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3 Expenses You Should Never Sacrifice In Your Household Budget

frustrated woman with a paper and calculatorIf you believe that budgeting is one way to get out of debt, then you should understand the importance of creating a household budget. A lot of Americans are dealing with debt – some of them are managing credit wisely while others are failing at it.

After the Great Recession, we have come to realize just how important it is to have a budget plan. It can help you control your expenses so you can put aside more money to pay off your debts. The extra money can even be sent towards your savings. It can also help you avoid a lot of financial dilemmas in the future. It can help you understand why you are in a particular financial situation and how you can get out of it.

Why do we need to cut back on our budget

Taking a look at how Americans spend their money is a great way to help us understand our financial habits. According to, the majority of the household budget is spent on food. Now, the majority of our budgets go to housing costs. Among the things that grew in percentage in our budgets include healthcare and entertainment expenses. These details will all be evident in your budget and it is important for you to analyze them so you can determine the changes that you need to make in order to improve your financial situation.

In most cases, people who are forced to use a budget plan are those who have a need to cut back on expenses. The main reason for that is debt. We had to cut back on a lot of things because we need to increase the amount allotted for our debt payments.

In an article entry on, they mentioned a statistic from Experian that revealed the average monthly debt payment of consumers. In 2010, the monthly debt payments of Americans range between $763 to $1,285. If the average household earns between $4,000 to $4,500, their debts take up 20% or so of their income. They only have 80% left to live on. With utilities, food, transportation and other expenses, how can the average American household survive?

This is why a lot of us create our household budget for the purpose of cutting back on expenses.

3 expenses that you should not compromise in your budget plan

But while there are so many things in our usual spending list that we can trim down, there are those that you need to exert caution when trying to cut back on them. There are certain entries in our budget plan that we should never sacrifice.

Healthy meals

The first is healthy and nutritious food. Even if the processed food is cheaper, it is not worth it to risk the health of your family just so you can save a couple of dollars. You still need a well balanced diet and that is something that you should never compromise. If you want to trim your food expenses, you may want to cut back on eating out. These cost a lot more than what you will spend if you cook your meals at home. And when you are out shopping for food, make a list of what you need. That way, you can forecast in your household budget the amount of money that you will need to ensure that your family will eat healthy food always. Here is a video from HowCast about how you can feed your family healthy food even when you are on a tight budget.

Doctor prescriptions

When the doctor prescribes you medicine or treatments that you need to get better, you should not skip on this just so you can trim your household budget. If you have to save, go and ask your doctor to prescribe generic medicines. But do not skip a dosage or take a lower one just so you can save. Get the savings you need elsewhere and not your medications. Your health is a top priority. If you do not take care of it now, it might get worse and cost you more money in the process. One of the best ways to deal with big medical bills is to avoid them by taking care of your body.

Personal hygiene

There are so many things that this can cover. For instance, buying a very cheap make up just so you can save on money and end up getting an allergic reaction is not really the wisest of moves. Proper hygiene is something that you need to be careful with. Try to get deals for toilet papers, and similar products but do not buy nameless brands without making sure if it is safe for you. In the end, it might cost you a healthy body if you sacrifice proper hygiene for the same of making budget cuts.

How to fix your budget plan if it is not working

If you are already implementing a household budget and you realize that things are still not improving, you may need to reconsider your budget plan. Here are 5 steps that you can follow to help fix it.

  1. Track your spending. In most cases, when your household budget is not working, it only means there is something wrong with your expenses. Of course, it always pays to take a look at your income too. Maybe you based your budget expenses on the wrong income. But even if this is the case, you still have to take a look at your expenses. and other authority sites have listed some budget software programs that you can use to track your spending.
  2. Compare your spending with your existing household budget. Once you have tracked your spending, compare it with your budget and see where you are spending a lot of money on. This will help you see where you should cut back on or where you should adjust the amount in your budget.
  3. Analyze why you are overspending. If there is a particular category that you are guilty of overspending, you need to ask yourself why that is so. Is it because you do not have self control? Or is it because you simply made unrealistic cuts in your budget?
  4. Do something to stop overspending. When you have identified the reason why you are overspending on a particular category, you need to correct that or cut back on something else to meet your budget limit. If you are overspending on food because you keep on eating out, then you need to cut back on that and opt for home cooked meals instead. Revise your household budget according to your plans to stop spending beyond what your budget dictates.
  5. Commit to the new plan and observe. Be disciplined in following your new plan and see if it works for you now. If not, then you need to go back to step one and analyze your budget plan once more.

Making your household budget work will involve a lot of changes in your habits. You have to look deep into your financial habits so you can determine if that is what is causing you to fail in your finances. Sometimes, it is not really the debt that is the problem. It is our own behavior when it comes to our money. We need to learn how to change our behavior and that is the only way that we can implement a budget that is effective in improving our financial situation.

Secret To Wealth: Spending Less Than You Earn

2 guys shaking hands saying "We can do it"Do you want to grow your personal wealth? If you do, then you have to start spending less than what you are earning. That is the secret to building true wealth that will not be spent in a rush.

A lot of us think that being wealthy is all about earning more money. That is why we end up spending a lot of time working and turning our backs to what matters most in life. We skip family events because there is a deadline to be met in the office. We miss seeing our children grow because we had to hop on a plane to fulfill the demands of our job. Despite all of these sacrifices, we are still far from being wealthy.

Why is that? published an article that started with this sentence: Americans are spenders. That is our reputation. We spend so much money to buy a house, a car and a lot of useless junk. We also spend too much on our education. Some of us even put ourselves into debt just to keep up appearances.

The article said that we are encouraged by the government to spend just so we can say that our economy is growing. Our economy is 70% reliant on consumer spending. That is why everywhere you turn, you will see signs, advertisements and endorsements with one message: spend, spend, SPEND!

Truth be told, there is nothing wrong about spending. However, excessive spending can be destructive. Especially when you are borrowing the money that you are using to pay for your expenses.

If you think about, we are all driven by the need to be able to spend. Financial capability is what really drives us to work hard every day. It is what motivates the young ones to study. To bring themselves to a position wherein they are able to work so they have enough money to spend. Our pursuit of wealth is anchored upon our ability to spend. While it is true that being able  pay for the things that you want is a sign of adequate wealth, we have the wrong notion of how to build up our personal net worth.

The truth is, the only way we can become rich is to develop the habit of spending less.

Reasons why lower expenses help you build wealth

It may seem difficult to grasp – lower spending will lead to more wealth. But here is the main reason why lower expenses will lead to richness – you can save.

That is really how simple it is. You want to be able to save so you can put yourself in a position wherein you have abundant finances at your disposal.

You may be thinking right now that this is sort of contradictory. You will choose not to spend now so you can spend in the future? That is correct. What you actually want to do is to discipline yourself to spending less than you earn today so you can save to set up your finances so the future will not be burdened by the excessive spending that you are doing today.

According or an article published on, only a little more than half of Americans are setting specific goals. From 54% in 2013, the count is now down to 51% in 2014. It is also safe to assume that not all of them are meeting their goals.

If you want the motivation to help you develop the habit of spending less than what you earn, here are 4 important reasons.

You can correct the mistakes of the past

One of the important gains to spending less is to be able to correct the mistakes of the past. The norm today is this: we work hard just so we can pay for the expenses that we have done in the past – our debts. That is not how you should set up your finances. The real secret to wealth is to spend less today so you can save for the expenses of the future. Besides, savings can complete your debt solution – regardless of the program you have chosen to use. By spending below your income, you can free up money to help pay for your debts.

You can build up your emergency fund

Another benefit that you will get from a lower spending is you can build up your emergency fund. This reserve fund is the money that you will use so you do not have to borrow money when an emergency strikes. You want to be ready for any even that could lead you to debt. Having adequate money in this fund will help you keep the stress level low despite the crisis that you are currently facing.

You can prepare for retirement

Saving for the future is very important. Sadly, not everyone believes in this. They think that they can just wing it when they get there but when you are in your pre-retirement year, you will feel the rising panic – knowing that you do not have enough money to retire. Do not put yourself in this situation. Discipline yourself today so you can build enough wealth to help you live a comfortable and quality lifestyle when you retire.

You can invest

Of all the reasons to spend less, this is the most proactive in getting you more money. When you free up a portion of your income because you are spending less than what you earn, this is extra money that you can invest. It can be invested in stocks, bonds or even in real estate. This is how you setup your money so you it can earn you extra income. Make your money work for you. This is an effective first step in building your wealth.

Tips to lower your spending

Of course, when you are used to consumerism like we are, spending less is not that easy to implement. In fact, published an article that compared how Americans and the British differ in terms of spending. Their finding revealed the following facts:

  • Americans are more comfortable in spending money – even if it is not their own. The credit industry is relatively larger compared to its UK counterpart.
  • Americans are positive in their perspective of the future and that makes them less cautious of the repercussions of their debts.

The problem with the spending of Americans is a lot deeper than we think. It is a cultural thing to spend more than what we are capable of. But we need to stop those bad spending habits and that could take a lot of work.

Here are some tips that can hopefully help you correct your ways so you can practice spending less to build up your wealth.

  • Set up saving goals. This will give your financial life direction and will guide you through every decision that you have to make.
  • Create and follow a budget plan. This is how you can reach your saving goals. You want to know where your money is going so you can decide where you should be spending less. It is all about letting go of the expenses that are not important and concentrating on those that will lead you towards your goals.
  • Avoid unnecessary expenses. No matter how small the expense is, do not spend on it if it is not necessary. These small expenses add up and soon, you would have wasted a lot of money on it already.

Spending less is tougher to implement than you think but if you really want to grow your wealth, this is the habit that you need to develop.

12 Keys To Making Better Decisions About Your Personal Finances

man fanning money near his earDid your parents teach you to be a smart money manager? If so, consider yourself lucky. Most parents will talk to their kids about the birds and the bees but not about budgets and CDs. They must assume we’ll pick it up on our own, which is how most of us learn about personal finance. The Irish writer and poet Oscar Wilde once said, “Experience is simply the name we give our mistakes.” Unfortunately this is how many of us learn to be better money managers. We make mistakes like maxing out our credit cards, learn the consequences and become smarter about money.
Keys to making better decisions

If you’d rather not learn how to make good financial decisions by making bad ones and learning from them, there are some keys to making better financial
decisions …

Be brutally honest with yourself

If you’re not careful you can fool yourself into making some really bad financial decisions. For example, you could decide to borrow from your 401(k) because, heck, you would be paying interest to yourself. Or you might buy furniture you don’t really need because of the lure of zero interest financing. These are the kind of decisions where you could be deceiving yourself into financial problems. Be brutally honest with yourself about all of your decisions and the motivations behind them. Do you really need to borrow from your 401(k) to buy that new car or could you just save money for a year or 18 months and then pay cash? And while 0% interest can be a good deal in some cases you shouldn’t use it as an excuse to buy something you don’t really need. A good rule of thumb is that when in doubt, get a second opinion from a family member or friend that you know is good with his or her money. As George S. Clason once wrote, “It costs nothing to ask wise advice from a good friend.”

Watch out for fees

There are almost always fees attached to things that have to do with finances – credit cards, banking, investments and other financial products. It’s absolutely critical to keep fees low especially when it comes to investing. Making money in the stockmarket is tough enough by itself without paying fees that wipe out your gains.

Use cash not credit

Whatever you do, don’t finance your lifestyle on credit. Credit card debt can just ruin your life. Pay cash for everything from groceries to vacations to cars. If you need to make sacrifices to pay cash, do it. Using credit to buy things is the equivalent of stealing money from yourself in the future. Every cent you borrow must be paid back and often at very high interest rates. As the Persian poet Omar Khayyam wrote, “Take the cash and let the credit go. Nor heed the rumble of a distant drum.”

Save a dime out of every dollar

This is very simple but very powerful. Make a habit beginning right now to save at least 10% of your gross pay. Save 20% or even more if possible. If you don’t doubt what this can mean to your lifer, read the book The Richest Man In Babylon by George S. Clason.

Think long-term

Ours has turned into a “get rich quick” society. But if you really want to build lasting wealth, you need to think long term as you make your financial decisions. This puts everything into perspective from a $4 latte at Starbucks to how much you should invest in your 401(k). As an example of this, if you think long term you would realize that a daily $4 latte eventually adds up to $21,056 over 10 years. And investing $1000 a month beginning at age 25 (instead of age 35) generates $1.7 million more by age 65.

Learn to live with uncertainty

While you may think you should avoid uncertainty like the plague when making financial decisions, the problem is that it costs a lot to avoid it. For example, the insurance industry thrives on uncertainty when it comes to cash value life insurance and annuities. However, some protection against uncertainty is unavoidable such as term life insurance and auto insurance. Be sure to think twice before spending a lot of money in return for guarantees.

For example, this concept can be especially important if you are evaluating an annuity. Annuities can be part of some financial plans but there are always fees associated with these products and they tend to limit the upside. An annuity will generate a constant stream of payments but at a high cost. The key here is to think carefully before spending a lot of money to avoid uncertainty. There are rewards to learning to live with it.

Keep things simple

There is an old rule of thumb that the more complex is a “solution,” the less likely it is to be your best option. For example, in most cases term life insurance is a better investment than complicated permanent life insurance products. And index funds are generally better than more complicated actively managed funds. One simple way to invest is in funds or ETF’s as this is usually better than complicated insurance products that have an investment component. In other words, all things being equal, simple is most often better.

stack of moneyHarness the power of compounding

It’s important to harness the power of compounding. Once you understand it, you can better evaluate your financial decisions to make sure they take advantage of it and not ignore it. If you’re not familiar with compounding this is where you earn interest on your investment and then interest on that interest. For example, if you started with $100 and added $100 a month at 2% interest, you would have $1,313.08 at the end of year one and then $2,550.64 at the end of year two and not just $2500.

Always consider the power of compounding whether it comes to paying off debt or how you need to be investing today.

Do the critical things first

Don’t put off the big financial decisions. Begin every day thinking about those things you need to accomplish and get to the important stuff first. Don’t put off actions such as preparing a will, investing for retirement or buying life insurance. When you do the critical things first, everything else will just be much easier.

Take responsibility for your actions

Despite what the politicians might want you to believe, you are not a victim. These people may tell you that the problem is corporate America or that the system is rigged but the result are the same – it makes us feel helpless. This is all nonsense that’s created to score political points rather than moving the country forward. Never play the victim.

Learn to think outside the box

Do you tend to view financial decisions in black and white? For example, do you believe that your emergency fund should always be in cash in a bank or that you should pay off all your non-mortgage debt before investing? These approaches to personal finance often turn out not to be in your best interest. Don’t make a financial decision without weighing the pros and cons and considering all alternate options.

Don’t be greedy

Your friend has a great stock tip that’s absolutely guaranteed to make you money. But you also worry that this might be too good to be true. When this is the case, it usually is. Whenever you’re faced with one of these deals you need to monitor your own emotions. You may be tempted by a get rich quick mentality. But think twice before acting as these deals often do turn out well.

2 Factors That Contribute To A Successful Frugal Lifestyle

woman smilingA frugal lifestyle is not something that you can just decide to do overnight. In most cases, learning how to live frugally is tougher than you think because it involves a complete turnaround of your consumerist way of thinking.

But the thing is, excessive consumerism have led to most Americans being in debt. We have gotten used to the idea that bigger is better. While that may be true, we have pursued it blindly despite the fact that bigger is something that we truthfully cannot afford.

The time has come for us to embrace the idea that frugality is the way for us to correct the bad habits that consumerism have deeply engraved in all of us.

But what exactly does a frugal lifestyle mean?

We found a simple yet spot-on definition in one of the articles on It defined frugality as making intentional choices with your spending. It is very clear when it said that it is not about being cheap. Although your goal will be to spend less so you can maximize your limited income, you will be doing that not by being cheap. What you will do is to define what you think are the important and priority expenses and separate them from those that are not. Those that are not included in your priority list – those are the expenses that you will be cheap with. That is because you have decided that these are unnecessary expenses and that removing them from your life will not benefit you at all.

A frugal lifestyle, when implemented correctly should not deprive you. That is because you will make sure that the expenses that are important to you will be funded. But even that decision to fund it will still be done wisely. For instance, a home is an important expense but frugal thinking will tell you that you do not need it to be too big for your needs. It will just be right and frugality will teach you that being excessive does not mean you are better off. You will learn how to be content and accepting that will make you feel surprisingly free.

2 important characteristics of frugal living

The same article from PTMoney also said that the importance of living a frugal life stems from the fact that we need to correct our spending habits. Unless we find a way to change that, it will not matter how much we earn. We will always be at a deficit because we do not know how to spend our money wisely.

That is why you need to start learning how to live a frugal lifestyle. But the thing is, this way of living does not come naturally. Consumerism is something that a lot of us got used to that changing it will be a struggle.

But the good news is, this change is possible – if you do it one step at a time. There are two important factors that you can concentrate on first and you will realize that accepting the frugal changes will be a lot more easier to adapt to.

Financial management

The first factor that you should concentrate on is learning how to manage your money. If you find it hard to wrap your head around the changes that frugality will teach you, then you can focus on something less intimidating – like money management. If your financial management skills suck, you will find it hard to start a frugal lifestyle. So you need to start by learning the right financial management skills.

Managing your finances begins with a budget. You want to check out both your income and your expenses to see how it fits together. Is your income higher than your expenses? Or is it the other way around? If your expenses are greater than your income, then you need to correct that. Your budget will help you accomplish this task by showing you just how much you are capable of spending. You can distinguish which expense is the priority and which ones you can let go off. Looking at your budget will help you organize your finances so you can make better spending choices.

Financial management in a frugal lifestyle is not only about budgeting. It is also about smart spending and most of all, saving. If budgeting is about planning, the implementation of financial management is manifested in your spending and savings. When you have these things covered, then you are making the first important steps towards a frugal living.

Debt reduction

The other factor that will help make a frugal lifestyle easier to implement is debt reduction. Take note that we are not saying you should eliminate debt. You still need debt to be present so you can keep your credit score up. This will come in handy in your financial life. But we are encouraging you to reduce your debts so it will not compromise your finances as you are trying to implement frugality. A frugal mindset will frown at wasting money. That includes wasting it on unnecessary interest rate payments. So get rid of your high interest debts so your money will not be wasted on making your creditors rich.

According to the latest study done by, consumers have started to prioritize taking on secured debt instead of acquiring credit card debt. The latter is notorious for encouraging unnecessary spending and high interest rates. This change in the consumer payment pattern is said to be influenced by the Great Recession. This is a good sign because it shows that most of us do not look at debt as the cause of our problems. We learned that it is our own financial behaviors that got us in debt.

Realizing the role of our behavior in financial success is the key to implementing frugality. That is because frugal living is all about changing your behavior.

Frugal ideas that will get you out of debt

In most cases, people are motivated to live a frugal lifestyle because they want to get rid of their debts – or at least get it under control. Frugality can help you save money so you can increase your debt payments and thus pay off more of your balance.

Here are some frugal ideas that you can use to help solve your debt situation.

  • Conduct a yard sale. This will help you organize and declutter your life and at the same time, earn extra money to send to your creditors.
  • Choose to save the change that you have at the end of the day. For instance, any quarter that you have at the end of the day should go straight to your piggy bank. Whenever this bank is full, send this extra money as payment for your debt. Then fill it up again.
  • Use coupons. These are great tools in frugal living. If you think that those coupon ladies on TV are weird – well they are not. They are in fact, more wiser than you think. Couponing is a great way to save money so you can grow your debt payment fund. And it is actually a growing industry. According to an infographic published on 2 out of 3 Americans have used coupons in the past. If you haven’t done the same, then you are part of the ⅓ who have yet to enjoy the benefits of couponing.

These are only a couple of the things that you can do to help yourself pay off your debt faster. Although a frugal lifestyle is not devoid of debt, it is definitely not ruled by it.

Will Tiny Homes Save Boston Residents From A Destructive Household Debt?

house with cash in itIn an article we wrote in June of this year, we mentioned how there is an increase in household debt. We mentioned how there is a steady increase in debt from July 2013 to March 2014. From $11.5 trillion, the debt now currently stands at $11.6 trillion. It may be a sign of growing consumer confidence or it may be a sign of us going back in our own ways. But one thing is for sure, we need to keep our debts in check if we do not want to return to the same situation we were in during the Great Recession.

In an article published on, an interesting concept is discussed about how tiny homes can possibly solve financial problems.There are middle, high school and college students who are currently interested in these tiny houses. Young professionals and retirees are also attracted to the appeal of these low cost homes that could lead them to a debt free life. If you think is a fad, it is not. With a more comfortable and homelike feel than RVs, these tiny houses are gaining attention in all of the country. In fact, the article mentioned that Texas, Wisconsin and Oregon are all utilizing these small home structures to solve their problems with homelessness. There are also private investors who are starting to plan Tiny Home communities.

According to statistics published on the there is a continuing growth in the popularity of these homes. In fact, from 2004 to 2013, there is a 687% growth in the “Tiny House” keyword search. That means people are interested in the idea of these small homes.

In Massachusetts, this trend is not yet gaining foothold but that does not mean it is not welcome. The article mentioned a couple of facts that indicate how this movement may be what the Boston residents need to alleviate their respective household debt.

What is the credit situation of homes in Massachusetts

The article mentioned that the reason why this is not as popular as it is in other states is because the situation in Massachusetts is not as bad. The unemployment rate is 7.4% – which places the state in the 18th place in the lowest unemployment list. Only 11.6% of the residents are living below the poverty line and that means people are not really in dire financial conditions.

Does that mean there is no financial problem here? That is unlikely. There are three important statistics that the article mentioned that can spiral out of control and become a full blown crisis.

  • Boston is the 31st most expensive city in the whole world. If this cost of living is not lowered, the young adults may have to relocate in order to afford paying off their student loans and build up their savings.
  • Massachusetts in general experienced the highest increase in homelessness. They are actually in 5th place compared to all the other states in 2012 to 2013. The count in January 2013 is 19,029 homeless people. The state is spending $82 a night to help a homeless family live in a motel room. That is $30,000 a year.
  • Students spend an average of $7,500 to $9,000 a year on room and board expenses alone. That is approximately $30,000 to $36,000 for a 4 year course. This cost is adding to the debt that the student has to take in order to afford the high cost of a college education.

The article also mentioned a couple of nationwide statistics that will not add to the confidence that people in Boston has to be feeling. The statistics show that:

  • The median middle class household income in 2012 is at $51,071 – which is actually still lower than the average in 1989 at $51,681.
  • The poverty rate in the country in 2012 is at 15% – approximately 46.5 million people.
  • The household income declined by 8.3% since the crash of 2007.
  • The young adults that are aged between 25-34 are still living with their parents and have a poverty rate of 9.7%.

These statistics are quite scary especially for the young adults who are graduating with a lot of student loans. We do not want the future leaders of the country to start their lives in debt because this is the norm that they will get accustomed to.

How can they afford to live the American Dream that is comprised of a stable career, a big home and their own car? In fact, a lot of Millennials are delaying a lot of things in their lives because of their debts. They cannot buy a home, pursue a career that they love and live a stress free and optimistic  lifestyle – all because of the household debt that they are currently burdened with.

How can Tiny Homes help keep people out of debt?

The article ended by mentioned three ways that Tiny Homes can help Massachusetts deal with the three problems mentioned above.

  • To deal with the homeless families costing the state $30,000 a year, the article suggested that Tiny Homes be put up for them to live on. This makes a lot of sense because these homes cost between $20,000 to $24,000 only.
  • Make Tiny Homes available to college students – something they can purchase and pay off while they are in college. They can use this home to eventually finance something greater when they graduate – like paying off their student loans or selling it to finance the down payment for a bigger home.
  • Residents who are burdened with high rental prices can actually live in these homes for a fraction of a cost than the bigger houses.
  • The Tiny House industry also needs investors. This is a booming industry that attracts a lot of investors from different states. This may be a business that residents of Massachusetts can make money from.

You see, the article is saying that downsizing to a Tiny Home can help you save major categories in your household budget. We can see three important benefits to these Tiny Homes that the article did not mention.

No Mortgage

First of all, there is no mortgage. This is the highest amount in the average household debt. The cost of a Tiny Home, even if you get a company to build it for you is only between $50,000 to $60,000 at the most. That is usually the 20% down payment that is needed for the average American home. You can pay for your tiny house in cash and be free from mortgage. According to, the average mortgage payment for a 3 bedroom home is $865 in the fourth quarter of 2013. This is based on a 30 year fixed rate mortgage at 4.46% and with a 20% down payment.

Lower cost of homeownership

The smaller the home, the less you have to pay in terms of utilities and other monthly bills. When you live in a tiny home, you will need even less. Since your space is also small, you will not have the urge to buy unnecessary stuff. This will really keep your spending to a minimum.

Faster growth of personal wealth

Lastly, you will benefit from a faster growth of your personal wealth. Without the mortgage payment and the lower monthly bills, your chances of accumulating household debt will be a lot less. Not only that, you will have more money to put aside in your savings. You can build up your emergency fund and that will make it very easy to maintain debt freedom.

Here is a video of Amy Henion about tiny homes and why she thinks that it is the ‘gateway dream.’ By this she means tiny homes can help you reach a lot of your dreams – may they be related to your finances or not.

11 Financial Things You Should Have Done Before Turning 30

woman smilingIf you’re close to or about to turn 30, this is a fairly significant milestone. Your youth is behind you and you are now definitely an adult. With adulthood comes some great responsibilities and number one on your list should be to take charge of your finances. We understand this doesn’t sound like much fun and that personal finance can sound like a very dry topic. But it cannot be denied that financial things play a huge part in our lives, that money is always one of the top stressors and that it can cause the biggest discord among couples. In fact, every report we’ve seen ranks finances as the second biggest reason for divorce – right behind communication or lack thereof. We hope that you already have your personal finances at least somewhat under control. You should have a reasonably good idea as to where your money’s going and how your spending stacks up against your earnings. Beyond this, here are 11 goals you should have achieved by now. These goals are, of course, not for everyone and some of them may not be feasible for you. However you should keep these in mind as general guidelines. And if you haven’t yet achieved them, it might be time to sit down and write out a plan for accomplishing them.

You should have saved up for the big expenditures of life

You should be thinking about, anticipating and saving up for the big expenses of life. You will need to factor in your wedding, children, a pet, a house and other similar big ticket items. If you plan for these events, you’ll be adjusting your lifestyle, you will be able to afford those expenses and you will not have to go into debt to pay for these items. You should probably try to budget a realistic amount to cover these expenses so you don’t have to go into debt. Of course, another good idea is to forgo some of these expenses and question if they really are necessities.

You should be living within your means

By now, you should know about living within your means and also enjoying life. You should be able to put priorities on your spending and then save in other areas so you can enjoy those “guilty pleasures”. Even if that pleasure is just a daily latte, you should be able to indulge yourself so long as you’re cutting your spending aggressively on other items. Also, be careful about comparing yourself to other people. What they skimp on may not be what you want to give up.

You should have emergency savings

We hope you already have an emergency fund. Most experts say this fund should be the equivalent of six month’s worth of your living expenses and some say it’s even better to have a year’s worth as a better buffer. Of course, it’s easy for those experts to say this. If you find that it’s extraordinarily difficult to save the equivalent of six month’s of living experiences, try for at least three. Life is full of unanticipated issues such as an automobile accident, a serious illness, a friend or family member who suddenly needs financial help or losing your job. If you don’t have an emergency savings fund your only alternative will be to go into or further into debt.

You should be maxing out your 401(k) contribution

If your employer offers a 401(k), you should max out your contribution or at the very least meet your employer’s match. A 401(k) is really the workingman’s best friend. The money is taken out of your salary before you even see it – making your donation practically painless. If your employer does match your contribution this is like free money. While the stock market probably won’t continue to grow the way it has the past several years you could still earn good money by choosing the right stocks or mutual funds for your 401(k). And if push comes to shove you could borrow from your 401(k), which means you would be borrowing from yourself and the interest you would pay you would be paying yourself. And that’s not a really bad deal.

You should be a master of automation

You should by now have learned how to master the art of automation. If you send a chunk of your salary automatically to your savings every month you would be paying yourself first. And when you save money, you can tap into the power of compounding interest. This is when you earn interest on your savings, which is added to your savings and you then earn interest on it. If you automatically save as little as $50 a month for 30 years you would end up a millionaire – thanks to the power of compounding interest.

You should have a Roth IRA

If you have a conventional IRA, good for you. That’s money that you save pretax, meaning it’s money you don’t have to pay taxes on. However, the downside to this is that you will have to pay taxes on the money when you begin withdrawing it. In comparison, with a Roth IRA you pay taxes on the money you deposit into the account but it’s then tax-free when you withdraw it.

You should have written a will

None of us wants to think about our “final destination” but there’s no way to avoid the fact that your life will ultimately come to an end. If you don’t have a will, you will die intestate. If this occurs, a person will be named as your executor and will decide what happens to your property. Under intestate succession laws only spouses, and registered partners (if you live in a state where that’s an option) and blood relatives can inherit. This means any friends, unmarried partners or charities would get nothing despite any intentions you might’ve had to the contrary. So, if you haven’t done this already, go to an attorney or a site such as LegalZoom and get a will prepared That way you will be able to control exactly where your money and your properties go.

You should be paying off your high interest debts

If you haven’t done this already you need to sit down and make a list of your debts in order from the one that has the highest interest rate down to the one with the lowest. Once you have your debts prioritized, you need to concentrate on paying off the one that has the highest interest rate. Of course, you will need to continue to making at least the minimum payments on your other debts. But when you pay off the one that has the highest interest rate, you automatically save the most money, which you can then use to begin paying off the debt with the second highest interest rate and so on.

You should have a decent credit score

If you’ve been handling your finances sensibly, which means keeping your credit card debts under control, you should by now have a fairly decent credit score – of 750 or above. Most lenders look at credit scores in ranges as follows.

  • Very good or excellent – between 700 and 850
  • Good credit score – between 680 and 699
  • Average credit score – between 620 and 679
  • Low credit score – between 580 and 619
  • Poor credit score – between 500 and 579
  • Bad credit score – between 300 and 499

If you haven’t seen your credit score recently, you can get it from for $19.95 or free if you sign up for a trial of the company’s Score Watch program. It’s also possible to get a version of your credit score at sites such as If you have a credit score lower than 680, you may have some work ahead of you to get it raised. The reason for this is because there’s an indirect ratio that exists between your credit score and how much interest you will be charged on a credit card or a loan. In other words, the higher your score the lower interest rate you will be charged.

You should have already read several good personal finance books

While some people like to think you can master personal finance instinctually, this is just not the case. If you really want to be on top of your personal finances you need to have by now read several books. If not, you need to get to work. You should probably start with Your Money or Your Life ($12) and Total Money Makeover ($18). Beyond these, the simple fact is that you just can’t read too many books about money management.

You should know how to negotiate

Finally, by now you should have had some practice negotiating – over your salary, with service providers and others. While there are areas where it’s simply impossible to negotiate – like at your neighborhood supermarket – there are also many other areas where you can save money if you know how to negotiate successfully. If not, here’s a video with some good information about the art of negotiating.

The American Household Debt Crisis: Improving, But Far From Over

cartoon of American debtThe consumer debt problem of Americans had always been viewed as a cultural thing. As sad as it may seem, Americans are known for being overspenders. Our culture gave us the notion that bigger is better and more is always merrier. Unfortunately, this mentality got us under so much household debt during the Great Recession.

It may seem like the economy is improving but the latest report from the New Your Fed reveals that the consumer debt is steadily increasing in the first quarter of 2014. According to the article published on Liberty Street Economics blog of, there is an increase in the willingness of lenders to lend money. They allowed longer payment periods and they loosened the restrictions that used to hinder consumers from borrowing money. That means the credit supply is increasing and consumers are well aware of that. That is one of the factors driving up the level of household debt in the country.

The American consumer debt is improving compared to other countries

But while the debt is higher, a report from the OECD or Organisation for Economic Co-operation and Development revealed that compared to other countries, the US is one of the few who showed that their credit level is going down. The report from the revealed that both United Kingdom and United States household debt fell by 24% between 2007 and 2011. The other countries like Netherlands and Greece increased their debt level by 41% and 34% respectively.

The same report also mentioned that the ratio of the household debt versus the net disposable income is highest in Denmark at 135%. The countries following the statistics include Netherlands, Ireland, Norway and Switzerland. The lowest recorded ratio comes from Slovak Republic at 49.4%.

What does this mean for all of us? Does it mean we do not have to worry about anything when it comes to our finances? Have we finally started to apply the right financial and credit management skills?

Well that is still too early to determine at this point. There are conflicting data that will tug at opinions about our ability to manage our money.

On one side, we are exhibiting better recovery and debt growth statistics compared to our neighbors. But that does not mean we should take this lying down. The New York Fed said that our debts are still rising. Unless we have successfully lowered our debt amount, which is still more than a trillion dollars, we cannot assume we are past the danger zone. It is too early to say that we have wiser financial practices – but we cannot erase the fact that we are improving. That means we still deserve a pat in the back.

An article published on discussed an interesting idea about our debts. They mentioned that although American household debt rose to $129 billion during the first quarter of 2014, it is not so bad. Although it increased for three consecutive quarters to $11.65 trillion, it is still below the peak of the 2008 financial crisis.

Not only that, the article mentioned that credit card delinquencies continue to decline. That means Americans are paying off their debts. They may be racking up debt, but this is debt that they can afford to pay. At least, at this point, more people are financially able to live comfortably and keep up with their payments at the same time. This apparent credit confidence is viewed by economists as a good sign.

In a country whose economy is 70% driven by consumer spending, this bodes well for businesses. It means people are in a financial situation that makes them more confident to make purchases. And when they make more purchases, it will lead to higher profit for a lot of businesses. When businesses are earning well, employees are compensated and have higher job stability. That can put households in a better position to increase their respective net worth.

The Fox Business article quoted experts who say that higher debt levels with lower delinquency rates is reflective of a better economy. But this does not mean we should encourage taking on more and more credit. There should still be a cautious approach to applying for more debt. Do not do it to upgrade your lifestyle unnecessarily. It makes sense to take on credit for a new home but make sure that you will not make it excessive. Do not buy a bigger home using credit when you can live in a smaller home and be free from mortgage debt sooner than later. Refrain from buying a vehicle that is flashier than you need it to be.

How to keep debt at home low

In all intents and purposes, you want to keep your household debt in manageable amounts so that when the economy turns south, you will not be as crippled as you once were during the Great Recession. Although consumer debt indicates financial confidence, you need to be smart about it.

We are not saying that you should completely remove debt from your life. There are debts with the potential to jumpstart your net worth. These include mortgage loans and student debts. But make sure that you borrow only what is necessary and do not base it on what your current income can afford to pay off. If something happens to your job, that can leave you with mountains of debt that you cannot afford to pay back.

So to help keep your household debt from leading to your financial demise, here are four tips that you can implement.

  • Budget your credit card spending. Making credit card purchases is good for your credit report but make sure that you include it in your budget. It can only be beneficial to your credit score if you can pay it back in full during the grace period. It also means you do not have to worry about additional financial charges that will make you spend more than you should. When you plot your credit card spending in your monthly budget, you will be able to put aside the money that will allow you to pay it back in full once the bill comes in. It will also give you a limit as to how much you should be spending on your card each month. That will keep you from the temptation of overspending your card purchases on things that are not necessary.
  • Make one expensive purchase at a time. There are times when we need to make expensive purchases on electronics, home repairs, gadgets, etc. There is nothing wrong with this. But make sure that you schedule it well. If you see a great sale on a TV but you know that the AC unit in your home requires replacement, you need to prioritize. Make one expensive purchase so you will not compromise your budget for the month. Know the schedule of your purchases so you can save up for it and buy them in cash instead of credit. Reserve your credit for expensive expenses that happen unexpectedly – e.g. blown transmission, busted taillights, etc.
  • Boost your emergency fund. Another effective way to keep your household debt from increasing is to grow your emergency fund. That way, any unexpected expense will not have to compromise your budget significantly. You can keep it from destroying your financial schedule and force you to be in debt. Planning and preparation is the key to a healthy financial life.
  • Get debt help. When you have more than enough debt to deal with, you also have the option to get debt help. There are many debt relief programs that can help make your monthly credit payments a lot easier. You have debt consolidation, debt management, debt settlement and balance transfer. You have the option to hire a professional to help you out or you can do it all yourself. In case you plan on getting debt help from a professional, make sure that you know the laws protecting you from abusive ones.

It may be true that the American culture dictates that household debt will always be present. But that does not mean it should be allowed to grow significantly that will put us in danger of another financial meltdown. We need to learn from our past mistakes and use that knowledge to improve our financial future.

8 Signs That You Need To Implement Financial Management

checklistFinancial management is a critical part of growing up. It dictates how well you are able to handle income and dispense the same for payments on your expenses and other loans. It restricts your purchases and tells you what is important and what can wait. It tells you as well what you can do to increase your income to meet financial targets. Financial management can also be a potent tool against debt.

This is important to share when there are about 20 million college students on an average at any given year according to That is a lot of college seniors entering the workforce where they will be earning on their own and experiencing life in full blast. The walls of their colleges and universities has now grown bigger to accommodate a lot more responsibilities. On top of these is developing financial management in running their money.

It starts with a desire to get their finances in order. There are still  a good number of Americans who are not able to balance a checkbook. The 410 (k) retirement fund, investments and emergency funds are alien to them. These are some of the foundations of financial management and college graduates and even some seasoned professionals needs to understand this to survive financially.

8 signs that you should start working on money management skills

As you go through life, there are pit stops where you need to make decisions and add some financial tools in your arsenal. Some of these can start as early as when you get your first job and for others, it could be as late as a few years before retirement. Whenever it happens, you should be able to discern these signs and know that it is time to work on your financial management skills.

When you start earning your own money

As soon as you leave university, the first order of business is not a vacation with your friends or a cruise with your partner. It should be to look for a job because your expenses and loan payments will not wait for your to finish a good time. If you have student loans, six months is a short time for a grace period and you need to start making payments after. Getting a place to stay, applying for utilities and others will require you to have a steady income.

When you get a job, income will not be too far behind. And when you start earning your own money, it is a clear sign that you need to implement proper financial management. This will put order in your finances and ensure that your monthly salary will not only last you until the next paycheck but will actually provide financial security for you in the long run.

When you already have a bank account shared that there are about 7.7% of American households who still do not have their own bank account. That is approximately 1 in every 13 American families. There are mixed sentiments on how the banking system helps consumers but it cannot be denied that it is one of the safer ways to keep money and allow it to grow. When you open your own bank account, it is another step up  that needs proper management of your finances.

When you are saving for a goal (e.g. retirement, etc)

Having financial targets is another clear sign that it is high time for financial management skills. These can be in the form of emergency funds or retirement funds. In fact, there is only about 18% of Americans who are confident that they have enough funds for retirement according to Having financial goals is also a clear sign of financial maturity as you are already planning ahead and not just for the moment.

Here is a video explaining how saving for retirement might need to be done until 68 years old:

When you are responsible for paying monthly bills

Being able to pay for utilities such as water, electricity, phone, internet, and cable is another benchmark on the need to implement financial management. You need to be able to juggle your income with your expenses to avoid coming out short at the end of the month.

When you have started taking on credit

Taking on credit is another sign of financial maturity. Adding expenses on your card or taking out a payday loan to fix some part of the house needs proper management of finances. Without it, you might just end up in a store sale using up the loan you took out for another unnecessary expense.

When you start monitoring your credit

Monitoring your credit comes from the need to understand where you are putting your hard earned money. What items are you buying and where you can cut down on expenses. Financial management will help immensely at this point because it can provide a clear direction on how you can proceed after monitoring your credit.

When you  have started investing

Investment is a by-product of forward thinking and once you start delving into the world of investments, you will need financial management to guide you through your options. In fact, investing is one key to financial independence. It can help you plan for your future and hopefully retire at the time when you want to, not when you need to.

When you start paying your taxes

Making tax payments is a sign that you are already earning your own money. This calls for the need for financial management not only to monitor your income but to check as well if you are remitting the right amount for your taxes. Tax refund is a great surprise at the end of the year but it actually stems from wrong tax calculation. That would have been money you could have used for investment at the early part of the year. Instead of just giving the government an interest-free money, it could have earned a few dollars somewhere else.

4 important concepts of financial management

Financial management has four key pillars that consumers need to understand. It is beneficial to know these points in order to practice proper management of your finances.

  • Budgeting. Income has to be treated as the output of your hard work. You should put importance on how you use it and this is where budgeting comes in. Understand the important expenses and forego those that you can live without.
  • Saving. At this day and age, not a lot of people has an excuse not to save. Even technology has made saving easier. This is an important aspect of financial management because it allows the consumer to have funds for future use.
  • Smart spending. Similar to budgeting, spending smartly allows you to weed out your needs from your wants. It helps you identify and prioritize the important spending items in your budget.
  • Credit monitoring. It is important to be on top of your finances and monitoring your usage of credit can give you a great overview of your habits. Where you spend too much and where you can make improvements are just some of the advantages of checking your credit spending.

Financial management is an important tool in putting sense in your finances. Some people say that it is not how much you earn but how well you use what you have. This is where proper management of your finance kicks in. As long as you see the signs along the way, financial management can guide and steer you in the right direction.

Are Money Habits Contagious? Absolutely!

woman thinkingYour money habits can make or break your financial life. It does not matter how much money you earn. What matters are the decisions that you will make regarding how it will be used.

In truth, your preferred habits will play a role the financial decisions that can change your life. This is why you need to be careful about that habits that you will allow yourself to develop and get used to. The thing about these habits is they are instinctive. They become an integral part of your behavior that in most cases, you no longer think when you act on them. It is important that you learn how to choose the right money habits so it will only lead to the good financial behavior that will lead you to the growth of your personal net worth.

What is tricky about your financial habit is they are contagious. It goes both ways. You can influence the behavior of other people and they have the same effect on you. In fact, a study done by the American Institute of CPAs and published through the proves that financial peer pressure does exist. When Millennials are asked about their financial behavior, they usually have similar traits as their peers. 78% of young adults admitted that they have adapted the same money habits as their friends. In fact, 66% said that they consciously try to keep pace with their peers in terms of living arrangements. 64% feel the same way about their choice of clothing.

While there is nothing wrong about you wanting to keep up with your friends, you need to be cautious about how you are doing it. If it means that you have to rack up sizable credit card debts, then you may want to step back and analyze if the money habits you are showing is still healthy for your financial life.

Signs you are easily swayed by financial peer pressure

Succumbing to financial peer pressure is not really for everyone. Some people act as the influencer in the sense that they help others pattern habits according to their own. There are those that are on the other end in which they can easily be swayed by their friend’s money habits.

It has to be noted that not all influences are bad. You can save money through the influence of friends. But before you can identify how you can filter out the good from the bad influences, it is important to learn if you are highly inclined to adapt the habits of the people around you.

There are certain signs that will tell you if you can easily be influenced by the people around you.

Most of the stuff you own are things that you friends also have.

If you look at all your possessions and you find that there are several similarities with those of your friend’s, then you know that you either influenced them or they influenced you to make the purchases. It can go both ways but the important thing here is that within the group, someone is influencing others to buy all the same stuff. It does not have to be an active influence that they literally tell others to buy the same purchases. It can be a passive influence that will seem like each individual is making a choice but they are in fact, highly motivated by the money habits of others.

You do not aspire to own something unless it is owned by your friends.

Do you get the urge to buy something just because you saw a friend own it? When you shop with friends, you end up buying stuff that you never intended to. That is an indication that you are more likely to succumb to peer pressure. In some cases, it may not even be a friend. It can just be someone you know. Make sure that you will not give in to these urges if they are not necessary in your life. Although may think that you earn the same amount of money, your financial situation will always be unique compared to those of your friends. You may have other financial obligations that they do not have. They may be able to afford that purchase but the same is not true with you.

Opinions of other people matter to you.

Lastly, you know that you can easily be swayed by money habits of other people when you find that the opinion of other people matter to you. There is this innate need in us to be accepted by others. This is what leads us to seek out the opinion of other people. According to an article published on, as much as we need food and shelter, we also need acceptance. Even in the past, we needed to group together so we can survive by hunting in groups. Belonging to a group requires acceptance and that need in us fuels the importance of other people’s opinion. But here’s the thing – how important is it to you? Getting the opinion of other people is okay but make sure that you do your own thinking too. Do not blindly agree – think your way through it first.

How to keep yourself from contagious financial habits

We are not entirely saying that you should not let yourself be influenced, you just need to learn how to filter which influence will be worth your while. These is a connection between your money habits and your financial decisions because acting on your habits usually make you feel good. When that positive feeling is there, it helps you make a solid decision about your finances. After all, your emotions are one of the strong influencers in your life.

Here is a video of Professor David Tuckett, a member of the UCL Psychology and Language Sciences. He is explaining the role that emotions play in making financial decisions.

It is not yet a complete study but it is interesting that he said how emotions invested in a financial decision will help in the motivation of reaching a particular goal. That is part of the investment that you will personally make in your decision to act on certain money habits.

If you are intent on curing compulsive buying habits that are ruining your finance, here are some tips that we have for you.

  • Buy stuff on your own. If you have to make a purchase, just do it on your own. This is one of the ways you can curb the most dangerous money habits there is – overspending. In addition to that, you may want to make a list of what you need to buy. Bring that list with you and do not go beyond that list.
  • Look for a financial goal buddy. This will be a person that you will reveal your financial goals to so they can help tell you off if your decisions will take you further from your target. In most cases, this is a person with the positive money habits that you want to have – or at least, you both aspire to have the same financial behavior. It does not even have to be someone that you have known for a long time. It can be someone new. According to an article published on, changing behaviors sometimes require someone new in the group. That way, they can bring something new to influence you with.
  • Keep track of your finances. Identifying the good financial habits mean you have to start tracking where your money  is going. That will help you identify what are the leaks and what should be prioritized. When you know your priorities, you will have the motivation to change any bad money habits that you may have.

How To Quit Living From Paycheck to Paycheck

man looking tired with workIf you’re like many Americans you live from paycheck to paycheck. We can empathize because we’ve certainly been in that position. But when you’re living this way, you’re skating on thin ice and peace of mind becomes a very elusive goal. One recent study revealed that 38 million American households live like this – spending all of each paycheck. Of course, many of these 38 million households own their homes or have retirement accounts but very little or no cash on hand.

What happens when the unforeseen occurs?

The biggest problem if you live from paycheck to paycheck is what happens in the event of an emergency. You could have an auto accident or lose your job. There could be a natural. If you have no cash to fall back on what do you do in the event of an unforeseen occurrence? The fact is that if you live from paycheck to paycheck this can be a disaster. It’s not good from an emotional standpoint, either. When you do have an unforeseen event your only option is to get into or fall further into debt. Debt has a way of ballooning and your stress level can balloon along with it.

How can you break the cycle and quit living this way? Here, with our thanks to Lifehacker, are 13 real life stories of people and what they did to stop living from paycheck to paycheck.

We started a small emergency fund

One couple said their first step was creating a small emergency fund. They felt this gave them some peace of mind in the event of an unanticipated problem. They said this was the biggest part of stopping the paycheck-to-paycheck cycle. They understood that it requires time to create a true emergency fund but felt that even a small one could help them whenever unexpected expenses came their way. They kept the money in an easily accessible savings account. It was in a separate account because that almost made it “out of sight, out of mind.” When they check their account balances on their main accounts the money isn’t there so they aren’t tempted to use it. However, they did know that it was there and available if they needed it.
For this couple, step two was to start paying down debt. They felt this was another big part of getting out of the paycheck-to-paycheck cycle.
Finally, this couple said that a large part of breaking the paycheck-to-paycheck cycle was creating a spreadsheet to track daily expenses. This allows them to keep track of all expenses and income on a day-to-day basis. This also permits them to plan ahead as they can see exactly how much money they will have in two months or even two years.

I opened a second bank account

In addition to just “saving” and “making a budget” another guy we’ll call John calculated just how much money he would need to live plus a few additional bucks to make things comfortable. He then had his direct deposit salary split into two bank accounts. He put the money he needed to live comfortably directly into one account and the extra money into a new secondary account. He knows like the previous couple that there is other money available should he actually needed but that it’s a mental thing — that it’s just much easier to save money when it’s not in the same bank account he uses every day.

We flattened our monthly spending

A second couple sat down and calculated what their annual expenses were, which included things such as Christmas spending, school fees, car repairs and maintenance, vacations and so forth. They totaled these expenses and then divided it by 12. This resulted in a “monthly payment.” As an example of this if they budgeted $1200 for vacation and divided it by 12, they knew they had to save $100 a month. Once they knew this monthly total, they deposited that amount into their “Annual Savings” account. What this did for them was flatten their monthly spending so that they knew exactly whether or not they had enough to eat out that month or do something that wasn’t in the budget. It also made it possible for them to pay off their mortgage years early so they now use cash to pay for everything they need and even a few things they just want.

I paid off my student loan debt

One young man said that his finances had been a struggle mostly because of his student loan debt and that he wanted to get rid of it as quickly as possible. He has a graduate degree but works in a nonprofit so his paycheck barely covers his living expenses. Despite this he tries to save a couple of hundred dollars a month out of his main income. He is trying to build an emergency fund so that he won’t be wrecked by an unexpected expense or forced to use credit cards. He is eating very cheaply including a lot of lentils, beans and rice. He watches for supermarket deals on meat and lives in a small studio apartment. All this has helped him not only save money but also break the paycheck-to-paycheck cycle.

I started doing freelance writing

A really good way to break the paycheck-to paycheck cycle is to find extra ways to make money. One woman did this by doing freelance writing. She is unable to do this full time to develop a client base as her regular day job often requires 60+ hours a week. But this certainly does help. In addition her boyfriend will soon be moving in with her. They make about the same amount of money so if they share the rent, car payment, utilities and food costs they will be able to lighten their financial load considerably. She reports that this should allow them to start saving in earnest fairly soon and break out of that cycle for once and for all.

I cut the cable

Do you spend somewhere in the neighborhood of $100 a month for cable TV? A guy we’ll call Robert totaled this up and realized he was spending $1200 a year to watch TV just a few hours a day. He eliminated his cable service and changed his cell phone plan, which got him down to $15 a month while his friends were still paying from $50-$100. He also stopped eating out and learned to cook. He found that this also helped him make new friends. He discovered that when he shopped at farmers markets and places where you can get real food, it opened his eyes to a lot of tastes beyond cheese, sweet, salt and deep-fried – and he has save massive amounts of money.

My wife is becoming an electrician

How would you feel if your wife became an electrician? A woman in Oregon got sick and tired of working retail. She was earning the maximum for her type of job at $14.50 an hour and couldn’t earn any more without going into management, which she felt was its own special hell. Her husband encouraged her to get training that was offered for women interested in the trades. She took this training and is now three years into an apprenticeship as an electrician. The schooling she got to learn her trade was free and she gets paid about two times as much now as previously, and will make even more after she’s completed her training. Her husband advises people to look to trades and trade schools instead of colleges these days. They need more people, pay really well and offer great benefits. It’s way better than what the service industry and retail jobs offer and at the same time you end up with a profession you can be really proud of.

I live off of other people

One man admits that he makes ends meet by living off of other people. He also rents rooms dirt cheap instead of apartments. These rooms are usually cramped and small but they cost less and sometimes there are odd rules like the time he lived in a commune where everyone shared everything. He preaches you should watch what you spend and spend only on those things you really need.

I have a small savings habits

While you might be able to save big by cutting out those large expenditures like cable or entertainment, it’s also possible to do as this man did and develop small savings habits. He learned to cut his hair with a buzzer rather than paying for a haircut every month or so. He asks his friends and family to give him Amazon gift cards for Christmas and his birthday and uses them when he needs to replace something such as work shoes. He also learned the value of eating an early dinner and buying his drinks pregame instead of at the sporting event where you pay lots more. He also now walks to work.

budget on top of moneyYNAB has been a godsend

YNAB or You Need A Budget is a program designed to help people create and stay on a budget. “Jim” says it has been a godsend. It helped him go from being in serious trouble every month to having a surplus and a savings account for expensive trips. He found that it was amazing how much control he had over his finances when he could see where his money was going. He feels YNAB is better than most other budgeting systems because it links his home computer to his cell phone enabling him to enter all information about this spending immediately. If he sees that one of his budget items has gone red (spent more than he had budgeted) he just moves money around to fix it.

I had a “realization”

One person commented that his break through was when realization stepped in – and he realized he was just living from paycheck to paycheck. What he did to break the cycle was to first learn minimalism — that possessions don’t make you happy. He had always hated the thought of having to stay accountable but has learned the benefits of it. He tracks every single dollar he spends. He reports that there are plenty of apps out there that do the job very well. He also maintains a large gap month in and month out. This is the gap between his income and his expenses and, of course, the larger the gap the better.

I paid off my auto loan three years earlyMan leaping with joy Rev 1

One person stopped the paycheck-to-paycheck cycle when he realized that his money was being spent on a lot of little things over the course of a month. He stopped buying little trinkets because they were just a dollar or a shirt because it was on sale. He eliminated cable TV and switched to a cheaper phone plan. He said he has also gotten better about shopping for groceries. By doing all this he was able to save several hundred dollars a month and used the money to pay off his debts. He was able to buy a car and pay it off three years early. He now makes sure that he has at least $2000 in the bank for unexpected emergencies. He found that one of the best things about paying off his car is that he could then raise the deductible on his insurance to a higher amount, which has also saved him money.

I pay myself first

This is an idea that was popularized by Warren Buffett. The secret according to one commenter is to make savings and investments part of your budget. Know how much you’ll invest each month in your 401(k), in paying down your debt and putting in your savings account. Put these funds into their respective categories immediately. If at all possible set it up so that the money is automatically withdrawn from your checking account and deposited into those other accounts. He found that if the money isn’t just sitting there all month he’s less tempted to spend it on a whim.

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