Everyone knows that raising kids can put a serious squeeze on your budget. Beyond covering day-to-day living expenses, there are all of those extras to considerâsports, after-school activities, braces, a first car. Oh, and don’t forget about college.
Add caring for elderly parents to the mix, and balancing your financial and family obligations could become even more difficult.
“It can be an emotional and financial roller coaster, being pushed and pulled in multiple directions at the same time,” says financial life planner and author Michael F. Kay.
The “sandwich generation”âwhich describes people that are raising children and taking care of aging parentsâis growing as Baby Boomers continue to age.
According to the Center for Retirement Research at Boston College, 17 percent of adult children serve as caregivers for their parents at some point in their lives. Aside from a time commitment, you may also be committing part of your budget to caregiving expenses like food, medications and doctor’s appointments.
When you’re caught in the caregiving crunch, you might be wondering: How do I take care of my parents and kids without going broke?
The answer lies in how you approach budgeting and saving. These money strategies for the sandwich generation and budgeting tips for the sandwich generation can help you balance your financial and family priorities:
Communicate with parents
Quentara Costa, a certified financial planner and founder of investment advisory service POWWOW, LLC, served as caregiver for her father, who was diagnosed with Alzheimer’s disease, while also managing a career and starting a family. That experience taught her two very important budgeting tips for the sandwich generation.
First, communication is key, and a money strategy for the sandwich generation is to talk with your parents about what they need in terms of care. “It should all start with a frank discussion and plan, preferably prior to any significant health crisis,” Costa says.
Second, run the numbers so you have a realistic understanding of caregiving costs, including how much parents will cover financially and what you can afford to contribute.
17 percent of adult children serve as caregivers for their parents at some point in their lives.
Involve kids in financial discussions
While you’re talking over expectations with your parents, take time to do the same with your kids. Caregiving for your parents may be part of the discussion, but these talks can also be an opportunity for you and your children to talk about your family’s bigger financial picture.
With younger kids, for example, that might involve talking about how an allowance can be earned and used. You could teach kids about money using a savings account and discuss the difference between needs and wants. These lessons can help lay a solid money foundation as they as move into their tween and teen years when discussions might become more complex.
If your teen is on the verge of getting their driver’s license, for example, their expectation might be that you’ll help them buy a car or help with insurance and registration costs. Communicating about who will be contributing to these types of large expenses is a good money strategy for the sandwich generation.
The same goes for college, which can easily be one of the biggest expenses for parents and important when learning how to budget for the sandwich generation. If your budget as a caregiver can’t also accommodate full college tuition, your kids need to know that early on to help with their educational choices.
Talking over expectationsâyours and theirsâcan help you determine which schools are within reach financially, what scholarship or grant options may be available and whether your student is able to contribute to their education costs through work-study or a part-time job.
Consider the impact of caregiving on your income
When thinking about how to budget for the sandwich generation, consider that caring for aging parents can directly affect your earning potential if you have to cut back on the number of hours you work. The impact to your income will be more significant if you are the primary caregiver and not leveraging other care options, such as an in-home nurse, senior care facility or help from another adult child.
Costa says taking time away from work can be difficult if you’re the primary breadwinner or if your family is dual-income dependent. Losing some or all of your income, even temporarily, could make it challenging to meet your everyday expenses.
“Very rarely do I recommend putting caregiving ahead of the client’s own cash reserve and retirement.”
When you’re facing a reduced income, how to budget for the sandwich generation is really about getting clear on needs versus wants. Start with a thorough spending review.
Are there expenses you might be able to reduce or eliminate while you’re providing care? How much do you need to earn each month to maintain your family’s standard of living? Keeping your family’s needs in focus and shaping your budget around them is a money strategy for the sandwich generation that can keep you from overextending yourself financially.
“Protect your capital from poor decisions made from emotions,” financial life planner Kay says. “It’s too easy when you’re stretched beyond reason to make in-the-heat-of-the-moment decisions that ultimately are not in anyone’s best interest.”
Keep saving in sight
One of the most important money strategies for the sandwich generation is continuing to save for short- and long-term financial goals.
“Very rarely do I recommend putting caregiving ahead of the client’s own cash reserve and retirement,” financial planner Costa says. “While the intention to put others before ourselves is noble, you may actually be pulling the next generation backwards due to your lack of self-planning.”
Sunny skies are the right time to save for a rainy day.
Start an emergency fund with no minimum balance.
Start Saving
Online Savings
Discover Bank, Member FDIC
Making regular contributions to your 401(k), an individual retirement account or an IRA CD should still be a priority. Adding to your emergency savings each monthâeven if you have to reduce the amount you normally save to fit new caregiving expenses into your budgetâcan help prepare you for unexpected expenses or the occasional cash flow shortfall. Contributing to a 529 college savings plan or a Coverdell ESA is a budgeting tip for the sandwich generation that can help you build a cushion for your children once they’re ready for college life.
When you are learning how to budget for the sandwich generation, don’t forget about your children’s savings goals. If there’s something specific they want to save for, help them figure out how much they need to save and a timeline for reaching their goal.
Ask for help if you need it
A big part of learning how to budget for the sandwich generation is finding resources you can leverage to help balance your family commitments. In the case of aging parents, there may be state or federal programs that can help with the cost of care.
Remember to also loop in your siblings or other family members when researching budgeting tips for the sandwich generation. If you have siblings or relatives, engage them in an open discussion about what they can contribute, financially or in terms of caregiving assistance, to your parents. Getting them involved and asking them to share some of the load can help you balance caregiving for parents while still making sure that you and your family’s financial outlook remains bright.
The post Budgeting Tips for the Sandwich Generation: How to Care for Kids and Parents appeared first on Discover Bank – Banking Topics Blog.
I had a great talk with Millennial Money Man yesterday and my favorite piece of advice he gave me was to âwrite what youâre passionate about.â It took me literally five seconds to think of the one thing Iâm really passionate…
The post Is Being Debt Free Worth it? appeared first on Modern Frugality.
According to a YouGov Parent Survey in 2019, a quarter of parents entered the 2019 holiday shopping seasonstill paying down debt related to 2018 holiday spending. Deloitte numbers put holidayretail salesgrowth in 2019 at 4.1% year-over-year. In 2020, Deloitte predicts growth of between 1% and 1.5% year-over-year for the holiday season.
It might be that some people no longer want to pay for holiday gifts, decorations and food a year down the road. But it’s also true that the COVID-19 pandemic has hit consumerwallets and some people might be cutting back this year.
That doesn’t mean that people aren’t shopping. Google and other thought leaders note that changes to shopping habits and the need for social distancing and other measures will likely spread the holiday shopping season out longer. Shoppers are also likely to turn to online shopping.
With a ton of shopping opportunities, a longer holiday shopping season and pent-up pandemic energy, it might be easy to overspend and create debt you’ll deal with into the future. Follow these tips to prepare for holiday shopping so you can protect your financial standing, save money and make the most of the resources you have this season.
1. Check your credit scores
Begin by checking your credit scores and reports. They tell you where you stand if you want to apply for credit. They also give you a baseline of where you are so you know if your score goes up or down later with no explanation.
An unexplained drop in your credit score can be a sign your financial information is compromised. Unfortunately, the holidays are prime time for many scammers. Using a service, such as ExtraCredit’s Track It feature to keep tabs on 28 of your FICO scores, helps you know when you need to act to protect your credit.
2. Ask for a credit limit increase
If you have existing credit cards and you’re a cardholder in good standing, the months prior to the holidays can be a good time to ask for a credit limit increase. You’re not asking so you can spend more-it’s typically advisable to keep spending in line with your budget no matter how much credit you have.
You’re asking for a higher limit so you can spend what you already planned to without hurting your credit utilization. Credit utilization is the second-most important factor in determining your credit score-second only to payment history. It’s the ratio between your credit limit and how much of that credit you have used.
If you have a card with a limit of $1,000 and you spend $300, that’s a utilization rate of 30%. But if you get approved for a credit limit of $2,000 and you spend $300, that’s a utilization rate of only 15%, which is better for your score.
3. Apply for a credit cardwith a 0% APR introductory offer
Those with good or excellent credit might want to consider applying for a card with a 0% APR introductory offer. If you qualify for such a card, you typically have one or two years to pay off purchases made during the introductory period without accruing any interest.
This can be a way to finance your entire holiday without paying anything more for the privilege of doing so. However, it’s still important to maintain your budget and not overspend just because you won’t be paying the balance off until later. Otherwise, you make this season’s holiday festivities next season’s problem.
4. Pay down debt before-and after-the holidays
Speaking of last season’s debt: If you can pay it down before you start spending this season, that’s a great accomplishment. It also frees up your credit and your budget so you can better enjoy the current holiday season. If you’re paying $100 a month on your debt, that’s $100 a month that might go toward gifts or celebrations that you don’t have to put on a card this year.
If you do use credit to pay for the 2020 holidays, have a plan for paying it down as soon as possible. That’s especially true with 0% interest cards. The longer you wait, the greater the chance you’ll miss the introductory period and potentially be on the hook for a lot of interest expense.
5. Create a holiday spending budget
Whether you’re using cash or credit-or a mix of both-enter the 2020 holiday shopping season with a plan. Take an honest look at your personal budget. If you don’t have a budget, create one before you move forward. Then decide how much you can realistically spend during the holidays.
Consider which gifts you want to buy and which events you want to host or attend. You might not be able to do everything, and that’s OK. Be honest with yourself, your family and your friends about what you can afford to do with your time and money this year.
Then make a list and assign each item a monetary budget. That can include:
Gifts as a total
Gift extras, such as wrapping and tags
Shipping, both for receiving items you buy and for shipping gifts to others
Food and drinks
Travel
Decor
General festivities, such as tickets to holiday events
Once you assign a dollar amount to a category, stick to it. That’s a good idea even if you’re spending with credit.
6. Align budgeted spendingwith credit cardrewards
Once you know how much you want to spend, decide how best to spend it. If you’re using credit cards for the holidays, check your accounts to see if any offer cash back or rewards points. If they do, double-check which categories or stores you can shop in to earn the most points with each card.
For example, some travel rewards cards offer 6x points when you shop at supermarkets. You could use such a card to cover the food-and-drink portion of your holiday budget and reap the biggest rewards possible from that spending. You might also be able to maximize rewards when purchasing gift cards.
7. Guard your financial information and identity
As you enjoy holiday shopping, be on guard. Don’t use debit card PIN numbers unless you have to, and shield the keypad when you enter your information. Keep a close eye on your wallet or purse, and check your credit card statements regularly to ensure all charges are yours. You can also use ExtraCredit’s Guard It feature to help keep your identity and account information safe during and beyond the season.
Sign up for ExtraCredit today!
The post Prepare for Holiday Shopping with These Timely Credit Tips appeared first on Credit.com.
Deia Schlosberg had been working as an environmental educator, teaching students about issues concerning conservation and sustainability. While she loved teaching, she wanted to reach people on a larger scale about the importance of protecting the environment. So she decided to follow her dream of becoming a filmmakerâa dream that would require her to return to school for a graduate degree. She had no idea at the time that it would lead to becoming an award-winning documentarian.
While Schlosberg’s choice may have paid off, learning how to pay for grad school as a working adult can be a challenge. There are various benefits to getting an advanced degree: You can learn more, you can earn more, you can further advance in your current job or prepare for a career change. However, you might also find yourself stressed by the expense and resulting debt of it all, especially if you have kids, a home or other financial commitments. So a big question on your mind could be, “How much should I save for grad school?”
Below are some lessons on how to financially prepare for grad school to help you determine if and when you should go back to school. If you haven’t yet decided if graduate school is right for you, see section 1 for tips on how to decide. If you already know you want to go back to school, skip to section 2.
1. Decide if going back to school is right for you
Getting an advanced degree may seem like a ticket to success, but depending on your chosen area of study, the outcome may vary. For Schlosberg, it was a bit of a risk. It can be difficult to get a break in the film industry, and going to grad school could mean carrying around debt for a long time. Is this the type of outcome you would be willing to accept?
According to Emma Johnson, best-selling author, career consultant and founder of Wealthysinglemommy.com, there are a few things you can do to help you decide whether or not going back to school is right for you:
Do your homework. When considering how to pay for grad school as a working adult, research your degree options and the jobs to which they might lead. Compare cost and compatibilityâfor instance, will classes for the program align with your work schedule? Once you’ve determined what kind of occupation you may pursue after grad school, search online for information about that occupation’s average earnings.
Solidify your goals. You may find clarity in writing out your goals for going back to school. Some benefits are tangible, like earning more money, building a professional network and gaining skills. Others might be less tangible, such as finding personal fulfillment. Once you know your goals, it will be easier to determine if a graduate degree makes personal and professional sense.
“Your savings should not only depend on tuition but also what the degree isâi.e., how easy it will be to repay once you are working in the desired field.”
Give your degree program a test run. Consider taking classes that relate to the degree you are interested in getting in grad school. These classes can give you a taste of the subject matter you’ll be studying and help you meet people involved in the field. Also, if prerequisites are required for your advanced degree, they often cost less online or at a community college, which is important to remember when thinking about how to prepare your finances before grad school. Make sure the course credits will be accepted at the graduate school you plan to attend.
Take a hands-on approach. To level up in your existing career or find out what it’s like in a new field before making the change, get some work-related experience first. For instance, to learn more about moving up in your own field, get out and meet those higher level professionals by attending conferences and networking events. The same tactic applies if you want to change careers.
2. Know how much you need to save
How to pay for grad school as a working adult can be complicated, but you’ve decided you’re ready for it. Plus, hitting the books at a time when saving for retirement or your child’s education could be at the forefront makes the task of how to prepare your finances before grad school even more critical.
Figuring out how much to save for grad school begins with determining the cost of attendance. Here are a couple ways to do that, according to Johnson:
Do the research. Once you have found a school and degree that you like, visit the school’s web site. Some schools may provide the cost of tuition, fees and estimated costs for books, supplies and transportation. Costs can vary tremendously, depending on various factors: whether you attend full or part time, whether you attend a public or private school, whether you are an in-state or out-of-state resident and the time it takes to get your degree.
Determine your budget. Once you have a handle on the school-related costs, build a spreadsheet that accounts for these costs and projects monthly income and living expenses. Working through a savings plan beforehand can help you financially prepare for grad school by showing just how much you’ll need to budget for monthly on tuition plus living expenses. Once you determine these factors, you’ll get a better idea of what you need to save up.
Create a savings buffer. After you determine your monthly costs, pad that number. “Your savings should not only depend on tuition but also what the degree isâi.e., how easy it will be to repay once you are working in the desired field,” Schlosberg says. She saved a little more than she estimated, giving herself an extra cushion to cover some of the potential risk to her finances.
“You may have to downscale your career and current lifestyle to go back to school, which may be a worthwhile investment of time and resources.”
3. Allow yourself a flexible timeline
One key factor in planning the timeline for earning your graduate degree: Don’t be in a rush. If you need to, create the time to save. It may not be necessary to go back to school full time or finish on a particular schedule, Johnson says. She mentions these possible paths to earning your degree when planning how to pay for grad school as a working adult:
Consider a side hustle. One option is to go to school full time and take on a side hustle. You may not make as much as you did as a full-time employee, but the income can complement your savings. It may also allow you to concentrate more on your degree and finish faster.
Attend part time. Go to school part time (nights and weekends) while working. It will take longer, but it will also minimize your debt, which could be better in the long run.
Take it slowly. Only sign up for a class or twoâwhatever you can affordâand continue to work. This part-time “lite” approach may take even longer, but could help you avoid overextending yourself financially or sliding into debt.
Take online classes. Consider online programs that could lower the cost of tuition and allow you to continue working full time.
4. Take advantage of potential cost-saving benefits
So you’ve done your research on how much you need to save while determining how to prepare your finances before grad school. But there are ways to potentially cut or eliminate some of those costs. What comes next are some solutions that may help pay your grad school bills:
Consider loans, financial aid and scholarships. “I took out some student loans for living expenses, but I tried to pay off my tuition as I went by working through school,” Schlosberg says. Graduate students may also be eligible for different types of scholarships and grants, which is aid that does not need to be paid back. Depending on your area of study, scholarships and grants can also be obtained through federal and state organizations, private foundations, public companies and professional organizations.
Ask your employer to pay the tuition. One way to financially prepare for grad school is to talk to your manager or human resources representative to find out if your current employer would help pay for, or fully fund, your degree through tuition reimbursement. This is most likely if you plan to move up the ladder and use your new skills on behalf of the company.
Take advantage of in-state tuition. Some people move to the same state as their desired school to try to get a break on tuition. “I moved to Montana and worked a couple jobs for a year before applying so I could get in-state tuition,” says Schlosberg. Whether you are already a resident or you move to a new state, be sure to determine how long you need to be a resident to qualify for in-state tuition at your desired university.
Cut back on discretionary expenses. Seemingly small things like adjusting your lifestyle to lower your monthly costs, which could mean fewer lattes and dinners out, might go a long way in resolving how to prepare your finances before grad school. “You may have to downscale your career and current lifestyle to go back to school, which may be a worthwhile investment of time and resources,” Johnson says.
Financially prepare for grad school and get a new start
Answering the question of how to pay for grad school as a working adult requires significant research and preparation, but some say it’s worth it, including Schlosberg. It not only gave her a whole new start, but a wealth of knowledge going forward to nurture her future endeavors. “Getting a graduate degree gave me the confidence to jump into a new career. I met an amazing network of people,” Schlosberg says.
But an advanced degree may not be a necessity. While it could look impressive on a resume, for many employers, a master’s degree is not a requirement. “Whatever you do, don’t go back to school just for the sake of getting a degree,” Johnson says. When thinking about how to financially prepare for graduate school, make sure it fits into your financial picture and that you’re able to âweigh your sacrifices against future gains,” she says.
The post Hitting the Books Again? Here’s How to Financially Prepare for Grad School appeared first on Discover Bank – Banking Topics Blog.
After you’ve successfully put in an offer for your dream home and set a date for closing, you’ve come to the final steps of your home buying journey. However aside from getting the keys, you’ll want to be prepared for the additional costs, and steps that will be required for a successful home purchase.
The Preparing For Closing Day guide contains information, tips, and more about what to expect on the big day. The guide will also include a checklist of what to prepare and an example of how to calculate the funds needed for closing.
To learn more about how you can best prepare for closing day, get our free buyer’s guide here.
Pre-Closing Day Checklist
To ensure a smooth process for your home transaction, you’ll still have a few steps to go through before you get your keys. Here are 6 steps to check off your list before closing day:
Review your contract
Complete a final walkthrough
Meet with your lawyer
Purchase home insurance
Know how much cash is required at closing
Secure cash required for closing
Cash Required At Closing
Understanding the costs that will be required at closing day is important to know even before you start your home search. Not only will you be prepared for what to expect, but this can help you with budgeting your costs.
Some examples of costs to include in your calculation:
Down payment
Title insurance
Legal fees
Land transfer tax
Statement of Adjustments
Another important document is your statement of adjustments, which will display any credits to both the buyer or seller as well as the final amount payable by the buyer on closing day. You can expect the following to be listed in the statement:
Purchase price
Your deposit
Prepaid property taxes, utilities or fuel
Prepaid rents
Appraisal fee
Land survey fee
For a sample calculation of cash required at closing, download our Preparing For Closing Day guide here.
The post How to Prepare For Closing Day [Free Download] appeared first on Zoocasa Blog.
Putting your money to work is one of the best ways to maximize your financial potential. Whether you make six figures a year or minimum wage, every dollar you bring in is an opportunity to make more.
But strategically allocating your finances is about more than just funneling money into your investment accounts. It’s also the best way to plan and save for the things that are most important to you, like a vacation to Bali or a down payment on a new home.
Zero-based budgeting is one of the most popular ways to do this. Read on to find out if this strategy is right for you.
What is Zero-Based Budgeting?
Zero-based budgeting, also known as zero-sum budgeting, centers around the principle that every dollar in your budget should be categorized. At the end of the month, a zero-based budgeting system lets you know where 100% of your income went.
The difference between a regular budget and a zero-based budget is that a traditional budget allows leftover money to sit in your checking account. A zero-based budget would require that you move those extra funds to savings, debt payoff, or some other goal. If productivity, efficiency, and structure are important to you, then this system might be just what you’re looking for.
Money coach Nick True of Mapped Out Money and his wife Hanna have been using a zero-based budget for seven years. Using this budget has forced them to spend their money in a way that more closely reflects their goals.
âA zero-based budget has helped us be efficient with our money and consciously spend it in a way that aligns with our values,â he said.
How to Create a Zero-Based Budget
Start by making a list of all the categories where you spend money every month. These may include:
Housing
Transportation
Debt including student loans, credit cards, and personal loans
Savings
Groceries
Utilities and internet
Health insurance and medical expenses
Childcare
Entertainment
Subscriptions and memberships
Personal care
Pets
Gifts and charity
Then, decide how much you want to allocate for each specific category. Use your monthly credit card and bank statements to estimate a realistic figure.
One feature of zero-based budgeting is that you use last monthâs income to determine how much you can spend. This way, you’re only using money that’s already in your bank account and not relying on a future paycheck. Thatâs why zero-based budgeting is particularly helpful for consumers with a variable income.
Once you’ve written everything out, subtract the expenses from the income. On conditions that your expenses exceed your income, you’ll have to revise the budget to cut costs.
If you have money left over, you need to assign it to a category. If you donât, youâre more likely to spend it on something non-essential instead of putting it toward a long-term goal. This is the essence of zero-based budgeting.
How to Implement a Zero-Based Budget
After youâve created a budget, you have to start tracking and categorizing your expenses. Itâs best to do this every day, or at least once a week because it can get overwhelming if you wait any longer. Find a routine and schedule thatâs easy for you to stick to.
If you keep overspending in a certain category, stop and consider if you need to increase the amount in that category – or find ways to remove the temptation.
You should also remember that a zero-based budget is not static and that you should change the budget when necessary. If Christmas is coming up, for instance, you may want to allocate more money in the gifts category.
How Does it Compare to Other Budgeting Methods?
A zero-based budgeting system may require more maintenance and diligence than other types of budgets. Because you have to give each dollar a job, that means you also have to track each dollar that you spend. This can be time-consuming and frustrating.
If you have an unexpected expense in a zero-based budget, youâll have to revise your budget or use your savings.
âFor example, I recently had to take my cat to the vet, and the bill was more than I currently had sitting in my pets category,â True said. âSo I moved money from clothing and dining out over to the pets category to cover it for the month.â
Because you have to classify each transaction, zero-based budgeting forces you to confront how much you actually spend. If you keep overspending on take-out or random Amazon purchases, your budget will tell you. You canât hide your spending habits from a zero-based budgeting system.
Other Budgeting Systems
If a zero-based budget sounds too confusing or difficult to set up, here are some simpler alternatives:
50/30/20 Budget
The 50/30/20 budgeting method, developed by Senator Elizabeth Warren, is a simple budgeting system that works well for beginners.
The method involves dividing your monthly income into three categories: 50% toward needs, 30% toward wants, and 20% toward saving/debt payoff. When you make a transaction, youâll classify the item as a need, want or saving/debt payoff.
The 50/30/20 system is easy to use because there are so few categories, leaving room for personalization and improvisation. Itâs a good choice for someone who wants to budget regularly but finds zero-based budgeting too involved or too restrictive.
Cash Envelope
The cash envelope system involves using physical cash to pay for all eligible expenses. You decide how much to spend and withdraw the cash from your bank account, then you divide it into envelopes labeled with the category name.
For example, if you’ve allotted $500 to groceries, you would withdraw $500 in cash and put it in an envelope marked âgroceries.â That $500 is supposed to last you the rest of the month. If you spend it before the month is over and still need groceries, you’ll have to take money from other categories, dip into your savings or find a way to earn more money.
This system is great for people who prefer a more analog approach, or for anyone who needs a little extra help to avoid overspending on certain categories.
The post Zero-Based Budgeting 101 appeared first on MintLife Blog.
To make sure they were financially on the mark, Hynd, a marketing executive for HR software company Youmanage, decided to do some research on how to afford a dog on a budget, shortly after Chewie settled in. He was glad he did: He found that the costs of dog ownership added up to much more than he originally anticipated. Fortunately, there was still time for him to adjust.
But Hynd’s foresight is not always top of mind for new dog owners. Getting a dog can be an emotional, knee-jerk decision, and you may not think about the expenses that go along with it or how to budget for a dog. The cost of owning a dog over the average lifespan of 12 years ranges from $5,000 to $20,000. The majority of dog owners underestimate this figure.1 That’s the kind of misunderstanding that can leave you short on funds for things such as vaccinations and preventative careâeven food and toys.
So when asking yourself the question, “How much money should I budget for a dog?” you’ll be glad to know that a little financial preparation can go a long way toward making sure you’re ready for the responsibilities that come with pet ownership. The information that follows can help you and your new pooch share a happy, healthy friendship for years to come.
Welcome home: First-year costs for your pup
“Before getting my dog, I made sure to save as much money as possible,” says Danielle Mühlenberg, a professional dog trainer and blogger at PawLeaks, a site that focuses on dog training and dog behavior. Mühlenberg paid $1,300 for her 115-pound rottweiler Amalia. A safe approach when thinking about how to budget for a dog is to “always put away more money than you’ve calculated in your budget, so you won’t be overwhelmed by any surprise costs,” she adds.
Mühlenberg outlines the first-year expenses new dog owners should expect as they resolve how to afford a dog on a budget and some suggestions on managing costs:
Purchase/adoption fees and dog license
The purchase of a purebred puppy from a breeder can cost anywhere from $800 to $1,500 or moreâwhich makes a pure-blooded hound the most expensive type of dog to own. At the other end of the spectrum are the many shelter or rescue dogs in need of a home; they can generally be adopted for as little as a few hundred dollars. You will also need a dog license to bring home your pup, which runs from $10 to $20 on average (and needs to be renewed annually).
Pro Tip: Once you bring your tail-wagger home from the shelter or breeder, research local vets. Offices in one neighborhood or town can be much pricier than what you’d find if you’re open to a commute.
Upfront medical costs
It can cost between $200 and $800 to spay or neuter a dog at a veterinary clinic. You can typically pay less at a shelter or humane society, where such procedures are often subsidized by donations. In other costs, puppies need an initial exam and special vaccinations that typically run between $75 and $100 (rabies is the only shot required by law, however). Microchipping, while not mandatory, is recommended to help identify your pet if it’s lost or stolen. This procedure costs around $40.
Pro Tip: Plan to have your dog spayed or neutered. Otherwise, you may pay higher boarding fees and license fees, as well as release fees if your pup is taken in by animal control.
Comfort, training and grooming supplies
Expect to spend another few hundred dollars for a collar and leash ($6 to $50), food bowls ($10 to $50), waste bags ($6 to $20), a crate and bed ($25 to $250), doggie shampoo and brushes ($5 to $10), training pads ($16 to $35), toys ($10 to $200) and the first month’s supply of food ($40 to $60).
Pro Tip: Supplies like a dog crate or bowl can be found secondhand for a lower cost, sometimes for free. Check online listings for yard sales and giveaway events, where used or unwanted items are given away instead of being sold or thrown away.
Lost time at work
A new puppy needs a lot of attention, which can add to the cost of owning a dog. One in five dog owners took time off from work to care for a new puppy.2 Some puppies have a harder time on their own and can chew up your home and belongings, so it’s worth knowing this upfront in case your pup needs a sitter.
Pro Tip: Prepare for “puppydom” ahead of time by banking extra personal days or asking about short-term, work-from-home opportunities.
Ongoing expenses for your furry companion
Annual, ongoing costs of owning a dog can vary widely depending on your situation. Why the disparity? It’s due mainly to dog size. For instance, larger dogs eat more food, and if you’re the type of owner that chooses premium kibble over a lower-cost option, that can really add up. Groomers also charge more for larger dogs because of the extra time and care needed to handle them.
Mühlenberg spends about $1,200 per year on her Rottweiler’s high-end food and another $600 annually for twice-weekly social training sessions. A pricey diet and puppy play camp may fall in the “nice to have” category of dog ownership for some. Dog owners worried about how to afford a dog on a budget can minimize these costs by choosing less expensive canned food and kibble or by making their own dog food. To save on other expenses, Müehlenberg grooms her dog at home, makes her own toys and treats and buys pet supplies in bulk.
To get a handle on how to budget for a dog, here are some of the biggest costs annually that dog owners need to plan for:
To help relieve the financial burden of how to afford a dog on a budget, you may want to open a savings account for emergencies. Mühlenberg puts a few hundred dollars aside each month, which can be tapped for unplanned household repairs due to any damage the dog may cause, dog sitting for unexpected travel or illness or other pup-related surprises. The Discover Online Savings Account is one place to hold cash for a dog-only emergency fund and grow your savings.
You earned it. Now earn more with it.
Online savings with no minimum balance.
Start Saving
Online Savings
Discover Bank, Member FDIC
Invest in keeping your pooch healthy
As you can see, there are a lot of annual costs to consider when determining how to afford a dog on a budgetâand they can really add up, particularly when a pooch gets sick or is involved in an accident. Preventative care such as flea, tick and heartworm medication, which can cost a total of $64 to $320 monthly, and regular vet visits can decrease the risk of an expensive health condition.3
For larger or recurring costs, consider pet insurance (an annual policy costs about $360 to $600).2 Some unexpected expenses can be offset by a pet insurance policy, which “is kind of like a forced savings account,” says Sara Ochoa, DVM, veterinary consultant for product review site DogLab. “You pay the insurance company, and they will pay for most of your pet’s medical bills.” This might go a long way in resolving how to budget for a dog.
For example, a typical pet insurance policy may cover accidents, illness and conditions that are genetic, congenital and chronic, as long as these conditions were not present at the time the policy was purchased.5
âAlways put away more money than you’ve calculated in your budget, so you won’t be overwhelmed by any surprise costs.”
Ochoa is often able to witness the financial benefits of pet insurance firsthand. She cites one example of a client whose dog had emergency surgery and spent a few nights in the hospital. According to Ochoa, the bill would have cost the owner around $7,000. With their pet insurance, they paid somewhere around $1,000.
Create a happy home for your four-legged friend
In the end, how to budget for a dog just takes some advance planning and preparation, which can help manage the upfront costs and monthly cash cushion required to ensure a happy and healthy dog. By understanding the cost of owning a dog as much as possible, you’ll have less financial stress and more time to focus on play time with your pup.
“Even with the associated costs,” Hynd says, “I don’t for one moment regret our decision [to bring Chewie home].” Mühlenberg agrees: “Bringing a dog into my life has always been a goal and dream of mine. The love and affection you receive back from a dog are priceless.”
Sources:
1“The True Cost of Owning a Dog or Cat,” Credit.com 2“The True Cost of Getting a Puppy in 2019,” Rover.com 3“The True Cost of Getting a Dog,” Rover.com 4“5 Reasons to Get Your Dog Licensed,” Cesar’s Way 5“Pet Insurance Coverage: What You Need to Know,” ConsumersAdvocate.org
The post Fido-Proofing Your Budget: Managing the High Cost of Owning a Dog appeared first on Discover Bank – Banking Topics Blog.
If this past holiday season looked and felt a lot different than previous years â understand that you are not alone. The unexpected rollercoaster ride that 2020 forced us to take part in was one for the books that created more than enough opportunity to truly prioritize what served as important factors in our lives. While there are still a lot of unknowns on the horizon, one key area we absolutely know must be in order is our finances. Whether youâre recouping from job loss, illness, or unexpected expenses, letâs dedicate some much-needed time to refocus our attention to ensure our money works in our favor â with the right execution plan.
Refinement is the name of the game
Typically, every year many people attempt to create a strict budget. In theory, thereâs absolutely nothing wrong with this â as long as youâre able to adhere to it and follow through. Where this can get tricky is many people create a budget thatâs unrealistic and emotions of defeat swiftly knock. We all know how this ends up â youâve abandoned the pre-work and merely fall back into old habits. In order to set something thatâs reasonable and restrictive where necessary, refine your current budget. This approach shifts your perspective and doesnât create such harsh goals that will make you feel theyâre unattainable.
Identify at least two areas you would like to work on within your current budget. For example, letâs say eating out is a problem area and you want to dedicate more income to savings. First, review at least 2-3 previous bank statements to obtain real information about how much you spent over the course of time. Now, choose your ânewâ number that will now become your maximum for ordering food. By evaluating what youâve previously spent on eating out and identifying the new number youâd like to establish, you have now created a pathway to crush your new goal. If swiping your debit card serves as a daily temptation, adopt a cash system. Once that money dedicated has been depleted for the month (or pay period), that is your cut off. For remaining funds left over, throw the extra into your savings account. Developing new habits with very old tactics has serious benefits. Your goals arenât impossible, but there has to be a fresh approach adopted to see them through.
Tackle newly acquired debt
Letâs admit it, last year was rough. A lot of things ended up happening that should or should not have. If you fell into some new credit card debt or still handing remnants from previous years â take a breather and remember life happens. Review all credit card statements, potential medical bills, or anything from creditors and list them all cohesively. While this can be done on pen and paper, for easier tracking be sure to also create some sort of online document. You’ll be able to see them compiled with due dates, amounts, and creditors. Itâs recommended to handle high-interest accounts first, but personally take inventory of what works best for you. Starting with the lowest amount owed also has benefits, as this builds up personal momentum. We all love to celebrate wins along the way and our finances are no exception to this. Each of us has different motivators and the common denominator for both scenarios is that debt is actively being paid off!Â
We donât know what the future holds but we have the choice to operate from a place of gratitude. Will we make all of the best and most sound financial decisions? No. Will everything go perfectly and according to our plan? Not a chance. However, we can make the daily decision to keep our hearts and minds on the positive things. Every year brings new challenges and itâs our responsibility to stay the course and see our personal finance goals through.
Accountability partners can be essential in providing us thoughtful words even when our minds donât. Set up a recurring, virtual monthly finance chat with close ones to help keep you on track. Solicit the assistance of a financial advisor that can serve as a sounding board to help provide guardrails or a listening ear. Donât dwell on what wasnât accomplished last year (or the previous years), every day is a new day to implement new things.Â
The post Getting Back to the Basics appeared first on MintLife Blog.
We are in the midst of a major economic shift. While workers in the past could expect to keep a stable job with a traditional employer for decades, workers of today have found they must either cobble together a career from a variety of gigs, or supplement a lackluster salary from a traditional job by doing freelance work in their spare time.
Though you can make a living (and possibly even a good one) in the gig economy, this kind of work does leave gig workers vulnerable in one very important way: retirement planning.
Without the backing of an employer-sponsored retirement account, many gig workers are not saving enough for their golden years. According to a recent report by Betterment, seven out of 10 full-time gig workers say they are unprepared to maintain their current lifestyle during retirement, while three out of 10 say they don’t regularly set aside any money for retirement.
So what’s a gig worker to do if they don’t want to be driving for Uber and taking TaskRabbit jobs into their 70s and 80s? Here are five things you can do to save for retirement as a member of the gig economy. (See also: 15 Lucrative Side Hustles for City Dwellers)
1. Take stock of what you have
Many people don’t have a clear idea of how much money they have. And it’s impossible to plan your retirement if you don’t know where you are today. So any retirement savings should start with a look at what you already have in the accounts in your name.
Add up how much is in your checking and savings accounts, any neglected retirement accounts you may have picked up from previous traditional jobs, cash on hand if your gig work relies on cash tips, or any other financial accounts. The sum total could add up to more than you realize if you haven’t recently taken stock of where you are.
Even if you truly have nothing more than pocket lint and a couple quarters to your name, it’s better to know where you are than proceed without a clear picture of your financial reality. (See also: These 13 Numbers Are Crucial to Understanding Your Finances)
2. Open an IRA
If you don’t already have a retirement account that you can contribute to, then you need to set one up ASAP. You can’t save for retirement if you don’t have an account to put money in.
IRAs are specifically created for individual investors and you can easily get started with one online. If you have money from a 401(k) to roll over, you have more options available to you, as some IRAs have a minimum investment amount (typically $1,000). If you have less than that to open your account, you may want to choose a Roth IRA, since those often have no minimums.
The difference between the traditional IRA and the Roth IRA is how taxes are levied. With a traditional IRA, you can fund the account with pre-tax income. In other words, every dollar you put in an IRA is a dollar you do not have to claim as income. However, you will have to pay ordinary income tax on your IRA distributions once you reach retirement. Roth IRAs are funded with money that has already been taxed, so you can take distributions tax-free in retirement.
Many gig workers choose a Roth IRA because their current tax burden is low. If you anticipate earning more over the course of your career, using a Roth IRA for retirement investments can protect you from the taxman in retirement.
Whether you choose a Roth or a traditional IRA, the contribution limit per year, as of 2018, is $5,500 for workers under 50, and $6,500 for anyone who is 50+.
3. Avoid the bite of investment fees
While no investor wants to lose portfolio growth to fees, it’s especially important for gig workers to choose asset allocations that will minimize investment fees. That’s because gig workers are likely to have less money to invest, so every dollar needs to be working hard for them.
Investing in index funds is one good way to make sure investment fees don’t suck the life out of your retirement account. Index funds are mutual funds that are constructed to mimic a specific market index, like the S&P 500. Since there is no portfolio manager who is choosing investments, there is no management fee for index funds. (See also: How to Start Investing With Just $100)
4. Embrace automation
One of the toughest challenges of being a gig worker is the fact that your income is variable — which makes it very difficult to plan on contributing the same amount each month. This is where technology comes in.
To start, set up an automatic transfer of an amount of money you will not miss. Whether you can spare $50 per week or $5 per month, having a small amount of money quietly moving into your IRA gives you a little cushion that you don’t have to think about.
From there, consider using a savings app to handle retirement savings for you. For instance, Digit will analyze your checking account’s inflow and outflow, and will determine an amount that is safe to save without triggering an overdraft, and automatically move that amount into a savings account. You can then transfer your Digit savings into your retirement account.
5. Invest found money
An excellent way to make sure you’re maxing out your contributions each year is to change your view of "found money." For instance, if you receive a birthday check from your grandmother, only spend half of it and put the rest in your retirement account. Similarly, if you receive a tax refund (which is a little less likely if you’re a gig worker paying quarterly estimated taxes), send at least half of the refund toward your retirement.
Any gig workers who often receive cash can also make their own rules about the cash they receive. For instance, you could decide that every $5 bill you get has to go into retirement savings. That will help you change your view of the money and give you a way to boost your retirement savings.
Investing in your retirement early is the best way to ensure financial stability as you age, especially when it comes to understanding various retirement options. Getting started may feel overwhelming â luckily weâre here to help. We help break down the difference between 401(k) and 403(b) accounts, and how they can impact your financial life.
You may already know the value in adjusting your budget to make saving for a rainy day a priority. But are you also prioritizing your retirement savings? If youâre just getting started in the workforce and looking for ways to invest in yourself, 401(k) and 403(b) plans are great options to know about. And, the main difference between a 401(k) and a 403(b) is the company whoâs offering them.
401(k) accounts are offered by for-profit companies and 403(b) accounts are offered by nonprofit, scientific, religious, research, or university companies. To understand the similarities and differences between plans in depth, skip to the sections below or keep reading for an in-depth explanation.
How a 401(k) Works
How a 403(b) Works
The Difference Between 401(k) and 403(b)
The Similarities Between 401(k) and 403(b)
5 Ways to Grow Your Retirement Savings
$19,500 with your employer matches. Plus, most retirement funds have required minimum distributions (RMDs) by the time you turn 70. This essentially means you have to take a minimum amount of money out each month whether you want to or not.
In most cases, employers will offer 401(k) matching to encourage consistent contributions. For example, your employer match may be 50 cents of every dollar you contribute up to six percent of your salary. For example, with this employer match on a $40,000 salary, you would contribute $200 and your employer would contribute an additional $100 each month. This pattern would continue until your annual contributions hit $2,400 and your employer contributes $1,200.
Employee matching is essentially free money. Youâre monetarily rewarded for your retirement payments. Be sure to pay attention to vesting periods when setting up your employer match. Vesting periods are an agreed amount of time you need to work at a company before you receive your 401(k) benefits. For example, some companies may require you to work for their team for a year before earning retirement benefits. Other employers may offer retirement benefits starting the day you start working with them.
403(b) accounts include school boards, public schools, churches, hospitals, and more. This type of account is also known as a tax-sheltered annuity plan â they allow pre-tax income to be invested until taken out.
Employers that offer 403(b) retirement plans may offer a pool of provider options that undergo nondiscrimination testing. This allows employers that qualify for this account to shop around for plans that offer the best benefits and donât discriminate in favor of highly compensated employees (HCEs). For instance, some 403(b) accounts may charge more administrative fees than others.
Employers are able to offer employee matching on 403(b) accounts if they decide to. To cut costs for nonprofit companies, 403(b) retirement plans generally cost less than 401(k) accounts. Costs associated with starting up these accounts may not affect you, but it may affect your employer.
Account Type
401(k)
403(b)
Yearly Contribution Limit
$19,500
$19,500
Employer-Issued Packages
For-profit employers:
Corporations, private establishments, etc. and sole proprietors
Non-profit, scientific, religious, research, or university employers:
School boards, public schools, hospitals, etc.
Minimum Withdrawal Age
59.5 years old
59.5 years old
Early Withdrawal Fees
10% penalty, tax, and additional fees may vary
10% penalty, tax, and additional fees may vary
Source: IRS.org
The Differences Between 401(k) and 403(b)
Both a 401(k) and 403(b) are similar in the way they operate, but they do have a few differences. Here are the biggest contrasts to be aware of:
Eligibility: 401(k) retirement plans are issued by for-profit employers and the self employed, 403(b) retirement plans are for tax-exempt, non-profit, scientific, religious, research, or university employees. As well as Hospitals and Charities.
Investment options: 401(k)s offer more investment opportunities than 403(b)s. 401(k) accounts may include mutual funds, annuities, stocks, and bonds, while 403(b) accounts only offer annuities and mutual funds. Each employer varies in retirement benefits â reach out to a trusted financial advisor if you have questions about your account.
Employer expenses: 401(k) accounts are generally more expensive than 403(b) accounts. For-profit 401(k) accounts may pay sales charges, management fees, recordkeeping, and other additional expenses. 403(b) plans may have lower administrative costs to avoid adding a burden for non-profit establishments. These costs vary depending on the employer.
Nondiscrimination testing: This form of testing ensures that 403(b) retirement plans are not offered in favor of highly compensated employees (HCEs). However, 401(k) plans do not require this test.
The Similarities Between 401(k) and 403(b)
Aside from their differences, both accounts are set up to aid employees in retirement savings. Hereâs how:
Contribution limits: Both accounts cap your annual contributions at $19,500. In the event you contribute over this limit, your earnings will be distributed back to you by April 15th. If youâre under your retirement contributions by the time youâre 50 years old, youâre allowed to make catch-up contributions. This means that, if youâre eligible, you can contribute $6,500 more than the yearly contribution limit.
Withdrawal eligibility: You must be at least 59.5 years old before withdrawing your retirement savings. In the case of an emergency, you may be eligible for early withdrawal. However, you may be charged penalties, taxes, and fees for doing so.
Employer matching: Both retirement account options allow employers to match your contributions, but are not required to. When starting your retirement fund, ask your HR representative about potential benefits and employer matching.
Early withdrawal penalties: If you choose to withdraw your retirement savings early, you may be penalized. In most cases, you need a valid reason to withdraw your funds early. Eligible reasons may include outstanding debt, bankruptcy, foreclosure, or medical bills. In addition, you may be charged a 10 percent penalty fee, taxes, and other fees. During a downturned economy, as weâve seen with the COVID-19 pandemic, fees may be waived.
retirement plan options and their benefits. When employers offer retirement matches, consider contributing as much as you can to meet their match.
2. Set up Monthly Automatic Contributions
Save time and energy by setting up automatic contributions. You may feel less interested in contributing to your retirement as your payday approaches. Taking time to set up a retirement fund and budgeting for this change may be holding you back. To meet your retirement goals, consider setting up automatic payments through your employer. After a while, you may not even notice the slight budget adjustment.
3. Leverage Employer Matching
Employer matching is essentially free money. Employers may put money towards your future for nothing but your own contribution. This encourages employees to consistently put money towards their retirement savings. Not only are you able to earn extra money each month, but this âfree moneyâ will grow with interest over time. If you can, match your employerâs contribution percentage, if not more.
4. Avoid Early Withdrawal
Credit card balances, student loans, and mortgages can be stressful. Instead of withdrawing early from your retirement fund to pay for these, consider other debt payoff methods. If youâre eligible to withdraw from your retirement early, you may face penalty fees, taxes, and administrative expenses. This may hinder your savings potential or push back your desired retirement date.
5. Contribute Your Future Raises and Bonuses
If youâre saving less than $19,500 to your retirement fund this year, consider contributing more. If you earn a bonus or a raise, stick to your current budget and consider increasing your contributions. Ask your employer to increase your retirement payments right before you receive a bonus or raise. The more you contribute, the more interest youâll accrue over time.
Whether your retirement funds are established through a 401(k) or a 403(b), these accounts offer you the chance to build your financial portfolio. Consistently funding your retirement account may better your financial plan and set you at ease. As your contributions age, so do your interest earnings. Youâll be able to make money on your pre-taxed income and set your future self up for success. Get started by checking in on your budget and carving out a specific amount to put towards your retirement each month.
The post Whatâs the Difference Between 401(k) and 403(b) Retirement Plans? appeared first on MintLife Blog.
