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In March I offered some financial advice to Michelle, a Mint user who was struggling with debt, a lack of retirement savings and a bit of family financial drama amongst her siblings.
Michelle was anticipating a cash bonus from her company and wasnât sure if she should save the money or use it to relieve her debt.
I recommended a two-prong approach where she uses the cash to play savings catch-up in her retirement account and knock down some of her debt, which, at the time, included a $3,000 credit card balance and $52,000 in student loans.
Six months later, Iâve checked in with the 38-year-old real estate developer, to see if any of my advice was helpful and if sheâs experienced any shifts in her financial life.
We spoke via email:
Farnoosh: Have your finances have improved over the last 6 months since we last spoke? If so, what has been the biggest improvement?
Michelle: Yes. I’veÂ aggressively been contributing to my 401(k) â about 50% of my pay – and had hoped to reach the annual maximum of $18,000 by June, but looks like it will be more like October. I also received a $40,000 distribution from a project that I closed.
F: What aspects of your financial life still challenge you?
M: Investing for sure. I never know if I’m hoarding too much cash. I am truly traumatized from the financial downturn.Â I just joined an online investment platform, but it wasÂ also overwhelming. Currently I have $45,000 in a regular savings account that earns 1.5%.
Another challenge is not knowing whether to just bite the bullet and pay off my student loans or to continue to pay them monthly. Â I hate that I’m still paying loans 16 years after I graduated and it’s a source of frustration [andÂ embarrassment] for me. Â I owe $36,000. Often times I have an inner monologue about the pros and cons of just paying them off but then my trauma from 2008 kicks inâ¦and IÂ decide to keep my $45,000 nest egg safely where I can check the balance daily.
F: I recommended allocating $45,000 towards retirement. Was that helpful? What are some ways you’ve managed to save?
M: Yes, I recall you saying you recommended having a total of $100,000 towards retirement for a person my age. Currently, I have $51,000 in my 401(k), $35,000 in a traditional IRA and $17,000 in my Ellevest brokerageÂ account, so I’ve broken the $100,000 goal.
I did add a car note to my balance sheet. My old car suffered a total loss (major electrical failure due to a sunroof leak!) and the insurance gave me a check for $9,000.Â I used it all towards the new vehicle (aÂ certified used 2014 Acura) and I’m financing $18,000.
F: Your dad’s home was a source of financial stress, it seemed. Were you able to talk with your siblings and arrive at a better place with that?
M: My dad actually has passed since we last spoke. He passed in February and so his will went to probate. My siblings and I have decided not to make any decisions about the house for at least one year. Yes, this is kicking the can further down the street however, they recognize that I maintain the house and pay the real estate taxes and so they are not pressuring me to move or to sell.
The new deed has been recorded and the property is under all our names and so everyone seems ok with knowing that I can’t do anything regarding a sale or refinance unilaterally.
So, for now, I live rent free other than payingÂ utilities, miscellaneous maintenance on the houseÂ and real estate taxes quarterly. This, too, is helping me saveÂ aggressively.
Also, the new car note has replaced the hospice nurse contribution so I’m not feeling that my budget is overburdened with the new car.
I think ultimately I will buy out at least two of my siblings and stay in the house. Verbally they have expressed being okay with this.
Have a question for Farnoosh? You can submit your questions via Twitter @Farnoosh, Facebook or email at firstname.lastname@example.org (please note âMint Blogâ in the subject line).
Farnoosh Torabi is Americaâs leading personal finance authority hooked on helping Americans live their richest, happiest lives. From her early days reporting for Money Magazine to now hosting a primetime series on CNBC and writing monthly for O, The Oprah Magazine, sheâs become our favorite go-to money expert and friend.
The post Mint Money Audit 6-Month Check-In: How Did Michelle Allocate Her Windfall? appeared first on MintLife Blog.
Yuttachai Saechan/Getty Images; realtor.com
Those who are fortunate enough to still be collecting a paycheck while quarantined or sheltering in place might expect to build up some serious savings. While you work from home, you’re avoiding your usual commuting expenses, and you’re probably saving money by not going to bars, restaurants, and movies, or skipping that vacation to Fiji.
But as spending decreases in some areas during self-isolation, it can creep up in others. To brace yourself and your budget, keep an eye on these expenses while youâre self-isolating at home.
If youâve gone from office life to Zoom life, youâre spending more time at home than usual, which could ramp up your household expenses.
âYour utility spending might be considerably higher if you’re spending more time at home cooking, charging devices, using lights and appliances,â says Ted Rossman, industry analyst at CreditCards.com.
To keep your utility bills down, turn off lights when you leave the room, open windows during the day to let in cool air, unplug devices that youâre not using, and consider turning down your water heater by a few degrees.
Even if youâre not hoarding (and you shouldnât be), you might find yourself spending more on groceries while you shelter in place.
For some people, an uptick in grocery spending will be offset by the money saved from not dining at restaurants. But if your local store is picked overâor if you pay fees for grocery deliveryâyou could spend more on groceries than usual.
âIâve been to a local grocery store, and the only thing that was available was organic, so I couldnât buy the generic. I actually had to spend more money,â says Steve Repak, author of the â6 Week Money Challenge for Your Personal Finances.â
If your grocery spending feels out of hand, be flexible and creative with your menu. Cook the food you already have at home before you head back to the store. Sites such as Eater have compiled resources for home cooks, including Pantry Cooking 101 and How to Stock a Pantry.
If youâre using a delivery service, place infrequent, larger orders instead of several small orders. Or consider curbside service; many stores are allowing free pickups where they bring your groceries right to your car, so you can save on delivery fees and tips.
3. Meal delivery and takeout
You may not be able to enjoy a nice meal at a restaurant, but you can order takeout and deliveryâand those indulgences can add up quickly. After all, itâs not just the meal youâre paying for.
âThereâs probably still a service fee, and on top of that you have to leave a gratuity,â Repak says. (It’s also a good idea to generously tip the workers who are delivering your food in these times.)
If youâre on a budget, reserve takeout and delivery for special occasions or those days when you just canât muster the motivation to cook.
4. Alcohol and other sources of comfort
If you find yourself decompressing with a glass or two (or three) of wine every night, your drinking habit could do a number on your budget. And you wouldn’t be aloneâalcohol consumption has shot up nationwide, and in states where recreational marijuana is legal, dispensaries are reporting booming business.
âSocial isolation is really strongly linked to physical and mental health problems, and the way we cope with a lot of them is by drinking more,â Repak says. âPeople are going to smoke more and drink more … and we need to find other healthier coping mechanisms to offset that additional spending.â
You may not want to totally forfeit your evening glass of pinot, but you can make your supply last longer by sipping a mug of (far more affordable) chamomile tea on occasion, or opting for a calming yoga video or breathing exercise.
Watch: Our Chief Economist’s View on the Pandemic, Mortgage Rates, and What’s Ahead
Youâve rewatched all your favorite shows on Netflix and Huluâso, now’s the time to add a Disney+ subscription, right?
Not so fast, Repak says.
âSave a little bit of money by just picking one of the streaming services,â he suggests, or at least donât pile on new subscriptions to the ones you already have.
To free up your budget, take inventory of your other monthly subscriptions, services, and other recurring expenses, and see if there’s anything that can be eliminated.
âTen dollars a month may not sound like a lot, but if you have five of those, that’s $600 annually,â Rossman adds.
6. Online shopping
If you turn to retail therapy to soothe your soul, your budget could take a hit. True, many retailers are offering deep discounts in order to move merchandise, but even discount purchases add up.
âImpulse buying is a potential trap,â Rossman says. âSome people fall victim to it more than others.â
Instead of clicking âadd to cartâ as a coping mechanism, Repak suggests cleaning out your closet instead.
âThis is a great time that we can offset our budget by decluttering our house or apartment,â he says.
Use sites like Poshmark to sell your clothes, or Mercari for your household items. Many donation centers such as Goodwill are still accepting donations, tooâjust call ahead to make sure your local store or donation drop-off location will take your items.
7. New hobbies you’re trying in quarantine
Our spending habits are highly personal, and you might find yourself throwing money at a new habit or hobby to fight cabin fever.
âItâs a worthwhile exercise to track your spending, especially now that so much is different,â Rossman says. âLook through your credit card and bank statements from the past month. Do you see anything surprising? Are there areas where you spent extra but didn’t feel it was worth it? These could be good ways to cut back.â
And remember: Even if quarantine has eliminated some of your old day-to-day expenses, itâs easy to overestimate how much youâre saving.
âMost people don’t have a great handle on their budget and spending habits anyway, and so much has changed of late,â Rossman says. âIt’s easy to overlook things.â
The post Watch Your Wallet: 7 Hidden Costs of Self-Isolating at Home During Coronavirus appeared first on Real Estate News & Insights | realtor.comÂ®.
The post Why a Family Should Make Major Financial Decisions Together appeared first on Penny Pinchin' Mom.
Whether or not you have the option to stay at home with your children or choose to work full or part-time, making major financial decisions with your partner or spouse can make a huge difference in your self-esteem and deepen your trust in each other. Having an equal voice in the big decisions, backed by the solid knowledge of what your joint investments and accounts hold, is a smart mom move.
Donât be scared of the words âmajor financial decisions.â Keep reading. Iâll be gentle.
Donât let fear guide you
Nothing used to make me more nervous than the idea of talking about money. And itâs not because I have a lot of it, quite the opposite. When I was single, I always paid my bills, but rarely on time. I racked up interest on my credit cards, wasting money I couldnât afford to give away. I didnât file my taxes for ten years, which cost about $5,000 to clean up.
I was at war with money. So, I was more than happy to hand over the management of the family finances to my partner as soon as we combined households.
This was a mistake. It wasnât wrong for any nefarious reason. My ex-husband remains one of my best friends. Simply put, it was a missed opportunity. But, for someone with a less trustworthy partner, handing over responsibility could lead to a major disaster.
Making decisions means sharing responsibility
Letâs start with the best-case scenario. You and your partner have a good stable relationship. Money is okay. Thereâs enough coming in that you arenât really worried about any of the basics. But who sits down and pays the bills?
If itâs you, then you know how much the taxes are and the utilities and the mortgage or rent. Maybe you balance out what you allow yourself to purchase at the grocery store by what you know is in the family checking account.
But, if your partner doesnât know the cost of living, whatâs to stop them from ordering an expensive new gadget. Maybe they make more money than you bring in, and they are super excited about the new iPhone.
Sounds like a tense situation brewing.
A new piece of electronics is tiny as far as major purchases are concerned. But spending nearly (or even over) $1,000 for the latest smartphone can set back a family making an average income when an out-of-pocket medical expense pops up in the same month. And, with a family, thatâs bound to happen.
If both partners know the familyâs finances, purchases can be coordinated and saved for. Thatâs the first step to bigger things, like buying a home, paying for college, and figuring out what kind of retirement you can look forward to.
How to get started with family finances
Talk about it. Itâs family meeting time. Say you want to pay the bills or share them. I know couples who pass the responsibility of paying the bills back and forth every six months. They have a joint checking account and set up all the bills in an online payment system that needs to be monitored. Find a method that works for you.
You might think you are really good at saving money, because you only buy sale items, but thatâs small potatoes. If you expand your thinking to future savings and layout purchases in a spreadsheet, you might have fun planning how much you can save in a month and a year. Then you get to plan what to do with those savings at your next family meeting.
For example, once you save $1,000, you can begin to think about opening an investment account, like an IRA, for retirement, or you could invest in stocks on your own.
Stuff happens: be prepared
No one wants to think about death, divorce, or disability. But, moms with kids stand to lose the most when these things happen. Knowing the state of your familyâs finances ahead of time will save you time and stress when you can least afford to waste either.
Even the most civilized divorce is a tense process. To serve or answer a divorce summons you have to know every last detail of your own and your partnerâs income, expenses, and investments.
Do you know how much your partner has squirreled away for retirement? Have a talk about what kind of future you want to have together and what expectations you have for your children. You donât just get what you ask for; you get what you plan for, too.
And, if an accident happens, your husband or wife would want you to be OK. If you and your partner donât know each otherâs bank information and logins, exchange them as a shared trust exercise. Itâs good practice, in case of an emergency and necessary should something terrible occur.
Take care of yourself
My college sociology teacher told the women in my class something Iâm going to pass on to you.
Get your own bank account and credit card, separate from your partnerâs. Pay bills on a credit card that you know you can fully pay off on a monthly basis so that you can build your own credit.
You never know when your credit score could become what saves your family from a disaster, like homelessness. And if you get used to making small and medium-sized financial decisions together, youâll be ready for the really big things.
After your initial discomfort dissipates, youâll find that having your familyâs financial facts at your fingertips gives you confidence. When you donât know how much you have and how much you spend, then your partner is your banker. And no matter how much love you share, money will always be a power issue.
A family financial meeting once a quarter or twice a year will save you from answering to your partner about your credit card bill or wondering why your debit card isnât working.
—By Nic DeSmet
The post Why a Family Should Make Major Financial Decisions Together appeared first on Penny Pinchin' Mom.