychological Science published a study about how well students recall a lecture if they type the notes or write them longhand….The writers could better remember the message because they’d actually processed what it meant.

I think something similar happens when we try to automate our budgeting process…The result is a technically correct reflection of how our spending compares with our budget, but we miss the chance to process what the numbers mean.”

#2: Revamp your budget.

What good is doing all that initial legwork if you aren’t actually going to put your findings to good use?

After you’ve clearly outlined where your spending panned out for the year (or whatever time frame you chose), it’s time to figure out where you are leaking funds unnecessarily and how you can rework your 2016 budget to better fit your intended lifestyle, income, and short and long-term financial goals.

Here are a few things to consider:

1) Where did the “blind” spending occur and does this spending fit with your priorities?
If you spent an exorbitant amount on eating out this year but your stated priority was saving for vacation, you might need to find specific ways to cut back on the former in order to keep your spending in line with your goals.

2) Are you saving consistently?
Saving consistently for short and long term goals is key if you want to find yourself in a better financial situation in the next 12 months and beyond. If you don’t have a consistent savings habit established, where can you cut in order to apply those funds towards your goals?

3) What future expenses can you plan for now?
Financial hiccups occur when future expenses aren’t planned for in advance. Think about your holiday spending, for instance. If this leaves you with a large credit card bill you can’t pay off immediately, add it into your budget now.

#3: Set specific financial goals.

Kick those vague goals to the curb this year. It’s time to get specific with each of the milestones you’re working towards both in the immediate future and in the long-term.

If you haven’t already established goals for yourself, start with 1-2 short term (e.g. paying off one credit card balance in full and saving enough to visit family out of state) and 1-2 long-term (retiring in 15 years, being debt-free in the next five years).

These are all great goals on their own, but they are just the beginning. A well mapped out goal should read more like this:

Pay off entire $10,000 balance on “X” credit card by November 2016. Payments of X amount will be paid monthly in order to reach goal.

This goal sets a target achievement date and works back from there in order to determine the monthly payment amount. This would also take into consideration interest rate on the card and the weight the existing budget can bear in terms of increased payment amounts.

With these action-oriented tasks, making 2016 look financially rosier than 2015 will seem like a real possibility instead of just a shot in the dark.

Are you ready to get started?

The post 3 Money Tasks to Get Your New Year Started Right appeared first on ReadyForZero Blog.

The One Question I Ask Myself That Helps Me Reduce My Spending

The One Question IAsk Myself to Cut Spending

There are many reasons why we make purchases, especially those that could be classified as impulsive.

We could be feeling particularly emotional over external circumstances and hope for the burst of satisfaction that comes from spending money. We could be swayed by advertising that convinces us we need what retailers are selling. We could see a friend or neighbor with something and suddenly we want the exact same thing.

These subtle, or not so subtle, messages that influence spending are everywhere. In fact, they are so prevalent, we often don’t notice how often we must make a decision whether we will fight them or give in to them.

Regardless of why I’m feeling tempted to make an unnecessary purchase, I have one specific way of cutting off the urge and moving on.

It boils down to this question:

Would I rather have this or X,Y,Z? (Insert any big picture goal I have been planning for.)

It’s all about choices, not deprivation.

Growing up, I never heard the words, “We can’t afford that.” Since I was prone to worrying about everything – even the family finances – I’m extremely grateful for this. Instead, my parents would steer my sister and I away from certain “wants” with the explanation that we were choosing to spend our money in other ways.

It wasn’t about approaching money from a place of lack, instead it was about making an either, or choice. We could afford a lot – if we didn’t squander it on impulse purchases along the way.

Notice the difference in feeling from these two approaches. By steering clear of the deprivation aspect, it doesn’t feel like a punishment to stop yourself from making a certain purchase.

It emphasizes the importance of setting big goals. 

Making impulse purchases becomes the default for your money when you have no other vision or place for it to funnel into. Therefore, one of the best ways to combat the urge to spend is to have a bigger plan for your money. This could be anything from going on a vacation to getting out of debt – anything that gets you excited and motivated to keep working towards that goal.

Impulse purchases can quickly make you a slave to your money by sparking the never-ending debt cycle. Goals, on the other hand, put you in charge of your money by telling your money where to go instead of asking where it went.

It takes you out of the emotionally charged moment.

When I’m confronted with a craving for junk food and I’m not even particularly hungry to begin with, I know that distracting myself with something else for ten minutes will either make me forget about the craving, or will significantly lessen the intensity of the craving.

Spending is much the same way.

If I stop and mentally remove myself from the situation by asking if this purchase is worth putting my hard earned money towards (and removing it from somewhere else), I can adjust the emotional intensity of the moment.

It helps you to see how trivial that one purchase might be.

When a purchase is isolated, it can seem logical, or at least explainable.

Now try filling in the blank with that purchase: “I am choosing to make purchasing ___________ a priority because it is currently more important than [paying off debt, buying a house, saving for vacation.]”

If that statement sits well with you, then consider the purchase. But often times, putting it in this context will suddenly make you see how trivial that one purchase is in the grand scheme of things. And fighting the impulse might just become a piece of cake.

It lessens the reliance on willpower.

Willpower is almost never a reliable ally. One day you might be able to stick to a spending plan like nobody’s business, but the next day trouble at work or a fight at home might make willpower take a back seat to the urge to pacify your emotions with spending.

Instead of relying on willpower, this question allows you to rely on logic – “I can’t have X if I’ve spent money on Y.” And, if you are already goal oriented, you can lean on the motivation sparked by reaching money milestones.

We’re rarely pushed to do something by the sheer fact that it’s the responsible thing to do. So if we can attach an action to something larger than that, it’s a great place to start.

What’s your spending roadblock?

If this either/or proposition doesn’t work for you, find one that does. Is there a motivating factor that would get you to rethink handing over your credit card next time the desire to make an impulse purchase hits?

Find your spending roadblock and you might see your financial picture shift in the process.

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