Personal Finance

  • How To Improve Your Credit Score

    My credit score was not great when I first started learning about money, but recently I’ve benefited from multiple refinances where my excellent credit gave me huge benefits and saved me tens of thousands of dollars

    After refinancing our mortgage AND the parent plus loans I’ve been paying, I’m more convinced than ever that you shouldn’t ignore credit. When you have bad credit you can get denied for loans or have to accept bad rates that end up costing you a lot of money.

    Instead we should work to make your credit score better without going into debt. I know not everyone agrees on credit in the personal finance world – everyone gets feisty – but it’s a fact of life for us real life every day people.

    Over the years I’ve been able to raise my low credit score to one that is considered excellent. This excellent credit score has helped save me lots of money in interest rates on my loans and has put me in a much better position financially.

    Learning how to improve my credit score took some work so I’d like to share some of the tips to improve credit scores that I learned along the way.

    Why You Should Improve Your Credit Score

    The unfortunate reality is that your credit score matters. 

    Good credit gets you access to better rates, allows you to pay less on big items like homes and cars, and even determines your ability to qualify for certain jobs or rentals. 

    You don’t have to love debt or need credit card debt to get a good credit score. In fact, I hate debt. But I also live in the real world and out here your credit score is a tool that can open up doors to a better experience in life.

    Having no credit sounds like an amazing idea but in the real world it makes things much harder. You will have access to fewer companies when you apply for a mortgage because many won’t do manual underwriting. You’ll  have access to less rental options because many landlords don’t want to (or can’t) go through the hassle of evaluating your finances and manually approving you. 

    The fact of the matter is that having good credit opens up doors for you.

    Here are a few reasons why building a good credit score is important:

    • Good credit will get you better interest rates when you need credit for financing a large purchase.
    • Good credit means you will pay less overall on those big purchases you have to make on credit.
    • Buying a home requires a credit score with most lenders and the better your credit score, the better loan you will be able to get. 
    • Having bad credit can stop you from being able to buy a home at all until you improve it.
    • Your credit score determines your ability to rent an apartment and many won’t accept below 700.
    • Your credit score can affect getting certain jobs in certain industries where you have to appear trustworthy.

    Clearly having good credit is important. It affects many areas of your life and having bad credit will force you to pay more for the same things others get at a much lower overall cost.

    The good news is your credit score is something you can work to improve!

    We have excellent credit now so we got great rates and had an easy time with our refinance. I got a great rate on our mortgage and I got to move the rate on student loans from 8.5% to just over 3%. Before that? My mom got denied for a refinance because of credit. She’s been working on her credit and debt payoff but in the real world she is still penalized by companies and forced to pay 5% more interest. Or even worse on other products.

    It’s not fair. It’s really not. When you have bad credit you have to pay more when you do need to purchase something with credit. You can also be denied certain jobs, rentals, and more. Pretending like you don’t need good credit might sound cool and counter cultural until you are the one being denied opportunities to make your life better…. because of credit.

    The good thing is that credit is something that can be fixed. It’s a game. There are known things you can do to improve your credit. And if you’re smart you can benefit from it. Pretending it doesn’t exist doesn’t work for most of us so I’m more convinced than ever it’s important to understand how credit works, learn to use it responsibly, and benefit from the concept.

    What Makes Up Your Credit Score

    In order to improve your credit scores, you need to understand what makes up your credit score.

    To help you understand how factors affect your credit score, here’s a screenshot of my info in Credit Karma while I have a 823 credit score.

    Here are the things that will affect your credit score from highest to lowest impact:

    1. Payment history – Percentage of payments you’ve made on time
    2. Credit card use – How much credit you’re using compared to your total limits
    3. Derogatory marks – Collections, tax liens, bankruptcies, civil judgements on your credit report
    4. Credit age – Average age of your open accounts
    5. Total accounts – Total open and closed accounts on your report
    6. Hard inquiries – Number of times you’ve applied for credit (in the last couple years)

    These are the things that impact your score the most. Two of them are things that you do automatically when you start budgeting and paying down your debt – you pay things on time and you use less of your available credit.

    So let’s talk more about these factors and how you can use them to actually improve your credit score.

    How To Improve Your Credit Score

    While I don’t take pride in having a great credit score, it has been something I’ve worked to improve over the years and has benefited me greatly. Ultimately a high credit score wasn’t a point of pride but a practical matter that I needed to improve to help myself and my family.

    It is possible to build your credit score but there are some things you need to know about improving your credit score. Having this knowledge is the first step to improving credit and the next will be implementing it. 

    Here are some important things to know:

    • It is possible to rebuild credit responsibly over time.
    • There is no QUICK way to fix credit. Any method will take time.
    • You do not need to pay someone else to fix your credit. You can do it.

    My own credit score went from the low 600s to the high 700s and now to the 800s. This has improved my loan interest rates and helped us get a good mortgage rate which saved us tens of thousands of dollars in interest.

    The Basics Of Improving Your Credit Score

    If you want to improve your credit score, there are some basics you need to know about how to improve your credit and therefore your credit score.

    The basics of improving your credit score:

    1. Check your credit score AND your credit report
    2. Pay your bills on time
    3. Reduce the amount of debt you owe
    4. Increase your credit limit

    Those are the very basics of building your credit over time.

    Of course, there are lots of little things to do with each item and in certain situations so we will walk through them all in the coming sections and action steps. You can do this!!

    For action steps you will want to do the following items:

    • Check your credit score for free with multiple sources.
    • Check your credit report and make sure it is accurate.
    • Pay your bills on time every month and never be late.
    • Keep your balances low on credit cards and revolving credit.
    • Do not close old accounts you don’t use.
    • Apply for and open new credit only as needed.
    • Pay off debt as you can rather than moving it from account to account.
    • Make responsible purchases on credit that you know you can pay off.
    • Don’t obsess about your score, just let it improve over time.

    These are the basics for improving your credit score. I’ll break each one down further below.

    Check your credit score for free.

    Improving your credit starts with knowing your credit score and knowing where you stand with credit. Once you know what you are working with you will know how much it can improve by implementing the basic ideas for improving a credit score.

    You can check your credit score for free from a number of sources these days. You should never have to pay to get your credit score.

    Check your credit score from 3 different sources.

    I recommend checking your credit score in at least 3 locations so you can get an average and see what different scores are saying about your credit worthiness. Different sources will report a different FICO or Vantange score so checking multiple sources gives you a clear idea of what different places are seeing.

    Here are a few places where you can check your credit score for free

    • Experian app
    • Credit Karma
    • Creditwise – offered within Capital One accounts

    Checking your score is the first step because you have to know where you are starting. It may be hard to see and face the facts if your score is very low but finding out where you start is the only way to improve.

    Check your credit report and make sure it is accurate.

    When you are trying to improve your credit you have to not only find out your credit score but also check your credit report to see what the credit bureaus are seeing.

    Luckily, once a year you can pull your credit report FOR FREE thanks to the federal laws in the United States. You can get a free copy of your credit report every 12 months from each credit reporting company from annualcreditreport.com.

    There are multiple reasons to check your credit report:

    • Checking your credit report gives you an idea where you can start improving credit.
    • Reviewing credit reports helps you catch signs of identity theft early.
    • It allows you to ensure that the information on all of your credit reports is correct and up to date.

    Here’s how you complete this step:

    Step 1: Check your credit report.

    There is ONE website in the US where you can pull your credit reports for free thanks to this law: annualcreditreport.com

    You don’t need to pay for your report from any bureau or any other website. This is the only website you need! It is the only official site explicitly directed by Federal law to provide them.

    Sign up and enter your information on the website to get your three credit reports.

    Next, review the information. If there is any incorrect information, make a note of it for the next step.

    Compare the three credit reports against each other. Do they match? Where are the discrepancies between the different bureaus? Mark these for your information for future steps.

    Step 2: Dispute and remove any incorrect information.

    Sometimes there may be mistakes on your credit report. That’s why it is important to pull and double check your credit report every year.

    Once a year you can should pull your credit report for free and make sure nothing has changed or been reported incorrectly. Staying on top of your credit makes sure when you do build good credit it will be there for you when you need it.

    Pay your bills on time every month and never be late.

    On time payments is a huge factor in your FICO score and all other credit scores. Paying your bills on time is actually one of the biggest factors in determining your credit score. FICO says it is 35% of their calculation for your score.

    Unfortunately missed payments or late payments will negatively affect your credit score. Paying your current bills on time should be the first active step you take toward improving your credit score.

    If you’re having trouble with late or missed payments, here are a few things to try to pay your bills on time:

    • Make a list of every bill you have to pay. You should have an accurate and up to date list of all bills you owe each and every month. If you have a lot of bills to pay it’s easy to let one fall through the cracks if it’s not listed. 
    • Check your credit report to make sure you’ve included every bill due on your list. Your credit report lists all lenders you owe money to so you can add any debts you’ve either missed or forgotten entirely.
    • Review your bank accounts and credit card statements for recurring bills you pay each month. This will include things like subscriptions, memberships, cell phone bills, etc.
    • Add the due dates to your list of bills to pay. You have to know when bills are due in order to pay them on time or early. 
    • Set up automatic payments for bills. It’s easy to forget a due date when your life gets busy so make sure your bills are paid automatically when it’s an option.
    • Set up payment reminders. You likely can’t pay every bill automatically so you will never to make sure you have a system for making manual payments on time. You can do this on some banks or just use your calendar. Put all your bill due dates into your calendar and set up automated reminders so you can pay the bill on time or double check autopay to make sure it was paid.

    This might seem like a lot of work but always paying your bills on time will help you maintain good relationships with companies and improve your credit score.

    Getting current on your bills and staying current without missing payments or paying lae will help you improve your credit score. The longer you pay your bills in a timely way the higher your credit score will increase and the less your past payment mistakes will count against you.

    If you are truly struggling just to make ends meet or feel like you are drowning in debt, then reach out to a legitimate credit counselor or financial coach. Don’t go to a disreputable credit repair place with big promises but look for help to get out of the hole you’re in right now. This solution won’t hurt your score and will give you a plan to manage your credit by paying on time and improving slowly over time.

    Keep your balances low on credit cards and revolving credit.

    How much credit you are currently using will affect your credit score. If you are only using a small percentage of the credit you could be using then your score will be higher.

    Having a good credit score doesn’t mean you need overwhelming amounts of debt. In fact, having large debt balances usually hurts your credit score because of the credit utilization factor.

    Your credit utilization is the balance of your debt compared to the available credit you have access to. This contributes 30% to FICO score’s calculation which means it is something you need to work on asap. 

    The goal here is to pay off debt while still keeping your credit limits high. This lowers the amount of credit you are using compared to the amount you could actually use. 

    The first step of course is paying off debt so we will focus on that step here. It is one of the easiest areas to work on but it does require discipline, focus, and organization.

    Do not close old accounts you don’t use.

    While this is debated by some in the personal finance world, I found that not closing accounts helped my credit score.

    When I finished paying off a debt or simply moved on to a new credit card for rewards, I never closed the old account unless it had an annual fee.

    If a credit card did have an annual fee, I did close the account but asked the company to roll the credit limit to another card without a fee or to another existing card. This trick helps raise your credit limit drastically!

    Having old accounts still open for use will help increase your credit score since age of accounts is a big factor in your score. You don’t have to use your older credit lines often but just enough to keep them open.

    Apply for and open new credit only as needed.

    Having multiple accounts open for long periods of time can help your credit score but that doesn’t mean more is better.

    You don’t need to open 25 different accounts to get a good credit score. In fact I have less than 10 and have an excellent credit score.

    Be selective in the credit lines that you open. Don’t max yourself out with too many new open lines of credit. It will drop your credit score temporarily and it could potentially put you in a precarious situation.

    If you are in a credit building stage, then you should work on opening new cards strategically over time but never all at once. Wait 6 months or more between opening new credit lines.

    Pay off debt as you can.

    I don’t carry debt balances and pay off all my debt but still keep my credit score high so it is available for me to use if I need it.

    Paying off debt rather than moving it around with transfer balances is a smart move for your overall financial situation. It also helps your credit score because the lower your debt utilization the better your score will be.

    Paying off debt can help improve your score if you are reducing the amount you owe and freeing up space you can use. Debt utilization amounts are a part of the credit score as we discussed before. Your score will rise when you have lower amounts of debt because you are utilizing less of the credit available to you.

    Here are some practical ways to pay off debt:

    • List out all of your debts and make a plan to pay them down using either the debt snowball (lowest balance to highest) or debt avalanche (highest interest rate to lowest).
    • Pay off debt instead of moving it around. Paying off your debt will lower your overall utilization amount which will increase your score.
    • Use extra money in your budget and from side hustles to pay down your debt faster. 
    • Keep balances low on credit cards and any other revolving credit you have open. High balances on credit cards will negatively affect your score.
    • Do not close your unused credit cards when they are paid off unless there is a yearly fee for keeping them open. If you do close a credit card, ask the company to roll that credit limit to another card you have open with them.

    Always make sure you make responsible purchases on credit that you know you can pay off.

    Don’t obsess about your score, just let it improve over time.

    It might be tempting to pay someone to help improve your credit score quickly, but be cautious of these services. Many are not helpful but take your money for something you can do yourself.

    You can improve your credit score over time by following common sense credit guidelines and getting on a budget.

    The less you obsess about your credit score the better off you will be.  Ultimately a credit score isn’t the most important thing in your financial life and there are ways to operate around a bad credit score or no credit score at all.

    If you are planning to use credit less and don’t need it for a future mortgage or car loan or new job then your credit score will be less important.

    Remember that even if you are planning to use credit in the future, you can work with what you already have, pay things on time, use credit responsibly, and build your credit score from there.

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  • Living With Roommates To Save Money & House Hack

    When you are saving money to pay off debt or afford a big expense like your first home, you likely will be looking at a number of options to save money. One area where you can save a lot of money is by living with roommates.

    Why live with roommates?

    Living with roommates is actually a great way to get social interaction and save money!

    When you live with roommates you are able to save money because you are splitting your rent costs. Rent or mortgage costs are generally the largest line item in most people’s budget. Getting a roommate to cut down on that expense makes a lot of sense when you are trying to save money.

    Another benefit of living with roommates is the social interaction and community. This can be a huge positive when you have the right roommates and love the people you live with. They can greatly add value to your life, but you have to be careful because it can also go the other way.

    Those are the top two benefits I personally found when living with roommates but there are plenty of others!

    Living With Roommates

    I’ve had plenty of roommates over the years during college and after. I’ve lived with friends,  family and strangers.

    In fact, I’ve never lived alone until I briefly lived alone for 6 months in my late twenties. And even after that brief stint living alone I realized I still wanted to live with other people!

    The reality is that living with roommates is harder than living alone because you have to share space. Communication is important and resentments can come up when there are disagreements about how the space should be used. Conflicts can arise over things like chores, cleaning, and sharing food.

    Ultimately the reality of living with roommates is that it takes a lot more work on interpersonal relationships but provides benefits that greatly outweigh the level of work you must put in for most cases.

    Why I Lived With Roommates 

    So why did I still live with roommates when I know it involved a lot of extra work? Why was I willing to deal with the tradeoffs?

    I wanted to save money on rent.

    That’s it! The number one reason to live with roommates was the reason I did it. Living with roommates was the right choice for me because it was the cheapest living option. Regardless of what city I’ve lived in, or my spot in life, living with roommates has always been the cheapest living arrangement.

    Living with roommates might not always be ideal or what you expect, but I know it’s what is best option to save money!

    House Hacking With Roommates

    A popular solution to not only saving money but eliminating your mortgage is house hacking.

    House Hacking is a phrase coined by BiggerPockets podcast host Brandon Turner and it just refers to the strategy of renting out portions of your primary residence to generate rental income that is used to offset the cost of your mortgage and other expenses associated with owning a home.

    Basically, you get roommates to live with you in the house that you own and your roommates pay your mortgage! You save money, build equity, and can generate positive income in the right locations.

    House hacking is often a way to get into a more expensive home or home ownership in an expensive location where you can’t afford the home on your own. It’s also a great way to squeeze all the value possible out of owning a home so you benefit financially.

    Living with roommates in order to house hack is possibly the very best way to utilize living with other people because you achieve accelerated financial benefits from the arrangement.

    Here are some of the benefits of living with roommates in order to house hack:

    • Lowering your monthly housing cost through generating rental income
    • Renting out portions of your property means you still get to use it
    • Lowering your taxable income base by acquiring extra tax write offs (mortgage interest deduction)
    • Having the possibility of removing your mortgage payment, insurance, and maintenance expenses completely through the rental income
    • Learning how to be a landlord without as much upfront risk
    • Transitioning into the world of real estate investing again without the huge unfront risk

    There are clearly a lot of positive benefits of living with roommates and this is not even including all of them!

    Tips For Living With Roommates

    If you are single it’s a lot easier to live with roommates because you can simply move into a house with a lot of people or rent a room out from someone.

    If you are married this is still possible. It’s also an option for you to rent or buy your own place and then bring in roommates. This will give you more control as you will be in the position of power to set rules and evict the person if things go wrong.

    It always helps to have a written agreement or lease with people you are living with even if it’s just a temporary situation or you are the person moving in. This covers both parties in case something goes wrong and there are disputes to settle later. It might be awkward at first to bring up the fact that you want a written agreement to cover your roommate situation, but it’s a very smart idea in the long run!

    Additionally there are many things you can do to be a good roommate and ensure that nothing goes wrong. Be a good roommate by:

    • respecting your roommates space and privacy
    • doing the dishes and other household chores when needed
    • not being nosy about the roommates life
    • setting clear boundaries for each other and respecting them
    • picking up after yourself, especially in common areas
    • respecting the other person’s right to reserve and use common areas
    • being a happy and positive person in interactions with roommates

    Do those things and you won’t have any problems at all living with roommates. In fact, it might be the best thing you ever did!

    Help With Living With Roommates

    If you want to be extra prepared for living with roommates, or don’t know how to handle a situation that has come up, try reading books and blog posts about how to deal with roommates.

    There are several inexpensive ebooks that you can get to help you navigate the world of living with roommates. Try these to start:

    These books are a great way to learn about roommate living and learn how to solve or prevent common problems that arise among people living together. You can spend $10 on all these ebooks and save yourself from unnecessary strife.

    Good luck with your roommate living. I know it’s for me and I hope you can find a way to make it work for you too!

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  • 6 Most Profitable Digital Products To Sell Online

    I love selling digital products and I’m glad I finally started selling digital products in 2019 after years of dragging my feet. It has been an incredible and profitable income source in my online business!

    Selling Digital Products

    Selling digital products is a highly profitable way to earn money online while also helping your customers solve a problem and improve their lives. It’s truly a win for everyone.

    Selling digital products is actually my favorite way to make money online (here are the ways I make money online). I sell digital products that make me hundreds of dollars every month and sometimes even thousands in passive income. I love making products once that I can then sell thousands of times.  

    Whether you are a blogger, YouTuber, or online business owner, selling digital products is a great way to earn money online in 2020 and beyond.

    Even if it is not your main revenue it can become a great side income that helps you earn money to pay for items you need.

    Why Should I Sell Digital Products?

    Maybe you are wondering if you should even sell digital products or why digital products are such a great way to earn money online. 

    There are a ton of reasons why you might want to start selling digital products. Here are a few:

    • Passive income – create products once and sell an infinite number
    • No physical inventory to worry about – everything is done online
    • Low start up costs – you can create digital products with free programs
    • Easy to create products – time to create digital products can be low
    • Easy to sell – plenty of avenues to sell your products 
    • Easy to create products for multiple niches & interests

    These are very compelling reasons for why every person wanting to create an income online should be making and selling digital products. It is a fantastic opportunity to create passive income for yourself while also creating useful products for others. 

    How to Sell Digital Products Online

    There are many different ways to sell digital products online and each have their pros and cons. 

    You can sell on sites like Etsy where you don’t own your platform but can reach a huge amount of customers quickly. 

    You can sell on your own website as well which takes more work to setup but you keep more of the money and have more control over your products. 

    First, you will need your own website or at least a domain for selling on your own website. See how to start a website or blog here. 

    Next you will want an e-commerce platform that will allow you to both take payments and deliver your digital products to your customers. There are many different e-commerce platforms that make this possible so let’s look at the best ones for selling digital products specifically.

    Etsy – I love selling on Etsy because you don’t have to find people to buy your digital products – they are already on the platform and Etsy is bringing them to you! It’s easy for beginners to start and Etsy shop and you can get 40 free listings through this link.

    Podia –  Podia is a more robust platform that will allow you to not only sell digital downloads but also offer memberships and online courses. If you have plans to grow a full online business it’s the ideal platform to use to keep everything in one place. Get a 14 day free trial of Podia here

    SendOwl – This platform is specifically designed for selling digital products. You upload the digital products and start selling immediately. This platform is just $9 per month with no additional fees taken our from sales you make. Get a free trial of SendOwl here.   

    Woocommerce – WooCommerce integrates easily with existing WordPress websites to sell digital downloads. WooCommerce is not specifically for digital downloads but they have made the process super simple for sellers and do not take additional fees from sales. I currently use WooCommerce to sell my digital downloads on my website. Get started with WooCommerce.

    How To Determine Profitable Digital Products

    There are tons of digital products you can sell online but if you are looking for maximum profitability from your efforts then you need to think about your end customer.

    If you are aiming for a market of people who don’t have much money then you can’t price your items that high. If you are looking to sell to a group of people that won’t get anything besides personal satisfaction from your product that drops the level of profit for you as well. The customer you are targeting will determine how profitable your item will be.

    You want to look for markets where your future customer is going to gain high rewards from your products therefore they will be willing to spend more which increases your profit.

    The most profitable items help someone earn money or achieve a goal especially if it financially benefits them more. An example of this is selling editable marketing materials to real estate agents. These products are profitable because you can charge more for them because the customer is willing to spend more to save time in creating these materials and will make money in their business from them.

    Next let’s look at some of the most profitable product ideas and examples of each.  

    6 Most Profitable Digital Products To Sell Online

    If you are planning to add digital product sales to your online income streams, then you likely want to make sure you choose the most profitable digital products to sell so your time is used wisely.

    Below are my top picks for the best digital products to sell in 2020 and beyond. 

    1. Ebook templates
    2. Marketing templates
    3. Swipe files
    4. Spreadsheets templates
    5. Online courses
    6. Elements for creators 

    These are incredibly profitable areas of digital products because they are things that help other people make money. Generally people with money or making money are the ones who are willing to spend more. 

    There are dozens if not hundreds of other digital product ideas for things you could sell online, in fact I’ve shared more than 60 digital product ideas you can sell online!

    Regardless of which digital product you decide to sell, your profits for creating a digital product will always be higher than a traditional product because you are creating a product once you can sell again and again.

    Growing A Digital Product Business On Etsy

    Etsy has downsides but it’s also an amazing place to build a business and earn an income.

    If you want to grow a business selling digital downloads on Etsy I recommend my friend Sharon’s Etsy Entrepreneur course where she walks you through the process of setting up an Etsy shop and growing it to make $1,000 a month or more. She grew her Etsy store of digital downloads to more than $1,000 a month and has inspired many people to do the same.

    Remember that your business growth will depend on being consistent and growing over time adding valuable products. For most of us we begin with one product and grow over time building on what works.

    Over time you will learn tips and tricks to grow your digital products shop and find that success can be far beyond you expected when you focus on profitable digital products.

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  • Trying New Budgeting Styles | April Paycheck Budget

    Our April paycheck budget has a ton of new changes because our lives are different now and it felt like a good time to change up the budget as well! We are now trying out a pay yourself first method which we will soon combine with a percentage based style like 80/20 or 50/30/20. I’ll be sharing more about these as we try new stuff out!

    While our lives are so different as we navigate the current financial crisis and global pandemic we’ve adjusted our goals for the year and it felt like a good time to change up how we budget because everything else is different too!

    Our main focus for paying ourselves first is our savings for our emergency fund and building up 3 months of expenses because $1,000 is not an emergency fund.

    Budget With Me!

    In the video you can budget along with me as we cover the budget necessities: bills, fixed expenses, variable expenses, debt payments, and sinking funds.

    This is the first time we have implemented the pay yourself first method where we put all of our goals first and make sure those are covered before anything else. That means savings, investing, and debt repayment comes first in our budget before bills of expenses like food and fun.

    If you are new to watching our budgets, here’s a little run down of our situation! We both work full time, I do freelance work and earn income from my YouTube channel and this is our take home income that I am budgeting. I cover bills, variable spending expenses, sinking funds and the goals for the month. This month we are super focused on increasing our emergency fund which we are trying to cover 3 months of expenses and eventually even more.

    April Paycheck Budget Setup

    During this paycheck our main goal was to continue building our emergency fund.

    April monthly goals:

    • Save $2,000 for our emergency fund
    • Don’t do unnecessary online shopping

    Goals for this paycheck for me were:

    • starting a new type of budget
    • setting up business payments biweekly
    • emergency fund growth

    With that in mind we broke down our April 2020 monthly budget into a more specific way for this paycheck budget.

    April 2020 Monthly Budget

    Here’s the breakdown of the paycheck budget for the first half of April 2020.

    Salary$2,599
    Extra Income$26
    Pennies Not Perfection$400
    Total Income$3,259

    With $3,259 in planned income for the month we broke it down this way.

    Pay Yourself First:

    Emergency Fund$1,130
    Student Loan$220
    Roth IRA$50
    Robinhood$10
    Ellevest$10

    Fixed Expenses:

    Mortgage$600
    Therapy$130
    Netflix$15

    Sinking Funds:

    Phone$50
    Life Insurance$35
    Car Insurance$75
    Car Repairs$50
    House$25
    Christmas$25
    Emergency Fund Extra$45

    Variable Expenses:

    Food$350
    Gas$50
    Medication$30
    Birthday$50
    J Personal$100
    M Personal$50
    Giving$100
    Misc$50
    Buffer in Acct$9

    Paying Yourself First

    Paying ourselves first is super exciting! Let’s be real, it’s fun to save money and invest money once you realize what that money can do for your in the future.

    Paying yourself first isn’t hard it just means prioritizing things like saving, investing, and paying off high interest debt. Paying yourself by doing these things before anything else in your budget is a great way to hit goals.

    We plan to continue trying this style of budgeting and see how it helps us better hit all our many goals!

    Our Emergency Fund Savings

    Because we aren’t playing many different expenses like daycare or going out to eat or going to events or throwing parties (the list goes on) we are able to save a lot more money in our emergency fund!

    We recently determined what we need for our emergency fund to equal 3-6 months of expenses.

    Looking at our monthly expenses and cutting out many things for an emergency situation means we need roughly $3,000 a month for our expenses. This means for a 3 month emergency fund we will need $9,000 saved. For a 6 month emergency fund we will want to stock up $18,000.

    We have a plan for our emergency fund and hopefully things go well and we can save it up with our extra income coming in and big paychecks from the government.

    Now with planning to save $2,000 a month we will also be adding a lot of our regular income to our emergency fund. This means we will be able to save up to $9,000 much quicker than I originally expected.

    This paycheck we were able to save over $1,000 to the emergency fund which moves us even closer to our goals.

    Investing To Hit Goals

    While we are prioritizing savings during this time due to potential job security, we are also continuing to invest small amounts into the market and dollar cost average our investments.

    One of my goals this year is to max out my Roth IRA and because I haven’t started on that goal yet it felt like a good time to get going on that goal.

    I’ve been investing for a long time now and I love investing when markets are going up and when markets are going down. In fact, my shortest time frame investments are for at least 15-16 years from now when I want to use the dividends to help my daughter.

    Because I am not investing money for the short term I don’t worry much about the markets year to year ups and downs because I know that in a long time frame that money will continue to grow. That’s why I’m still investing small amounts even when I have bigger goals to achieve, because I know small amounts I won’t miss now will add up to huge amounts later.

    I’ve talked a bit about the investing platforms I use for different purposes and here are the ones I plan to use this month:

    Because all of thee accounts have different goals and allow me to try out the more popular investing platforms I’m able to try different things and also work toward multiple goals in the far off future.

    Trying New Budgeting Styles

    I don’t call myself a budgeting expert and probably never will because there are too many styles of budgeting. What works for me for a while doesn’t work for me at another time. What works for me may never work for you.

    The thing is that creating a budget and following it during times of uncertainty and times of stability both helps you create a sense of calm and control. And if budgeting doesn’t feel like it’s working for you? Try a different method!

    Some people love budgeting by paycheck. Some people love Dave Ramsey’s method. Some people adore YNAB. Some people do 50/30/20 percentage based budgeting. There really are many styles of budgeting and one size does not fit all!

    I plant to go through a few more styles of budgeting to see if we can improve on what already works for us. I think it is great to take the best bits of advice from various sources and make them work for you. Best practices from others can improve your life very quickly and that includes with budgeting!

    No matter what your goals are, continue with budgeting and using your money wisely and consistently to hit your goals. You don’t have to be perfect with your money but you do need to be consistent!

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  • Is $1,000 Enough For An Emergency Fund?

    Certain financial experts suggest you start bettering your financial life with saving up $1,000, and while that is a good start, most people have expenses far beyond $1,000. But is $1,000 enough for an emergency fund?

    While a starter emergency fund of $1,000 can help many people get started, it’s important to consider whether or not $1,000 is enough for an emergency fund.

    Why do you need an emergency fund?

    Why exactly do you need to keep money in savings for an emergency? Generally when things are going well and income is flowing in most people do not prioritize an emergency fund (myself included!). However, ignoring an emergency fund only ends up hurting you when you finally encounter an emergency.

    An emergency fund is absolutely critical for anyone who wants to be prepared for handling the ups and downs of life. Life is filled with unplanned events and an emergency fund allows you to walk through things that pop up with lots of peace.

    What type of events might be considered an emergency? These are things that come up during a month that you weren’t expecting but are a normal part of life. That includes many things like the following that run close to over over $1,000.

    • Emergency: a dental office visit that ends up costing hundreds up dollars or even up to $1,200 or more for an emergency
    • Emergency: flat tires where you end up needing to replace 1 or even 4 tires that can costs from $400 – $1,000
    • Emergency: medical event where you have to visit the ER which could cost $500 with your deductible and more for ambulance services or follow up appointments

    There are a number of different types of emergencies but many of them cost hundreds of dollars that you likely don’t have included in your current budget. Having one of these expenses pop up could destroy your budget and send you into debt if you do not have an emergency fund.

    If you can’t pay for the emergency expense with your income during the month then you might turn to credit cards or borrowing from friends and family. Either situation increases debt and makes your life harder in the long run. Being able to cover an emergency expense with your emergency fund makes things easier and less stressful.

    An unfortunate fact of life is that “emergencies” do happen and they will happen to you. That is why having an emergency fund is something you must do if you want to maintain your quality of life and go through life without being stressed by each new emergency.

    How Would You Pay For $1,000 Emergency Expense?

    Let’s start at the beginning… Can you afford an emergency expense that is $1,000? As I shared before, many common emergency expenses can be $1,000 or even more. Sadly according to many studies and polls, almost half of American can afford a $1,000 emergency expense but unfortunately that means half can’t cover that unexpected bill.

    Most people who responded to the poll linked above would pay for a $1,000 expense like a cap repair by dipping into savings like an emergency fund.

    Others responded to say they would pay for an emergency expense by using a credit card, taking out a personal loan, or asking family for help to cover the unexpected expense.

    The Federal Reserve has backed up this type of response with survey results that said 61% of Americans said they would pay for an unexpected $400 expense with cash, savings or a credit card. In their poll only 12% said they would not be able to cover it.

    Between savings, credit, and help from family most people at least have an idea of how they would want to cover an unexpected expense.

    Is $1,000 Enough For An Emergency Fund?

    In most cases, $1,000 is not enough for an emergency for most people.

    On average a general emergency for people is more than $1,000 and Bankrate found that the average unexpected expense for survey respondents was about $3,500.

    So what happens when you’ve only saved up $1,000 for emergencies and then you encounter the typical $3,500 emergency? Unfortunately that means you have $2,500 you need to find a way to pay for and many people then turn toward credit cards or worse, payday loans. Those options can be a very high cost solution since the average credit card rate is 17%.

    One thing to remember when thinking about emergencies: they will eventually happen. In any given year probably a quarter or the people you know will need to find a way to pay for a financial emergency.

    So if we know emergencies will happen, those emergencies on average are $3,500, and any given year it might be us that has an emergency, what do we do with this information? We plan to save more than $1,000 in an emergency fund so that we will not have to turn toward high cost solutions to cover emergency expenses.

    When $1,000 Isn’t Enough

    You might want to know some specific situations where $1,000 is enough for you and when it is not.

    When $1,000 is enough for your emergency fund:

    • you are a student and live with family and have very limited expenses
    • you have a very stable income that is guaranteed and multiple sources of that income

    In some cases where you have very low or no expenses or if you have multiple sources of guaranteed income then you may be able to get by with just $1,000 in savings.

    When $1,000 is not enough for your emergency fund:

    • if you have children and are the sole provider for them
    • if you own a home and need to cover any unexpected repairs
    • if you are self-employed or have commission based inconsistent income
    • if you work in an industry prone to layoff
    • if you have chronic health problems and will likely have medical expenses
    • if you have multiple pets especially if older or unhealthy

    As you can see, there are many life situations where there could be a need for more than $1,000 in an emergency fund. If you are more likely to encounter “unexpected” expenses regularly, then you should work to build a larger emergency fund.

    How much should I have in my emergency fund?

    Since we clearly know $1,000 is not enough for an adequate emergency fund, how much do you need to save?

    This exact number of savings you need will vary from person to person and will depend on a few factors.

    Your emergency fund will depend on:

    • your monthly income
    • your monthly expenses
    • the stability of your income
    • your risk tolerance

    You will need to take into account all of those factors to determine how much you want to save up for your emergency fund.

    Let’s say you earn $3,000 a month but your expenses per month are only $2,000. You have a stable job but you are a single person so if you lose your income you will not have a backup plan besides unemployment.

    In this case you would want to save up 6 months of expenses, so 6 x $2,000, or $12,000 would be your emergency fund number.

    If you have a spouse and you both work then you might air on the side of saving up just 3 months of expenses.

    The more unstable your income is the more your will want to save up. If you are a business owner or work on commission then you might want to save up 6 months of expenses or even more in order to feel secure.

    For us we both work so we decided to save up 3 months of expenses. That meant we needed 3 months of $3,000 in expenses, or $9,000. We plan to save up even more eventually but having $9,000 means we feel secure enough to weather most emergencies that come along.

    You will have to look at all of the factors in your unique situation and then decide what makes the most sense for you and what gives you the most peace. Finding the peace of mind number for your situation will depend on both the numbers and how you feel about the numbers. Remember that this is a very personally choice and won’t necessarily match the numbers of other people who may have different factors involved!

    Tips For Saving An Emergency Fund

    Savings can be challenging when you are trying to juggle debt repayment, mortgages or high rents, and lower paying wages than previous generations. However, despite the circumstances we need to be more focused than ever because we know that $1,000 is not enough to cover emergencies.

    If you have struggled to save in the past then saving for emergencies might be something you need to try multiple tactics to achieve. Here are a few ways people have found success in saving consistently to build an emergency fund:

    You can try one or more of these tactics in order to start saving and keep building your emergency fund savings accounts.

    Where To Save Your Emergency Fund

    Where should you save your emergency fund? What’s the best place to keep your savings?

    I personally use and recommend an online savings account with a high interest rate. There are many online bank accounts you can open at placed like Capital One, Ally, or SoFi where you get a high interest on your savings with no fees.

    Reasons I like these types of accounts for your emergency fund:

    • You don’t have account minimums so you can start your emergency fund from the very beginning with just $1 or $5 or whatever you can spare. If you watch my Transfer Tuesday videos then you know $5 of consistent action adds up!
    • They are easy to open and generally very user friendly. These banks are not complicated and they make the process very easy and also don’t charge fees that traditional banks may charge.
    • Online only banks make it more inconvenient to withdraw the whole amount in your emergency fund which means you will be more likely to only use it in a real emergency.
    • You can keep your savings account separate from your regular checking account. If you want you can open an account at one of these banks you don’t normally use so your money is safe and not immediately accessible to put into your checking account.

    Online bank savings accounts are my personal favorite way to save but you can also save in any other savings account. Just make sure there is not a minimum balance requirement in case you need to use all the money and that there are no fees.

    Most savings accounts, even the ones with the highest return will not give you much return for your money. That is totally ok because you are not looking to make this money “work for you” as an investment.

    Your emergency fund is not meant to be an investment. It is meant to be an insurance policy so that it is there when you need it. You should not invest your emergency fund in the stock market since there is no guarantee the money will be there when you need it.

    Remember that whether you are starting with $5 or $500, keep saving your money!

    You may only be able to saving $5 a week but being consistent over time adds up and that consistency is more important than perfection!

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  • How To Spend Your $1,200 Stimulus Check

    Stimulus checks for Americans are set to arrive starting April 9 and coming in waves over the next few weeks. The stimulus update for April 9 is that money should be arriving for people starting today Thursday April 9 or tomorrow Friday April 10 and the coming weeks.

    We are likely getting stimulus checks next week based on what government officials have said in the last couple of days so let’s talk about it! Today I’m going over some of the ways you could and should spend your stimulus money in order to use it wisely as well as share what we are doing with our stimulus money.

    Why Are We Getting Stimulus Checks & Who Gets Them?

    Let’s start with bad news – unemployment numbers are so very bad right now. I know people have been commenting on my videos about being laid off and I’ve been scared I would be as well, but now 10% of the American labor force has filed for unemployment with today’s numbers added in. That’s insane and more than any time in history for initial claims in a short period. 

    A lot of this is situational and hopefully most of these jobs come back and when stuff calms down people go back to work.

    Unfortunately combining this with the fact that most of us in the USA don’t have enough to cover $1,000 emergencies… we are in trouble. But the government is here to the rescue… in a way by hoping to get people through this temporary rough spot and get them spending as well to stimulate the economy.

    they are going to send every adult $1,200 if you made under $75,000 on your most recent tax return from 2019 or 2018. They will be looking at the most recent tax returns from these years. Married couples making under $150,000 will get $2,400.  You also get $500 per child on dependents. 

    So for us as a two income household with one child making under $150,000 we will get $2,900.

    If you qualify for these stimulus checks the government has now said they will start hitting direct deposit accounts starting next week. Considering I filed our taxes this year and got our refund in under two weeks… I believe they will hit our account next week. Things are moving fast and furious because they know we need the money out here.

    How To Spend It, If You Need It

    Since the money is coming soon, today I’m going to talk about ways to spend your stimulus check and share what we plan to do with ours because at a time of high unemployment and lots of uncertainty we need to make sure the money we are getting doesn’t go to waste. 

    Pay to cover your immediate needs. First, if you’ve lost your job and need the money for every day living then definitely pay for the essential necessities in your life. Pay for your food. Buy your medications. Pay for the things you need to actually survive right now. That’s what the money is for and using it for this is smart. Make sure you are healthy and well to get through this. 

    Pay your bills. Again, if you’ve lost your job and don’t know how to pay your rent then you should use this money for bills after you’ve covered the necessities for living. If the money won’t stretch far enough then cover the most essential bills until you get unemployment or a new job income coming in. This is again, for essential bills like covering your rent or utility bill, not paying for your subscriptions or other non necessary bills.

    Save the money. Open a high interest savings account if you don’t already have one and just save it. You can use Capital One, Ally, of SoFi. Open the account and put the money in this account and just let it sit there short term until you need it. If you’ve already started saving, then use the money to build your 3-6 months emergency fund and be more cautious right now. This is personally what we are doing because I do still have job uncertainty if this lasts longer than expected. 

    How To Spend It, If You Don’t Need It

    If you already have your essentials covered and an emergency fund and your job is very secure and this is “bonus” money for you, then congrats! You have a couple options for what to do with it.

    1) Invest in the market. The market is pretty volatile lately and doesn’t necessarily correspond to normal cues but you could go ahead and invest the money. Personally we use index funds and dollar cost averaging for the majority of our investing so I’d go with that method maybe in a Roth IRA but if you are doing this be cautious because none of us know how long this will last or what the market results will be.

    2) Invest in yourself. Spend the money to buy an online course you want to learn. Or spend the money on a certification you have been wanting to get and finally have time to do. If you have 

    3) Give it away. Give the money to a charity you care about. Or heck to people you know need it more than you. Venmo or cash app people money because you know they need it and you care about them. Be a blessing to others.

    I would say that it’s worth playing it safe with this stimulus check. Having more money on hand is the best bet. 

    There may be more rounds of layoffs, there may be more rounds of stimulus checks. Or there may not be. None of us really know yet and anyone saying they know something for sure is just talking with false confidence. Use this money for the best use for your family in whatever way makes the most sense for you. 

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