All Posts By

Tarra Jackson

Feb 16
Love0

13 Easy Ways to Improve Your Finances On Your Lunch Break

By Insurance, Investments, Money Management, Saving No Comments

If you work full time, you know how hard it is to keep up with all the little things outside of your job. But have you tried putting your lunch break to good use? Instead of spending the hour chatting at the watercooler while you munch on a snack from the vending machine, grab something healthy and use the rest of the time to tackle some important odds and ends – like your finances. Below, we share 13 tasks that you can accomplish over lunch that will help you build a better financial future.

1. Pay your budget a visit

Check your budget from time to time so that you can visualize the progress you’re making toward paying down debt or saving. Make it a habit.

“This will help you stay on track and help you feel motivated to keep working hard toward reaching your goal,” said consumer finance expert Andrea Woroch.

She suggests using an app like Mint, which links all of your financial accounts in one place and provides a real-time snapshot of your spending and saving habits.

2. Write down your goals

Rather than just thinking about your financial goals, write them down in a diary or on a vision board. “You’re more likely to stick to your budget if you write down your plans and are specific,” said Marshay Clarke, a certified financial planner at Betterment, a financial advisory site. Make sure to revisit your goals periodically to stay on track.

3. Open a savings account

You’re more likely to save money if you have somewhere to put it. During your lunch break, you can easily open a savings account at your current bank or with an online bank that offers a high-yield savings account. While you’re at it, set up a recurring monthly transfer from your checking account for automatic savings.

4. Save with ease

There are apps that help you save and take minutes to set up. Dr. Elizabeth Dunn, co-author of the book “Happy Money“, is an adviser for the Joy app and their free FDIC-insured savings account. The app allows users to automatically save extra cash without having to do much extra work. “This is important because just adopting the goal to save money doesn’t seem to change people’s financial behavior,” Dunn said. “But getting a little nudge to save a manageable amount of money can make a difference.”

Other apps that allow you to save incrementally are Digit and Qapital. Digit will recommend how much you should save, based on your spending habits and financial obligations, whereas with Qapital, you create your own saving rules.

5. Earn more

If cash is really tight, or you want to save for a large purchase, maybe it’s time to pick up a side hustle with Fiverr or TaskRabbit. Plenty of people have been known to use their lunch hours to pick up riders as Uber or Lyft drivers, too. Put those extra funds toward a future goal, like a vacation or down payment for a new home.

6. Get familiar with your insurance

If something unforeseen should happen in your home, like a fire or a robbery, do you know what you’re covered for? If not, take a few minutes to find out so that you’re not caught off guard should something occur. No insurance? Research policies online over lunch.

7. Sign up for credit monitoring

Knowing your credit score is important because it can positively or negatively affect your ability to secure a loan, qualify for certain credit cards and, in some cases, get a job. A free service like Credit Karma or Credit Sesame will monitor your score and send you emails if something is amiss.

8. Think about the future

Use an online retirement calculator to determine if you are saving enough for your long-term goals. If you’re falling short, consider increasing your 401(k) elections from your paycheck, or set up an automatic deposit from your bank account to your investment account.

Also, check your retirement account online and make sure your beneficiaries are in order. It only takes a minute to add a beneficiary and you’ll have peace of mind that your funds will go to the right person(s) if you were to pass away.

9. Review your paid subscriptions

Review those subscriptions you’re being billed for each month. You might be paying for things that you rarely, or never use. If those New Yorker magazines are piling up, or you can’t remember the last time you listened to Amazon Music, it might be time to cancel.

10. Negotiate with service providers

Call your phone or internet provider to see what promotions they are offering. Or, contact your credit-card provider about a possible APR reduction. If you have good credit, you might be in luck.

11. Review your credit card statements

Do you blindly pay your credit-card bills each month? Even if you use autopay, you should take a few minutes each month to scan your statements to ensure that all of the transactions belong to you and are accurate.

12. Get fit

Take a walk or attend an exercise class. Health care is expensive, and the better you take care of yourself, the better your chances of avoiding costly medical bills. Some life insurance providers offer reduced rates to customers who show a certain level of fitness activity on their fitness trackers. Fitness can pay!

13. Sharpen your financial skills

Skip the digital Solitaire or Candy Crush and read a financial book, like The Wisdom of Finance by Mihir Desai. Doug Kinsey, certified financial planner and Partner at Artifex Financial Group, enjoyed the book so much that he took Desai’s Harvard HBX Course, Leading with Finance, which you can complete online.

“Another helpful HBX course is Economics for Managers,” said Kinsey. “Either one of those courses will help almost everyone by providing greater insight into how the world works from an economic and financial perspective.”

Clarke recommends the financial books Rich Dad Poor Dad, by Robert T. Kiyosaki, and A Random Walk Down Wall Street by Burton G. Malkiel. So take a look at those, too.

Also check out the financial book Financial Fornication by Tarra Jackson.

MagnifyMoney is a price comparison and financial education website, founded by former bankers who use their knowledge of how the system works to help you save money.

Originally appeared on WWLTV.com. 

Oct 24
Love0

4 Reasons You Should Never, Ever Take A 401(k) Loan

By Money Management, Retirement No Comments

If you’ve got a pressing financial concern and money in your 401(k), you may be tempted to take the cash out by taking a 401(k) loan. After all, the money is just sitting there, you’d be paying interest to yourself if you took out the cash, and you may have plenty of time to put the money back before retirement.

While it can theoretically seem like a smart financial move to use that money to pay off high-interest debt, put down a down payment on a house, or fulfill another immediate need, you should resist the urge and leave your 401(k) cash right where it is. The money already has a job — helping you afford food, housing, and medicine when you’re too old to work — and the only reason you should ever take it out is for a true life-and-death emergency.

Here are four big reasons why you should leave the money in your 401(k) alone so you don’t have major regrets later.

1. If you can’t pay it back, you get hit with a big tax bill

When you take a 401(k) loan, you typically must make payments at least once per quarter and must have the entire loan repaid within five years, although there are exceptions such as a longer repayment period if the money you borrow is used as a down payment for a primary home.

If you are not able to comply with the repayment rules, the entire unpaid amount of the loan becomes taxable. Plus, if you’re under 59 1/2, you will not only have to pay federal and state taxes on the money you withdrew but will also have to pay a 10% penalty for early withdrawal.

Depending upon your federal tax bracket and state taxes where you live, your total tax bill could be around 40% or more of the amount withdrawn; for example, if you were in the 25% federal tax bracket, paid 8% California state tax, and paid a 10% penalty for withdrawing money early, you’d owe 43% in taxes. If you borrowed $10,000, the government would get $4,300 and you’d be left with just $5,700.

That’s a really high effective interest rate — so you’re taking a big gamble that you’ll be able to make all the repayments without a hitch.

2. You’ll be stuck in your job or forced to pay back the loan early

When you leave your job and you have an outstanding 401(k) loan, you typically have to pay the loan back right away or your employer will alert the IRS and taxes and penalties will be triggered. The specific length of time you have to pay can vary from plan-to-plan, but 60 days is typical.

This means that unless you have the cash, you’re left with a choice between sticking it out at your job until you’ve repaid the entire balance — which could take years — or paying a hefty sum to the government. You could be forced to forego career opportunities to avoid the tax hit… assuming you actually have a choice about whether you leave your job and don’t get laid off first.

If you are let go, you’ll still be forced to repay the loan or pay taxes. This could mean coming up with a lot of cash right when you’ve lost the income that your job was providing.

3. You’ll miss out on the earnings your investments would have generated

When you have money invested in a 401(k) and you take a loan against your account, the money for the loan is typically taken out in equal portions from each of your different investments. If you’re invested in six different funds, one-sixth of the value of the loan would be taken from each.

During the time that your money is pulled from your account, you’re not making any investment gains. If you took a $10,000 loan from your 401(k) 20 years before retirement, took five years to repay the loan at 5% interest and were earning 8% on your investments, you’d lose about $2,625 in earnings, assuming you repaid the loan on time.

Of course, you could lose much more (or much less) depending upon the movement of the market. If you took a 401(k) loan during the financial crisis in 2008 and sold all of your investments when they were way down because of the market crash, you’d likely have had to buy back your investments at a much higher price and would have missed out on much of the market recovery.

And, of course, there’s also a risk that you won’t put the cash back at all… which could end up costing you decades of compound interest and which could result in that $10,000 loan having a price of more than $62,000 by the time you reach retirement age, if you took out $10,000 20 years before retiring and never paid it back.

4. Taxes and fees will cost you

When you repay the money from a 401(k) loan, you do so with after-tax dollars (rather than with pre-tax money, like with your individual contributions). When you take the money out of your retirement account as a senior, you’re taxed because no distinction is made between the pre-tax contributions you made to the account and the after-tax loan repayments. You’re forced to pay taxes twice: once when the money went in and once when it come out — which can cost you thousands.

To make matters worse, interest on a 401(k) loan isn’t tax deductible, so if you’re borrowing money toward a house or if you’ve taken cash out of a 401(k) to repay student loans, you’re not even getting a mortgage interest deduction or taking advantage of the tax deduction for student loan interest that you would likely otherwise be entitled to take.

You’ll also have to pay fees, in most cases, to take a 401(k) loan. These fees can be higher than the costs associated with a conventional loan.

 

Originally appeared on Money.cnn.com. 

Sep 22
Love0

The Secret To Being A Great Saver

By Investments, Money Management, Saving No Comments

“What’s the difference between ‘paying yourself first’ and saving money?” — Ayesha

Paying yourself first is a way to save money. In fact, it’s the best way to save money.

The trick is that rather than setting extra money aside, you’re saving for yourself and your future goals right away, before spending the rest on non-essentials. Treat the savings goal like an important bill — just like your rent or mortgage — that must be paid every month. The only difference is it’s a bill you pay to yourself.

“Anybody can save the remnants of a paycheck after they’ve spent most of it,” says George Galat, a California-based financial adviser.

“[Paying yourself first] is purposeful, proactive and implies a level of progression toward a collection of goals,” says Galat.

Here are a few ways to pay yourself first — without feeling like you’re making a big sacrifice.




Set up automatic payments

A common obstacle to saving your money is that the amount you planned to save tends to dwindle toward the end of the pay period.

“The reality is that some competing interest always comes up to reduce if not eliminate well-intended savings,” says Howard Pressman, a Virginia-based financial adviser.

Related: What In The Wealth is an Annuity?

That’s why one of the principles of paying yourself first is to set up automatic payments into accounts set aside for retirement, debt repayment, or emergency savings. That way you don’t have to consciously think about choosing to save, and won’t be tempted to spend it first.

“If one has automatic savings taking place into the 401(k), Roth IRA or a sweep from checking to savings, it’s going to get done,” Pressman says.

Max out your 401(k) (if you can)

One of the first areas of your financial life you should pay attention to is your retirement savings.

But most people still aren’t saving enough. One in four workers have less than $1,000 saved for retirement.

Setting aside 10% or 15% of your income may seem daunting, but is not as impossible as it might seem.

When Jon Haagen, a New York financial adviser, asks people if they can save 15%, they usually disagree. However, when he rephrases to ask whether they might be able to live on 85% of their income, most say that they can.

“The second way of asking seems less daunting,” he says.

Change your mindset

Once you decide to pay yourself first, you may feel like you have a lot less money at your disposal than you once did.

The key is to change the way you think about your income, and accept that you need to — and can — live off less.

“It’s really about fooling your brain into thinking ‘this is how much I make and this is what I can spend,’ said Jeff Maas, a California-based financial adviser.

“Eventually you will adapt your spending habits to match your perceived income and it won’t feel like a chore or a sacrifice to save.”

 

Originally appeared on Money.CNN.com by Laura Sanicola @laurasanicola

Sep 21
Love0

3 Signs You’re Living Beyond Your Means

By Money Management No Comments

It’s a frightening statistic that 47% of Americans would struggle to come up with $400 to cover an unplanned expense. Yet nearly half of today’s workers are living paycheck-to-paycheck, with no financial cushion whatsoever, and a big part of the reason boils down to living beyond our means.

Now you might be thinking: I work hard for the money I earn, so shouldn’t I spend it? And there’s some truth to that. We all deserve to enjoy the fruits of our labor, but many of us take that to an unhealthy extreme by not only spending every penny we bring home, but exceeding our earnings and racking up debt.

If you’re not sure where you fall on the spectrum, here are some clues that your spending needs to be scaled back — immediately.




1. Your credit score is low

There are several factors that go into your credit score, some of which carry more weight than others. The two biggest, however, are your payment history, which speaks to your ability to pay your bills on time, and your credit utilization, which is the extent to which you’re using your available credit. If you’re living beyond your means and spending too much, you’ll be less likely to pay your bills in a timely fashion. Similarly, if you’re using a large percentage of your total credit line, it’s probably because you’re racking up too many charges and not paying them off quickly enough.

Credit scores can range from 300 to 850, but a score below 580 is considered poor, according to Experian, one of the three major credit bureaus. If your score has plunged into unfavorable territory, it’s a sign that your lifestyle is too large for your income.

Related: 5 Easy Ways to Improve Your Credit Score

2. Your housing costs eat up more than 30% of your paycheck

Housing is many Americans’ largest monthly expense, and while it’s natural to want to live in a home that’s spacious and conveniently located, it’s also easy to fall into a trap where you’re overspending on housing, and thus putting your finances at risk.

No matter how much you earn, your housing costs, which include your mortgage payment, property taxes, and homeowners’ insurance, should never exceed 30% of your take-home pay. If your current housing expenses surpass this limit, it’s a clear indication that you’re in way over your head.

Related: How to Reduce Expenses in Every Budget Category

Between 2011 and 2014, 52% of Americans had to make at least one major sacrifice to cover their housing costs, according to the MacArthur Foundation. These included delaying retirement savings and cutting back on healthcare.

Though you might justify an expensive home as your one indulgence, so to speak, taking on too much house also puts you at risk for higher-than-average maintenance costs, which can wreak havoc on your budget and compromise your financial security. You’re better off finding a less lavish home you can more comfortably afford — meaning, one whose total anticipated monthly costs equal less than 30% of what you bring home in your paychecks.

3. You’re not saving any money

Working Americans are generally advised to set aside a minimum of 10% of each paycheck for emergency savings or retirement. If your expenses are such that there’s absolutely no money left over each month to stick in the bank, it’s a sure sign that you’ve adopted too costly a lifestyle.

Now what if you fall into that category of people who are saving some money each month, but perhaps nowhere close to that 10% target? If that’s the case, your spending may not be too egregious in the grand scheme of things, but it could mean that you’ve already embarked on a very dangerous path.

If any of these circumstances apply to you, it’s time to start changing your ways — before your long-term finances take an irreversible hit. To start, create a budget that outlines your current spending, and compare it to what you’re getting from your monthly paychecks.

Next, work on cutting expenses so that you’re not only spending less than what you bring home, but have at least some money left over to add to your savings.

Related: 5 Methods to Help Your Save Money

You can approach your cost-cutting efforts in one of two ways. Some people prefer to slash one major expense, like housing or a car payment, to improve their financial picture. Others might opt to eliminate a number of smaller, less significant expenses, like cable, restaurant meals, and lawn or house-cleaning services. Whether you go with the former or the latter really boils down to which situation you think you’ll adjust to more easily. Some folks might have a hard time moving to a new home, and so they’d rather cut 12 other expenses to stay put.

 

Originally appeared on Money.CNN.com by Maurie Backman for The Motley Fool.