onesavvydollar-blog

[onesavvydollar-blog]

OneSavvyDollar Saving Challenge Day 11: Trim the Fat

Can you believe it’s Day 11? Good job getting here. I’m sure you’re crushing your daily tasks. Every actionable step this week is to help you find ways to reduce your expenses so you can save even more towards your financial goal for the year.

If you’re new here, you have missed a bit but no worries. You can catch up and hurry back here.

Today’s Task: Review all your subscriptions.

Items needed to complete task: Your last 3 months credit card or checking account statements.

Timeframe: 15 -20 minutes

Wondering what might be eating away at your savings or why it seems like you never have any extras for things that you truly need? Subscriptions.

From makeup (Birchbox) to magazines, TV (Netflix, Hulu), meals and even credit report services, we’ve gradually turned into a subscription based society. Guess what? I don’t believe this will be changing anytime soon.

The problem with subscription based charges asides from the fact that they could make up the bulk of your recurring nonessential expenses, is companies lure you with a lower payment if you pay up front for the whole year. The idea is that you’d be paying less each month when you calculate your monthly payment.

For instance, a monthly subscription that charges $110 for all customers who pay upfront versus paying $10 monthly at $120 is a saving (I use that word loosely) of 10% . They are not only counting on you to not think through the actual cost, there is also a high chance that you’ll forget about your subscription because your payment method is automated.

We all know that it is easier to start a subscription service on your account but extremely difficult to end it.

This means, as the CEO (Cash Expert Officer) of your household and savvy consumer that you are, you have to find a way around the subscription madness.

How can you do so?

The idea is to get only what you need. When I look through people’s budget, this is one of the first areas that can be trimmed quickly because your priorities change all the time.

To complete this exercise, you’ll have to be honest with youself.

1) Gather you last 3 months statement for both your credit card and checking account.

2) If you haven’t used the service in the last 3 months (90 days) yet you’ve paid upfront, get rid of it. Call up and request a refund for the time unused. One service that usually falls in this category is the gym.

3) Ask youself “Self, can I live without this service? Even if you’ve used the service, check your frequency. How many times in the last 3 months have you used it? Once? Twice? Get rid of it.

4) Try canceling for 3 months. If you forget about the service after then, you never needed it in the first place.

In Week 1: Day 4, we set up our budget and filled out the column for “Actual budget”. Review your budget using all the tips from week 2 and make your savings adjustments in the “Budget Column”. For instance, if you’ve succeeded in canceling some of your subscriptions, from say $80 to $30 update your automatic transfer in your saving account by the difference of $50.

When was the last time you reviewed your subscriptions? Have you cancelled any you subscriptions you forgot about? Share with me in the comment section.

Don’t forget, you can still join our Facebook group to help you along your journey here

[onesavvydollar-blog]

OneSavvyDollar Saving Challenge Day 10: (Tips to) Shop for Cheaper Car Insurance

Are you new to OneSavvyDollar challenge? You have missed quite a lot but no worries. You can catch up on our daily tips and read all About the saving challenge.

Today’s Task: Shop for auto insurance.

Timeframe: 30 minutes

I started driving at 19. To the insurance companies, I was too young and inexperienced. These two categories meant that I was considered high risk. I remember shopping around for insurance at the time and I couldn’t even go to the major insurance companies like Geico or All State. I had to go through a broker. Never use a broker. Go directly to the major insurance companies in your area.

The broker from DCAP helped me get insurance through Apple. The cost of my insurance at the time was $2,655 for a year. But I wanted to drive; I needed to drive. The sooner I got on the road, the better for me. Living in Long Island without a car meant relying on the bus; I was tired of taking the bus and having my whole life revolving around their schedule. Even though the insurance quote was a little more than 2 times the price of the car, I signed up and started driving.

One year later, I was 20 with some driving experience and no accidents. I felt I could do better and decided to shop around. After making a few calls, I got the best quote through American International Group (AIG). My insurance dropped 38% from $2,655 to $1,640 for  year. I switched insurance immediately.

The following year, I was 21 with a 2 year history, no accidents or claims and I shopped around again. This time, I found Geico and my insurance dropped another 48% from $1,640 to $848 for the year. Geico took into account my good records, good student (yes they have a good student discount and I had to fax in my grades) and defensive driving.

Why have I told you this?

Most of your recurring bills are not constant. Get in the habit of reviewing your recurring bills and finding better options. If you are a loyal and good customer, you can negotiate with your current creditor or you can go elsewhere. But before you make that switch or start shopping around, you need to know

What’s affecting your car insurance payments?

Age: The younger and less inexperienced you are, the more you can expect to pay. See my story.

Vehicle: I just got a new used car. I went from driving a Camry ’99 to a Corolla ’09 and my insurance went up by 150. I only had liability on the Camry because it was too old. Should this stop you from buying a new car? No, just make sure you can afford it. Most people don’t factor this into their costs of owing a car. You can always shop before you buy. The newer the car, the more expensive your insurance will be. It will cost more money to replace it.

Deductible: This is the amount you will pay out of pocket before your insurance claim kicks if you get in an accident. The higher your deductible is, the less your monthly insurance payment will be. Ask for a quote for $500, $1,000 even $1,500 and see the difference before signing the dotted lines.

Credit score: I tell people that having bad credit will cost you. Always. Most people don’t know that insurance companies usually do a soft pull on your credit; a soft pull allows companies check your credit to qualify you for a product without your permission. They are allowed to do this because it doesn’t affect your credit score.  Protect your credit score.

Demographics: . I moved about 3 years ago and called my insurance company to change my address. After updating my information, the representative told me that my insurance would be going down by $100. When I asked why, she said my new neighborhood was considered “safer”. Uh oh! Talk about being

Claim: Insurance agents check for the number of claims you’ve filed. If you’re always getting into accidents and filling a claim, this will eventually affect your rates. No amount of accident forgiveness will stop your insurance from going up.

Moving Violations: Your driving record is crucial! About two years ago, I kept getting speeding tickets and I learned my lesson fast. Paying for tickets in New York is no joke and they could be tearing holes in your budget.  There are all kinds of fees (court + administration) and the impact on your insurance could be costly. Obey all traffic rules and be mindful of your driving.

Defensive Driving: Taking this once every 3 years could reduce your driving violation points (if you have any) or can reduce your insurance premium by at least 10%

Now that you’re armed with this information, you can now shop around for insurance and negotiate your payments. Sure there are comparison tools to help you search but I’m a phone person. To make it easier for you, I have included the the current phone numbers for seven major insurance companies that can provide you with lower rates.

State Farm: 1 (844) 811 2109

Liberty Mutual: 1 (888) 398- 8924

All State: 1 (877) 810 – 2920

Progressive: 1 (800) 776- 4737

Geico: 1 (800) 841 7474

AAA: 1 (800) 222 -4357

Nationwide: 1(877) 669 6877

Still hesitant about shopping around because you’re not sure what to say? Here are questions you can use as a guide for your shopping.

Hi,

I’m going through my budget and shopping around for auto insurance. I’ve been a customer with you for XYZ years and I feel like I might be paying too much for insurance . Can we go through my policy?

Start with your current provider. Remember what I said about retention? Your current provider will review your policy and might be able to tweak things around to keep you.

1. My employer is XYZ  do you offer discounts for their employees?

Use this if you have changed your place of employment recently and never updated that information. When I was a Citibank employee, we got all kinds of discounts like phone bills, insurance, etc. We used to get anywhere from 10% to 15% in discounts depending on provider. If you are a state employee, mention that as well.

2. I am a member of XYZ professional or retail association do you offer discounts for their members? This could include (Credit unions, Costo, AARP)

Remember Day 2 where I talked about getting an account with a credit union, If you’re a member of some credit unions, they have relationships with some  insurance companies. I always get the offer in the mail for Liberty Mutual but each time i’ve called, my current insurance company beats their price. You could reduce your insurance by as much as 10%.

3. Can we go through my deductible?

You can increase the amount of your deductible (the amount you pay before insurance kicks in during an accident) to get a lower monthly payment. Please, make sure you can afford to pay this amount if you get into an accident  You won’t be able to suddenly reduce your deductible to avoid paying it.

4. How much can I save if I insure my house and car with you?

If you are a renter, consider getting renter insurance. It might help bring down your monthly payment. Renters insurance is petty cheape You can have all your personal belongings covered for as little as $200 in a year.

5. Am I getting a discount for the safety features on my car?

I have anti lock brakes, my tires have a lock and I also have an alarm system on my Corolla ’99 . You can be sure I mentioned that to my insurance company. Having anti theft features can reduce because you have taken the extra measures to protect your car.  Do not forget to mention that.

6. Do you offer discounts for college students?

This is another perk of going to and staying in school. sides from reduced movie tickets, you can also get lower insurance. If you have good grades, mention it too. I used to get the “good student” discount all the time.

7. Can I save money buy paying for the entire policy for the year or 6 months up front?

I usually pay my insurance 2 times in a year. This saves me a monthly $5 fee. If it is worth if for you, you can also set up automatic payments directly with the insurance company.

8. I have just taken defensive driving. Is that included in my policy?

Hint: Your employer might be offering the defensive drivers course for cheaper. Take it! If your employer doesn’t, check your local library; they offer defensive driving courses for at a reduced price too. Defensive driving courses saves you another 10% in payment.

In Week 1: Day 4, we set up our budget and filled out the column for “Actual budget”. Review your budget using all the tips from week 2 and make your savings adjustments. For instance, if you’ve succeeded in reducing your car insurance from say $110 to $80 by shopping around, update your automatic transfer in your saving account by the amount saved,. In this example, $30.

When was the last time you shopped around for auto insurance? Have you shopped around recently? If you have other tips working for you, share with me in the comments. Don’t forget, you can still join our Facebook group to help you along your journey here

[onesavvydollar-blog]

OneSavvyDollar Saving Challenge Day 9: (How to) Lower Your Cable Bill

Are you new to OneSavvyDollar? You can read all About the saving challenge.

Today’s Task: Find lower options for your cable bill.

Timeframe: 20 minutes+

The cable industry is one of the few industries that remain an oligopoly; there isn’t enough competition. The three main companies we have are Comcast, DirectTv, VerizonFios and TimeWarner. With limited choices available, this means you might have go round in circles till you’re forced to come right back to the same cable company you left.

Everyone is usually enticed with the introductory offer of just under $100 for the first year if you bundle your TV, internet and home phone. But really, who’s still using home phones? Remember when we used to not have enough minutes to talk on the cell phones so home phones were the perfect substitute. These days, what we don’t have enough of is unlimited data.

Anyway, after the promotional rate is done, your bill could go up as much as 40% and we all know that cable bills can be very vague with all the extra charges like regional sports fees (if you’re like me who doesn’t watch sports this makes no sense), state and local tax fees, maintenance fees and many more. This is is why you have to get into the habit of reviewing your bills at least  every 6 months. You want to know exactly what it is you’re paying for.

How To Reduce Your Cable Bill

1.Get rid of your DVR/Tivo: You aren’t home to watch your favorite show so you set your DVR to record it while you’re away. Chances are you can still watch all your shows On Demand. I use the On Demand feature from my cable all the time. Sure, you might have to wait a few days for your shows to be added to the playlist but who cares? I’m watching it for free while still being in control of when I watch TV. #Winning.

2. A la carte cable: A la carte cable is where you pay for only the channels that you really, really watch. On Day 2, we talked about needs and wants. Almost every adult has heard both words but for some reason, putting it into practice remains one of the hardest things we do. Do you need the extra cable box in your room? Get regular cable and just leave out the extras. Starz, ShowTime, HBO cost an extra $5 to $10 after taxes. If you have a channel that you watch religiously because of one show, how about cancelling when the season ends to reduce your bill?

3. Negotiate a lower price: I bet you didn’t think this is possible considering the fact that there aren’t many cable companies. Cable is one of your negotiable bills. It is as simple as calling and asking politely for a reduction in your bill. A customer service representative can go through your statement with you and both of you can decide what plan works for you.

There might also be promotions that you’re not aware of for whatever reasons. Even though there are only 3 major cable companies, each one of them is still interested in keeping their customers. Call and ask.

4. Cut the cord: Yes, you can disconnect your cable entirely. When I was in graduate school a few years ago, I disconnected my cable. I was getting distracted and frankly tired of my cable bill always going up so I got rid of it entirely and survived on Hulu which was basically free at the time. While Hulu is no longer free, options are popping up everywhere like Amazon Prime- $10.99, Netflix- $10 and Hulu at $7.99, which are all still cheaper than the regular cable TV.

But I recently found something good. A few weeks ago, my cable box suddenly stopped working on a Saturday night and I had to wait till Monday to get a replacement box. What did I do?

A few quick searches on the internet led me to “Yahoo View”.  If you’ve ever watched Hulu before they weaned customers off their free services, this is old Hulu and the perfect replacement. You can catch all your regular TV shows on Yahoo view for free.

Have you tired to get a lower cable bill using any of these methods? How has it worked for you? If you have other tips working for you, share with me in the comments. Don’t forget, you can still join our Facebook group to help you along your journey here

[onesavvydollar-blog]

OneSavvyDollar Saving Challenge Day 8: Negotiate Your Credit Card Interest Rate

This is Day 8! We are officially in the second week of our #SavingChallenge. Can you believe it? We have about 2 weeks left. New here? You can read all About the challenge.

Today’s Task: Negotiate your credit card interest rate.

Timeframe 20 minutes.

Goal: Look into your budget’s “financial bucket” to determine which expenses you can reduce.

The first question you might be thinking is, “can I really ask for a lower interest rate on my credit card”? The answer is absolutely. There are many of your expenses you can negotiate and this is definitely one of them.

How do I know this? Because I’ve done it and it works.

Last summer, I was stationed to work in a different location and had a 30 minutes walk (it was too nice out so I skipped the subway) from the train station to the office. I decided to call my credit card company to ask just because #CloseMouthsDontGetFed.

I got a representative over the phone and let’s just say 12 minutes later, the interest rate on my credit card went from 15.99% to 12.99%.

A whopping 3% points difference!

You might be thinking, “but I pay off my balance in full every month so why do I need to do this”?  You want to have the lowest possible interest rate on your credit card to cover your bases.

Life happens and sometimes we get into situations that are a little out of our control. The other day, a friend casually mentioned that something came up and she had to pay $5,000 which she put on her credit card. She has given herself a few months to pay it off. She would also rather pay off her credit card because it has a higher interest rate than build her emergency funds right now which is OK.

Maybe prior to the $5,000 situation, she used to pay off her credit cards in full. If she has the lowest interest rate on the card right now, then her interest payments will be much lower.

The 3 Times Your Credit Card Issuer Can Increase Your Interest Rate.

A credit card is a revolving loan. This means that there is no end date. You could use your card, pay if off, use it again without reapplying. Your (minimum) monthly payments depends on the total balance owed on the card.

Here’s what you may not know. A part of the disclosures (fine print) says that the financial institution is allowed to increase the interest rate on your credit card up to a maximum of 29.99% for a majority of places.

This information alone means nothing is really permanent on your credit card unlike installment loans which are pretty much fixed till the life of the loan.

So when can your credit card issuer (legally) increase your interest rate?

1. When the promotional rate ends. Nothing lasts forever and sadly, 0% promotional rates is one of them. But you must have saved a lot of money during the no-interest period so you shouldn’t be worried.

2. When you are up to 60 days late on your payments. On my statement, it is actually boldly written in a very obvious section of my statement. But yes making late payments will increase your interest rate and surely affect your credit score. Your credit score takes a nose dive when you are more than 30 days late on paying any of your bills.

3) When you have defaulted on an existing agreement. If you made an arrangement with your credit card issuer, do the best you can to keep it. One slip up and they have the right to increase your rate. Speak to someone if for some reason, you can’t meet up with the agreed upon plan.

Since your credit card issuer has the right to increase your interest rate, you also have the right to ask for a decrease in your interest rate. It’s all a bunch of variables anyway so why not. Here is the script I used when I called in.

Hi, my name is ________________

I’m calling to find out who can I speak with about reducing the interest rate on my credit card.

You want to make sure you’re speaking with the right person to save yourself time. Sometimes, a different department say “retention” might be the only department with the right to make such changes.

I’ve been a loyal customer for XYZ years and I’m usually on time with my payments/pay my bills in full. I’m getting better offers on other credit cards but I’d rather remain a customer here because of my long standing relationship.

Before placing the call, you need to make sure you have a leg to stand on. Ever heard of the Latin maxim, he who comes into equity must come with clean hands. Bad behaviors such as late payments will always cause you troubles in the future. Most businesses will do anything to keep an existing customer.

At the point, the agent is looking through your history to fact check you.

I have my mortgage, checking and saving account, credit cards and even direct deposit. Also, I use this card heavily (in my case, it was true because it was a Travel Rewards card)

If you’re dealing with a bank where you have more than a credit card, mention it. This is why it is important to build relationships with your financial institution. The more product lines you have, the better.

12 minutes later, the interest rate on my credit card was reduced. This all happens before I even got to the office.

Do be nice but firm. Nobody likes being yelled at talk more of on the phone.

Be firm because your credit card issuer might have a new credit card with a promotional rate going on.  The day I called, I was determined to get the reduction on my current card – nothing else.

If you are refused the interest rate reduction, but offered the promotional rate card, take it and just do a balance transfer.

Let me know if this script works for you. Share your success or obstacles with me in the comment. We have a lot of negotiating to do this week. Yup! You’re not done.

Don’t forget, you can still join our Facebook group to help you along your journey here

[onesavvydollar-blog]

OneSavvyDollar Saving Challenge Day 7: Evaluate and Catch Up

Day 7 is here! Are you new to our saving challenge? You can read all About the challenge.

Today’s Task: Evaluate and Catch up

Timeframe: 15 minutes+

Congratulations on completing the first week of our saving challenge! We’ve had so many daily activities some easier than others. I may not have mentioned it to you but our first week was all about the “setup”. You see, the hardest part of getting anything done is starting. The other half of the problem is not knowing what to do first.

Quick Recap

Day 1: We decided to save with a purpose so we could have a sense of direction for where or money is going.

Day 2: We opened up a “Savings Account” to help us create a separation habit and to put more money (you’ll see next week) into.

Day 3: We had to get our mind right by getting familiar with the reasons people stay broke.

Day 4: We did the heavy lifting here. We created our budgets to give us a visual pattern for where our money is going.

Day 5: We analyzed our budgets by creating our own financial buckets. This was another heavy lifting.

Day 6: We set up our savings account and bills for automations because even with good intentions, we all still need a little push with staying committed to our goal.

I have provided you with all the tools (Money Goal, Money journal and  Budgeting excel spreadsheet) you need to help you be in control of your finances.

Today is the perfect day to play catch up. What?!? Did you think you were never going to get a break? If you’ve been following along with the daily tasks, job well done! Today’s task should be a breeze for you. If you haven’t, what are you waiting for?

How to Work Today’s Task.

Read the daily activities and determine which one you’ve missed out on.

1) Review your financial goals and be certain they haven’t changed in the last few days. Because as we know, life happens and priorities change.

2) For group members, analyze your budget’s “financial buckets” to ensure you’re on track to save the amount you agreed to come December 15th. If you’re not a part of the group, you should have determined your own saving goal amount at the beginning of the challenge. (Day 1).

3) Keep your “Money journal” handy. We will need it for the next week which begins tomorrow.

Buckle up! Next week’s tips will include even more ways you can save more money within your budget.

Are you keeping up with your challenge?Share what you’re learning so far with me in the comment. If any of these challenges or tools (spreadsheet) has helped you, consider sharing it with your friends.

Don’t forget, you can still join our Facebook group to help you along your journey here

[onesavvydollar-blog]

“Who’s This?” Interview!

Ogechi Igbokwee was interviewed by “Who’s This?”. Check out the Interview here!: https://www.facebook.com/captainashley12/videos/10159144989085249/

[onesavvydollar-blog]

Advice #7!

Your boyfriend/girlfriend/husband/wife is not your saving account or financial plan. #GetYouYours

#OneSavvyDollar

[onesavvydollar-blog]

Question #4!

Have you started repaying your student loans?

If yes, how much is your monthly payment and what kind of repayment plan are you on?

[onesavvydollar-blog]

Question #3!

Does your job bring you joy or does it make you stressed out?

[onesavvydollar-blog]

Question #2!

We know how people love giving 'advice'. Lool! What is the worst money advice you ever received?

[onesavvydollar-blog]

Advice #6!

Today's Tip:  If you're in a relationship/marriage, live off one income.

[onesavvydollar-blog]

OneSavvyDollar Saving Challenge Day 6: Automate Your Savings and Bills

Day 6 is here! Are you new to our saving challenge? You’ve missed quite a but no worries.  You can still catch up by clicking on each one

Pre Day: About the challenge. Day 1: Let’s Swap. Day 2: Open a Savings account. Day 3: Four Reasons Why People Stay Broke Day 4: Set up a budget Day 5: Analyze your budget

Today’s Task: Automate your Savings and your bills.

Time to complete: 20 minutes.

I love online banking. I don’t know how we ever survived without it. I use my online banking everyday and it saves me a lot of time. I get so much done while on the go or at home. Good riddance to standing in lines.

The best part of online banking for me is, I get to put my bank to work while I pursue other things. How so?

Bill Payer.

You can pay your bills for free instead of mailing out checks and dealing with customer service on the phone over lost checks. Talk about a waste of time.

You can pay individuals say you owe someone monies. Just get their information (address, email, phone number) and add them to your Bill Payer. Your bank will send the payment for free.

You can also pay yourself! Say you wanted to transfer money from one of your bank accounts to another, all you do is add your information as it appears at the other bank and the bank you transfer from will send the money to you in a matter of 2 business days. Again, for free.

Why is this is important? It’s an automatic goodbye to (domestic) wire transfers fees which cost s an average of $25 for outgoing wires and $15 for incoming wires.

You can also set up payments/bills to go out every month of the same day or you can make adjustment based on when you have the funds in your account.

How Can You Save More?

This free service your bank provides allows you get into the habit of paying yourself first and pay your bills on time.

You’ve set up your budget, created your own financial bucket which included assigning a percentage for saving. No doubt you’re feeling accomplished with your #BossMoves. You say to yourself: “Self, I promise to always fund my savings account”. You really mean it and have every intention to do so.

Here’s the reality. You get paid for the week and somehow the money never makes it way to the savings account.

You see, there’s a gap in thinking about something (intent) vs actually doing it (action) and the only bridge that connects that gap is – commitment.

For some reason, the one category (even though it may have been budgeted for) that quickly ends up with a zero balance, is the savings or emergency account.

Here’s another reality- The money is rarely used for emergencies. Purchasing items you can live without is not a need if say it affects a higher need.

A higher need is getting into an accident on a Monday morning, having to replace a car out of the blue and having no money because you’ve been spending money allocated to “Saving/Emergency” at the club every weekend for the last 6 weeks to impress your friends.

Being in a situation like this leaves you with one option – borrow from friends, family or the bank. If you borrow from the bank, you can count that as one more bill + interest you have to add to your budget.

Think of it this way; every time you don’t save, you are stealing money from your future self.

What’s Your Next Steps?

Set up the specific amount you’ve allocated for saving to go into the saving account automatically same date every month like clockwork!

Review your bills and schedule all the bills that are fixed (don’t change in amount) and recurring (happens every month) to go out same date every month. This way, all your bills go out on time. You are saving money every time you pay your bills on time.

Review the due dates on your bill to ensure that you have the funds available in your account to cover the amount or else, you’ll be stuck paying a bunch of overdraft fees. Seeing your account in the red from overdraft charges is a horrifying feeling.

The ultimate goal of today’s task is to get you to build a habit consistently and as painlessly as possible.

Are you keeping up with your challenge? Which category of expense are you spending (heavily) on? Share what you’re learning so far with me in the comment. If any of these challenges or tools (spreadsheet) has helped you, consider sharing it with your friends.

Don’t forget, you can still join our Facebook group to help you along your journey here

[onesavvydollar-blog]

Question!

Have you read any books about money that has helped you a lot? Share with us👀

[onesavvydollar-blog]

Advice #5!

Today's Tip: There's NO shame in living within your means. Saying yes to everything beyond your budget to please people will only lead to stress and anxiety.

Meanwhile, shout out to our new members. Welcome to the group 👏👏. Feel free to post up or ask your questions.

[onesavvydollar-blog]

Advice #4!

Today's tip: I could write all the tips in the world but if you keep making excuses for your financial situation, nothing will change.

You could either make moves or make excuses. The choice is yours.

[onesavvydollar-blog]

OneSavvyDollar Saving Challenge Day 5: Analyze Your Budget

Welcome to Day 5! Are you new to our saving challenge? Here’s what you’ve missed. Click on each one to catch up:

Pre Day: About the challenge. Day 1: Let’s Swap. Day 2: Open a Savings account. Day 3: Four Reasons Why People Stay Broke Day 4: Set up a budget

Today’s simple task: Analyze your budget.

Time to complete: 30 mins- 60 mins.

I’m SO glad you’re doing your daily tasks and sticking with the challenge. You’re doing something your future self will thank you for.

Now that you’ve downloaded the BudgetSheet and filled out the actual expenses column, you can see where your money is going and now know what needs to be changed to improve your financial well being. Good work!

Believe it or not, you’re becoming an expert all on your own but hold on, your not quite done yet. Your budget still needs to be reviewed, and adjusted based on the results you got. So what was your outcome?

A) My expenses equals my (net) income and allows me save.

B) My expenses exceed my (net) income and doesn’t allow me to save.

C) My expenses are below my (net) income and I am able to save.

In a perfect world, the best situation to be in is A or C. If completing your budget shows that your expenses exceed your income and doesn’t allow you save, then you need to make some adjustments.

Before we get into this, there are all kinds of expenses going on in your budget every month.

The Different Types of Expenses

Fixed: These are items on your budget that don’t change from month to month. For example, your rent or student loan.

Variable: These are items that change from month to month. For instance, gas, groceries and entertainment. To some extent, you can control this expense.

Recurring: These are items in your budget that you always have to pay for. For instance, rent or mortgage.

Non recurring: A non recurring expense are usually one offs. Like something that just happened. They usually take the form of emergencies. For instance: a roof or car repairs. Even getting a ticket. Even though these items might be one offs, we still need to prepare for them.

Essential (Needs): Your needs are items that are necessary for survival. For instance: shelter, food and water. These expenses are also your priorities.

Non essentials (Wants): Your wants are often your desires; items you’d like to have but can do without. These are your non priorities and often show up on your budget as your life style choices.

The difference between needs and wants is is where we get into trouble – a lot.

“I need that Gucci Bag to survive” is not a true statement. The same way, “I need that Rolex watch to survive” is also not a true statement.

“I need to take that $750 trip to survive” is not a true statement especially if it means not paying your rent.

The conversation about wants and needs sounds really simple or obvious in writing but is rarely the case. In real life situations, we often put our wants ahead of needs.

I’ll tell you a (true) story.

A young girl is getting ready to go to college to study International Business. She applies to a few state and private schools and is accepted by all the schools she has applied to. But her first choice is a private school. Here’s the reality: the private school comes with a price tag of $60,000 per year.

She receives $3,500 as scholarship from the the school, $6,500 for academic excellence, $500 from a local business group and $5,000 in financial aid. This brings her total funds to $15,500.

Here is another reality: her parents cannot afford to pay for the difference.

The question is, did she need to go to her school of choice? No, she had other options.

With $5,000 alone in financial aid, she could have started off at the community college or a state university in the area.

These different kinds of expenses might seem like a lot to know but the goal is to identify which one of them is eating up the most of your budget and finding an alternative.

Create Your Own Financial “Bucket”.

What does this mean?

Review and define your spending priorities. As a rule of thumb, you can use the 50/30/20 budget.

The first 50% goes towards your essentials which includes rent, food, transportation. These are thing you need to get by your daily activities. Of this 50%, budget 35% for your housing and utilities.

I’ll tell you another (true) story.

A former employee at Yelp with a monthly net income of $1,466 was renting an apartment at $1,275. She had no roommates. At this point, her debt to income ratio was at 87% ($1,275/1,466). As you can guess, it was impossible to accommodate other expenses (needs or even wants).

The next 30% is for your non essentials (lifestyle choices) like vacations, hobbies, gym, entertainment. You see, when people say, “live within your means”, it simply translates to spending less than you make by cutting back. It doesn’t mean doing without.

The remaining 20% you can put towards your long term savings like 401k, building and emergency funds or paying down debt.

Of course you can adjust the percentages based on your current situation. The idea is to get all your bases covered while getting you started on saving.

Money is a very powerful but unintelligent tool. It always needs to be told what to do.  You have to assign every dollar a job or else, it runs off on its own.

Are you keeping up with your challenge? Which category of expense are you spending (heavily) on? Share what you’re learning so far with me in the comment. If any of these challenges or tools (spreadsheet) has helped you, consider sharing it with your friends.

Don’t forget, you can still join our Facebook group to help you along your journey here

[onesavvydollar-blog]

OneSavvyDollar Saving Challenge Day 4: Create a Budget

This is Day 4! Are you new to our saving challenge? Here’s what you’ve missed. Click on each one to catch up:

Pre Day: About the challenge

Day 1: Let’s Swap

Day 2: Open a Savings account.

Day 3: Four Reasons Why People Stay Broke

Today’s simple task: Set up a budget. We are going to take this one step at a time so you don’t feel overwhelmed. List all your sources of income and all your actual expenses.

Time to complete: 20 mins- 45 mins.

Good job for getting this far!

I know, I know, you don’t want to create a budget.

You’re afraid to confront the reality of your financial situation or worse still, feel like you’re being restricted. But trust me, a budget can save your life. Literally!

I’ve held several workshops and when people tell me they are living pay check to paycheck, the first thing I ask is, do you have a budget? To which I often get a response of “no”. How can you tell if you don’t have a visual picture of your spending pattern?

The immediate benefit of setting up a budget is that it let’s you know what you’re working it. Knowing is liberating!

Carrying on without a budget is like groping around in the dark or traveling in an unfamiliar place without a sense of direction.

You see, whether you are trying to save more, have your debt under control, get out of debt completely, and even build wealth, (Yes, wealthy people have budgets) creating a budget is your first step to financial freedom.

Your goal after coming to this knowledge is to live within (or below) your net income.

Here are a few other reasons why you need a budget.

To decide how you want to spend your money.

To determine how to spend money in the future.

To learn to live on less than available income.

To stay out of financial trouble.

When I decided to start saving right after I transferred $50 into the sub account I had created, I wrote down a list of my expenses. My list was  written on nothing fancy. I didn’t use a fancy software; it was good ole paper, pen and a calculator.

You don’t need any software to set up your budget but if you feel better using one, go right ahead. The only thing you need to come to the table with is receipts of all your bills.

Your budget can be really simple or slightly complicated depending on the household. I’m single so I’ll admit I have things fairly easy but in a household of say four, the situation is very different.

I’ve removed some of the pain points of getting started with your budget by creating a simple budgeting spreadsheet to help you through this step. The sheet includes formulas all you have to do is input your numbers.

Items needed.

1) Your Pay stub

2) A list of all your Expenses. (Hint) use your bank statements.

You are to fill out only your current actual expenses for now.

Feel free to remove any expense category that is not applicable to you. You can also add more categories based on your situation but you do need to fill it out entirely and be honest about your expenses.

You can download the simple spreadsheet and share with your network and loved ones.

BudgetSheet

How is the challenge coming along? Are you crushing each task?. If you’re having troubles accessing any of the downloads, let me know.

Have you found the articles related to each challenge useful? Please share with your friends and family.

Don’t forget, you can still join our Facebook group to help you along your journey here