Month: February 2024

Saving for that emergency fund.

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Emergency Fund Savings:

We have all heard the saying, we should have an emergency fund, right. “They”, meaning the experts say this fund should be between 3-6 months of expenses. Not an easy task for most and can feel overwhelming for many. According to Nerdwallet  45% of Americans could not come up with $1,000 for an emergency. Most Americans Save, but Many Can’t Cover a $1,000 Emergency – NerdWallet  That might be a car repair, so you can get to work, a repair at home that can not wait…. The list goes on. Most people are saving money each month, which is great, and it’s usually in a retirement account and or a savings account. Yet, on average as a group we are falling short with short term “emergency” fund account. We have discussed many times if you really look at your monthly spending and your “habits” there is a good chance you can find an extra $100.00 plus a month to put away in an emergency fund account. Sure, it may take almost a year to get there, at that rate, but the process would be started. If you look at it more as a game and a motivator as to how do I cut out another $20.00 here and there, and transfer that right into savings, thing will happen quicker! The emergency fund is NOT an account that you get to look at the end of the year and say hey I save $1200 and did not need any major or unexpected expense, and then use that money for something like a vacation! Bankrate did a survey on people saving for an emergency or saving for travel. Travel Vs. Savings: Many Americans Are Prioritizing Wanderlust Amid Economic Uncertainty | Bankrate I get it, I want to travel more too, but I also do not want to be under the stress of having to reach for a credit card to pay for a plumber to come to the house for a leak or for new tires! Credit card bills are stressful! Let’s stay out of the rabbit hole. When we have an emergency fund there is a sense of calm and pride to know you do not have to rely on family, a last-minute high interest loan shark loan or the credit card. It’s hard. I get for some that emergency fund of say three months, might be a large number.  The real goal is to start and have an emergency fund for emergencies. 

Hopefully no real disasters come your way like a job loss while you are working on your savings account. Like every big challenge, you need to start the process with small changes and once you gain confidence from seeing the impact, it will get easier. Like most habits we are trying to change, you may stumble here and there, just get back at it, it’s not a failure. Let’s work toward that first $1,000 in emergency fund savings and use that momentum to do more! This is in reach! How cool would it be to be on the other side of the statistics, of who has a $1,000 or more in an emergency fund! You go this!

The price of college

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Paying for college….

If you’re like most of us parents, figuring out how you will pay for your kids to go to college is stressful! Back in the 80’s a full-time college student could work part-time during the school year and full time all summer, to pay for a year at a state college. If you lived on campus, maybe you had to work a little more or get some help from your parents, but most of us did not have huge loans hanging over us when we got out.

If you went to a private school, you probably had some loans, but unless it was something like medical school, your loans were “manageable”. I did not know anyone that had to take the full 10 years to pay for those loans, and the loans were at 8%.  The average student debt in 1983 was about $5,500. The average starting salary for a college graduate that same year was just under $18,000.  In 2023 the average federal student loan after graduation was over $37,000, according to the US Dept. of Education, in this article published by Best Colleges; Average Student Loan Debt: 2024 Statistics | BestColleges  Additionally private student loan debt was just shy of $55,000. The interest rates can be anywhere to 4%-15%, for a private loan with a low credit rating, but on average is at 5.8%. The statistics tell us on average it takes most people closer to 20 years to pay off their student loans, vs the ten years you are given to start. This tends to be due to things changing in your life, like the loss of a job, starting a family… The student loan “crisis” IS a crisis. BUT, does it have to be? Look we all want the best for our kids and for them to have all the things they want and more than we had, but come on, its four years of their life, that they might end up paying for 10-20 years! College is a BUSINESS! They do not care that you have debt when you leave, they want you to drink the cool aid! It’s not about “oh this school, just feels right”! This is where I belong. No 18-year-old knows where they belong… and as parents we need to make sure they understand the financial side as well. Some student loan debt is fine, but not double what your first-year salary out of school will be.  Money math must be discussed. There are on-line calculators to show them how interest works. You know like when you buy a house and say you borrow $100,000 from the bank with that 30-year mortgage and then at the end of 30 years, you say “thank you Mr. Banker, here is your $100,000 and another $200,000, for letting me borrow that $100,000! Ya, that’s how interest works! The on-line calculator will tell you exactly what your monthly payment will be and what your total bill will be if you take the full ten years. No excuses! NO forgiveness! SORRY.

The plan has to be in place before the first tuition payment. Get creative, be an RA as an upper classman, FREE housing at most schools, is how they pay you, START paying the loans WHILE you are a student, vs allowing interest to add up. Pick a state college, meaning the state YOU live in, not another state. When you get your first job, they will not pay you more than the other guy, because you have more debt. And parents, we CAN NOT use our retirement savings to pay for college. You cannot finance your retirement. College is an investment and, in most cases, very much worth it! But be smart about it. You’re paying for an education, don’t get lost in the amazing campus.  Schools are pricey now, because of the “facilities” not the education. Make smart choices, school was fun back in the day when we had no all-night dining halls and amazing gyms. We met lifelong friends, played sports, did everything else that college kids do, and got a great education that allowed most of us to move out of our parent’s house 6 months later. Preparing for college is a giant step into adulthood, managing money and understanding how it all works, is part that process.

Happy Valentines Day!

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Money & Relationships

Personal finance is not always something that concerns only us.  If you are in a committed relationship or married, most likely you share finances with someone else. In many cases it seems like one person in the relationship “handles” the finances. In a perfect world it would be a team effort and both parties would be open to discussing the monthly expenses and spending. I’m not saying every dollar needs to be accounted for. I’m also not saying each person can’t have their “own” money either. But the important “reoccurring” expenses, aka bills. Should be known by both parties. I know, easier said than done…  We know most couples do not share everything about money, but how do we work with this situation? Not always easy to be the only one “cutting” back and looking at every expense in the online banking app., hey someone has to watch the store!  Statistics say over 45% of couples argue “occasionally’ about money. Ya my guess is that its higher than 45% and its labeled occasionally because it’s easier to just NOT talk about it.  Either way unfortunately one of the two people in the relationship carries most of the stress around money and the other just wants to ignore the topic and might “start” the argument, to cover up their lack of knowing the real status of the household finances, good or bad. In a perfect world you do what the experts tell you and simply sit down and perhaps have a conversation over a spreadsheet of the expenses and savings goals. Like a scene out of the Brady Bunch, right? The argument starts when you ask for that sit down meeting… ☹ If it’s so easy why are most couples still arguing about money? I certainly don’t have the answers here… I can just tell you; you are not along….

Habits

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We all have habits, some are good habits, some not so good. Habits are part of our behavior in all the areas of our life. Some people are very organized, Take Jess for instance, her work papers and planner… are so organized and color coded! It seems to come easy to her when it comes to important items like work. She started this habit very young as a student and has carried this habit into adulthood. I on the other hand, really must focus on keeping myself somewhat organized. I was never an organized student, well compared to my kid. But at the same time, I know it’s a “weak” spot for me so I do what I can to make small positive changes to be better organized.  This is an issue I could easily talk to a stranger about, and they would be happy to make suggestions and share their organizational skills or lack of them as well…

When it comes to our money habits. We NEVER want to talk about them. Nope, we don’t want to share that stuff! We all have money habits, again some good, some not so good. Let’s be realistic, we can’t fix all our bad money habits overnight, and maybe we don’t have to fix all of them? Maybe some are not that bad?  But I am guessing we secretly have some things we do repeatedly, that we say to ourselves, why do I do this to myself. 

In today’s world with so much online banking and automation that we can do, some of these bad habits might be easier than we think to break. To really start to make changes, you need to be honest with yourself as to what is a problem.  Write it down! Put it on paper and look at IT! Just ONE problem, not all or many of them if there is a list… Own it! Then write out the steps you need to take to make this a bad habit you no longer have.  Maybe you share your bad habit you are trying to break with someone you know will emotionally support you. That might be a spouse, a good friend, a co-worker.

Setting a goal is easy, executing it, not always as easy.  Maybe just saying the habit out load to someone and talking about it will be the biggest step. After that it might get easier to mentally tackle the habit. Good luck, stay focused and you got this!