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Do I need to save for retirement? Yes. The answer is ALWAYS yes. Unless you have a rich uncle that will leave you millions of dollars – AND you are REALLY good at budgeting and managing your own money, then you should be setting at least something aside for your retirement each month in an investment fund. Personally, I prefer setting up a Roth IRA for investments. (see why below)
Topics Discussed in this article:
How much Should You Save for Retirement?
What is the difference between a Roth IRA and a Traditional IRA?
What is the difference between a Mutual Fund and an Index Fund?
Why Invest Your Money?
I guess you could always just open a savings account at your local bank and begin setting extra money aside – or stick cash in an envelope under your mattress. I don’t suggest these methods because you won’t earn any return on your investment this way. See the scenario below.
Plus, it makes its tempting when you can have access to these funds. I suggest investing in a retirement fund – meaning placing funds in the stock market and leaving them there to earn interest over time. We’re talking 20-40 years!
My husband and I started investing in our early 20’s – and even then, we could only put away roughly $50 a month. But it was $50 a month going towards our future! Every little bit helps and the sooner you develop the habit of saving, the better off you’ll be.
How much should you save for your retirement?
This is dependent on a couple of factors.
Your current age
The age you Plan to retire
How much you have saved already
What your estimated return on your investment should be (historically, this will be anywhere from 7-11% return on your investment for the average investor)
Here is a Dave Ramsey Retirement Calculator where you can you input the above numbers and begin to play with these different amounts.
Remember that as your income increases over the years, the more you will be able to invest. So don’t worry if you’re numbers look low right now – you can always contribute more as your income increases.
Ideally, you will put away 15% of your total income into a retirement fund. Most employers have a retirement program – so know what your employer offers and ask questions!
Once you’ve played around with the numbers on the calculator, ask yourself, “How much do I need a year to live comfortably?” This answer will vary person to person.
Just for fun, let’s input the following numbers into the investment calculator. If you were 25 years of age and you had saved up $10,000 towards your retirement and you contributed $300 a month until you were 67 – let’s be safe and say a 7% return…. here are the results.
Doing a little math, you would have contributed $161,200 of your own money and your investment would yield over a million dollars. That’s assuming you NEVER add more into the account as your income ideally increases over the years.
THAT is the reason I suggest investing.
Now, take that total and divide by 20 (this is assuming you live until you’re 97 years old.) That will be the amount of money you would receive each year is you divided up your funds evenly over the course of your retirement.
If we keep with the above scenario, you would retire making with approximately $53,000 a year.
To find out how much you should save for retirement, just play with the numbers until you’ve found one that would yield a nice retirement for yourself. Then, you can set your goals on how much you should start saving. Even if you can’t afford to save as much as you’d like right now, just starting is the important part!
Setting Up an IRA
You have options when it comes to setting up a retirement fund. I prefer a ROTH IRA account, but you can use the traditional IRA as well.
There are differences between Roth IRAs and Traditional IRAs. See the chart below to compare the differences between the two.
There are some other terms you might come across when it comes to investing. There are multiple funds to choose from when investing some sort of money. One common question that is asked is what is the difference between a Mutual Fund and an Index Fund.
Here is an easy explanation.
Think of these as your ‘buffet.’ You can pick and choose which stocks to buy into. These accounts are actively managed – meaning your investment provider should be watching these to make sure they are placing your money in the stocks that will lead to a higher return on your investment. This is why it is extremely important to find a provider you trust!
Mutual funds have a lower buy in rate, however, the fees you pay your investor will be higher (generally 1-1.5% of your earnings). But remember, your investor wants to make money too – which is why they actively manage these accounts closely!
Mutual Funds also have more volatility – meaning they are more unpredictable. But the average return of your investment is roughly 7%.
***Some people will argue that the average return of your investment is more like 11-12% percent. Which, historically, that is the correct average. However, that includes the 80’s and 90’s where the stock market jumped and the average investment THOSE years were roughly 20%. Which is why the average over time is estimated around 11-12%. But if you only consider the past 10 years, the average is roughly 7%.
If mutual funds are you ‘buffet,’ then Index funds are more like your ‘summer camp lunch.’ Everyone gets the same thing and a little bit of everything. These accounts are passively managed because they are less volatile and more stable than mutual funds.
Think of it this way. An index fund can include a fortune 500 company. If one branch of that company goes under – there are still 499 that will carry your investment. Because of this, there is a higher buy in – generally $25,000 to begin investing in Index Funds. Exceptions can be made and this number can vary depending on your investor.
But, while the buy in rates are generally higher, the investor fees are lower.
If you don’t understand the stock market, I highly suggest hiring someone to do your investments for you. Click HERE to find some investors near you today and compare rates.
What We Use
We are 100% on a Dave Ramsey Retirement Plan. We use companies and investors endorsed by Ramsey (as linked above) because of his extensive knowledge of the stock market and his abilities to teach someone to plan, save, and setting you up for a great retirement – one that won’t have you depending on the government, or other people in your elderly years.
If you don’t want to have to take on a job after you retire – even though I love my Wal-Mart greeters – you need to be setting SOMETHING aside for your retirement. It’s about living a frugal life now, so you can enjoy the freedom later!
Do you need some ways to increase your income? You can create a website online and learn how to make money in the long term to go towards your investments.
Why not start an online business now – you can receive FREE basic training on how to set up your website and how to start making a residual income online with a website.
Are you looking for a side hustle? You can also check out THIS POST on how to make money doing odd jobs by posting your skills on websites like Craigslist and Facebook.
Or, simply start saving money with these 50 ideas! Sign up to receive a print out of all 50 ways you can save money. Hang it on your fridge and check them off the list as you save money each month towards YOUR future!
How important is saving for retirement to you? Let me know in the comments below! Comment and tell me what you want YOUR future to look like! What are your goals?
This post contains affiliate links. See my Private Policy | Disclosure Page for more information.
Everyone looks forward to their vacation time! It’s important to be able to escape your everyday routines and enjoy your time away. But what’s my #1 Stressor when it comes to vacations? Finances! Here are some tips to make your vacation a little less stressful and how to budget for your vacation!
1. First off – BUDGET.
I’m a huge fan of budgeting for EVERYTHING! If you want to be smart about your finances (even while you’re on vacation) you need a budget! It’s easier on your wallet if you’ve spent time saving up for your vacations a little each month. Even if you put $50 a month into a savings account – you’ll be glad it’s there when you need it!
See how I budget with my Envelope Budgeting System.
2. Next, PLAN
When you plan the details of your vacation beforehand you can know how much money you will need each day of your trip. Give yourself a daily allowance and stick with it!
If you fail to plan, then you plan to fail.
Look up restaurants near your destination and check out their menus – that way you won’t be surprised when the bill comes!
Plan every stop and every sightseeing outing. Check ticket prices online beforehand…most places even offer discounts when you book tickets early online.
But put a few extra dollars aside for those impromptu outings as well…let’s face it, you ARE on vacation! Having a little extra ‘just in case’ is nice! You’ll be relieved when realize that you CAN live it up a little!
Do you want to see what type of vacations you can plan on a budget? Click HERE to put in your ideal travel and budget information and World Of Magic Travel will send you an estimated quote on how much your trip will cost! It’s a really neat tool to help you plan your next destination!
3. CUT SPENDING
If you want to save up for your vacations, it’s best to start cutting your everyday spending. This could be as simple as making your own coffee from home, meal planning to cut your grocery bill, or not eating out for a few months to put that money into your vacation fund.
Keep it Fun! Every time you save money, put that amount into a jar and watch it grow! See how much you can save each week and how fast you can fill it up! But don’t touch it! You’ve already budgeted for your NEEDS (step #1). Save that money for your vacation so you can fulfill those WANTS later! You will appreciate the delayed gratification once you’re on your vacation and you don’t have to pinch pennies!
4. RESEARCH EARLY AND OFTEN
Research different companies offering package deals that can save you money when you book flights and hotel rooms together. Check and see when companies will be offering cashback rebates or having special deals and take advantage of them!
Always ask your hotel if they can provide you with special ticket prices to nearby attractions or discounts at local restaurants.
See what kind of deals you can make! Check out How to Make a Deal: What I learned in China!
6. IF POSSIBLE, PLAN AN OFF-SEASON VACATION
Sure, we all love summer vacations, but you can usually find the BEST deals if you travel off-season. It might be fun to take a trip over Christmas Break – it will cost less…. plus, you can avoid seeing your in-laws!
Extra Travel Tips:
Did you know that flights are can up to $100 less when you book them the last few weeks of August?
Cruise lines are also less expensive when you book your cruise between fall and spring. Wouldn’t it be nice to get away from the cold for a week with a Mediterranean cruise? Sounds nice, right!?!
It’s always nice to bring home some sort of ‘memento’ from your trip. But do you really need another trinket that just lays around the house? Never underestimate the power of pictures! Pictures make great memory books and can generally be made pretty cheap.
Choose what you want to look for beforehand. My husband and I try to get either a shot glass or a coffee mug from our destination. They’re cheap, practical, and I get to reminisce on our vacation every time I drink from one!
Magnets also make great gifts!
Never underestimate FREE gifts! You can always bring home the sand from the beach or dirt from the Rocky Mountains!
If you want to know some other Travel Stressors and how to avoid them, click HERE.
I hope this list gives you a good idea of how to budget and plan for your next vacation! What’s your next destination? Let me know if the comments below!
Spending your money on an endangered cat species – Optional.
Keeping track of your money with a budget – Not Optional…
(unless you really don’t care where your money goes. And if that is the case – I’m in need of a new air conditioning unit. 😊)
But if you’re looking to stay in control of your money, here is a list of some of the top budgeting apps that can help you keep track of your financial goals.
Note: Budget apps generally have the same core features. They let you set up a budget and help you keep track of your expenses. Most Apps are free with options to pay for the privilege of linking your bank account.
Here is a list of some of the top-rated budget apps. I will highlight some of the features that set them apart from the rest of the bunch.
Choose the one that looks good to you and start budgeting today!
Budget APP Options
- Wally is a relatively new company that offers an app that lets you compare your income with your expenses.
- You can set goals directly with the app and see your progress
- My favorite feature is the ability to scan your receipts
- You can also keep track of your spending daily as well as monthly
- Level money allows you to link more than one bank account
- This is your simple, basic tracker
- Favorite Features: they make predictions for your balances and regular bills. They also have a spendable feature which allows you to label your purchases as ‘essentials’ vs. ‘non-essentials’ which is good if you’re trying to save money and need a quick reference on what items you can cut out of your spending.
- This app follows the principles and ideas of Envelope Budgeting
- There are 3 different versions: Free, Premium, and Coaching
- With the free version, you are allowed only a set amount of budget categories. If you want the unlimited option you have to become a Premium member.
- I do like their coaching feature. If you’re really struggling to save and budget, they offer coaching sessions to help maximize your budget and help you plan for retirement.
- Mint is a more popular budgeting system that prides itself on being the “All In One” budgeting app
- They do budgets, automatic billing, and lets you track your credit score
- They offer investment ideas and will even give advice on finding loans and opening credit cards
- This is a very simple budgeting app. They offer a paid version with more features.
- The home screen lets you see how much money you have ‘in pocket’ (be aware of the account balances trap)
- They track your bills, your income, and your outgoing expenses.
- Relies heavily on the Envelope Budgeting System (my preferred method)
- They offer a free plan, but their paid plan is only $5/month or you can pay for the whole year at a discounted rate of $45. I would highly recommend this app if you are wanting to mobilize your envelope budgeting method
- This is a Paid service. You can try it free for 34 days, but after that you pay $5/month or $50/yr.
- They also rely on the envelope system.
- They have 4 basic principles:
- Give Every Dollar a job
- Embrace your true expenses (i.e. saving for car repairs)
- “Roll with the Punches” – a nice ‘don’t sweat it’ attitude.
- Age your money – This is the heart of their training. They offer classes to show you how to save enough to begin living off last month’s income.
My #1 Choice
Every Dollar budget app. See how to set up your budget with this Step-by-Step tutorial. EveryDollar was founded by Dave Ramsey who made the Envelope Budgeting system famous. This is what I personally use in my home.
Check out Dave Ramsey’s life changing book!
Did I miss one? What’s your favorite Budget app? If you want more details about budgeting please drop me a comment below and I’d be happy to guide you anyway I can.
CONTROLLING YOUR MONEY BEFORE IT CONTROLS YOU
WHAT IS AN ENVELOPE BUDGET?
Envelope budgeting is a technique made famous by Dave Ramsey to teach you how to curb your spending and teach you discipline. It’s a budgeting method that allows you to plan how you will spend your money in advance.
This will not only allow you the freedom to spend your money as you choose, but also helps halt spending sprees that can slap your account balance with overdraft fees. Making a conscious choice of how you are going to spend your money beforehand will allow for discipline in your everyday spending choices.
Account Balances vs. Envelope system
It’s very common for people to use the account balance system when making their spending choices.
What is the account balance system?
Great question! This is when you look at your deposits, see how much money you’ve already spent, and make a choice to purchase something based on your account balance.
Deposits – Withdrawals = Account Balance
This is great in the short term – or just a quick check up, but let’s look at a scenario where this might get you into more trouble than it’s worth.
Sally gets paid $2000 at the beginning of the month.
Sally sees that she still has $1200 by the 15th of the month. This is great! She made it half way through on minimal spending and decides she wants to treat herself to a few new outfits.
She buys a few outfits for $300 and then decides to eat at a fancy restaurant and spends another $50.
Sally still has $850 left – and seeing that she only spent $800 the first half of the month this seems like a good scenario. Except one little detail. Sally also forgets things.
Sally forgot that her rent payment of $450 is due on the 25th. She also forgot that her water and electric bill are also due at the end of the month which is another $175.
Now, she has to make it on 2 weeks spending under $225. Sure, she could eat Ramen every night for dinner – but when her car breaks down, now she is very worried that her account will be over drafted and she will have to pay those fees on top of everything else!
Have you ever found yourself in a similar scenario? I know I have. I remember in college when there was a time that I literally had $.02 in my bank account – THAT was scary! And yes, I ate Ramen for dinner – a lot of Ramen…
If this has ever happened to you, or if it’s still happening, then you might want to consider the Envelope System.
No, seriously – What is an Envelope Budget?
This is a budgeting system designed to Plan and Track ALL your projected expenses. This is the rent payment, the water bill, the phone bill, grocery shopping, gas money – any category of items you knowingly spend money on each month.
Here’s how it works:
When you get paid, cash your check! If you get paid 1x a month, you can choose to cash half of it – especially if this is a new system. That way you can see how you are doing in the middle of the month and learn to play around with your numbers until you get them right.
Buy envelopes – standard, Manila, whatever you prefer. (or, if you’re broke, staple 2 pieces of paper together to make your own!)
Write a category on each envelope – 1 category per envelope. You will most likely have one for RENT, one for GAS, one for WATER/ELECTRIC, GROCERIES, etc.…You’re going to need a lot of envelopes!
Decide upfront how much you are going to spend in each category.
Start with the payments that are consistent, (most likely your Mortgage, Cell Phone Bill, Car Payment, Cable Bill, etc.…)
Then, put the exact amount of money (that you cashed) into each corresponding envelope.
Next, decide your other categories (restaurants, groceries, etc.…) Then, decide how much money you will spend that month (or half the month if you have decided to go that route) and put that amount of money into those envelopes…Did I mention that you will need A LOT of envelopes???
They Even Come In Pink!
If you have extra money left over, you can add more to a specific category – or what I do is set aside a MISCELLANEOUS fund for when the air conditioner breaks, etc.…
Use ALL your money. Put it somewhere – don’t just leave it without a home. (you can always revisit this later: see important notes below)
Finally, throughout the month, every time a bill comes up, grab your cash and pay! There’s no fuss and no wondering if the money will be there because YOU decided BEFOREHAND to set that money aside for that specific purpose.
What happens when you run out of money?
You stop spending in that category. Don’t go out to eat if it’s not planned in your budget. If you’re friends call you up to go out, volunteer to be the designated driver. (*tip: most restaurants give the DD free fountain drinks)
If you run out of grocery money – you might have to eat rice and beans a few nights.
Three things you learn when Envelope Budgeting
1. How to allocate all money to specific categories
2. How to Control Impulse Spending
3. Shows you practically and in real life how much you’ve spent and how much you have left to spend.
- Celebrate your left overs
2. Don’t Cheat! If you get to the store and forget your envelope at home – turn around and go back for it!
This is a tool to help you allocate where your money goes. Are you going to get it right the first time? No. Will have to adjust and re-adjust your categories and your envelopes until you find a routine and system that is personal to your own lifestyle? YES!
Please don’t starve for the sake of ‘doing it right.’ If you budgeted $175 for your water/electric bill and it only costs you $125 for that month, then you can plan on moving the extra into another category that might be running low – groceries/gas, etc.…
Remember THIS is your budget. This is YOUR lifestyle. No one can come in and magically set up a perfect budget for you. YOU have to do it.
Once it becomes a habit, I promise that you will barely notice it. And it really is freeing knowing what you get to spend money on each month!
My husband and I each have money set aside as our ‘blow’ money. This means we can spend it on whatever we want – no questions asked! If I want to spend it on Coconut water and Yoga, I can!
BUT WHAT ABOUT….
Isn’t carrying around all that cash dangerous? Probably. But if it’s the discipline you need to get you started on your way to having more control, then do it – even if it’s just for a while. But if you want a more secure way, there are many programs out there that will allow you to follow this system digitally either by APP or computer.
Or go mobile with these TOP BUDGETING APPS.
If you want more personalized advice on how to use this budgeting system, drop me a comment below! I’d love to help you get started.
Are you struggling to keep track of where your money goes? Do you need a budget but just can’t seem to sit down and create one? Let me show you how to create a budget and stick with it!
UNDERSTANDING A BUDGET
Budgeting is one of those things that is a fairly simple concept, but harder to make and maintain. However, you do need a budget! Why? Well…how are you doing without one?
Budgets can be explained simply as ‘money in’ and ‘money out.’ They remind you how much money you have coming in, so you can freely spend what you have once the bills are paid. Let me show you how I budget and how easy it can be!
I use the program designed by Dave Ramsey for my household budget. I find it easy to set up and easy to you. You can set it up directly from your computer and even download it in app form. Best of all, the FREE option is all you need!
First, head to everydollar.com to create your free account.
Create Your Account
- Verify Your Email
Begin Setting up Your Budget
CREATING YOUR BUDGET
Now let’s get into the numbers! The first thing you will notice is that there are 2 columns. A PLANNED column and a RECEIVED column. Input how much you plan to receive for the entire month under ‘planned.’
The default setting will call this PAYCHECK 1, but you can edit it by highlighting and typing in your preference. For example, McDonald’s check, etc…If you want to track more than one income source, simply click the ADD INCOME button. Add the amount you received, the date, and from what source.If you receive multiple payments in one day from different sources, you can click the ADD A SPLIT and input both at the same time. For example, $500 from McDonald’s and $200 from Birthday Money, etc…
ASSIGNING A PLACE FOR EVERY DOLLAR
Now, you will repeat the same steps you used for adding your income to assign a dollar amount to each category in which you spend money.
They give you suggested categories, but you can add/delete/change the name of each one. For example, they give you a Housing Tab with Mortgage, Water Bill, etc… Simply add what you expect to pay for each in the given month. You can change Mortgage to ‘RENT’ if it fits better.
You will do this until your ‘budget amount’ is equal to the amount you planned on receiving. Do this until you have created an EveryDollar Budget. You will see a PLANNED and a REMAINING tab. As you keep a record of your transactions, you can click on the REMAINING tab and change it to show how much you’ve spent for that particular category.
As you hover over a specific category, simply click on it and choose add new to record your transaction.
STICKING WITH IT
Creating your budget is only half the battle. Once you have it set up, you need to remember to record your transactions. You can try to record them after every transaction, but I prefer to set aside some time a specific day of the week and do all the week’s transactions at once.
For example, I try to go through my bank account and match up the transactions on Friday afternoons. That way, I know how much money I have left for the month and can plan my weekend and the following week accordingly.
It takes time a discipline to set up a budget and stick with it. But once you make it a habit, it’s truly a freeing experience. You don’t have to feel guilty for spending extra money for the month because you’ve decided beforehand what to spend those extra dollars on. Now, you can tell whether you have enough to eat out, or if staying in is a better option for you to reach your goals.
EveryDollar’s free features are sufficient enough for anyone to successfully create and maintain a budget. But they do offer a PLUS feature that automatically pulls each transaction from your bank account.
The cost is $99/year which makes it $8.25/month. If you struggle to sit down with your bank statement and record every transaction, this might be a good fit for you. Sometimes an extra $8.25 a month is worth your sanity and if it makes your life a little easier – go for it!
Even the FREE version of EveryDollar will allow you access their extra features coined by Dave Ramsey as “Baby Steps.” These are 7 steps you can take to get out of debt, create an emergency fund, build wealth, and secure a financial stress-free future.
My husband and I have followed these 7 steps and currently use EveryDollar for our budgeting needs. It takes time and discipline, but we hardly ever have to stress about where our money goes.
Keep your eye out for more to come on these 7 Baby steps.
What’s the hardest part of keeping track of a budget? Do you use another system? I’d love to know! Drop me a comment below.