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Unemployment Benefits Explained: Terms, Definitions and More

After reading that sentence, you may have a couple choice acronyms yourself. Maybe, “OMG — WTH does that mean?”
Also referred to as Unemployment Compensation, UI is the longstanding benefits program run by each individual state. It’s for people who are out of work at no fault of their own. To qualify for UI, you have to have made a certain amount of money in the recent past  — typically from a W-2 job with an employer that paid into the unemployment system through payroll taxes. Specifics like previous employment duration or earnings vary.
Beyond helping those who were laid off, PUA offers benefits to people who can’t go to work or lost income due to a variety of coronavirus-related reasons. Some examples include contracting COVID-19, caregiving for someone who has COVID-19 or staying home to take care of your kids whose school closed due to COVID-19 lockdown rules.
Millions of newly eligible folks now have access to benefits. But the new programs put state unemployment agencies in a tricky position. They are receiving record-breaking surges in applications at the same time that they are tasked with creating and paying out brand new benefits. The result: overburdened websites, unclear instructions and lots of jargon.
“Understanding the difference with all these programs and acronyms is going to be confusing,” said Michele Evermore, an unemployment benefits policy analyst at the National Employment Law Project.
DUA: Disaster Unemployment Assistance is not Pandemic Unemployment Assistance. You may come across this long-standing natural disaster assistance program on your state’s unemployment website. Do not apply. Despite their similar names, they are very different.
Now that you have a better understanding of the two major unemployment benefits programs, let’s look at extensions, payment enhancements and other important programs that you may be eligible for.

The 2 Unemployment Programs You Definitely Need to Know

Depending on your state, average UI payments are between 0 and 0 per week, according to the latest data from the Department of Labor. The duration of UI programs also depends on your state. They last between 12 and 30 weeks (without any extensions). The most common duration is 26 weeks.
“Some extensions and changes to federal UI programs will include the reinstatement of the FPUC program, extension of PUA program and PEUC program for those who qualify,” the notice states.

Unemployment Insurance (UI)

CAA: The Continued Assistance Act, aka Continued Assistance for Unemployed Workers, is part of the 0 billion stimulus package that became law on Dec. 27, 2020. It extends many of the unemployment programs created by the CARES Act.
FPUC: Federal Pandemic Unemployment Compensation boosts unemployment benefits by 0 a week for up to 11 weeks between Dec. 27, 2020, and March 14, 2021. Anyone who is approved for at least of unemployment benefits will automatically receive this bonus. No separate application or action is needed. This program previously paid out 0 per week under the CARES Act, but that version expired in July 2020.
Since the start of the pandemic, mass unemployment has rocked the nation. To help mitigate the damage, two economic stimulus packages allotted unprecedented sums of money to create new benefits programs that assist people who are out of work.

Pro Tip
PEUC: Pandemic Emergency Unemployment Compensation extends the length of Unemployment Insurance aid for a maximum of 24 weeks. The first stimulus deal extended UI benefits for 13 weeks, and the second stimulus package added an additional 11 weeks. New applicants (after Dec. 27, 2020) are only eligible for the 11-week extension. This program does not extend Pandemic Unemployment Assistance.

Pandemic Unemployment Assistance (PUA)

These two foundational programs provide the bulk of unemployment aid through weekly payments. Once you understand the difference between them, a lot of the other programs will start to make sense.
Take, for example, this update to applicants on Arkansas’ unemployment website after the second stimulus package passed:
Source: thepennyhoarder.com
Additionally, to collect UI, you have to be able to work, available to work and actively seeking work. Some states have waived the “actively seeking work” requirement during the pandemic.

Our guide to filing for Pandemic Unemployment Assistance includes an interactive map to help you find your state’s application rules.
A woman holds hands with her infant while looking for something on her laptop.

7 Quick Definitions to Important Unemployment Terms and Programs

DOL: The federal Department of Labor oversees all states’ unemployment systems. Your state may have its own agency named the Department of Labor that administers its unemployment benefits. Generally speaking, DOL refers to the federal agency.
This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.
CARES Act: The Coronavirus Aid, Relief and Economic Security (CARES) Act was the first coronavirus relief package passed in March 2020. It expanded unemployment assistance, authorized ,200 stimulus checks and provided relief for small businesses, among several other things. Under this law, those who are partially or fully unemployed as a direct result of the coronavirus may receive up to 39 weeks of federal unemployment benefits.
EB: Extended Benefits are available in every state except South Dakota. EB is a state-level benefit that extends Unemployment Insurance by six to 20 weeks — depending on your state and your local unemployment rate. To qualify during the pandemic, you may have to exhaust a federal unemployment extension first. (See PEUC below.)
Here’s a primer on seven key terms that you’re sure to come across as you apply for benefits.
Because PUA is a federal program, all states must offer it for a maximum of 50 weeks. The minimum weekly payments vary by state, however, because they’re calculated as half your state’s average UI payment. With average state UI payments between 0 and 0, you can expect minimum weekly PUA payments between and 5 depending on your state.
Pandemic Unemployment Assistance is a new federal unemployment program. It’s up and running in all 50 states. The first stimulus package created PUA in March 2020. Throughout the pandemic, PUA has been a lifeline for tens of millions of jobless people who don’t qualify for regular UI benefits.
Use this tool from the Department of Labor to find your state’s unemployment website and start a UI claim.
Adam Hardy is a staff writer at The Penny Hoarder. He covers the gig economy, remote work and other unique ways to make money. Read his ​latest articles here, or say hi on Twitter @hardyjournalism.
For the first time nationally, gig workers and freelancers, who are considered 1099 independent contractors, have been able to receive unemployment benefits through PUA.
Our plain English guide will help you make sense of it all. Consider bookmarking this page and referencing it as you trudge through the process of getting your benefits.
The overwhelming majority of people relying on unemployment benefits are receiving aid from two key programs. According to figures from the Department of Labor, more than 13 million people are collecting Unemployment Insurance and Pandemic Unemployment Assistance benefits.

How to Build Good Credit in 10 Painless Steps

If you want to whip your finances into shape, here’s a good New Year’s resolution: improving your credit score.

A lot of New Year’s resolutions fail because they’re so extreme. Think of all the bonkers weight-loss and money-saving goals that surface at the start of every year.

This resolution is different. No extreme measures are required. But there aren’t any shortcuts. Building good credit is a goal you need to commit to 12 months a year.

How to Build Good Credit in 10 Steps

Ready to make 2021 the year you finally prove your creditworthiness? Or are you looking to recover from a 2020 setback? Here’s how to build good credit in 10 steps.

1. Stay on Top of Your Credit Reports

It’s essential to monitor your credit reports, especially if you received a hardship agreement from a lender due to COVID-19. Under the CARES Act rules, lenders are supposed to report your account as paid in full while the agreement is in effect, as long as you weren’t already delinquent. But mistakes happen. Even in normal times, about 1 in 5 credit reports contained inaccurate information.

Through April 2021, you can get one free credit report per week from each bureau. (Typically, you’re only entitled to one free credit report per year from each bureau.) Make sure you access your reports at AnnualCreditReport.com, rather than one of the many websites that offer “free” credit scores but will make you put down your credit card number to sign up for a trial. File a dispute with the bureaus if you find anything you think is inaccurate or any accounts you don’t recognize.

Your credit reports won’t show you your credit score, but you can use a free credit-monitoring service to check your score. (No, checking your own credit doesn’t hurt your score.) Many banks and credit card companies also give you your credit scores for free.

Pro Tip

If the bureaus agree to remove information from your credit reports, expect to wait about 30 days until your reports are updated.

2. Pay Your Bills. On Time. Every Single Month

Yeah, you knew we were going to say this: Paying your bills on time is the No. 1 thing you can do to build good credit. Your payment history determines 35% of your score, more than any other credit factor.

Set whatever bills you can to autopay for at least the minimums to avoid missing payments. You can always pay extra if you can afford it.

A strong payment history takes time to build. If you’ve made late payments, they’ll stay on your credit reports for seven years. The good news is, they do the most damage to your score in the first two years. After that, the impact starts to fade.

3. Establish Credit, Even if You’ve Made Mistakes

You typically need a credit card or loan to build a credit history. (Sorry, but all those on-time rent and utility payments are rarely reported to the credit bureaus, so they won’t help your score.)

But if you have bad credit or you’re a credit newbie, getting approved for a credit card or loan is tough. Look for cards that are specifically marketed to help people start or rebuild credit. Store credit cards, which only let you make purchases at a specific retailer, can also be a good option.

4. Open a Secured Card if You Don’t Qualify for a Regular Card

Opening a secured credit card is one of our favorite ways to build a positive history when you can’t get approved for a regular credit card or loan. You put down a refundable deposit, and that becomes your line of credit.

After about a year of making your payments on time, you’ll typically qualify for an unsecured line of credit. Just make sure the card issuer you choose reports your payments to the credit bureaus. Look for a card with an annual fee of no more than $35. Some secured card options we like (and no, we’re not getting paid to say this):

  • Discover it Secured
  • OpenSky Secured Visa Card
  • Secured Mastercard from Capital One
A woman checks her credit card balance while on the phone.

5. Ask for a Limit Increase. Pretend You Never Got It

Increasing your credit limits helps your score because it decreases your credit utilization ratio. That’s credit score speak for the percentage of credit you’re using. The standard recommendation is to keep this number below 30%, but really, the closer to zero the better.

If you have open credit, ask your current creditors for an increase, rather than applying for new credit. That way, you’ll avoid lowering your length of credit, which could ding your score.

The downside of a higher credit limit: You’ll have more money to spend that isn’t really yours. To get the biggest credit score boost from a limit increase and avoid paying more in interest, make sure you don’t add to your balance.

Pro Tip

Don’t believe the myth that carrying a small credit card balance helps your credit score. Paying off your balance in full each month is best for your score, plus it saves you money on interest.

6. Prioritize Credit Card Debt Over Loans

Tackling credit card debt helps your credit score a lot more than paying down other debts, like a student loan or mortgage. The reason? Your credit utilization ratio is determined exclusively by your lines of credit.

Bonus: Paying off credit card debt first will typically save you money, because credit cards tend to have higher interest rates than other types of debt.

7. Keep Your Old Accounts Active

Provided you aren’t paying ridiculous fees, keep your credit card accounts open once you’ve paid off the balance. Credit scoring methods reward you for having a long credit history.

Make a purchase at least once every three months on the account, as credit card companies often close inactive accounts. Then pay it off in full.

8. Apply for New Credit Selectively

When you apply for credit, it results in a hard inquiry, which usually drops your score by a few points. So avoid applying frequently for new credit cards, as this can signal financial distress.

But if you’re in the market for a mortgage or loan, don’t worry about multiple inquiries. As long as you limit your shopping to a 45-day window, credit bureaus will treat it as a single inquiry, so the impact on your score will be minimal.

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9. Still Overwhelmed? A Debt Consolidation Loan Could Help

If you’re struggling with credit card debt, consolidating your credit card debt with a loan could be a good option. In a nutshell, you take out a loan to wipe out your credit card balances.

You’ll get the simplicity of a single payment, plus you’ll typically pay less interest since loan interest rates tend to be lower. (If you can’t get a loan that lowers your interest rate, this probably isn’t a good option.)

By using a loan to pay off your credit cards, you’ll also free up credit and lower your credit utilization ratio.

Many debt consolidation loans require a credit score of about 620. If your score falls below this threshold, work on improving your score for a few months before you apply for one.

10. Keep Your Credit Score in Perspective

All the credit-monitoring tools out there make it easy to obsess about your credit score. While it’s important to build good credit, look at the bigger picture. A few final thoughts:

  • Your credit score isn’t a report card on the state of your finances. It simply measures how risky of a borrower you are. Having an emergency fund, saving for retirement and earning a decent living are all important to your finances — but these are all things that don’t affect your credit score.
  • Lenders look at more than your credit score. Having a low debt-to-income ratio, decent down payment and steady paycheck all increase your odds of approval when you’re making a big purchase, even if your credit score is lackluster.
  • Don’t focus on your score if you can’t pay for necessities. If you’re struggling and you have to choose between paying your credit card vs. paying your rent, keeping food on the table or getting medical care, paying your credit card is always the lower priority. Of course, talk to your creditors if you can’t afford to pay them, as they may have options.

Focus on your overall financial picture, and you’ll probably see your credit score improve, too. Remember, though, that while credit scores matter, you matter more.

Now go crush those goals in 2021 and beyond.

Robin Hartill is a certified financial planner and a senior editor at The Penny Hoarder. She writes the Dear Penny personal finance advice column. Send your tricky money questions to DearPenny@thepennyhoarder.com.

This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.

Source: thepennyhoarder.com

How to Work from Home While Schooling Your Kids

Parents all over the United States have had to make lofty and quick adjustments due to the pandemic erupting the daily routines many of us haven’t had to change in quite a while. Feelings of overwhelm, exhaustion, and sheer confusion have consumed many; leaving the evergreen thoughts about how to best accommodate our children while simultaneously completing remote work effectively. If you have been struggling with finding a balance or could use some extra pointers to smooth out this process; see the tips below and breathe a little easier knowing there’s additional help available. 

Wake up at least an hour earlier 

I know, this is probably the last thing you wanted to hear fresh out of the gate. However, take this into consideration – you can use this uninterrupted time to knock out some tasks, enjoy your cup of coffee or breakfast before the day truly begins. Rushing (especially in the mornings) tends to set a precedence for the day, causing your mind and body to believe that a pace of hurriedness is expected; generating feelings of burnout very easily. Crankiness, low engagement, and minimal productivity doesn’t serve you, your work, or your children well. Use this solo time to still your thoughts so you are able to be fully present for all things the day holds. While this may take some time to get used to initially, you’ll thank yourself when you have the energy to handle any and everything! 

Set and abide by a clear routine 

Comparing your child’s school schedule in conjunction with your personal work obligations very clearly can showcase what needs to get done and when. Reviewing this every evening beforehand or once a week with your children creates new, positive habits that become easier to follow over time. Not only does this mimic physical in-school setting, but it also generates responsibility and a sense of accomplishment for your little ones. If necessary, communicate with your manager if there are time periods you need to be more present to assist your children with any assignments. 

Designate ‘do not disturb’ time periods 

Depending on your work demands, there are conference calls and online meetings that may have to happen while the kids are completing their individual assignments or classroom time. To make sure everyone fulfills their tasks with minimal interruptions, create time periods that are dedicated to completing the more complex tasks that require a more intense level of focus. To avoid any hiccups, give some leeway before the blocked time to address any questions or concerns. While this doesn’t guarantee that nothing else arises, it establishes peace of mind so that your thoughts can be directed to the tasks that lie ahead.    

Plan out all meals for the week

If meal prepping wasn’t your thing before, it definitely should be now. Having lunch and/or dinner already prepared not only saves you time (which is a necessity) but also helps to normalize the growing grocery bill that seems never-ending. Planning not only avoids confusion and lengthy food conversations, but it also sets a routine the entire family can abide by. Easy food items such as tacos, burrito bowls, sandwiches, and an assortment of fruit provide a healthy balance – while avoiding ordering fast food or takeout multiple times a week.  

Establish a ‘lessons learned’ list 

Similar to an end of year job evaluation, you and your family can take a personal inventory of the things that have worked effectively – while taking note of the things that didn’t. At the end of every week have a very candid conversation with your children. Ask them what worked for their schooling and also self-assess the positives during your remote work. Remember to keep an open mind! Instead of automatically responding with frustration, consider how much of an adjustment this is for kids. They’re accustomed to a multitude of settings and environments, which develops their reasoning and comprehension skills. If they identify something was less than satisfactory, ask what can be done (within reason) to improve their new learning environment. These notes can take place on sticky notes, a large whiteboard, or a simple notepad. This doesn’t have to be a serious sit-down conversation; it can almost be presented as a game. Keeping track of these items will help you all make tweaks as necessary while finding a solid sweet spot.  

Give yourself (and your children) grace 

Life as we knew it switched in the blink of an eye. The busyness of going into the office, dropping the kids off at school, and shuffling them to extracurricular activities stopped more abruptly than any of us could have imagined. As we all know but don’t like to admit, every day isn’t a good day. There are many nuances that happen throughout the course of time that can derail our plans, leaving us to feel defeated. But before going off to the deep end, remember this – every day serves as a chance to start over. If the food wasn’t prepared ahead of time it’s okay. If the workday didn’t go as smoothly as expected, it’s quite alright. Take a deep breath and remember we are all doing the best we can with what we currently have. Learning to navigate new waters such as this is only achieved through trial and error.   

Celebrate the small wins 

Let’s face it – this is new for all of us! While online learning and remote work have been in place for more than a few months, we have to grant ourselves grace. So, if you haven’t already – give yourself and your children a pat on the back! Plan safe outings you and your family can enjoy such as picnics, movie nights, or any outdoor activities. Getting some fresh air for at least 30 minutes during the day can help boost productivity and the moods of you and your children! Each week may not be easy, but it is rewarding to know that the effort you’ve put forth as a parent is a positive contribution to your family.   

One question that we all need to ask ourselves is-will we ever gain this amount of time with our families again? Let’s embrace this moment with learning and lasting memories.  

The post How to Work from Home While Schooling Your Kids appeared first on MintLife Blog.

Source: mint.intuit.com

8 Safe Investments for People Who Hate Risking Their Money

Think back to what the stock market looked like to you in March 2020, aka, the apocalypse. Did it look like:

A.) The biggest bargain sale you’ve ever seen in your lifetime? 

or

B.) A burning pit of money that was about to incinerate your life’s savings?

If you answered “B,” you probably have a low risk tolerance. You worry more about losing money than missing out on the opportunity to make more of it.

Being cautious about how you invest your money is a good thing. But if you’re so risk-averse that you avoid investing altogether, you’re putting your money at greater risk than you think.

Do Safe Investments Actually Exist?

When you think about the risks of investing, you probably think about losing principal, i.e., the original amount you invested. If you keep your money in a bank account, there’s virtually no chance of that happening because deposits of up to $250,000 are FDIC insured. 

But consider that the average savings account pays just 0.05% APY, while in 2019, inflation was about 2.3%.

So while you’re not at risk of losing principal, you still face purchasing power risk, which is the risk that your money loses value. Your money needs to earn enough to keep up with inflation to avoid losing purchasing power. If inflation continues at 2.3%, buying $100 worth of groceries will cost you $102.30 a year from now. If you’re saving over decades toward retirement, you’ll be able to buy a whole lot less groceries in your golden years.

There’s also the risk of missed opportunity. By playing it too safe, you’re unlikely to earn the returns you need to grow into a sufficient nest egg.

Though there’s no such thing as a risk-free investment, there are plenty of safe ways to invest your money.

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8 Low-Risk Investments for People Who Hate Losing Money

Here are eight options that are good for conservative investors. (Spoiler: Gold, bitcoin and penny stocks did not make our list.

1. CDs

If you have cash you won’t need for a while, investing in a CD, or certificate of deposit, is a good way to earn more interest than you’d get with a regular bank account.

You get a fixed interest rate as long as you don’t withdraw your money before the maturity date. Typically, the longer the duration, the higher the interest rate. 

Since they’re FDIC insured, CDs are among the safest investments in existence. But low risk translates to low rewards. Those low interest rates for borrowers translate to lower APYs for money we save at a bank. Even for five-year CDs, the best APYs are just over 1%.

You also risk losing your interest and even some principal if you need to withdraw money early.

2. Money Market Funds

Not to be confused with money market accounts, money market funds are actually mutual funds that invest in low-risk, short-term debts, such as CDs and U.S. Treasurys. (More on those shortly.)

The returns are often on par with CD interest rates. One advantage: It’s a liquid investment, which means you can cash out at any time. But because they aren’t FDIC insured, they can technically lose principal, though they’re considered extraordinarily safe.

3. Treasury Inflation Protected Securities (TIPS)

The U.S. government finances its debt by issuing Treasurys. When you buy Treasurys, you’re investing in bonds backed by the “full faith and credit of the U.S. government.” Unless the federal government defaults on its debt for the first time in history, investors get paid.

The price of that safety: pathetically low yields that often don’t keep up with inflation.

TIPS offer built-in inflation protection — as the name “Treasury Inflation Protected Securities” implies. Available in five-, 10- and 30-year increments, their principal is adjusted based on changes to the Consumer Price Index. The twice-a-year interest payments are adjusted accordingly, as well.

If your principal is $1,000 and the CPI showed inflation of 3%, your new principal is $1,030, and your interest payment is based on the adjusted amount. 

On the flip side, if there’s deflation, your principal is adjusted downward.

4. Municipal Bonds

Municipal bonds, or “munis,” are bonds issued by a state or local government. They’re popular with retirees because the income they generate is tax-free at the federal level. Sometimes when you buy muni bonds in your state, the state doesn’t tax them either.

There are two basic types of munis: General obligation bonds, which are issued for general public works projects, and revenue bonds, which are backed by specific projects, like a hospital or toll road.

General obligation bonds have the lowest risk because the issuing government pledges to raise taxes if necessary to make sure bondholders get paid. With revenue bonds, bondholders get paid from the income generated by the project, so there’s a higher risk of default.

5. Investment-Grade Bonds

Bonds issued by corporations are inherently riskier than bonds issued by governments, because even a stable corporation is at higher risk of defaulting on its debt. But you can mitigate the risks by choosing investment-grade bonds, which are issued by corporations with good to excellent credit ratings.

Because investment-grade bonds are low risk, the yields are low compared to higher-risk “junk bonds.” That’s because corporations with low credit ratings have to pay investors more to compensate them for the extra risk.

6. Target-Date Funds

When you compare bonds vs. stocks, bonds are generally safer, while stocks offer more growth. That’s why as a general rule, your retirement portfolio starts out mostly invested in stocks and then gradually allocates more to bonds.

Target-date funds make that reallocation automatic. They’re commonly found in 401(k)s, IRAs and 529 plans. You choose the date that’s closest to the year you plan to retire or send your child to college. Then the fund gradually shifts more toward safer investments, like bonds and money market funds as that date gets nearer.

7. Total Market ETFs

While having a small percentage of your money in super low-risk investments like CDs,

money market funds and Treasurys is OK, there really is no avoiding the stock market if

you want your money to grow.

If you’re playing day trader, the stock market is a risky place. But when you’re committed to investing in stocks for the long haul, you’re way less exposed to risk. While downturns can cause you to lose money in the short term, the stock market historically ticks upward over time.

A total stock market exchange-traded fund will invest you in hundreds or thousands of companies. Usually, they reflect the makeup of a major stock index, like the Wilshire 5000. If the stock market is up 5%, you’d expect your investment to be up by roughly the same amount. Same goes for if the market drops 5%.

By investing in a huge range of companies, you get an instantly diversified portfolio, which is far less risky than picking your own stocks.

8. Dividend Stocks

If you opt to invest in individual companies, sticking with dividend-paying stock is a smart move. When a company’s board of directors votes to approve a dividend, they’re redistributing part of the profit back to investors.

Dividends are commonly offered by companies that are stable and have a track record of earning a profit. Younger companies are less likely to offer a dividend because they need to reinvest their profits. They have more growth potential, but they’re also a higher risk because they’re less-established.

The best part: Many companies allow shareholders to automatically reinvest their dividends, which means even more compound returns.

Robin Hartill is a certified financial planner and a senior editor at The Penny Hoarder. She writes the Dear Penny personal finance advice column. Send your tricky money questions to DearPenny@thepennyhoarder.com.

This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.

Source: thepennyhoarder.com

How to Set Financial Goals: A Simple, Step-By-Step Guide

Want the number to be bigger? Go back through your budget and figure out where you can afford to make cuts. Maybe you can ditch the cable bill and decide between Netflix or Hulu, or replace a takeout lunch with a packed one.
It’s also the money you can use toward your long-term financial goals.
You’re in awesome financial shape — and you’ve made it to the fun part of this post.
So even though becoming debt-free seems like a big sacrifice right now, you’re doing yourself a huge financial favor in the long run.
You might try to get away with a smaller emergency fund — even ,000 is a better cushion than nothing. But if you lose your job, you still need to be able to eat and make rent.
And the trouble isn’t brand-new: We’ve been bad enough at saving for retirement over the past few decades that millions of today’s seniors can’t afford to retire.
Future you will thank you. Heartily. From a hammock.

What to Do Before You Start Writing Your Financial Goals

Now you can figure out exactly what you want to do with it.
You don’t need to abandon the idea of having a life (and enjoying it), but there are ways to make budgetary adjustments that work for you.

First Thing’s First: How Much Money Do You Have?

Did you know almost half of Americans have absolutely nothing saved so they can one day clock out for the very last time?
Ideally, you’ll want to find other ways to save for retirement, too. Look into individual retirement arrangements (IRAs) and figure out how much you need to contribute to meet your retirement goals.
Saving money is all well and good in theory.
And I do mean all of the expenses — even that .99 recurring monthly payment for your student-discounted Spotify account definitely counts.

  1. Figure out how much money you have. It might be in checking or savings accounts, including long-term accounts like IRAs. Or, it might be wrapped up in investments or physical assets, like your paid-off car.
  2. Assess any debts you have. Do you keep a revolving credit card balance? Do you pay a mortgage each month? Are your student loans still hanging around?

You also get to decide the size of your emergency fund, but a good rule of thumb is to accumulate three to six times the total of your monthly living expenses. Good thing your budget is already set up so you know exactly what that number is, right?
One method is known as the debt avalanche method, which involves paying off debt with the highest interest rates first, thereby reducing the overall amount you’ll shell out for interest.
Is everything in order? Amazing!

A woman creates a monthly budget while sitting on her bed. The sheets are white with a floral pattern on them. This story is about how to set up financial goals.

Create a Budget

To help keep you from financial goals like “buy the coolest toys and cars,” which could easily get you deeply into debt while you watch your credit score plummet, we’ve compiled this guide.
You get to analyze your own priorities and decide exactly what to do with your hard-earned cash.
Source: thepennyhoarder.com
Before you run off to the cool-expensive-stuff store, hold on a second.

Pro Tip
It’ll help you set goals and create smart priorities for your money. That way, however you decide to spend your truly discretionary income, you won’t leave the 10-years-from-now version of you in the lurch.

Your expenses probably include rent, electricity, cable or internet, a cell phone plan, various insurance policies, groceries, gas and transportation. It also includes categories like charitable giving, entertainment and travel.
And you need to start now, while compound interest is still on your side. The younger you are, the more time you have to watch those pennies grow, but don’t fret if you got a late start — here’s how to save for retirement in your 20s, 30s, 40s and 50s.

Need to go back to basics? Here’s our guide on how to budget.

But what are you saving for? If you don’t have solid financial goals, all those hoarded pennies might end up in limbo when they could be put to good use.
And if you’re operating without a budget, it can be easy to run out of money well before you run out of expenses — even if you know exactly how much is in your paycheck.
Jamie Cattanach (@jamiecattanach) is a contributor to The Penny Hoarder.
A ton of great digital apps can help you do this — here are our favorite budgeting apps — but it can be as simple as a spreadsheet or even a good, old-fashioned piece of paper. It just takes two steps:
See? It’s all about priorities.
So sit down and take a good, hard look at all of your financial info.
You might plan to travel more, take time off work to spend with family or drive the hottest new Porsche.

Setting Financial Goals

Once you’ve learned your net worth, you need to start thinking about a working budget.
It also offers me the opportunity to see what I prioritize — and to revise those priorities if I see fit.

  1. Build an emergency fund.
  2. Pay down debt.
  3. Plan for retirement.
  4. Set short-term and long-term financial goals.

If your job offers a 401(k) plan, take advantage of it — especially if your employer will match your contributions! Trust me, the sting of losing a percentage of your paycheck will hurt way less than having to work into your golden years.
By writing down my short- and long-term financial goals and approximately how long I expect it will take to achieve each, I can figure out what to research and how aggressively I need to plan for each goal.
Make a list of your debts and (ideally) don’t spend any of your spare money on anything but paying them off until the number after every account reads “Figuring out where your money should go might seem daunting, but it’s actually a lot of fun.

1. Build an Emergency Fund

You can’t decide on your short- or long-term financial goals if you don’t know how much money you have or where it’s going.
Print out the last two or three months of statements from your credit and debit cards and categorize every expense. You can often find ways to save by discovering patterns in your spending habits.
But there’s one more very important long-term financial goal you most definitely want to keep in mind: retirement.
Take the full amount of money you owe and subtract it from the total amount you have, which you discovered in step one. The difference between the two is your net worth. That’s the total amount of money you have to your name.

2. Pay Down Debt

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Congratulations. You’re in control of your money.
This will essentially be a document with your total monthly income at the top and a list of all the expenses you need to pay for every month.
Make a list of the goals you want to achieve with your money and which category they fall into. Then you can figure out how to prioritize your savings for each objective.
For example, some of my goals have included:
Your financial goals should be (mostly) in this order:

Pro Tip
There’s lots of great information out there about how to pay off debt, but it’s really a pretty simple operation: You need to put every single penny you can spare toward your debts until they disappear.

Finding money to sock away each month can be tough, but just starting with or of each paycheck can help.
If you ever want to stop working, you need to save up the money you’ll use for your living expenses.

A retired woman floats in a circular floating device in a swimming pool.

3. Plan for Retirement

Set the numbers you’re willing to spend in each category, and stick to them.
Congratulations! We’re almost done with the hard part, I promise.
If it seems like a lot, cool. Hang tight and don’t let it burn a hole in your pocket. We’re not done yet.
Many experts suggest making sure you have an emergency fund in place before aggressively going after your debt.
Because you’re wasting money on interest charges you could be applying toward your goals instead.
No matter your goals, it’s helpful to categorize them by how long they’ll take to save for.
If you’re motivated by quick wins, the debt snowball method may be a good fit for you. It involves paying off one loan balance at a time, starting with the smallest balance first.
But if you’re hemorrhaging money on sky-high interest charges, you might not have much expendable cash to put toward savings.
You can make the process a lot easier by automating your savings. Or you can have money from each paycheck automatically sent to a separate account you won’t touch.
If it seems like… not a lot, well, you can fix that. Keep reading.

FROM THE BUDGETING FORUM

4. Set Short-Term and Long-Term Financial Goals (the Fun Part!)

Maybe you want to have a six-course meal at the finest restaurant in the world or work your way through an extensive list of exotic and expensive wines. (OK, I’ll stop projecting.)
What experiences or things can your money buy to significantly increase your quality of life and happiness?
Now, let’s move on to repaying debt. Why’s it so important, anyway?
It’ll depend on your individual case — for instance, I totally have “wine” as a budget line item.
As a bonus, if your credit score could be better, repaying revolving debt will also help you repair it — just in case some of your goals (like buying a home) depend upon your credit report not sucking.
Start by listing how much you actually spent in each category last month. Subtract your total expenses from your total income. The difference should be equal to the amount of money left sitting in your bank account at month’s end.
All right, you’re all set in case of an emergency and you’re living debt-free.
We say “mostly” because it’s ultimately up to you to decide in which order you want to accomplish them.
After all, even if something seems like exactly what you want right now, it might not be in future-you’s best interest. And you’re playing the long game… that’s why they’re called goals!

But to make the most of your money, follow a few best practices while setting your goals.
For example, if you have a ,500 revolving balance on a credit card with a 20% APR, it gets priority over your ,000, 5%-interest car loan — even though the second number is so much bigger.
Consider the funds you have left — and those you’ll continue to earn — after taking care of all the financial goals above. Now think: What do you want to do with your money?
It’s pretty hard to argue against having more money in the bank.
That means you’ll pay the interest for a lot longer — and pay a lot more of it — if you wait to pay it down until you have a solid emergency fund saved up.