Budgeting, Money Management

Smart Moves to Make with Your Tax Refund

The post Smart Moves to Make with Your Tax Refund appeared first on Penny Pinchin' Mom.

It is tax season!

You know the goal is not to get much of a refund.

However, a refund is always better than paying in!

But when that money shows in your account don’t go and blow it on what you want!  Make some smart moves with your refund.

Pay off debt

If you have debt then that means you should not have fun with any extra money. Nope. Every penny that you earn (beyond your regular income) should be used to pay off your debt.

While some experts will claim to pay the bill with the highest interest rate, I recommend paying the lowest balances first.  The reason is you see results.

If you are getting $2,000 back and owe $500, $1500 and $2500, pay off two of your bills. Now,  you’ve got one payment and can roll all three monthly payments into one and pay that largest bill off more quickly.

You see progress in moving from three debts to one and that alone can be enough to keep you motivated.

Build your emergency fund

Experts used to say that your emergency fund should be three months of income for a family.  After watching many struggle through the last recession, I recommend it be six-nine months instead!

I get that is a LOT of money to save up, but your tax refund can be the perfect way to build up your savings.  But don’t put it in your regular savings account. You don’t want to be tempted to spend it.

Set up a new account at your bank. Deposit your refund into the account that is for emergencies only. Don’t touch it.

Now you’ve got money earmarked for your emergencies and should never touch it unless absolutely necessary.

Invest in your future

It is fun to spend money now but if your retirement accounts have taken a beating (or if they are non-existent) it is time to make that investment.

Visit with a financial expert and set up an IRA or other type of retirement savings account and invest that money.  That $1,000 you fund today will be worth much more when it is time to cash it in.

Make upgrades

Look around your house for appliances or vehicles that may need to soon be replaced. When you catch a sale, make the investment now. Don’t wait for it to break down completely.

If you do wait, you may be forced to pay full price and your money won’t go as far. Being proactive and replacing what needs to be when the price is right is a smart money move.

Make home improvements

Look around the house to see what needs to be repaired or updated. Is the paint starting to peel on the trim? Is the carpet wearing out?

Your house is an investment you’ve made so you need to take care of it. Peeling paint can lead to dry rot. Old carpet could lead to more stains, odors or even damage to the subfloor (which could cost you even more).

Take care of your house so when the time comes to sell, it is in great shape so you can get top dollar.

Do something for yourself

There is nothing wrong with making an investment in your well-being. In fact, it could be a very smart move.

When you feel better about yourself and give yourself the opportunity to get or do things you don’t normally, it changes your perspective.  You get the chance to focus on you and that is a GOOD thing.

Splurge on that handbag. Go out to dinner. Set up that spa day. Just don’t go too overboard.

Spend it as a family

You can also get the family to weigh in what you can do with your refund. You may have no debt; an emergency fund and retirement looks great. That means you can do something fun!

Talk with the kids about what to do with the refund.  It may be a vacation or adventure.  It may mean buying a basketball hoop or bikes for everyone.

Work together to determine the best way to use the money.

A tax refund is your money. Use it wisely.

 

The post Smart Moves to Make with Your Tax Refund appeared first on Penny Pinchin' Mom.

Source: pennypinchinmom.com

Debt, DIY, Education, Financial Planning, Investing, Money Management, Mortgage, Personal Finance, Real Estate, Retirement, Student Loans

Mint Money Audit 6-Month Check-In: How Did Michelle Allocate Her Windfall?

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 wasn’t 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, I’ve checked in with the 38-year-old real estate developer, to see if any of my advice was helpful and if she’s 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’ve aggressively been contributing to my 401(k) – 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. I just joined an online investment platform, but it was 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.  I hate that I’m still paying loans 16 years after I graduated and it’s a source of frustration [and embarrassment] for me.  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 in…and I 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 brokerage 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. I used it all towards the new vehicle (a 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 paying utilities, miscellaneous maintenance on the house and real estate taxes quarterly. This, too, is helping me save 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 farnoosh@farnoosh.tv (please note “Mint Blog” in the subject line).

Farnoosh Torabi is America’s 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, she’s 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.

Source: mint.intuit.com

Home, Money Management

How Much Will Cutting the Cord Save You?

The post How Much Will Cutting the Cord Save You? appeared first on Penny Pinchin' Mom.

Cord-cutting will save you money but for many people, that’s only part of the equation. Yes, you want to spend less on cable, but you want to do that without sacrificing too many shows you enjoy watching. So, before you rip the Band-Aid off, look at the facts, and find out exactly what cord-cutting would look like for you.

The cord-cutting decision is a big one. You need to weigh how much you’ll save vs. how much you’ll miss out on. What price do you put on being excluded from conversations about the latest shows and sports on cable? Are we talking about significant savings or significant pain here?

To start, let’s take a look at the numbers to figure out what you’re really paying per month for movies and TV shows.

What are you really paying for your viewing pleasure?

If your family is like 78% of U.S. households, you are spending an average monthly payment of $107 to subscribe to a pay-TV service (either traditional cable television, a satellite service, or a streaming option. That’s a number which has steadily inched up year after year.

When you have a family like mine, you may have also committed to several online streaming services. It’s hard to say no when friends on social media gush about must-see programs like The Marvelous Mrs. Maisel on Amazon Prime, The Great British Baking Show on Netflix, and The Mandalorian’s baby Yoda on Disney+.

Together an average family entertainment package — cable plus streaming services — can add up to over $140 per month, and that doesn’t include games.

How much are you spending?

And with so many cable options and a new “must-have” streaming service popping up seemingly every day, it’s easy to zoom past the average, if you’re not paying attention. Even if you stick to “the basics,” the amount you can spend can pile up fast.

Entertainment payments per month:

  • Cable bill: $107. U.S. average (according to a 2018 study by Leichtman Research Group)
  • Netflix for two H.D. streams: $12.99 (assuming you’re not borrowing a friend’s password!)
  • Amazon Prime: $12.99 (or a bulk bargain at $119 per year)
  • Hulu: $11.99

Pro tip: You can cut and paste this information into a spreadsheet to start your family budget for the new year.

Why not call and cancel cable right now?

Heck, you could save yourself $100 if you just cut the cord right now. But before you spend that money on last-minute holiday gifts, you should find out how much more your cable provider (which is generally also your internet provider) will charge you for broadband once you drop cable.  It’s generally at least $10 more a month without a bundle discount but, in some cases, the cost increase to get internet alone can be much higher, so, you have to weigh your actual savings.

Those fancy streaming subscriptions need a high-speed internet connection. Your cable/internet provider knows that and intends to make as much money off you as possible even if you cut the cord — this is especially true if you live in a market with only one provider (that also happens to be the cable company you just jilted).

I live in a rural area with broadband available only via Comcast. So, for us, it’s pay up or get ready to listen to the cows and the crickets. Our introductory rate was about $50 per month, not including setup and fees. Find out if you have a choice. Search for broadband and DSL providers in your zip code. The vast majority will offer service that’s fast enough to stream on multiple devices but be careful to read the fine print as what speeds the company promises to deliver. You will need service that’s 25 to 50 Mbps (megabits per second) in order to stream video well.

Before you cut the cord, do your research! If there’s competition in your area for internet service, try to negotiate a discount. It costs nothing to try, and you could save real money.

Pro tip: Some cable companies will offer you a “skinny” bundle with the major broadcast networks for just a few dollars more than getting internet alone. Ask before you fully cut the cord.

Prioritize your happiness

Cutting the cord almost certainly means losing access to some programming. That makes it a hard decision even when the savings will be significant. It’s important to look at your personal and family viewing habits before you make any decisions.

If you watch a lot of network television and live sports, then keeping cable might make sense for you. Or, if you prefer the content on streaming services, then go in that direction.

Consumers have more choices when it comes to television than ever before. That can be daunting – it’s easy to buy more than you can consume.

The good news is that most streaming services don’t penalize you for joining, watching what you want, and then leaving. Mix and match in order to find the right blend for you. That may mean leaving cable or opting for a smaller package.

Your options are plentiful and the choice is in your hands…though you’ll probably want to talk it through with all the other TV viewers in your home so you don’t accidentally inflict significant pain for relatively insignificant savings.

–By Nic DeSmet

The post How Much Will Cutting the Cord Save You? appeared first on Penny Pinchin' Mom.

Source: pennypinchinmom.com