How to Find a Happy Balance Among Competing Savings Goals

Saving money sounds straightforward — set cash aside for a future purpose — but in reality, people often face competing savings priorities. We want it all: the travel, the house, the flush savings account. So how do we figure out which savings goals to put first, especially when we’re working toward so many things at once?

“You’re also still trying to live and have fun and not eat ramen noodles every day,” says Al-Nesha Jones, a certified public accountant and founder of ASE Group, a full-service accounting, tax and advisory firm in West Orange, New Jersey. Saving is further complicated by the fact that we’re currently facing economic uncertainty, higher prices on everyday items and a tumultuous stock market.

Figuring out your savings priorities isn’t easy, but these strategies can act as guideposts:

Put your emergency fund first

Consider how you felt the last time you couldn’t cover an emergency, Jones says. “If it gave you major anxiety, keep that feeling in mind when you prioritize.” In other words, create your emergency fund before everything else, because it’s so critical to financial security.

“Now more than ever, people are understanding the importance of a rainy day fund,” says Eric Maldonado, certified financial planner and owner of Aquila Wealth Advisors in San Luis Obispo, California. “It’s good fundamentals to have cash in case stuff starts costing more.”

Next, prioritize retirement

“Retirement is a long-term game and time is on your side, so even if you start with something very small, the more time you give yourself to work on it, the better off you’ll be,” Jones says. “If you keep pushing retirement off, we blink and now we’re scrambling.”

Thinking through the worst-case scenarios of not saving for different goals can help underscore the importance of funding retirement accounts. Noah Damsky, principal of Marina Wealth Advisors in Los Angeles, says you should save for the categories with the most severe consequences first — and retirement tops that list, since no one wants to be impoverished in old age. “Running through those scenarios helps crystallize what’s important,” Damsky says.

Decide what you want in the near term

This next category of savings priorities is complicated, because you must determine your near-term goals. They might include buying a home, traveling, moving to a new city, starting a family or something else entirely.

Dale L. Shafer II, CFP and founder of Life Moves Wealth Management in Scottsdale, Arizona, recently moved with his family to that area from Michigan, and his near-term goal is to save up to buy a home there. The pandemic spurred many people to make major lifestyle changes, he says, and as a result their near-term savings goals shifted.

“Sometimes we reset expectations and sometimes we achieve more than we thought,” he says. It’s important to check in on your savings progress at least several times a year so you can recalibrate when needed.

Jay Zigmont, CFP and founder of Childfree Wealth in Water Valley, Mississippi, works with clients who don’t have and aren’t planning on having children. He says many of them are focused on major life shifts, such as starting a business, moving overseas, traveling or taking a sabbatical from work.

“You might not be able to do everything at once, but you can do most things over time,” Zigmont says.

Stay organized

To keep all of these goals straight, Maldonado suggests opening a separate savings account for each one and giving it a nickname, such as “Greece, $5,000” or “Lake cabin rental, $1,500.”

Online, high-yield savings accounts tend to offer higher returns than those at traditional banks, and you can set up automatic deductions from your checking account or paycheck. “It’s positive inertia that keeps the money going where you want it,” he adds.

You can always make changes later. “Just get in the habit of saving, and then you can go back and add other goals,” Jones says.

Enjoy life along the way

As important as it is to save for all of those priorities, so is enjoying life today. Don’t wait until you have a fully funded retirement to put money toward items that bring you joy, Jones warns. That’s why she’s saving to buy a Tesla, which she hopes to purchase by the end of the year.

Maldonado and his wife contribute a set portion of money to a family fun account. “We drain it every quarter. It’s guilt-free spending for the family,” he says, and goes toward things like camping trips, museums or parties. With their savings safely stored in other accounts, it’s spending the whole family can feel good about.


Kimberly Palmer writes for NerdWallet.

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3 Steps to Breaking Unhealthy Financial Habits

Some bad habits affect our physical health, like smoking, nail biting or eating too much junk food. But others take a toll on our financial health.

How do you know if you have unhealthy financial habits, and what can you do to build better ones? Take these three steps.

1. Dig into your relationship with money

Relationships with money are complex. It isn’t always easy to identify financially unhealthy behavior. But there are some signs you can look for. Common problem areas include spending more money than you earn, neglecting to start an emergency fund and not saving for retirement.

Taking a financial health quiz can be a good first step toward detecting weak spots. However, our struggles don’t always reflect poor habits or decision-making. Many experts say it’s important to consider the role that systemic issues can play in shaping financial health.

“Not being able to get a living wage, not having medical insurance, having student loans in a career that you can’t find a job. The fact that there’s nowhere in this country that someone who is living on minimum wage can rent a two-bedroom apartment. Those are all systemic issues,” says Saundra Davis, founder of Sage Financial Solutions, a San Francisco Bay Area-based organization focused on providing financial services for low-wealth communities.

If you’re dealing with these kinds of systemic problems, focus on finding support. United Way’s 211 service can connect you with resources if you’re struggling to pay bills or afford basic needs.

On the other hand, if your income should be enough to cover your expenses but doesn’t, that’s when you should look at your behavior, Davis says. What choices are you regularly making, and what do you have the power to control?

Look for patterns. Maybe you shop online when you’re bored or upset. Or you ignore your debt because it’s overwhelming. Maybe you tend to spend windfalls instead of using the money intentionally because your family didn’t emphasize the importance of saving growing up.

Emotions and experiences can have a major impact on our money habits. That’s why it’s also possible to develop unhealthy habits if you’re in good financial shape. For example, a person who pays all their bills on time and has plenty of savings might still feel anxiety around spending or argue about money with a partner.

“Often there’s that history of financial scarcity and loss somewhere in their background that’s unresolved that leads them to not be able to fully connect with the fact that they’re actually financially secure now,” says Ed Coambs, a certified financial planner and financial therapist in Charlotte, North Carolina.

Once you better understand what’s behind your unhealthy habits, you can begin to repair them.

2. Set personal goals

Ask yourself, “Where are you trying to go? And where are you right now? And then how do you bridge that gap?” Davis says.

Setting financial goals can put you on the path toward healthier habits. Your goals can revolve around specific dollar amounts, such as becoming debt-free or saving three months’ worth of expenses in an emergency fund, Davis says. Or, the goal might be about changing your money mindset, such as becoming more thoughtful about your spending or getting comfortable discussing money with others.

Create a plan that supports your vision of financial health. Say you want to boost your emergency savings or make credit card payments on time. Automating those transactions can help. You can transfer a specific amount from your checking account to savings each month or set up minimum credit card payments through your issuer’s website.

Coambs suggests checking in on your finances once a month or every couple of months. Review your budget and behavior to determine whether you’re on track to reach your goals.

3. Lean on resources

Breaking financial habits can be challenging. But you don’t have to do it on your own. There are people and activities you can turn to, “whether it’s journaling or having a conversation with your partner or some other mode of helping yourself feel safe again around the topic of money,” Coambs says.

There are also many professionals who can offer guidance. A financial therapist, for example, can help you unpack your money relationships.

“All of us have a money history. And if your money history is one where there’s a lot of emotional pain and chaos connected with money, then oftentimes those issues in your past need to be treated much like any other type of trauma,” Coambs says.

You may also choose to work with a financial planner or seek free advice on managing your budget, credit or debt from a nonprofit credit counseling agency.

Along your journey to improving your financial habits, learn to advocate for yourself, Davis says. “What that can do is reduce or eliminate shame, about going to get help wherever you might need it. If that means public benefits, if that means family and friends, whatever that means to you,” she says.

This article was written by NerdWallet and was originally published by The Associated Press. 


Lauren Schwahn writes for NerdWallet. Email: lschwahn@nerdwallet.com. Twitter: @lauren_schwahn.

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Grimace-Free Ways to Learn Personal Finance

The online landscape is littered with horrible personal finance advice: teenagers promoting day trading strategies, “influencers” flogging questionable investment schemes and people with dubious credentials insisting you shouldn’t invest in a 401(k).

Outrageous statements and flashy graphics grab attention, but there’s also plenty of sound, factually correct money content out there — and some of it is even entertaining. So if you want to learn more about managing your finances while having at least a little fun, here are some ways to go about it.

Audio worth listening to

With podcasts, you have a wealth of options (sorry, I couldn’t resist). One to try is “Stacking Benjamins,” which a Fast Company article accurately describes as striking “a great balance of fun and functional.” Former financial advisor Joe Saul-Sehy and certified financial planner Josh Bannerman mix news, banter and education with the help of regular contributors Paula Pant and Len Penzo, plus a wide variety of guests. (Full disclosure: I’ve been a guest on “Stacking Benjamins,” among other podcasts, and I co-host “NerdWallet’s Smart Money Podcast.”)

Also, check out two public radio podcasts: “Planet Money,” which explains how the economy works, and “This Is Uncomfortable,” which describes itself as a podcast about life and how money messes with it. Public radio isn’t known for being a laugh a minute, but high production values and good storytelling will keep you engaged.

If you like learning by listening, the social media app Clubhouse also might be worth exploring. This voice-only app allows you to listen and often participate in live conversations about a seemingly infinite number of topics. Consider starting with the Personal Finance Club. (Clubhouse started as invitation-only, but now is open to all.)

Of course, as with all social media, proceed with caution. Having a lot of followers doesn’t mean someone is credible, honest or knowledgeable. Plenty of people pose as experts without the credentials or experience to actually be one. No one is required to disclose conflicts of interest, and your default assumption should be that what you’re hearing or seeing may not be in your best interest.

Information or advice shared on social media is not customized to your unique circumstances, says CFP Lazetta Rainey Braxton of Brooklyn, New York. Research the ideas to ensure they make sense for your situation, and consider consulting an appropriate expert such as a tax pro, CFP or attorney, Braxton says.

What to watch

Suppose you’re more of a visual learner. In that case, you’ll find many credentialed experts to follow on Instagram, including CFP Brittney Castro and certified financial education instructor Bola Sokunbi of “Clever Girl Finance.” But for sheer fun, it’s hard to beat Berna Anat, also known as “Hey Berna,” a financial educator whose professed goal is to make “financial literacy more funny, more accessible and more Brown for young people everywhere.”

Anat and several other worthy Instagram creators such as “The Financial Diet” and “His and Her Money” are also on YouTube – along with a bunch of finance and investing channels spouting sketchy advice (often interrupted by even sketchier commercials).

Be wary of creators who pretend that making vast sums is easy or who promote risky strategies, such as options trading or borrowing money to buy volatile assets such as cryptocurrency, especially if you’re new to investing.

Also, be skeptical of creators who aren’t transparent about their financial situations or strategies, says Nashville-based CFP Jeff Rose, a blogger at “Good Financial Cents,” who has hosted the Wealth Hacker channel on YouTube since 2011.

Many people claim to have spectacular financial success but are really trying to lure you into buying courses or other products that make money for them and are not in your best interest.

That’s especially true on TikTok, where videos often last mere seconds, and bold claims about instant wealth seem to be the norm. Even here, though, some people are creating substantive, entertaining money content. Two to check out include Humphrey Yang (@humphreytalks) and Delyanne Barros (@delyannethemoneycoach).

Kick it old school

If books are your bag, you won’t have to caffeinate yourself to get through the following personal finance tomes that lace their education with plenty of humor:

  • “Stacked: Your Super-Serious Guide to Modern Money Management,” by “Stacking Benjamins” host Saul-Sehy and co-author Emily Guy Birken.
  • “Bad With Money: The Imperfect Art of Getting Your Financial Sh*t Together,” by comedian and LGBTQ activist Gaby Dunn.
  • Any of the three books by Erin Lowry, including “Broke Millennial,” “Broke Millennial Takes On Investing” and “Broke Millennial Talks Money.”

One final recommendation: “The Richest Man in Babylon,” by George S. Clason. This slender book of parables isn’t funny, but it is entertaining, an easy read and amazingly relevant nearly 100 years after its first publication.

The ways we learn about money may change dramatically, but much of the best personal finance advice doesn’t.

This article was written by NerdWallet and was originally published by The Associated Press.


Liz Weston, CFP® writes for NerdWallet. Email: lweston@nerdwallet.com. Twitter: @lizweston.

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6 Things to Know About Student Loans Before You Start School

The summer before your freshman year in college means choosing classes, checking out your future roommate’s Instagram and figuring out how you’re going to pay the bills.

Chances are you will need a loan: 2 out of 3 students have debt when they leave school, according to 2017 graduate data from the Institute for College Access and Success. But consider a loan after you’ve accepted grants, scholarships and work-study. You can get these by submitting the Free Application for Federal Student Aid, or FAFSA.

Here are six things you need to know about getting your first student loan.

1. Opt for federal loans before private ones

There are two main loan types: federal and private. Get federal loans first by completing the FAFSA. They’re preferable because you don’t need credit history to qualify, and federal loans have income-driven repayment plans and forgiveness that private loans don’t.

You may be offered two types of federal loans: unsubsidized and subsidized. Subsidized loans — for students with financial need — don’t build interest while you’re in school. Unsubsidized loans do.

Take a private loan only after maxing out federal aid.

2. Borrow only what you need — and can reasonably repay

Undergraduate students can borrow up to $12,500 annually and $57,500 total in federal student loans. Private loan borrowers are limited to the cost of attendance — tuition, fees, room, board, books, transportation and personal expenses — minus financial aid that you don’t have to pay back.

Aim to borrow an amount that will keep your payments at around 10% of your projected after-tax monthly income. If you expect to earn an annual salary of $50,000, your student loan payments shouldn’t be over $279 a month, which means you can borrow about $26,000 at current rates.

To find future earnings, look up average salaries in the U.S. Department of Labor’s Occupation Outlook Handbook. Then, use a student loan affordability calculator to estimate payments.

Your school should provide instruction on accepting and rejecting financial aid in your award letter. If you’re not sure how to do it, contact your financial aid office.

“We’re not scary people,” says Jill Rayner, director of financial aid at the University of North Georgia in Dahlonega, Georgia. “We really do want students and families to come in and talk with us so we can help strategize with them.”

3. You’ll pay fees and interest on the loan

You’re going to owe more than the amount you borrowed due to loan fees and interest.

Federal loans all require that you pay a loan fee, or a percentage of the total loan amount. The current loan fee for direct student loans for undergraduates is 1.062%.

You’ll also pay interest that accrues daily on your loan and will be added to the total amount you owe when repayment begins. Federal undergraduate loans currently have a 5.05% fixed rate, but it changes each year. Private lenders will use your or your co-signer’s credit history to determine your rate.

4. After you agree to the loan, your school will handle the rest

Your loan will be paid out to the school after you sign a master promissory note agreeing to repay.

“All the money is going to be sent through and processed through the financial aid office — whether it’s a federal loan or a private loan — and applied to the student’s account,” says Joseph Cooper, director of the Student Financial Services Center at Michigan Technical University in Houghton, Michigan. Then, students are refunded leftover money to use for other expenses.

5. You can use loan money only for certain things

Loan money can be used for education-related expenses only.

“You cannot use it to buy a car,” says Robert Muhammad, director of the office of scholarships and financial aid at Winston-Salem State University in North Carolina. “It’s specifically for educational purposes: books, clothing, anything that is specifically tied to the pursuit of their education.”

You can’t use your loan for entertainment, takeout or vacations, but you should use it for transportation, groceries, study abroad costs, personal supplies or off-campus housing.

6. Find out who your servicer is and when payments begin

If you take federal loans, your debt will be turned over to a student loan servicer contracted by the federal government to manage loan payments. If you have private loans, your lender may be your servicer or it may similarly transfer you to another company.

Find your servicer while you’re still in school and ask any questions before your first bill arrives, says John Falleroni, senior associate director of financial aid at Duquesne University in Pittsburgh. They’re also whom you’ll talk to if you have trouble making payments in the future.

When you leave school, you have a six-month grace period before the first bill arrives.


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The article 6 Things to Know About Student Loans Before You Start School originally appeared on NerdWallet.

5 Steps to Strengthen Your Finances in 2022

This article provides information for educational purposes. NerdWallet does not offer advisory or brokerage services, nor does it recommend specific investments, including stocks, securities or cryptocurrencies.

2021 was a year of financial strain for many Americans: Household debt and the overall cost of living increased, while median household income decreased, according to NerdWallet’s annual household debt study. In 2022, setting grand financial goals may not be realistic for every budget, but there are still smart steps you can take to shore up your finances.

1. Examine your spending

Household finances have changed drastically for many Americans over the past two years. Pandemic relief and stimulus programs — as well as the reduction of certain expenses due to pandemic restrictions, like commuting and travel — may have added money to some budgets. On the other hand, according to NerdWallet’s study, the overall cost of living has grown 7% over the past two years while median household income decreased 3% in the same span, putting the squeeze on many Americans.

A new year is an ideal time to examine your budget. Don’t have a budget? Start by pulling your bank and credit card statements for the past three months and adding up your spending in different categories — housing, food, utilities and so on — to see what an average month looks like for you. Knowing how much you’re spending now is key to creating a realistic budget for the future. Without this step, you might assume you should budget, say, $300 a month for groceries, but if you’re currently spending $600 a month at the supermarket, it’s probably not realistic to cut your spending so quickly by so much.

Once you’ve built a budget, compare your expenses to your income to see how much room there is to progress toward financial goals like saving and investing. You can then determine whether you need to increase your income, decrease your expenses, or both. Based on your eligibility, you might also consider seeking out programs to help you make ends meet, like an income-driven repayment plan for your student loans or the Supplemental Nutrition Assistance Program, or SNAP.

2. Add a little more to your consumer debt payments

Revolving household credit card debt — that is, credit card balances carried month to month — fell 14% over the 12 months that ended in September. But according to NerdWallet’s study, some Americans leaned on their credit cards to get through the pandemic. One in 5 Americans (20%) say they increased their overall credit card debt during the pandemic. Almost the same proportion (18%) say they relied on credit cards to pay for necessities during this time, according to the survey conducted for NerdWallet by The Harris Poll.

If you have a credit card balance and you don’t feel like you’re getting anywhere in paying it off, adding just a bit more to the monthly payment, if possible, can make a big difference.

Say you have a credit card balance of $5,000 at 17% interest, and your minimum monthly payment is $75. If you paid only that much each month, it would take more than 17 years to erase the debt, and you’d pay more than $10,400 in interest. But you could save thousands in interest charges and years of payments if you added $25, $50 or $75 to that monthly payment.

Small payment increases have a big impact

Monthly payment

Interest costs

Years to payoff

$75

$10,410

17.1

$100

$3,759

7.3

$125

$2,431

5

$150

$1,815

3.8

3. Evaluate your investments

Of Americans who have received pandemic relief since March 2020, 9% used at least some of that money to invest in cryptocurrency, according to the NerdWallet survey. This may be totally in line with your goals and risk tolerance, but take time to review your overall investment holdings. It’s recommended that you diversify your investments to reduce risk and increase your potential for return over the long term.

If you have a workplace retirement plan — like a 401(k) or 403(b) — participating in it can save you money on taxes in the short term and grow your nest egg in the long term. Consider investing your money there first — notably if your employer offers a match on your contributions. Otherwise, you’re passing up a guaranteed return on your investment.

4. Negotiate medical bills

Medical costs have risen by 31% in the past decade, according to the NerdWallet study. This is a staggering increase, especially when paired with a pandemic that resulted in overflowing hospitals. But medical bills are negotiable, and there are options to break up or even reduce your costs.

Many providers offer payment plans on medical bills. While you should inquire about associated fees or interest, this will probably be a cheaper option than using a credit card that charges interest. In addition, low-income patients may have access to hardship plans, which will break up your costs and potentially lower your overall bill. Ask your provider about these options.

You can also try to negotiate your balance down or seek a medical bill advocate to do it for you. Whichever route you choose, avoid ignoring your bills entirely. If your medical provider sells your debt to a collection agency, you have 180 days to deal with this debt before the collection account shows up on your credit reports. At that point, this debt can hurt your credit scores, making other financial moves harder in the future.

5. Save for something

More than 2 in 5 Americans (43%) who have received pandemic relief since March 2020 say they saved at least some of this money — for emergencies, a home or something else — according to the NerdWallet survey. So regardless of how much you can save and what your specific goals are, everyone could benefit from saving something, whether it’s $5 or $500 a month.

Your goal may be an emergency fund to help you stay afloat the next time the unexpected happens or a dream post-pandemic vacation paid in cash. But no matter what your ultimate goal is, regularly putting money aside gives you options, even if you choose to use the cash for something other than its intended purpose in the future.


Erin El Issa writes for NerdWallet. Email: erin@nerdwallet.com.

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5 Steps to Reach Your Money Goals in 2022

In addition to the new year bringing confetti and a fresh calendar, it’s a time to set big money goals for the next 12 months. That might mean finally paying off debt, buying a house or taking a long-delayed vacation.

With inflation and economic uncertainty clouding 2022, shoring up your finances this month can feel even more urgent.

“When you plan to start in the new year or some other important date for you, it can be easier to make that behavioral change, because we feel like we’re making a fresh start,” says Jeremy Burke, a senior economist at the University of Southern California’s Center for Economic and Social Research.

Here are five steps money experts recommend to help you reach your money goals in 2022:

1. Get a clear view of your finances

“The first step for everybody is to get organized,” says Phuong Luong, a certified financial planner at Saltbox Financial in Massachusetts. That means making a list of your savings, debt and assets. A complete picture of your finances can help you decide what to focus on for the new year, she says, and provide a document that’s easy to update annually.

Luong also suggests tracking your monthly cash flow with a spreadsheet or app to help you answer questions about what mortgage payment you could afford or which expenses you might be able to cut. “If you have those numbers organized, it’s easier to have those conversations, with a professional or with yourself, about what you can actually afford,” she says.

A complete self-assessment includes reflecting on your values, which may have shifted during the pandemic. “Figure out what is really important to you. Maybe you don’t want to spend as much on clothes, or you’d like to help more charities. Maybe instead of a car, you’d like a nice desk and chair. It’s easier to follow your budget when it’s aligned with your values,” says Shari Greco Reiches, a wealth manager in Illinois and author of the book “Maximize Your Return on Life.”

2. Take baby steps with your emergency fund

Emergency funds offer flexibility and comfort should you face unexpected expenses, but building one can be tricky. Behavioral economics suggests starting small, Burke says.

“Instead of setting a goal of saving $400 a month, it could be better to save $100 a week or an even smaller amount daily. There seems to be less friction to getting started when the time period is smaller so it’s pennies per day instead of dollars per month,” Burke suggests.

That means if you have a goal to save $1,000 by the end of the year, increase your chances of success by thinking of it as saving $2.75 a day.

3. Automate longer-term savings

Another lesson from behavioral economics, Burke says, is to set up automatic transfers into your savings each month. “In terms of improving long-term outcomes, it’s really helpful to have things automated as much as possible,” he says.

For example, if you contribute to a retirement account directly from your paycheck, you have to set it up only once, and your savings will continue to be deducted. You can also sign up to automatically increase the percentage you are saving each year or each time you get a salary increase, Burke adds. You could set up similar automatic transfers into a college savings account or a high-yield savings account for other goals like saving for a down payment.

4. Pay off the debt with the lowest balances

For Americans hoping to pay off high-interest debt this year, David Gal, professor of marketing at the University of Illinois Chicago, says his research shows that consumers are more successful if they start by focusing on the smallest balances first, called the debt snowball method. “That gives the perception of success and progress, and increases the motivation to pay off the bigger accounts,” he says.

Daphne Jordan, a CFP and wealth adviser in Texas, emphasizes the importance of staying positive. “Think about where you want to go in this new chapter of life,” she suggests. “Don’t see your financial past as a mistake. Everything is a learning experience.”

Having an accountability partner to check in with can also help keep you on track, says Rianka Dorsainvil, a CFP in Maryland and co-CEO of 2050 Wealth Partners, a financial planning firm. “Like with fitness, if we can count on one person checking in on us, we’re more likely to be successful.”

5. Plan for some fun, too

Budgeting for 2022 doesn’t have to be a downer: You can also fit in some fun spending plans, which might include reconnecting with friends and family. “If you want to take a trip in August, think about the cost of the plane ticket, hotel and food,” Dorsainvil says. If it totals $3,000, then aim to start saving $375 a month through August.

That way, she says, “You’re being realistic and setting measurable goals” — two approaches that increase your chances of success.

This article was written by NerdWallet and was originally published by the Associated Press.


Kimberly Palmer writes for NerdWallet. Email: kpalmer@nerdwallet.com. Twitter: @kimberlypalmer.

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Savings Tips for Newbies, Experts and Everyone in Between

When it comes to saving money, this year may look a little different from years past. The savings rate is lower than its peak of about 34% in April 2020, but Americans are still saving more than they did before the pandemic. This is according to the U.S. Bureau of Economic Analysis, which defines savings as the amount left over after spending money and paying taxes.

Unemployment is still elevated, however, and those who have lost income may be finding it more difficult to save. Either way, it’s important to have a savings plan.

Whether you are flush with cash, not sure how to save money or somewhere in between, here are the actions you can take now to maximize your savings:

Unsure how to save

If you’ve found it difficult to save money lately, try these tips to strengthen your bottom line:

Cancel high bank fees and other unnecessary expenses. “Businesses conduct financial audits for their expenses. Why not conduct a personal audit for yourself to cut spending?” says Michael Foguth, founder of the financial advisory firm Foguth Financial Group in Brighton, Michigan.

If you have a bank account that charges a monthly fee of $5, that adds up to $60 every year. Consider switching to a free account. There are options at many top online banks.

Another example: Say you signed up for a streaming service at the start of the pandemic because you were mostly at home. But now, if you’re not watching TV as much, you could cut the service to save money, Foguth says.

Weigh options to increase cash. Consider taking on part-time work — job growth is increasing and there has been pressure on employers to increase wages — or sell unused belongings to raise cash. For help with major expenses, such as rent and medical bills, reach out to community organizations. The government website usa.gov/help-with-bills is a good place to find resources. Even temporary cash boosts could help you unload debt and give you room to create a savings plan.

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Saving a little at a time

Maybe you’re able to save occasionally but would like to save more. If you’re already putting the previous tips to use, try these action items:

Open a high-yield savings account. The average savings interest rate is a low 0.06% APY, but there are other accounts that pay many times more. With a high-rate savings account, your deposits earn more money while being safely parked in a federally backed bank account.

Set up auto transfers to savings. Move money from a checking account to savings before you get the chance to spend it — on each payday, for example. If you are able to transfer just $25 into savings every two weeks, you’d stash $650 by this time next year.

Bank bonus money. Decide now to save any extra money you receive, such as a cash birthday gift, tax refund or stimulus money that you don’t need immediately for expenses.

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Already saving, ready to maximize

Already have a savings plan and looking for ways to make the most of your money? If you’re using the previous tips, here’s how to make your money work harder:

Reevaluate spending goals. You may have some of your savings earmarked for a big ticket item. But for some people, the pandemic redefined what was important to them. Before you cash out, consider whether your previous goals match your current needs.

Economic conditions may also come into play. Alissa Johns, a real estate investor and small-business owner in Valparaiso, Indiana, and her husband originally set aside money to buy a new home in early 2021. But she says when they saw how tight housing inventory was and how construction prices were rising in the area, they chose to stay put.

Instead of moving, “we decided to refinance our current home loan and vacant land loan for lower interest rates,” Johns says. She adds that doing so allowed them to “decrease our monthly expenses and be able to put more money towards saving.”

Maximize your emergency fund. Experts recommend having at least three to six months of savings set aside for emergencies. If you have some savings but haven’t hit that mark, keep plugging away until you reach your goal. If your emergency fund is fully funded, you could focus on long-term financial goals.

Check out rewards accounts. Consider getting more value out of your spending by using checking accounts and credit cards that offer perks or promotional offers. The best rewards checking accounts, for example, earn interest, offer cash back on spending and may even offer a one-time sign-up bonus.

Top savings strategies may look different for people in different financial situations, but the most important step for anyone is to take action. Regardless of where you start, act now and you can put yourself in a position to increase savings this year and beyond.

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Margarette Burnette writes for NerdWallet. Email: mburnette@nerdwallet.com. Twitter: @Margarette.

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Should You Become Your Own Boss?

Maybe you’re cringing at the thought of going back to an office. The seed of a business idea floats around in your head between work videoconference calls, after the kids are asleep or while you tend your pandemic garden. Or perhaps you were laid off during the pandemic and forced to work for yourself, and now you’re wondering if you should continue down this path.

“In 2020, there was an explosion in new business applications, reaching nearly 4.5 million by year’s end,” according to a February report by the Economic Innovation Group, a Washington, D.C., think tank. That’s an increase of 24.3% from 2019 and was the highest on record — 51% higher than the average from 2010 to 2019.

“COVID-19 was a social, cultural and emotional shock the likes of which we have not experienced for generations. Becoming an entrepreneur is a deeply personal decision, and the pandemic may have delivered the push for many to embrace it,” the report said.

Deciding if self-employment is right for you depends on your personality, your financial situation and your ability to adapt. Here are tips from people who became their own bosses.

See if you’re right for the job

Many of us now appreciate the flexibility of working from home. As a freelancer or independent contractor, you would have the power to set your own schedule.

“Being in charge is very, very attractive to many people,” says Keith Hall, president and CEO of the National Association for the Self-Employed, or NASE, a resource and advocacy group. “The other side of that coin is that when you are in charge of your own destiny, you are also responsible for it.”

Evaluate your abilities as a prospective employer.

“Freelancers need to be self-motivated, work well independently, be organized, learn how to market their services well and be comfortable with a certain level of uncertainty,” CEO Sara Sutton said by email. She runs two companies focused on remote and flexible job opportunities:  FlexJobs, a job search site, and Remote.co, which provides resources for companies considering remote work.

Hall suggests asking yourself if you have the motivation to be in charge of your own destiny. “If you wake up Monday morning and decide to stay in bed late, that’s a financial loss. Nobody is going to be standing over you making you get out of your bed.”

Make a plan that fits your finances

Before deciding whether to freelance, become a consultant or turn your side hustle into a business, take a close look at your finances.

Many cobbled together a budget during the pandemic. Revisit that plan to make sure you understand your hard costs, such as food, rent and day care. (The 50/30/20 approach is a quick way to divide your dollars into three buckets: needs, wants and savings.)

Isolate what you can put toward a business. Small costs like purchasing a domain name, buying the premium version of a software or membership fees for a networking group can add up.

Use your budget to set short- and long-term business goals, Hall says. “Know exactly what you need to earn to meet your family goals and translate that into a time schedule.”

Evaluate your timing

You may need to keep your day job for a while, but you can still build your business muscle.

“Being an entrepreneur was never a goal for me,” says Afenya Montgomery, founder and CEO of iCAN Collective, a creative workspace and event venue for women entrepreneurs of color in Chicago. Montgomery, a registered nurse and health care administrator, started health care consulting on the side. Her hunt for resources and support inspired the idea of building a community for women entrepreneurs of color.

Montgomery and her husband were raising three children and had no business experience, so leaving her day job wasn’t an option. She spent four years learning the ropes of entrepreneurship before she felt confident enough to quit.

She hosted networking events, opened a business bank account and finally registered her business as a limited liability company. Taking small steps can make the process less overwhelming, she says.

Seek support

Between strategies, goals and budgets, the thought of working for yourself might seem daunting, but entrepreneurs say you don’t have to do it alone.

Laura Licursi, founder of Elite Virtual Assistants, an agency that connects employers with remote assistants, says the pandemic was surprisingly hard on her online-only business as clients cut back. Licursi, who works from the Cleveland area, navigated through the uncertainty with a mentor from SCORE, a network of volunteer business mentors that partners with the Small Business Administration.

“My mentor helped me work through the inner workings of the business when things were slow, which really helped when business picked up again,” she says.

Entrepreneurs have more resources available than they realize, Hall says:

  • The SBA provides local resources to support aspiring entrepreneurs.
  • The NASE offers a business development grant program for members.
  • SCORE has mentorship resources, webinars and other online resources.
  • The IRS website has information on the tax implications of self-employment.

This column was provided to The Associated Press by the personal finance website NerdWallet.


Amrita Jayakumar writes for NerdWallet. Email: ajayakumar@nerdwallet.com. Twitter: @ajbombay.

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Financial Vital Signs to Monitor Right Now

A midyear financial review is often a good idea. This year, it’s almost essential.

With people going back to offices, travel resuming and Congress making significant changes to various laws affecting your finances, consider taking some time to check in on your money. You might be able to make some smart moves to reflect the new realities.

Budgeting

See where your money is going now. Using a budgeting app or taking a close look at recent bank and credit card statements can help. Then think about expenses you may face in the near future.

If you’re using your car more, for example, you might already be paying more for gas and insurance, but you also could face higher costs for maintenance or repairs. If you have kids, you might plan for back-to-school costs, sports equipment and activity fees. Vacations, travel, weddings and other celebrations may need to be budgeted for, as well.

It can make sense to trim some costs so you can afford these resurgent expenses. One possibility: Rotate your streaming services and other subscriptions. These may have sustained you during lockdowns, but you could put some on pause now to save money while you continue to enjoy others.

Perhaps you have more income: You’re back to work after being unemployed, or you’re a parent about to get the first of six monthly child tax credit checks from the IRS. (These payments will be up to $300 per eligible child starting July 15). Making a plan for this income can ensure it goes where you want, rather than dribbling away in unplanned purchases.

Debt forbearance

Forbearance on federal student loans is scheduled to end this fall, with monthly payments resuming in October. If those payments would be a hardship, contact your lenders to see if income-driven repayment plans or other measures would help.

If you requested forbearance on your mortgage payment or other debt, that has an expiration date, as well. Debt that’s in forbearance isn’t forgiven, so you’ll typically need to plan to make up the payments you missed. Check with your lender about your options.

Flexible savings accounts

Congress more than doubled how much employees can contribute to flexible spending accounts for child care in 2021. Workers can put in a maximum of $10,500, up from $5,000 in 2020. The limit for health care FSAs remains $2,750.

This year, you’re also allowed to make midyear changes to your contributions to either account, something that normally requires a change in life circumstances such as marriage or having a child.

Your employer must opt in to these changes, but if it has and you can increase your contributions, you could save significantly on taxes.

Frequent traveler programs

Last year airline, hotel and rental car companies softened the rules for their loyalty programs to reflect pandemic travel restrictions. Many extended the expiration deadlines for points, miles and free hotel night certificates. But the pause on expirations won’t last forever. Check your rewards programs and make plans to use your rewards before they disappear.

Similarly, you may have credits from canceled travel that also will expire if you don’t use them. If you can’t use those in time, request an extension.

Health insurance

If you buy your own insurance, you may get a better deal on the Affordable Care Act exchanges now that Congress has expanded the subsidies, reducing costs for most people. If you don’t already have ACA coverage, there’s currently a special enrollment period that ends Aug. 15. If you get unemployment benefits at any point during 2021, you can qualify for a zero-premium comprehensive policy. COBRA coverage to extend an employer health insurance plan is also free from April to September.

Retirement planning

Companies with 401(k)s are now required to let part-time workers contribute if they have worked more than 1,000 hours in one year or 500 hours over three consecutive years. Contact your employer for details.

Congress eliminated the age limit for making contributions to IRAs, so you can contribute past age 70 ½ as long as you have earned income such as wages, salary, commissions or self-employment income. Also, the age that typically triggers required minimum distributions from retirement accounts has been moved from 70 ½ to 72 for people born after June 30, 1949.

If you’re feeling generous, though, the age at which you can start making qualified charitable distributions from an IRA remains 70 ½. These withdrawals won’t be added to your income if the distribution is made directly to a qualified charity.


Liz Weston writes for NerdWallet. Email: lweston@nerdwallet.com. Twitter: @lizweston.

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6 Steps for Financial Spring Cleaning, Pandemic-Style

Given the challenges of pandemic life, many financial tasks may have stayed on the back burner this year as we all tried to just make it through each day. At the same time, the pandemic had a big impact on our financial lives, and some money-related to-do’s are likely in order.

Now that it’s spring, it’s a good time to conduct a thorough review of your finances and address any neglected areas. Here’s how to spring clean your finances after a year of pandemic living.

1. Update your budget

Your spending patterns might have totally changed over the last year: According to the Federal Reserve Bank of St. Louis, travel, hotel, restaurant and bar spending fell during the pandemic, while grocery and beverage store spending went up.

So it may be time to create a new budget that reflects current expenses, says Curtis Bailey, certified financial planner and founder of Quiet Wealth Management in Cincinnati. “Covid changed spending patterns last year, and potentially going forward,” he says. He suggests anticipating what habits you plan to continue beyond the pandemic and avoiding any drastic changes, such as buying a second home, until you’ve done a thorough analysis of your needs going forward.

Shea Newton, CFP and president of Financial Journey in Leesburg, Virginia, recommends redirecting some of that previous spending into an emergency savings account. Some people, she says, may want to replenish their emergency fund after dipping into it over the last year, or boost it to a higher level, given the income uncertainty many people continue to experience.

2. Set new financial goals

Looking forward to beyond the pandemic, you might want to set new financial goals, such as finally taking a big vacation or finding a job that allows you to continue working from home. “You may be reeling, trying to figure out your direction again. Ask yourself what is truly important” and whether your current spending reflects that, suggests Andrew Mitchell, CFP and financial advisor at Fiduciary Financial Advisors in Grand Rapids, Michigan. If you want to go on a big trip but much of your spending currently goes to daily expenses, then you may need to adjust your budget.

Mitchell also suggests asking yourself if you’re prepared for the next catastrophe. Looking back, do you wish you had had a larger savings fund going into 2020 or more diversified investments? Reflecting on those questions can help you set new goals that will help you get through the next challenge, he says, whenever it may arrive.

3. Review your insurance coverage

The pandemic has had a big impact on our homes: Not only are we spending more time inside them, often with more expensive technology and other items to help us work or attend school from home, but housing prices have also increased. According to the Federal Housing Finance Agency, home prices rose 10.8% between the fourth quarters of 2019 and 2020. You might need more insurance coverage than you currently have, says Noah Damsky, principal of Marina Wealth Advisors in Los Angeles.

The cost of building materials has also gone up, which means it would cost more to replace a damaged home, he adds. His firm recently helped one of its clients increase their dwelling coverage by 40% to better reflect how much it would cost to rebuild the home today.

Damsky also recommends increasing coverage for water damage. “Since we’re spending more time at home, we’re likely using water more frequently, and the potential for plumbing issues increases.” If you rent, then renter’s insurance is crucial. Apartments carry a higher risk for flood damage with so many people at home straining the shared infrastructure, he says.

4. Streamline subscriptions

Because of all the time spent at home, many families increased their spending on subscription services such as Disney+, Netflix and HBO. As we all start to leave the house more, it might be time to scale back, suggests Jason Dall’Acqua, CFP and president of Crest Wealth Advisors in Annapolis, Maryland. “Cancel the subscription services that you will no longer be using as much and realign your budget with more normal circumstances,” he says.

5. Update your credit card

If your spending patterns have changed, you might also want to consider a new credit card that better maximizes your current lifestyle. Bailey suggests first logging into your credit card accounts and pulling up a summary of last year’s spending, as well as the rewards that you earned.

Did you maximize your reward earning potential and redeem those rewards in valuable ways? If you spend a lot on takeout or restaurants but your current credit cards don’t reward you for that spending, then it might be time to apply for a new card that does, he says.

6. Zero out mobile app balances

Given the rising popularity of payment apps like Venmo, PayPal and Cash App, it’s a good idea to check your balances: NerdWallet found that about two-thirds of mobile payment app users say they have maintained a balance in their accounts, which means they aren’t earning interest on that money. Instead, consider transferring your cash into a high-yield savings account.

“Interest rates are low right now, but if you get into the habit now of moving money into your savings account, when interest rates rise, you will see a bigger impact,” says Newton.


Kimberly Palmer writes for NerdWallet. Email: kpalmer@nerdwallet.com. Twitter: @kimberlypalmer.

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