Why Building an Emergency Fund While Paying Off Debt is So Important

As many of you who have read my other articles on money know, I am trying to pay off my student loans which right now are still at about $55,000.  I don’t make a lot of money as a nanny, … Continue reading

52 Week Savings Challenge

Sorry this post is a little late.  With a bit of effort I promise it won’t be difficult to catch up!52 week headerMost of you have probably heard of the 52 Week Savings Challenge.  Basically you put money in a jar or savings account in an amount that corresponds with the week of the year.  For example week one you put in $1, week two you put in $2 and at the end of the year you’re putting in around $50 a week till week 51 which is $52.  Super simple concept and at the end you have $1,378.  Not a ton of money, but if you are struggling to get together an emergency fund or want a little cushion your budget so you can start living on last month’s income (YNAB Rule #4), this can give you the push you need to get there.

It also helps a person like me who needs more than just typical motivation of “I am saving money this is good.”  That does feel good, but what helps me out in the tougher months is feeling like I am gaming the system.  Instead of feeling poor and destitute I try my best to win the game.

I also do the 52 week challenge a little bit differently.  I tried a few years ago and started off great but come the end of the year when I needed a big car insurance payment or Christmas presents were due, I broke down and went into the cash.  So now I do it backwards.  In January right after Christmas and my birthday, when resolutions are in full swing and my commitment level is high I put in the $52 and commit to putting in at least $1 less a week.  I also get paid Bi-weekly so I am really paying every other week and the payment feels bigger.  As always I made my self a way to see my progress without looking at all that money and getting tempted.

1 Year Challenge Bi-Weekly Odd

On top of that little switch, I also try my hardest to game the system.  I  don’t settle on putting in only the minimum amount, as the weeks go by I try to match what I put in the week before.  Some weeks I do and some I don’t but my goal is always to put in enough that I have more than the minimum goal.

This is what my worksheet looks like so far this year….IMG_4681

You can see I feel a little behind on week 3.  Thinks were tight and I didn’t worry about it too much because I knew I would make it up.  I did make sure I highlighted it in a dark pink instead of my happy money green!

To download the printable if you got paid the week of January 1st Click Here

To download if you got paid the second week of January Click Here

Moving Away from Auto Draft

Where is your money going?

Where is your money going?

 

Just a quick disclaimer:  I know that 98% of this is all common sense, but I think sometimes we want so badly for things to be easier that we actually end up creating more problems for ourselves.  At its heart, this is about my attempt to give myself a little more work in order to have fewer headaches down the road.

Have you ever asked yourself where is my money going?  I don’t know many people who haven’t.  I think part of my own money mystery had to do with auto draft.  Don’t get me wrong, I love online banking and auto draft.  Being able to have the bank automatically transfer money and send out bills saves time and a little bit of money on envelopes and stamps.  Its a great system.

What I learned though was that someone like me who doesn’t have the best grasp on their finances really needs to not just set it and forget it.  Even though I was aware that bills needed to be paid, I was still over and over again deceived by whatever my current bank balance was.  I kept ending up short on money or worse in over draft.  What was so confusing to me is that I don’t buy anything extravagant, sure I probably spend a little too much on Dunkin Donuts coffee, but even my coffee is always plain black iced coffee.  Nothing extravagant again. I think I would be fine and then two days later I would look at my account and see that another $500 in bills had come out that I had forgotten about.  I was trying to figure out how to get out of over draft and the crazy fees that were causing a huge dent in my budget.  I needed to find away to stop forgetting about these bills and realize that looking at my bank account (as crazy as this sounds) does not give me an accurate picture of how much money I have.

Since January I have let go of auto draft on every but a couple smaller things like Netflix and my razor subscription ($6 every other month).  I made a list of the dates of all my bills and how much the minimum payment is.  (I always try to pay more than the minimum.  I figure if I can put enough extra on say my student loans, then at the end of a year I will have made at least one extra payment.  If you haven’t done the math on this it will seriously save you a bundle on interest and you’ll pay off your loan earlier.) I set an alarm every week for a time that I felt would be a good time that week to go and pay bills.  I know this may seem like a lot more work, and it definitely is more work than not doing anything like I used to, but hear me out.  I would pay all my bills that were due in the upcoming week and pay them.  I would also make sure that nothing was due within the day or two of the next day I was going to sit down and pay the next weeks bills.  If I didn’t have the money to pay right then, but was getting paid before my next paycheck came in, I would set another alarm to come back and pay bills as soon as my check was deposited.  Adding in this extra 10-15 minutes helped to save me and get me on the right path.

I also downloaded an app called Chronicle.  You may see this as unnecessary and there are definitely free ways to do the same thing.  For me it was worth the minimal amount to have a very visual representation of what is due next how much I owe and when specifically it is due.  I think it is also important to note that you need to do this on your own.  Chronicle does not connect to your accounts directly like Mint does.  (This is also one of the reasons I like it.)  I also would like to say that I DO NOT pay attention to what it says my expected balance is for the same reasons I don’t rely on what my bank account says. Its really important to think ahead and Chronicle is not a bank register.  If I pay for something Chronicle does not automatically know about it.

Bill

Chronicle desktop screenshot

Overview

Don’t worry this isn’t my real info 🙂

 

 

 

 

 

 

 

 

Wow I have gotten off topic, anyway by canceling automatic bill pay and having an active and rotating list and reminders for when my bills are due, I came up with a system that allowed me to be in touch and see exactly when money was coming out and how it impacted my account day to day (really week to week).  I was no longer surprised at how much or little money was in my account because I developed a hands on experience with my money.  I think that this is really important.  I have now started adding things back to auto-pay.  (Many companies offer small discounts for enrolling in auto pay.) The time I spent doing this exercise has gotten me into the very productive habit of watching my money.  In a pinch f I see that money is low I can run to the change jar (something I will talk about in a later post,) and deposit enough of that money to cover it before I get into over draft.  But that rarely happens any more because I don’t set things to go out before I have the money.

Do you have any tips for getting more in touch with your money?

Free Help with personal finance

I just wanted to drop a quick note and let everyone know about this gem I stumbled upon today. Lately I have been devouring as much practical (and appropriate for my current situation,) personal finance information as possible. I have had bad luck with some “Celebrity Financial Experts” and I have been really craving things that are put out there in a way that is straight forward, entertaining and very informational.
Today I found this link through PNC Bank. They call it PNC Achievement Sessions. Although it isn’t as entertaining as say Mr. Money Mustache (who I also enjoy reading,) it presents a lot of good information.  You also do not need to be a PNC customer and for the few videos I have watched so far, it looks like education is the goal, not selling you their products.  This is hugely important to me.  I hate feeling like some one is just trying to suck me in under the belief that I am doing what is best for me when really all I am doing is filling their quota.
As with any financial advice I feel it is important to diversify not only your money, but also where you are getting your information from. Let me know if you have any go to resources!

“You Need A Budget”

My boyfriend has just turned me on to a new budgeting software and I am in love! The only thing I am not in love with is the price. You Need a Budget is well worth the $60 price tag, but I am going to hold out from paying full price if at all possible, more on that later.
This software is in someways a glorified, easier to use spread sheet. I am sure that if you are a complete wiz you could make yourself something comparable for free. The part that would take a bit longer is the money management system that comes along with You Need A Budget (YNAB). If you have read the blog before you know that I love Gail VazOxlade’s money management system. I have also read some of Dave Ramsey’s things which are pretty similar. I stick largely to Gail’s principles, but I like to see where I can add and subtract to the system to fit my personal budgeting needs.
YNAB follows 4 basic rules that closely align with both Gail’s and Dave’s principles. Here are the rules:
1. Give every dollar a job. (I think Gail has even used this exact phrase.) Basically if you account for where every dollar is going to go, you won’t be tempted to spend it on something unnecessary. You can still have a place in your budget for fun spending, but you won’t look at your statements at the end of the month and realize you spent more than you thought.
2. Save for a Rainy Day. This is something that has been difficult for me. I have also read different ideas on how much this amount needs to be. I am still building my Rainy Day/Minor Emergency Fund and I plan to get it to at least a couple months worth before allocating that money to go towards other goals. This rule has always been difficult for me because when I see the money in my bank account I forget that it already has a job. YNAB is great for this because even though that money is in your bank account, it shows that it already has a job and that it is not money to be spent.
3. Roll With The Punches. This was my BIGGEST downfall before really taking hold of my budget and learning about my finances. I would miss a payment or some unexpected expense would come up and I would be so overwhelmed at the failure or perceived failure that I would ignore all of it for as long as I could stand. It felt horrible and it was a disastrous snowball. The longer I kept it going the worse it got and the hard it was to look at let alone dig myself out. Roll with the punches reminds you that shit happens. You have to get through and it resolve to do better next time. No budget is perfect and things will need to change as life changes. Realizing that budgets are meant to be fluid has been instrumental in getting myself on my feet and becoming financially independent.
4. Live on Last Months Income. I am not at level 4 yet, but I can’t wait to be. By allocating some of your budget each month as a rollover, you build up enough extra that you are no longer living paycheck to paycheck. You have a buffer for a payment that needs to be made earlier or if you move and need first and last months rent all at once. Really what it means to me if comfort. Obviously at this point you can’t abandon all your work and say “I’ve made it! No more budget!” But for a person who quickly becomes all encompassed by stress especially financial stress, its a nice little safety blanket.

I am very excited by everything about YNAB and will absolutely obtain a copy when my trial expires. Here are some ways to get discounts!
1. Download the free trial at http://www.youneedabudget.com and sign up for free live classes. At the end of every class, one person will win a free copy. To increase your chances of winning, sign up for classes at more obscure times of the day.
2. Go to http://www.steampowered.com , sign up for a free account and add YNAB to your wish list. They will notify you when it goes on sale. It looks like it goes on sale at least 2x a year for only $15!
3. Google coupon code for YNAB. There are tons of coupons for $6/10% off good for any time of year.

If all else fails spend the $60 it is totally worth it. But go ahead and watch some of the free videos and read their blog even if you aren’t sure. There is a lot of great advice even if you never buy the software.

Thanks for reading!

 

Get your financial S*** together!

*Disclaimer: I do not have my s*** fully together but I have made HUGE progress.

I have always struggled with money.  My biggest problem is probably my student loans.  When I was 18 and took out massive loans to go to college I thought everything would be fine, it was no big deal.  I have NO IDEA what I was getting myself into.  I think the larger overall problem for me was that money has always been an intangible to me and as an 18 year old I had no interest in learning about my financial health.  Move forward 10 years and I am still stuck in the same rut.  I have an average paying job, but was constantly going in and out of overdraft and feeling like payments were always sneaking up on me.  I’d go a few months feeling like I had a bunch of extra money and then a few weeks later I would be crying and feeling completely overwhelmed at my debt.  Another problem of mine has been that I just refused to look at the numbers.  Opening the mail and signing into my accounts instead of just letting it go to auto bill was incredibly daunting.  I had no idea what my credit score was or the status of any of my loans.  Don’t get me wrong, I know how dumb this is especially because I knew all along that I was in trouble.  Ignoring it made things far far worse.

About 4 months ago I started getting calls from my lenders.  I had assumed that everything was being paid correctly and on time because I had set up my accounts for automatic bill pay.  When Sallie Mae was blowing up my phone I knew something was wrong, but I just couldn’t make myself pick up the phone.  I am not dumb, but what I was doing was incredibly dumb.  I was too embarrassed to admit I had no idea what I was doing.

Finally, a couple months ago, I let my mom take a look at all my accounts and it was the best thing I ever did!  She immediately looked at what was going on and saw that I now owe more on my student loans than I originally took out to begin with.  I was devastated.  I feel like I go broke paying them every month and I pay them thousands and thousands of dollars a year.  And mind you I don’t life extravagantly.  I rent a small basement room from my employer, I drive the same car I have had since I was in college, I have no real interest in designer clothes (beyond of course saying “wouldn’t that be nice”), I cut my own hair most of the time, if I do get it cut, its by super cuts and no more than once a year.  Basically, I had no idea where my money was going.  Coffee is a bad habit of mine, but theres no way I was spending it all there… or was I?  Basically I will never know because I didn’t keep track of my money.

One of the best things my mother did (other than helping me eliminate my interest rate at least temporarily on my loan that coincidentally had the highest balance and the highest interest rate and was causing me to go further into the hole), she introduced me to Gail Vaz-Oxlade. In a very short period of time, Gail has become a major part of my life as well as my boyfriend’s by proxy.

gail

Gail Vaz-Oxlade is a “financial guru”  and no matter how financially together you are, I suggest you take a look at her site, read some of her books, and if you can get them, watch a few episodes of her TV shows.  I promise you will learn something.  Gail’s work is much more widely known in Canada, where she has 3 successful TV shows and countless books.  Her advice is practical and uplifting and ensures that even the biggest “Money Moron”  can pull them self out of debt.  She has taught me personally so many lessons and without making me feel judged or humiliated.  This one woman has taught me how to set up a flexible budget (as well as what that means), how to stick to it, how to start saving even when it feels like I have no money there to put away, and really just learning what my situation is instead of ignoring it.  Because of her and my own Gail (my mom), I have already started to make big progress digging myself out of my hole.

Here are a few of my favorite Gail Lessons (these are all paraphrased):

1. Control your money or it will control you.

2.  Credit is money you don’t have.  You can’t spend money you don’t have.

3.  If you don’t have enough money, you have two choices, a. make more money or b. find places to cut your spending.

4.  Credit cards are a tool but if you don’t use them correctly and to your advantage, you are making other people rich off your hard work.

5.  You spend so much time working to make your money, you should be conscious of where it is going.

6.  You can have it all, you just can’t have it all at the same time.

It is now a very rare occasion for me to purchase anything without hearing Gail in my head, which is a life saver for me.  And now that I know it is possible to live with no debt it is a major priority.

*If you are interested in learning from Gail, it can at times be difficult to find her things if you live here in the US.  The first place I would start is her website.  There are amazing articles, worksheets, and interactive guides to help you get your s*** together.  If you want to order her books, I was the most successful getting them inexpensively from Alibris.com.  Her TV shows are the hardest to find, but they are definitely entertaining.  Her show “Til Debt Do Us Part”  is in syndication on CNBC.  I don’t think it has a regular time slot, but if you set your DVR for it you’ll be able to get a hold of some episodes.  Her newer shows, “Princess”  and “Money Moron”  is currently shown in Slice, a Canadian cable network.  In the US we are unable to watch them online, unless you do some creative online research about IP addresses 😉