Frugality: a How To

Shifting towards a more frugal lifestyle can be a rough transition for anyone. Frugality is even harder to achieve if you don’t have the proper tools in place. If living frugally is something you strive for, come up with a plan of action and start incorporating a frugal mentality as soon as you’re able. In order to get the ball rolling, here’s a list of things you can start doing to achieve a frugal lifestyle.

Make a Purchase Wait List

The easiest thing you to start doing immediately is creating a running purchase wait list. For all non-essential purchases of over $100, place it on the list. Wait for at least 2 days (a week might be better) and if you still find yourself thinking about it, go ahead and get it! We are all guilty of impulse buying, so your wait list acts as a buffer for your wallet. Plus, it will be interesting to see how little importance some items will have after some time passes.

Remove Extras

Another way to cut down your expenses is to remove extra charges. At a closer look, most of us have memberships, service fees, and expenses that we are not utilizing. Removing them will free up some extra cash. Additionally, audit other monthly expenses that weren’t cut to see if you can trim down the cost through discounts or negotiating a lower price.

Quarterly Self Checks

At the end of each quarter, audit yourself. Look at your finances objectively and make changes accordingly. You should be on the lookout for a few thing. The first thing are the expenses that don’t give you the value you want. Why pay for something if you aren’t happy with it? For one time purchases, use it as a lesson to do more research before opening your wallet. Secondly, objectively look at your entertainment spending. This is an area almost all people can cut down on. If you want a frugal lifestyle, you might have to stop hitting happy hour at the end of the week.

Eat at Home

A large expense every one of us has is food. It’s a necessity but doesn’t have to take such a toll on your budget. The first thing to do is make a commitment to eating at home more. Cooking your own meals has a ton of financial benefits. You control how much each dish costs you. You have to buy the ingredients, so you set the price. Also, your leftovers become a gold mine! Each meal you eat leftovers is one less meal you’re paying for.

Buddy System

The biggest worry of being frugal is actually sticking with it. Employ the buddy system with a like-minded friend. There’s nothing quite like accountability and camaraderie to help you follow through. Two heads are also better than one. Use the added brain power to come up with better practices and ultimately save more money!

How to Prepare for a Personal Financial Crisis

Anyone can experience a devastating financial crisis. The best thing you can do when disaster strikes is having a plan of action. Financial crisis can come in many forms. More often than not, it involves job loss, unexpected medical expenses, or hefty car repair bills. With that being said, it can happen to anyone, so here is a guide to preparing for, and surviving, a financial crisis.

Have a savings

The best way to prepare for a financial crisis is to have an emergency fund. Having a savings account purely for emergency situations can help pull you out of a financial hole pretty quickly. Afterward, you’ll need to build it back up again, but you’ll still be able to pay your monthly bills while doing so. A good rule of thumb is to have 3-6 months worth of salary saved up. This will buy you some time in the event of a financial disaster.

Pay down your debt

Debt is a leading cause of financial crisis. Having debt and then accruing more becomes an extremely hard hole to dig yourself out of. Before a financial crisis happens, pay off debt and keep it as low as possible. An abundance of debt also indicates that you’re living beyond your means, which leads into the next point.

Reduce expenses

Reducing your overall expenses will leave you with more money. The good thing about more money is that you have more of it to save. The more wiggle room you have in your budget the better. We all have unavoidable expenses, like housing expenses and food, but trimming the fat will make job loss a much easier pill to swallow.

Build out your resume

The best thing you can do for yourself before a financial crisis is to invest in yourself. Building out your skillset and resume increases your marketability. If you lose your job and have taken the time to hone your skills, landing a new job will be an easy task. Additionally, gaining new knowledge and refining skills can also set you up for a job that pays more, which will get you back on your feet even faster.

Extra income

Use your skills to make some extra money from home. Doing so will be vital in times of financial crisis. Having a little extra cash flow on the side won’t solve all your problems, but it will help keep you afloat or pay down debt. To start earning some extra money from home, provide freelancing services or sell unwanted personal items on eBay. The possibilities are endless, as long as you’re willing to do the work.

Seek help

Finally, seek help when needed. This can be before, during or after a financial crisis. The best option is to have a plan before disaster strikes, but asking for help at any stage is better than dealing with it on you own. Seek help from a financial advisor. They can help you budget, plan for retirement, and guide you on the ways of making the most of your money.

Tips For Retiring Early

As Market Watch calls it, retirement just means being financially independent. Many people live decades reminiscing about a day that they won’t have to work so hard to pay their bills. Many can’t wait to retire so that they can start living. As the living costs grow, so does the retirement age, but here are some tips to help you reach your goal of financial freedom.

1. Understand Numbers
The first thing to do when you want to retire early, is understand how much money you’ll be able to live off. Typically, if you’re retiring, all of your bills and mortgages are paid off. You’ll have to calculate your monthly living and emergency expenses and figure out how much money you can actually live off while saving the rest of your income in long-term investments such as 401k or Roth IRA. One couple saved $1 million dollars in four years to retire at age 43.

2. Spend Less, Save More
It seems simple enough, but the key to having money in the bank is to spend less and save more. A majority of Americans spend money left and right on things that they don’t actually need, but want. For example, Americans spend half their food budget on eating out at restaurants. Groceries have also gone up in price over the years, and retail has been booming. In March 2010, families spent over $500 a month on shopping alone. The key point is that Americans are spending their income on unnecessary things rather than investing their money for saving. The best ways to save money is to be thrifty, including groceries are much cheaper (and healthier) at your local farmer’s market. Stores such as Aldi and Trader Joe’s are also great for saving money on food because they have healthy choices at the lowest prices they can sell at. Starting with changing your household spending is a great way to begin your early retirement process.

3. Invest
You don’t have to have a finance degree in order to invest your money. For one, every person who works full-time should have some sort of savings plan, whether through a Roth IRA or 401K. Another popular form of investment is housing. Owning a house will allow you to raise equity, but also have a backup plan in case of emergencies. As long as your mortgage is paid off, you can always sell your investment and get the cash for it, especially because housing typically goes up in price value. This is the easiest form of investment.

4. Income
It’s a good idea to have multiple sources of income for your early retirement.The current prediction is that most of us will never see a social security income, and if we do, we won’t be able to receive it until at least age 65. One typical way of creating income is owning a home. As the price value goes up, so will your equity. As mentioned this will allow you to sell your home, but other people choose the route of residential rentals for consistent income. The truth is that many places in the United States don’t have enough housing available, therefore there will always be a need for housing rentals. Another source of income would be starting a side business. Many people find ways to make money off their hobbies, such as landscaping, art, or sales.

5. Understand Your Values
Saving enough money for a retirement can be a lot easier than most people think: the hard part is changing your lifestyle. If you want to retire early in your life, it’s crucial to create a plan that you can stick to. This does mean becoming frugal with your lifestyle choices and decisions, but you will soon be able to realize what your life values are. When you learn how to live a simple life, you’re able to understand the difference between your wants and needs, and can see a different perspective when it comes to your financial choices.

What NOT to Do With Your Money

Sometimes it can be helpful to be told what not to do with your money rather than being told what you should be doing. That’s what we are going to take a look at today. Knowing what not to do can save you from costly mistakes or financial crisis. I’ve provided a list of a few of the big things you’ll want to stay away from doing with your money.

Never shop when you’re feeling down

A little retail therapy never hurt anyone, right? Well, it doesn’t really help your finances. Shopping while emotional will only lead to unnecessary spending. Also, shopping when you’re feeling under the weather makes you more susceptible to pushy salespeople. Their flattery might make you feel better, but give too much into that and you may end up making a purchase you can’t afford. Their goal is to get you to spend as much money as possible, don’t allow their hollow compliments to sway you.

Forgoing a budget

If you don’t have some kind of budget in place, you’re asking for trouble. Without a budget how are you supposed to keep track of your spending? Your budget doesn’t need to be overly involved to be effective. A simple budget that puts a cap on spending in all major areas will go a long way. A budget will keep you accountable to yourself and your wallet.

Having an inadequate emergency fund

It is a huge mistake to have an inadequate emergency fund. Ask yourself these questions:

Do you have six months of your salary saved?
Is that money separate from your regular savings?

If you’re jaw just dropped at the idea of having six months worth of your salary saved, pick it up and I’ll explain why it’s important. An emergency fund if for, you guessed it – emergencies. Things like losing your job, expensive car repairs, or unexpected medical bills. These things generally tend to cost a lot and can be detrimental to your finances.

If you answered yes to the first question, but not the second, you’re not out of the woods yet. Your emergency fund needs to be a separate account from your checking and regular saving accounts. The reason for this is because you should treat it differently than your ordinary savings. That money is for vacations, gifts, and any other “wants” you have. You should not be dipping into your emergency funds for a guys weekend away.

Don’t lend money to people you can’t trust

It will be very tempting to help out those in need – especially family and friends. If you are going to lend money out, make sure you can trust them. An untrustworthy person will have no problem asking for a loan with zero intention of paying it back.

A little bonus on this topic: Even if you can trust the person who’s asking for a loan, make sure you can afford it. Loaning money you don’t actually have to loan out will be a hit to your finances.
Managing your money is no easy task, but hopefully knowing what not to do has given you a different perspective. Overall, setting guidelines for your money will shed light on what’s important and push aside the things that aren’t.

How Do You Know You’re Ready to Buy a House?

Buying a house is quite possibly the single largest purchase you will ever make. It’s natural to be unsure of the best time to buy and even question if it’s worth it. Investing in property and buying a home is a great financial decision, but only if the time is right and you are within your means to do so. I have put together some factors that will help you decide when the right time to buy a house is.

Do you have a 20% down payment saved?

It won’t be impossible to buy a house if you don’t have a 20% down payment on hand. It will absolutely cause you to spend more money in the long run. In order to be granted a mortgage, you have to either have a 20% down payment or be ready to make up for it in “Private Mortgage Insurance.” Depending on your situation, you could be throwing out at least $100 extra each month just to secure a mortgage. It’s best to wait until you have the preferred down payment, but it’s not the only factor you need to consider.

What about money for maintenance & repairs?

If you by your own house, say goodbye to the days of calling a landlord once (okay maybe a few times) to get something fixed. As a proud new homeowner, you might also find yourself six months down the road and the owner of a brand new water heater. In this case, I’m sure it will be an expense you won’t be too thrilled about. When it comes to home ownership, think about your income and financial situation. Would you be able to handle all necessary repairs and general upkeep on the house?

What is your plan?

Do you plan to buy a home and live in it for 20+ years? If that doesn’t seem in the cards for you, it may be best to rent until you’re actually ready to live in the same place for a long period of time. A house is expensive to buy in general, but selling again too soon can cost more than what would have been the same time in rent. After closing costs, mortgage interest, property taxes, and maintenance, you probably are not going to come out ahead.

What about market fluctuation?

This kind of piggybacks off of the question above. If you don’t plan to stay in this home for years to come, then you should be worried about the housing market fluctuations. If you buy at a decent time, but turn around to sell a few years down the road in a dip in the market, you’ll end up losing big time. On the flip side, if your plan is to purchase a house for your family and also have the hope of growing equity, you’ll have time on your side.

How to Build an Emergency Fund

If you are like most people, you don’t have a substantial emergency fund. What constitutes as an emergency fund? Great question. An emergency fund is a runway of at least 3 months of your salary – the more the better. The hard part for most people is starting and consistently adding to that fund. With bills and unexpected costs, it can be even more difficult. The list below provides some tips and tricks on how to start and maintain an emergency fund for when life throws curveballs at you.

Budget

Create an effective budget for yourself. This will allow you to see where you are overspending. Additionally, sticking to that budget gives you an opportunity to take the money you were previously overspending and put it towards your emergency fund. You may also decide to sacrifice some things, like eating out, in order to stick to your budget. This can be hard at first, but you will start to become adjusted to the new budget and lifestyle that comes with it.

Decide Where to Keep the Money

You will need to have a place to store your money that is easily accessible in the event of an emergency. Creating a separate checking account can be a great way to have access to the money in a quick way. Having the additional account also makes it easier because there is no mixed money. That account is solely for emergencies.

Use it for Emergencies Only!

This will take a bit of discipline, but your emergency account is for…emergencies! What counts as reason to withdraw from your new account? There are quite a few instances where your emergency fund is appropriate to draw from. Here are a few examples:

  • Major car repairs
  • Sudden loss of job
  • Medical bills
  • Home repair

These are all instances where having a cushion of money will be extremely beneficial.

Automatic Payments

Treat your emergency savings account like one of your monthly bills. Set up automatic payments and stick to them! Knowing that your budgeted amount will end up in your account every month will be an excellent piece of mind. Plus, you can always make additional deposits if you end up under budget – and that’s a bonus!

Set Goals

Set goals for yourself. Things like “after x months I want to have x amount saved.” Goals are incredible ways of keeping you accountable to yourself and also marks your progress. When you hit your goals, make sure to give yourself a small reward. You earned it!

Financial Bucket List

When people think of a bucket list, most often they associate it with experiences they want to have before they pass on. Bucket lists in the traditional sense are great, but there is another type of bucket list that not too many people spend time thinking about. I’m talking about the financial bucket list. You know – what are the financial goals you want to hit before you kick the bucket? Sketch out your own financial bucket list or feel free to steal some from the list below!

Pay off Student Loan Debt

Paying off student loans is a big one on a lot of people’s financial bucket lists. With the cost of college rising it may seem nearly impossible, especially for millennials. This is a great thing to put at the top of your bucket list. It is absolutely achievable and can be done so well within your lifespan. Come up with a plan and start chipping away at it.

Having Perfect Credit

Having perfect credit open’s a lot of doors for you, but it’s also a pretty awesome achievement. If you feel like you want to earn this badge, stick it on your bucket list and start thinking of ways to improve your credit. You can start by making payments on time and keeping debt as low as possible.

Retiring Early

Wouldn’t you love to retire early with enough money to enjoy it? This is a great thing to add to the bucket list. How are you going to achieve it? If you are starting this bucket list at an early age you’re in luck because time is quite literally on your side. Invest the full amount in your 401k to get full company match. If you are eligible, open a Roth IRA as well and plan to hit the cap amount every year. If you plan well, you will easily be able to take an early retirement!

Setting Your Kids Up for College

You know just how much college costs and how hard it can be to pay down that debt, especially if you put this at the top of your bucket list. If this fits your bucket list goals, set up a college account for you kids and stuff as much money in there as you can for them. They will be eternally grateful and even more surprised if they don’t know about it.

Buy a House

We all need a place to live and many people rent in order to do so. There is absolutely nothing wrong with that, but if you have a goal of owning your own house someday – throw it on the list! Owning a home is a major financial investment and should be taken seriously. You will want to start saving for a decent sized down payment and also have the money to make repairs and upgrades to really make it your dream home.

Pay for a Car in Cash

Paying for a car in cash may not be the most practical thing that ends up on your bucket list, but you have to admit it would be pretty darn cool. If you want to look like a big shot and see a wild reaction from a salesperson, start planning and saving for the car you want to pay for outright. Much like everything else on this list, with proper planning and saving, you can achieve it.

How to Handle Client Expectations

Managing expectations as a wealth advisor can be difficult at times, but by keeping a few things in mind, it can be easier. Clients are more understanding about market dips and risky investments if there are a few essential things in place. Below is a list of crucial things to establish early on to help manage clients overall expectations.

Discuss and Manage Risk

Discussing and setting guidelines for the amount of risk that a client is comfortable with can go a long way. Problems tend to arise when the risk of investments are not completely understood before hand. If a client is comfortable with a moderate amount of risk and you know this, they will not be a surprised and upset when an investment does not go as you both hoped. On the other hand, if a client is risk averse and you have not picked up on that, their expectation is that you will not lead them astray.

Build a Strong Relationship

Relationships are the building blocks of overall expectations. In order to be on the same page, a client must understand the relationship and trust your judgement. Additionally, with a strong relationship established, missteps along the way are easier to swallow because they know you have their best interest at heart. A client will be less likely to send an angry email if they know you ultimately have their back.

Be Transparent

Transparency, especially when it comes to others money, is fundamental. Do not be afraid to be open and honest about big wins, but also the failures as well. Showing the good and the bad lets the client know you are not keeping anything from them. This will go a long way, especially if an investment does not go the way that you both had previously discussed. It is human nature to feel more relaxed with someone they trust and knows has their back. Your client with thank you for your transparency and in turn they will trust your overall judgement.

Listen

Take the time to really listen to your client. They will tell you exactly what they are looking for and where their interests are. Additionally, this gives you the chance to directly manage expectations from the beginning. Listen to a client’s needs, if they do not align with what you think is possible with their portfolio – tell them. It is better to talk about these things in a clear way early and often. By listening to their concerns and hopes, you will be able to proactively work towards a portfolio that is realistic and that the client is happy with.

Remain in Regular Contact

Constant contact is a great way to mitigate any issues. By staying in regular contact, the client knows exactly what is going on. They can take all the guessing out of it! The more informed they are, they less likely they will feel blindsided when things do not go the way they hoped or envisioned.

Money: The difference between right and wrong

People do not always use their money wisely, some of it is easier to see than others. There is a grey area of what are the right and wrong things to do with your money. Of course, these things all depend on where you are in life and how much (or little) money you have. The list below documents some of the more applicable guides of how to handle your money.

Gifting money

There is nothing wrong with helping out people in need, especially deserving family members. It really all comes down to where you stand financially. People run into trouble when they gift more money than they can afford, if they can afford it at all. If you can cover all past, present, and future expenses and then have some expendable money, by all means help. The real issue is if you do not have it. If gifting money to a loved one will help them, but puts you in financial trouble, nobody wins.

Saying yes…to everything

There is nothing wrong with doing fun things, but where the problems come up is when you can’t say no. You won’t be able to afford going out every weekend and you won’t be able to afford big trips all the time. Saying no to save your wallet is a good skill to learn. Plus, you will eventually get really good at picking the most exciting and fun things to do.

Withdrawing from retirement accounts too early

Retirement accounts are supposed to be reserved for, wait for it, retirement! If you are withdrawing from a 401(k) or an IRA before 59 and a half, you are quite literally short changing yourself. Any withdrawals that are not for qualified reasons are subject to tax and a 10% penalty. Do yourself a favor and leave this money alone.

There are a few exceptions to the rules, but be careful when doing so. You can dip into this money early for purchasing your first home, if you become disabled, or to fund education, but make sure you look into other options before dipping into your retirement – your older, wiser self with thank you.

Credit Cards

Credit cards are a great thing to have and great credit is even better. You can’t have one without the other, so be smart. Credit card debt weighs a lot of people down and is an unnecessary expense that adds up rather quickly. Having these cards around for emergencies or paying bills is a great thing, as long as you can pay off the debt rather quickly.

Managing your money can be tough, especially when it is tied to literally everything you do. It’s important to realize where you fall short and try to clean up your finances before you get yourself into too much trouble. Spending some time learning about what is good for you financially and what is not can save you a world of worry