by Kelsey Smythe | May 7, 2018 | Money
When I got the first job that paid more money than I actually needed each month, I wasn’t sure what exactly I should do with it. Sure, I had plenty of ideas. But what was the best thing? What would help me make my money work for me instead of just working for my money? These questions put me into research mode and led me into a personal finance journey that I still haven’t gotten tired of. There is lots to learn about personal finance. But at the end of the day, what you should do with any extra income is pretty straightforward. If you’re wondering what you should do with extra money coming your way, I’ve gleaned some solid advice that I’d love to share you.
First of all, it’s really important to decide ahead of time what you’ll do with extra money. If you don’t pre-decide, I promise you that the pretty new sweater from Nordstrom or the perfect addition to your collection from Amazon will really feel like a need (#preachingtomyself). Here are a few great options for extra income based on where you’re at with your finances right now.
If you’re living paycheck to paycheck
The first step you should take on your financial journey is to start an emergency fund. Most experts recommend building it up to $1,000 before focusing on paying off your debts. The reasons to have at least a little bit of an emergency fund are many. It will prevent you from going further into debt if the unforeseeable happens, such as if your car breaks down or you have to take your dog to the vet. It also contributes to your mental health. If you know you have at least a little bit of a cushion, you’ll have less anxiety when it comes to thinking about your finances.
While only $1,000 in your emergency fund (while you’re paying off debt) is recommended, there are a few reasons you may want a bigger fund. If you’re driving a car that frequently needs repairs or has a lot of miles on it, you could easily exceed your $1,000 fund. It’s also helpful to have more of an emergency fund if you have health problems and think you might have medical bills in the near future. Being self-employed is another great reason to have a greater emergency fund since that extra income might fluctuate. There’s no one best amount for everyone, so take an honest look at your financial needs and assess what will work best for you.
Decide ahead of time what your goal is and track your progress as you work towards it. I love to track my financial goals in Mint, which is a great free tool to use. The goals feature is only available on the website right now, so if you’re looking for it in the app, you won’t be able to find it. There are lots of other ways to track your financial goals. Some of my favorites are what people do in their bullet journals or the coloring pages they create.
If you already have a little cushion
Pay off your debt
Once you have an emergency fund, the very next thing you should start working on is paying off your debt. We live in a society that tells us that there is such a thing as good debt and bad debt. But unless you have 0% interest for life, all types of debt are costing you money every month and quite a lot in the long run. Let’s say you have a car loan for $8,000 with only 4.5% interest. That’s not too bad, right? For a 5 year loan, your payments will be $149 a month and you’ll pay $948 in interest. Look at what happens if you decide to pay extra each month.
If you double your monthly payment, you’ll pay off the loan 2.5 years early! But on top of this, you’ll be able to invest almost as much as the initial price of the loan. By paying an extra $150 a month, you end up with $8k in your investment account in 5 years. Now imagine that you didn’t pay any extra at all? In the same amount of time it took you to get $8k, you’ll have $0. That’s just an example of one small interest loan. If you work on paying off all your loans, you could be saving a lot of money. I love to use this calculator to play around with how much I can save by coming up with extra payments. This is a great calculator to show you how much you can gain by investing.
Debt Payoff Methods
Now that I’ve convinced you how powerful it is to pay off loans early, you might be wondering which one you should start with. There are two different methods that you can use. It’s really important to know yourself when deciding which debt to pay off first. If money is really stressful for you, you feel like you could lose the motivation to pay off debt at any moment, or you’re so discouraged that you could use a couple small wins, then you should pay off debt using the snowball method.
Snowball Method
The snowball method involves paying off the debt that has the smallest monthly payment first while paying the minimum on all other debts. Maybe you have a store credit card that you used to purchase a professional wardrobe for that new job (and extra income) that you have. Paying off the few hundred on that and being done with it might just be the win you need before you start really focusing on paying off your student loans. Put all your extra income toward the smallest debt first. Then, as soon as it’s paid, put the monthly payment you would have put toward the smallest debt to the next smallest debt until that gets paid off. As you keep doing this, your monthly payments toward your next debt keeps snowballing, until eventually you just have one debt left and you’re putting a big chunk of money towards it every month.
Avalanche Method
If you’re highly motivated to pay off your debt and know that there’s not a lot that can get you off track, the avalanche method is probably right for you. In this method, you’ll put your extra income towards the debt with the highest interest first. This is usually any credit card debt you might have, but you’ll want to get a list of all your debts and interest rates just to be sure.
The benefit to this method is that you end up paying the least amount of money in the end. High interest rates cause your debt to multiply over time. By paying off the ones with the highest interest first, you prevent this from happening. It’s not uncommon for your highest interest rate debt to be your biggest monthly payment, so this can be discouraging when you first start really focusing on paying off debt. This method definitely has the biggest payoff though, so if you know you can stay focused, this will be a great option for you.
There’s no wrong answer to which method you choose. Both of them work. The important thing is to understand what will work better for you. Once you figure that out, you can keep at it until you’re debt free.
If you have a small emergency fund and little to no debt
First of all, congratulations! This is an awesome place to be. Not a lot of people find themselves in this position. It might be tempting to spend most of what you earn, but there are still some better things to do with that extra income to set you up for financial success.
Build up your emergency fund
Once you’ve paid off debt, make sure that you build up your emergency fund to 3-6 months of living expenses. This will protect you for larger emergencies (like if your house burns down or you lose your job). Another reason a healthy emergency fund can be of huge benefit to you is that it grants you freedom. Hate your job? You can quit, knowing you have 3-6 months before finding another. I love that kind of freedom!
Emergency funds should always be kept somewhere safe (ie not under your mattress) but where you can access the money fairly quickly (because it’s not really an emergency if you know about it ahead of time). But should you save 3 or 6 months worth of funds? This depends on your situation. If you have a very secure job and are not likely to get fired or laid off soon, then 3 months should be plenty. If your job is less secure, seasonal, or you’re self-employed, then 6 months is certainly a safer option.
Save for Retirement
To be perfectly honest, saving for retirement sounds like the least fun thing to do with your money. There are so many things in the much nearer future that you can save for. But the earlier you get started, the better the results. That’s not really because you’re putting more money in. It’s the power of compounding interest. This is a great article explaining just how much more you can save if you start in your 20s versus starting in your 30s. Just a little bit of money saved 10 years earlier makes a huge difference.
But what if you don’t have extra income?
Maybe you’re already putting all of your income towards living expenses and don’t have any leftover. This is a sticky situation to be in, and I promise you you’re not alone. The first thing you should do is keep track of your spending to make sure that all of it is necessary. If it’s still looking like you’ll have to spend more each month than what you can earn, your next best option is to find a way to earn more. Every little bit helps, so even if you don’t have a whole lot of time, it’s worth it to look into a side hustle. Also remember that extra income doesn’t have to be just from your paycheck. Here are some other forms of extra income to be mindful of:
- Tax return
- Gifts
- Year-end bonuses
- Raise at work
- Clearing clutter and selling it for a profit
A Final Note
I already mentioned this earlier, but clear goals are really essential when it comes to managing your money. If you don’t know exactly what your highest priority is, you’ll spend half of your money and save the rest in random places. This makes it so that you’re not making a lot of progress in any one area. Think about what financial goal will make the biggest difference in your life over the long term and go for those.
Know your why. Even if you have a clear goal, it’s no fun going after it unless you really know why it’s important. It’s important to know not just that you want an emergency fund, but what it will mean for your life. Will it give you peace of mind? Can it keep you from spiraling into debt, meaning that you can pay for your kids’ college when the time comes? Will it be the first step on the road to opening up your own business someday? Those are much more meaningful goals which will help you stay focused on getting your finances in order.
Have an optimistic mindset. It can be discouraging when you feel like you have a ton of debt that will take years to pay off. You might want to quit when you realize that at your current savings rate it will take you 2+ years to finish your emergency fund. Don’t let that discourage you! The habits you’re building and knowledge you’re gaining will continue to serve you for the rest of your life. Small changes can make a huge difference. If you keep at it, you’ll get there someday.
Leave a comment and let me know what your biggest financial goals are right now. My husband and I are still building up our emergency fund. It feels like it’s taking forever, but I know we’ll get there! How about you?
by Kelsey Smythe | Apr 23, 2018 | Money
Being frugal can feel really hard and impossible, especially when you’re first starting out on improving your financial journey. We ladies often have full lives already, so putting the time in to save money doesn’t feel realistic. But it doesn’t have to be as scary as it seems. Here are some tips for effortless ways to start saving money.
Unsubscribe from emails
I was resistant on this one for a while. I wanted to know when there were going to be sales from Old Navy so that I can buy things that I “needed.” What I quickly discovered is that all those emails do is try and convince you that you need things that you really don’t. As soon as I unsubscribed, I was blissfully unaware of when all the sales took place and what I was supposedly missing out on. I was surprised to discover that I was pretty content with what I already had.
Set up automatic drafts
This is a lifesaver when it comes to getting your financial life in order. Set up an automatic draft into your savings account to come out as soon as you get your paycheck. If the money isn’t sitting in your checking account, you’ll be less inclined to spend it. We have several different things we’ve been saving for, so we set up automatic drafts for each savings account. It’s good financial decisions on autopilot. This way, you won’t feel like you’re constantly trying to decide whether you should spend your money or save it.
Unsubscribe from services you don’t use
If you’re not watching Hulu because all the best things are on Netflix, unsubscribe. (If you are watching Hulu, leave a comment and tell me what’s good!) If you have a subscription to Spotify and Pandora, pick the one you use the most and unsubscribe from the other. If you only watch one or two cable shows, definitely unsubscribe from that. Even if you only unsubscribe from 3 services that cost $10 each, that’s still $30 a month. $30 a month comes out to $360 a year! That’s some pretty easy money to put in your bank account.
A word of caution, however. It doesn’t do you any good if you save$30 a month only to start spending it on something else. When you unsubscribe from those services, consider immediately setting up an automatic draft into your savings account or toward your debt instead.
Order your groceries online
Groceries is the one line item in our budget that we struggle with the most. For some reason, every time we walk into the grocery store, our shopping list expands and our wallets shrink. Keeping your food under budget is hard, but what’s been really helpful for us is ordering groceries online and then picking them up. When you do this, it’s much easier to keep an eye on your total. On top of that, you’ll be less tempted by all the pretty and delicious things that you walk past. Lately we’ve been using Walmart Grocery Pickup, which has been wonderful. If you use this referral link, you’ll get $10 off your first order and I’ll get $10 off my next.
Find alternatives for hanging out with friends
One of the hardest things about saving money is how it seems to affect your social life. Oftentimes our relationships are built around spending money–going to the movies, going out for brunch, meeting a friend for dinner or happy hour. The idea of cutting back feels like turning yourself into a hermit, but it doesn’t have to be that way. What I like to do is counteroffer when my friends ask me to hang out to something cheaper or free. Here are some cheaper (or free) alternatives for spending time with friends:
- Instead of drinks out, have drinks at your place
- Instead of dinner out, meet for a drink or coffee (order a regular brew instead of a fancy drink to save more money!)
- Instead of eating, have a potluck picnic or go for a hike
- Instead of going out to see a new movie, find an old favorite and invite friends over to watch that instead. Provide the popcorn and tell them it’s BYOB
- Start a dinner night once a month with friends, alternating at houses. You can all chip in ingredients and make dinner with each other. This sounds like so much more fun than eating out, and it’s much cheaper too!
The sky’s the limit with what you can think of. We’ve been conditioned to spend money with and on the people that we love, but community is so much more than that!
If you do eat out, order water to drink
I know, I know. Water is no fun. But you save so much in the long term by ordering water instead of something else, especially alcohol. Not only are you paying the money on the actual drink itself, but you’re also getting taxed on the drink, and you’re paying for the tip as well. Say you order a glass of wine for $6.99. The tax would be about 5.54%, depending on where you are, and the tip would be an additional $1.05 (here in the U.S., you should pretty much always tip 15% or more! It’s only right). That brings your drink to a total of $8.42. Now say you’re only drinking one glass of wine at a restaurant a week. If you forego that and drink water instead, you’ll save about $33 a week and $404 a year.
All of these by themselves might not feel like much, but when you put them all together, you’re saving thousands each year. You’re now well on your way to less debt and a more comfortable emergency fund. Feeling like getting your personal finances in order may seem overwhelming, but it’s really just a combination of tiny steps that really add up. Leave a comment and let me know what ways you’re saving money!
by Kelsey Smythe | Apr 16, 2018 | Money
Figuring out how to sell your car can be a really stressful experience. It’s confusing, overwhelming, and a lot of work. A few months ago, my husband and I sold my 2007 Honda CR-V. We knew going in that the dealership would offer us the lowest price. The trade-in value of a car is always lower than a private sale. But selling it to a dealership is so much easier, and who has time to sell a car anyways? So I did my research and we took it in to see what they offered.
KBB Trade-in Value — $3,500 – $4,500
Carmax Estimate– $3,000
KBB Private Sale — $5,000 – $6,500
We knew when we went to talk to the dealer that it would be the least financially beneficial offer for us, but we were willing to throw some money away to save ourselves the hassle of selling it ourselves. To our surprise, the dealer only offered us $1,500 even though it should have been worth more than that. At that point, we knew that if we were going to get the most money out of our car, we were going to have to do the legwork and sell it ourselves.
We listed it both in Facebook Marketplace and on Craigslist, but we got the most responses on Facebook. A lot of work and a couple weeks later, we sold my car for $4,000, almost triple what the dealer offered us. Of course, private sales are always more profitable than selling to a dealership, but sometimes it can be a lot more profitable. Part of this is because selling a car yourself is a hassle and a little overwhelming, and dealers know this. But it’s also the number one way to get the most amount of money out of your old car. What we found out is that it didn’t end up being nearly as scary as we expected it to be! Here are some tips for how to sell your car your yourself and get the most amount of money from it as possible.
Clean it really well
This step is really important. No one will want to buy your car if there’s fast food leftovers in the back seat. Gross. Take everything out of your car. You want people to be able to imagine the car as their own, so take out anything hanging from the rear-view mirror or other details you’ve used to personalize it. If you have parking passes or a toll road sticker, take those out now too if you can. You don’t want to forget to take them out before you sell the car, and you want your car to look as clean as possible while showing it.
After you’ve gotten everything out of it, vacuum the inside and give it a good wipe down. Make sure you wash the outside too, of course. If you can’t do this in your own front yard, the next cheapest option is to take it to a car wash where you do the work yourself. If you have more money than time, take it to somewhere where they’ll clean it all for you. And make it smell pretty too! Febreze works wonders to get funky smells out, but it doesn’t hurt to have a car freshener too.
Take nice pictures
Taking good pictures of your car right after you cleaned it (but after the exterior is dry) can make a huge difference in getting people interested. It’s better if you take pictures somewhere other than a parking lot or your driveway. If you can find a pretty, green field to take pictures in, do that! A nice background can do wonders to make your car stand out from all the rest. Also try to take them when there’s good lighting, like shortly before sunset or on a cloudy day. You don’t have to have a fancy camera. Your phone should do just fine. Just make sure that the pics aren’t blurry.
I’ve found that the more pictures you have, the better. Take pictures from every angle, both inside and outside. It seems counter-intuitive, but also take any pictures of any dents or scratches you have. It makes you seem like a more trustworthy person to someone who is potentially going to pay thousands of dollars to you. Take pictures of the steering wheel and the backseat and anything else you can think of. When you post them, make sure to post the prettiest ones first. If you’re not sure what angles you should shoot from, look up what the car dealerships are doing and copy that.
Here are a few of the pictures I posted online to sell my car. We actually used a lot more than this! As you can see, we didn’t take it to a nice location for pictures either. It did the trick though. I had a lot of people send me messages about it!
Research your specific state’s policies before you start advertising
This is really important. Different states and countries have different laws and regulations. Make sure you get some good information on how to make a private sale from a reputable source before you start meeting with people. I can’t tell you how stressful it is if you don’t know these details. Some states require the license plate to go with the car but some states require that each new owner get a new license plate. Doing your research ahead of time ensures that you’ll know exactly what to do and won’t have to rely on or trust the buyer to tell you. This article isn’t state-specific, but it’ll help get you started.
After you’ve done your research, get all your paperwork in order. If you have copies of the service history- you’re a rockstar! Put it in a folder with your title so that when you’re going to go show it to somebody, everything is together.
Know the price of your car
This is really important so that people don’t take advantage of you. You want it to be a fair price for both yourself and the buyer. A good place to start when doing your research is Kelley Blue Book and Edmunds. Make sure you pay attention to the difference in pricing between selling it to a dealer and making a private sale. Chances are, depending on the age and condition of your car, you might have to go a little bit below what these sites list, but they’re a great starting point.
Post it online with as many details as possible
People are going to ask the most random questions. The more you put in the post, the less time you’ll waste-both yours and any potential buyer’s. Include things like whether it’s a 6 CD changer, what type of seats it has, whether it’s 4 cylinder or v6, etc. If you’re unsure of these, find your VIN number and look it up online. Usually you can find the VIN number on the driver’s side of your car, looking at the dashboard from outside. You can also usually find it on your insurance card or car registration.
It’s also important to tell people why you want to sell your car. As a buyer, I always want to know why someone is selling something. Is it because it’s broken or because they love it so much they’re updating to a newer model? When I posted my car, I told people that it had a lot of highway miles because of mine and my husband’s long distance relationship (true!), that I had just graduated college and started working full time (also true!) and that we decided to upgrade (all true!). It gives people a better idea of who I am and how I treated the car while I owned it.
Put in your posting that you’re selling it as-is
I had a friend who was sued once because he said in a Craigslist listing that the car was in perfect working condition and then something broke down on the car a month after it was privately purchased. Even though he fixed it for the person himself, they had a copy of the original listing and so sued him for false advertising. You want to be careful to be really honest about the condition of the car. Don’t oversell it and don’t promise something that just isn’t true.
Be truthful. If it’s broken, don’t tell people it’s running smoothly. You don’t necessarily have to put every little concern with the car in the post, but when you meet with people, be sure to tell them of any troubles you might have with your car. For instance, my mechanic told me that I might need my transmission fluid changed soon, so I told people that when they came to look. Not only does this make you seem more trustworthy to the buyer, but it also shows that you pay attention to the needs of your car and get regular maintenance.
Be friendly + respond right away
This is important because it shows people that you’re capable of being professional and pleasant to work with. There are plenty of used cars on the market. If you’re rude or take hours to respond to every message, those potential buyers will certainly find another car to buy. You want this to be as pleasant and hassle-free a process as possible, for both of you.
Be available to meet
I think this is the hardest part about selling your car yourself. Sometimes you’ll have to meet with quite a few people before you can successfully sell it. We My husband showed it to at least 4 different people when we sold my car. It was in January and really, really cold outside too. But just remember, even if you have to meet with 10 different people for an hour, the difference in the money you’ll get from selling it yourself versus selling it to a dealer is in the thousands. That’s definitely an hourly rate worth working for! For us personally, we spend about 4 hours meeting with people, which equaled about $625/hour.
Meet in a bank parking lot
We also found it helpful to have a set place where we meet people. This takes a lot of the decision making out of the process, which can be exhausting. We met people after school hours in a school parking lot near our house. In hindsight, we wish we had met people at our bank parking lot instead. The reason for this is twofold.
- You never know when someone is actually serious about buying. If they are, you probably need to get your title notarized. Most local banks have this service for their members.
- You can get all that cash deposited immediately into your bank account. I’m sure it’s unlikely, but you don’t want to get paid with forged bills. The bank certainly checks for those while depositing your cash. Even if the money is real, the last thing you want to be doing is driving around with thousands of dollars in your purse for a couple days until you can make it to the bank. Doing the transaction at the bank makes the process so much easier.
Call your bank ahead of time to make sure that they have a notary public and can do this service for you.
Be friendly!
When you’re showing your car to people, don’t act entitled or like you’re doing someone a favor. ‘The customer is always right’ applies to scenarios like this too. That doesn’t mean you have to let them walk all over you, but the friendlier you are, the more willing a person will be to offer you a fair price.
Stand your ground
Chances are, people who know a lot about cars are going to point out all the different things that “need fixed” and then lowball you. When this happens, politely say that you’ve done your research, and that this particular make and model in this particular condition is worth this much.
One gentleman told me that my car needed new shocks and a bunch of other very minor things, and then offered me $3,000 for the car. I asked him how much those things would cost him to fix (around $500) and offered to lower my asking price by that amount. He stuck with his $3,000, which was about 40% off my asking price. When I informed him that I’d be willing to go down some on price, but that the car was worth around $5,000 on Kelley Blue Book, he told me that “no one uses that website and its prices are inflated.” However, a lot of people use that website, and I had researched other websites as well. If you’ve checked the price on several websites, you won’t be as easily taken advantage of.
Be willing to go down in price
While I’m glad I held my ground in the above scenario, it can be good to budge a little. I could have probably waited, showed the car to more people, and eventually sold it for $4,500, but I was consistently getting offers for $4,000 or less. On top of that, trying to sell your car is a stressful, time-consuming experience that both my husband and I wanted to be done with. I decided that the extra $500 wasn’t worth the stress and hassle of keeping it on the market for another few weeks. $4,000 might have been slightly less than it was worth, but it was still A LOT more than the $1,500 the dealer offered. Being willing to go down in price reduced mine and my husband’s stress and sped up the process significantly. In fact, we sold it less than a week after my initial listing.
Have them sign a paper saying they’re buying the car as is
This is advice I found in this article. Have them sign a document saying that they’re buying the car as-is. We didn’t do anything fancy. My husband just printed out a form that said how much the sale was for, what the mileage was, and that the purchase was as-is. I made two copies, and both the buyer and myself signed both copies. The buyer took one home and I kept one for myself. I couldn’t tell you whether this would actually protect either one of us in court or not, but it sure made me feel a lot better.
Double check that you didn’t leave anything in the car
The last thing you want to do is have to try and schedule a meet-up after you sold your car. Look around to make sure you got everything out. Here are a few places you may want to check:
- seat-back pockets,
- sunglasses holder
- glove box
- your CD changer
- the trunk
- the center console
- underneath the seats
- in the crack of doom between the driver seat and the console
- your windshield–for parking passes, etc.
I found an extra pair of sunglasses in my car just before the new owners drove it away.
Watch in bittersweet nostalgia as someone drives your baby away
I felt surprisingly emotional about saying goodbye to my car, even though I was more than ready to get rid of it. I had spent a lot of time in it and it was the first car I picked out and bought completely on my own, so saying goodbye felt like the end of an era. But also, congratulations! You did it! And now you probably have a lot more cash in your checking account. Give yourself a pat on the back and then go transfer it into a savings account.
I hope this advice was helpful to you. Leave a comment and let me know if there is any good advice I missed, and be sure to share this article with anyone you know who’s going to be selling their car soon.
Note: I am not a lawyer or qualified person to give legal advice on how to sell your car. Make sure to read up on your individual state or country’s laws and regulations on how to sell your car.
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by Kelsey Smythe | Apr 6, 2018 | Books, Money
Now that I’m no longer going to school for my English degree, I have time to read. Surprisingly, at the top of my list are personal finance books. If you would have told me when I was a teenager that I would develop a deep love for reading personal finance books, I would have told you that you were nuts. Fourteen-year-old me would have thought that twenty-eight-year-old me was boring. But I do indeed love reading up on personal finance. I just can’t get enough. It’s not nearly as dull as I would have imagined, but practical and inspiring. Here, in no particular order, are ten books that I’ve been seeing around the interwebs and dying to get my hands on.
1. Broke Millennial: Stop Scraping By and Get Your Financial Life Together by Erin Lowry
I already started this one but got distracted with other things, like finishing my degree and planning a wedding and visiting my long-distance fiance. I flipped through the book and it looks like it has some great information. Erin is incredibly relatable and she’s got an easy-to-read writing style. This is a great book if money totally intimidates you and you feel like you need to learn the basics but don’t know where to start.
2. Meet the Frugalwoods: Achieving Financial Independence Through Simple Living by Elizabeth Willard Thames
I put myself on the waiting list for this book at my local library weeks ago. There were 9 people in front of me before the book even came out! I just got the notification that it’s waiting for me at the library so I’m going to go pick it up today. Can’t wait to dive in! I’ve been reading Elizabeth’s blog for about a year now and love it. Her posts are super long and I still read the whole dang things, so I know I’m going to love her book. This book would be a great choice for you if you’re interested in how to really cut corners in your spending and how that can let you choose your own path in life.
3. Rich Dad Poor Dad: What the Rich Teach Their Kids About Money That the Poor and Middle Class Do Not! by Robert T. Kiyosaki
I’ve heard about this book a lot but hadn’t looked past the title on account of the fact that I’m not a dad. My interest in reading this is mainly because it’s a classic personal finance book and I’ve seen the title everywhere. I think it would be useful to read to shape how I handle money myself, but also to start thinking about how I’ll teach my kids about money one day. (Sorry, Mom. This isn’t an announcement).
4. The Spender’s Guide to Debt-Free Living: How a Spending Fast Helped Me Get from Broke to Badass in Record Time by Anna Newell Jones
Confession: I’ve already read this book, but I’m planning on reading it again now that my life circumstances are a little different (ie: I have a full time job and a husband and more bills to pay). Anna has an amazing Facebook group that is really encouraging and supportive. I recommend the book and the community. It’s a particularly helpful book if spending is a struggle for you, but either way you’ll get a lot out of it.
5. The Simple Path to Wealth: Your road map to financial independence and a rich, free life by JL Collins
I have two reasons for wanting to read this. First of all, it was highly recommended by Elizabeth Willard Thames (see above), whose opinion on personal finance I highly trust. Secondly, the investment world scares me, and the best way to get over that fear is exposure (link to post). This book is supposed to have lots of great information on that.
I’ve been seeing this a lot of places and I’m curious to know what the author thinks people most need to know about money. I mean, what if there’s something that I don’t know yet? There probably is, and that thought is scary for an Enneagram 5 like myself. Also, if I like it, I’ll totally become one of those people who gift books about personal finance for someone’s graduation. You’re welcome.
7. The Millionaire Next Door: The Surprising Secrets of America’s Wealthy by Thomas J. Stanley
I’ll be honest, the main title doesn’t really intrigue me much. But the subtitle? I want to know the secrets. There’s a millionaire living next door to me? Who? I want to spot them. Not so that I can ask them for money. I’m just curious about people.
I’ve heard great things about this book, too. It’s supposed to be funny and easy to read. Most relevantly, Ramit tells you what to do with your money and why.
9. The Year of Less: How I Stopped Shopping, Gave Away My Belongings, and Discovered Life Is Worth More Than Anything You Can Buy in a Store by Cait Flanders
An entire year of no shopping? HOW? I’m dying to know more. Our culture has this mentality that we have to spend money, have to buy new clothes every season, have to browse the sales. Even though I know I don’t have to, I find myself buying things more often than I wish, which hurts my wallet and causes clutter. I’m looking forward to learning how Cait dealt with these issues and how exactly not spending affected her life.
This one is also on my list because of its status as a personal finance classic. I know a lot of people have found it helpful and I’m curious to see if it delivers on all it promises. The main premise of the book is that everyone has a money “blueprint.” The way you think about money can either make you wealthy or keep you poor, depending on what your blueprint is.
by Kelsey Smythe | Mar 13, 2018 | Money
There are two different ways that people look at their tax return. One way is that it’s your money that the government is finally giving back. The other is that it’s free money, a bonus, that you usually get once a year. Either way you look at it, there are smart things you can do with that chunk of money hitting your bank account. If you’re one of the lucky people who gets money back during tax season, you’re probably considering what you should do with the money. Get more bang for your buck and consider doing one of these smart things.
3 Smart Money Moves To Make With Your Tax Return
1. Pay off debt
Using your tax return to pay off debt is perhaps the best option, unless you’re intentionally keeping your debt in order to improve your credit score, which isn’t necessarily recommended. Wouldn’t it feel so good to get a chunk off your credit card debt, car loan, or student loans? One thing I enjoy doing is to put my info into this loan calculator to see how extra payments will affect the life of the loan. The amortization schedule shows you how extra payments will affect how much interest you pay and what date you’ll have it paid off by.
Snowball Method
There are two methods that finance experts recommend in deciding which debt to pay off first. The first is the snowball method, praised highly by Dave Ramsey. With this method, you put all your extra money toward your smallest debt first. When that is paid off, you take whatever you were paying toward that and put it toward the next smallest debt. People like this method because it helps them gain momentum. You get a big win right away, which helps you stay in the game. Additionally, with each small debt that you fully pay off, the more money you have to put toward your big-ticket debts.
Avalanche Method
The second method for choosing which debt to pay off first is the avalanche method. With this method, you pick whichever debt has the highest interest rate and tackle that first. You’ll pay less money in interest overall, so if you can stay motivated, this is a great method to use. Sometimes your biggest debt can have the highest interest rate, so if you think that you’ll be discouraged tackling your biggest debt first, the snowball method might be for you. If you know that you’re going to stay on track no matter what, definitely pay off the one with the highest interest first.
2. Save it
Another smart move you can make with your tax return is to save it. The sky’s the limit for different things you can save for.
Emergency Fund
If you don’t have any savings at all, your first goal should be an emergency fund. An emergency fund should be 3 to 6 months’ living expenses. The purpose of your emergency fund is to cover yourself for… well, emergencies. This way, if you lose your job or have a sudden and extensive medical issue, you won’t be in as much of a financial bind. To create your goal, tally up how much you need to live off of for one month and multiply that by at least three. Three months is usually enough savings if you have a very steady job with a very steady income. You’ll want to save closer to six months of living expenses if you foresee a job change in the future or if your income fluctuates as it does for those who work on a commission or are self-employed. If you already started an emergency fund, you can always use your tax return to beef it up a little.
Read more about emergency funds here.
Car Maintenance
Another smart thing to do with your tax return is to save it for car maintenance. This is especially important if you have an older car. Our savings account for car maintenance also doubles as savings for a down payment for a new car when the time comes. For that reason, we try to save more than we actually think we need for repairs. When it comes time for us to buy a new car, we hope to have a significant portion of the total price of the car already saved.
Other small savings accounts
We have several small savings goals besides our emergency fund, such as a travel fund. One thing you can do with extra cash coming in is to put all or part of it to complete one small savings goal. This would, first of all, feel really great. I love reaching my savings goals. It’s like the sticker chart of the adult world. But it would also free up money in your monthly budget to go toward something else. You could put the extra money in your monthly budget toward another savings goal, like your emergency fund, or put it toward debt.
3. Invest it
If you’re out of debt and you’ve got your savings accounts set up nicely, then another smart move to make with your money is to invest it. There are several different ways–some more obvious than others–to invest your money.
Stock Market
Investing in stocks is the first and most obvious way to invest. I would be lying if I didn’t say that the stock market still intimidates me a little bit. But I’m learning that it doesn’t have to be nearly as complicated as I think. I really appreciated this post over on the Frugalwoods blog. A good rule of thumb is to invest money for things that are at least 5 years in the future. For instance, we know we won’t be buying a house anytime soon, so we will probably create an investment account in which we’ll start saving for a downpayment for a house.
Retirement account
If you haven’t started a retirement account, do it now. One thing that motivated me to keep putting money into my 401k is realizing the difference between saving for retirement in your 20s vs your 30s. This article breaks it down really well. If you’re already in your 30s and feeling kind of anxious because you didn’t start saving in your 20s, don’t let that keep you from starting now! And if you already put money into your retirement account, I’m sure it wouldn’t hurt to beef up your retirement account if you already have one.
Home repair
I list this last because it isn’t always the smartest investment. However, if you know that you’re going to need to sell your house sometime in the future and there are some easy updates you can make to improve the worth of your house, definitely look into it. I am not speaking not from experience, as I have never owned a home. But I hear that the key to this is to do your research. Make sure the updates to your home are actually an investment and not just money that you’ll never see back.
Our Plan
We have a separate savings account that we’re putting money in every month for college applications and GRE testing. It’s nice to save now since we know those are some big expenses coming our way later this year. Our plan is to put part of our tax return to reach that savings goal, then put the rest toward our emergency fund, in which we’re about halfway to our goal. This will free up $75 in our monthly budget to put toward something else. We’re going to put that money toward our emergency fund as well. Using our tax return on both these things will completely cover grad school applications AND help us reach our Emergency Fund goal 1 year and 7 months sooner! It’s definitely a win-win.
P.S. You might also be interested in 7 Tips to Make Tax Season Easier!
