Posts tagged with: Emergency Fund

Finance Management in Your Forties: 5 Important Factors

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Many people consider their career high to be somewhere in their forties. Combining the ambition and excitement of their earlier years with the experience that comes with time, your 40s could be a time where you have made the right decisions and are enjoying a certain stability in your life. It could also be the most important time to start some serious planning about your family’s future and to think about slowly easing into retirement.

Here are some tips to manage your finances in one of the most crucial junctures of your life. These can make a significant difference in your life 10-20 years from now. That may not be the most compelling case for a look at your financial profile now, but it is certainly something you will come to appreciate at a later point.

Asset Allocation

Your risk profile should and will change with age, and it’s important that you adjust your investment portfolio accordingly. Make sure it suits both your short-term and long-term goals. Investment in equity may be a great plan for when you retire, but it be would less suitable if you have financial requirements that are coming up sooner – maybe your kids are graduating in a few years and you need to plan for their tuition; maybe you are expanding your family and plan to buy a bigger house. Your plans must fit into your investment portfolio. Make sure they are well-diversified and that there is no allocation overlap.

Invest in Profitable Assets

If you have been fortunate enough to have a stable income in your 40s, you should look into making well-thought-out investments in solid assets, but you have to be careful as to what that “asset” might be. Investing in a second car might sound like a convenient idea, but it wouldn’t count as an asset because the capital cost would be depreciating down the line. Ideally, you should look into income potential for capital growth, short-term capital gains and the risk involved before you decide about investing in an asset.

Maintain an Emergency Fund

By this time in your life, you must have a decent emergency fund. If that is not the case, it is important to start now. You will find that your emergency funds will be tested more and more in your forties. Be it health troubles or your child’s education, health or even wedding expenses, it can hit you from any direction even though you might have insurance Winnipeg coverage to offset some. Make sure you maintain an appropriate-sized emergency fund and keep replenishing it as necessary. Also, it might be a good idea to reinvest it in some other taxable investment account so that it can grow, especially if you feel like you have less use for it. Withdrawing it can come with some penalties, but you’ll have a higher chance of making a sizeable growth over time.

Insurance

Making sure you have appropriate insurance coverage is one of the most important factors to take into account. Your insurance needs at 40 may differ greatly from your 30s, especially in relation to your health. Even if your employee package covers this, it would be prudent to review it now and then. Do you need a long-term care package? Would taking out disability insurance be appropriate? It could be a lifesaver in the event of income loss due to unforeseen emergencies. Have you renewed your term insurance package? Have you reviewed your claim beneficiaries in the event you’ve had some major life changes, like a divorce? If you have large assets, consider an umbrella policy that covers life, health, auto and home insurance all in one with good coverage so you don’t have to manage separate policies.

Retirement

Are you earning more now in your 40s than you were when you last upgraded your retirement account? Perhaps it is time you review your investments in that area now that you are getting closer to retirement. Many people make the mistake of siphoning off excess income into an inflated lifestyle, the net gain of which is zero. Consider boosting your retirement contribution. This could take the shape of adding to your 401K, or if you aren’t satisfied with the matching contribution you are getting, you could roll it into an IRA that you control.

With that said, don’t forget to take out some money to invest in yourself. You have worked your way up to this stage, and you deserve to sit back and enjoy some of your hard-earned money. While retirement planning is an important factor that you have to start considering from now on, don’t forget that you only get to live your 40s once.


Small Goals Met – Emergency Fund, Credit Repair and more

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Just dropping in to share some exciting news…I’ve met one of my small financial goals on my road to getting back on my feet.  I now have $1,000 socked away in an emergency fund.  Woohoo!

With that goal met, my next goal is to clear up my credit a bit.  When I originally met with the mortgage company a few years ago regarding financing our build, they referred me to someone who came highly recommended.  At the time, I was able to qualify for the amount needed without it, my credit actually wasn’t too bad.  (Not good, but not too bad.) But now…yea, it’s in the pits.

Since I am able to pay my bills on time again and have relatively steady although fluctuating income, I decided it was time to get that going.  So I met with the company this past weekend, put down the non-refundable $400 deposit and now just have to wait.  Their work typically takes 2 months but can take up to 4 months.  So we will see.

Last small update…I am just a little over a month from having my ex-husband’s car paid off.  Sticking to him paying these last 2 payments.  I am looking forward to transferring the title and being rid of this last legal financial tie (excluding our kids but that is not at all the same thing.)

I haven’t forgotten about getting a real numbers update to you.  I will, I promise.  Thanks for your patience with me.

But I do have a question for you…have you ever used a credit repair service?  Experience?


May 2016 Debt Update

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Late is better than never! Plus, my debt payments are all scheduled for middle-to-end of the month so these are all still true numbers, no additional payments have been made in June yet. Here ya go:

PlaceCurrent BalanceAPRLast Payment MadeLast Payment Date Original debt, March 2014
Navient$725356.55%$980May$74218
ACS Student Loans$85966.55%$20May$8215
Balance Transfer Student Loan #2$73500% (through April 2017)$300May$7650
Medical Bills$58110%$25May$9000
Balance Transfer student loan #1$00% -Paid off in March 2016$5937
PenFed Car Loan-2.49%-Paid off in January 2016$24040
License Fees-2.5%-Paid off in April 2015$5808
BoA CC-7.24%-Paid off in June 2014$2220
Mattress Firm-0%-Paid off in May 2014$1381
Wells Fargo CC-13.65%-Paid off in May 2014$7697
Capital One CC-17.9%-Paid off in March 2014$413
Totals$94292 (April balance = 95,250)$1325Starting Debt = $145,472

The past couple months (April & May) had smaller debt payments than what I’d originally planed. One of our 2016 goals is to pay $30,000 toward debt in total. Here’s a table showing planned and actual debt payments:

Month 2015 2016 GOALS 2016
January $1678 Goal: $3500 $4013
February $1822 Goal: $1000 $1261
March $653 Goal:  $1000 $2134
April $1796 Goal:  $2000 $1521
May $1708 Goal: $2000 $1325
June $725 Goal:  $4000  
July $2125 Goal: $4000  
August $2250 Goal: $2500  
September $2575 Goal: $2500  
October $5513 Goal: $2500  
November $2751 Goal: $2500  
December $2522 Goal: $2500  
Total $26118 Goal: $30,000  

At this point (Jan-May), our goal was to have paid $9,500 in debt so far. Our actual payments put us at $10,254. So even though our recent payments have been below our goal, overall we’re still on track to hit our annual goals. Just as a note, the reason why the goal is set so high for June and July is because I get big checks from my part-time job these two months (instead of spreading out the payment across 4 months, which would be normal sized, I don’t get paid in May or August at all, but instead I get double-sized payments in June & July). Right now it feels scary/intimidating/impossible to be making a $4,000 debt payment (though, to be fair, I haven’t been paid yet this month so that’s probably why). I still want to be cautious and re-allocate some funds back to our emergency fund after having to raid it for life’s recent emergencies.  But I still think (fingers crossed) we should manage to make some pretty hefty sized debt payments, too. Time will tell and I’ll keep you updated! : )

Hope you all have a great weekend!

 


7 Things To Do After Getting a Raise

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By Holly Tomlinson

If you’ve recently received a raise, or you’re planning on having the talk with the powers that be soon, congratulations. This is an exciting step in any professional career, and the money earned shouldn’t be regarded lightly.

Look at Your Budget

You’ll need to look back at your budget and do some spring cleaning of sorts. Assess your budget as it is now and determine where you could decrease unnecessary spending. Take a look at your credit card statements from the past few months and take note of any purchases that you could have done without. Once you’ve reviewed your budget, consider where you could put your raise funds and make the biggest practical difference. Be sure not to automatically spend your raise without deciding the best place in your budget is should go.

Emergency Savings Fund

If you don’t have an emergency savings fund, then now is the time to create one. I would recommend having a six-month cushion in case of job loss or emergency. The expenses your emergency savings fund should be able to cover are extensive; from rent, mortgages, and utilities to food expenses, even health care to transportation. There seems to be a never-ending list of items you’ll be responsible for even in the unlikely case you lose your job. Establish automatic transfers when receiving your paycheck; you won’t miss the extra money that automatically goes into your savings account, but you will be glad you have it when a rainy day inevitably comes.

Pay Off Pre-Existing Debt

If you have debt hanging over your head, use the extra funds you’ve been given to start paying off those accounts, focusing first on the ones that are charging high-interest rates. The sooner you get out of debt, the less you will pay over time in interest, and your credit score can start improving the second you settle your debts. Some choose to pay off accounts in the opposite manner; by knocking off smaller debts, your list of accounts gets smaller quicker and may make the debt seem less overwhelming. If your debt is serious, then your raise should definitely go towards paying back what you owe to get you out of hot water with the IRS. If you’re in need of financial advice how to settle outstanding balances with the IRS, use a company like CTax to figure out the best option for you.

Give Back

Now that you’ve been given more, make sure you give back if you have the extra funds available within your budget. Donating to charitable organizations makes you eligible for tax deductions and will relieve the negative effects of decreased deductions and credits that may have come with your change in pay grade.

Consider Retirement

Once you’ve determined how your raise can be factored into your daily and monthly expenses, give a glance to the future. Putting more money in your retirement fund means you’ll have higher retirement income and potentially be able to retire sooner than expected. Consider contributing to a Roth IRA. You’ll pay upfront taxes on your contributions, but once you pull it out, you can grab it tax-free. If your employer matches your 401k contributions, make sure you put more into when possible.

Make Strategic Purchases

Just because you now have more money, it doesn’t mean you should spend it on anything. Rather than hit the ground running by throwing your hard-earned income towards frivolous purchases, it’s imperative to think before you buy. Try to make purchases that will pay you back in the long run. Maybe it’s time to get a new energy efficient appliance that will pay for itself with the amount of energy it saves in the long run. As you look at purchases you want to make, prioritize those which have the potential to save you money in the long run.

What Not to Do

There are several things you shouldn’t do, at least not in the first few weeks and months of receiving your raise. Signing the lease on a more expensive apartment or home, funding a business venture, and loaning out money may seem doable once you’re making more money, but these expenditures can actually come back to bite you. Be responsible with your raise, and don’t spend more simply because you have more money coming into your account.


What’s Next

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If you missed my post earlier this week, I announced the exciting news that we are officially consumer debt-free! YAAAAAAAAAAAY!!!! (insert happy dance emoticon)

What’s funny is almost immediately after making the final payment on the car….it broke. Ha!

A bit of euphemism. It didn’t break down. Just a piece of it broke off. Check this out.

IMG_1575

Nothing even happened to cause it to break! I was just driving down the road to get to work, minding my own business, when out of the corner of my eye I saw a piece of our car just flapping in the wind! I immediately exited the highway but on the exit ramp the piece fully fell off and broke into several pieces.

Hubs looked it up and thinks he can get the part for relatively cheap ($100ish) and do the install himself. So all is well, just kind of funny that the second it becomes OURS….it breaks. Ha!

At any rate, I’ve had a couple people comment and ask what’s next now that the car is finally paid in full.

It’s tough because #1) I’d love to start punching Navient in the face, taking out loans left and right, and #2) I have a relatively small balance transfer loan (just over $2100) from what was originally a student loan that I’d love to pay off next month.

BUT…

I’m trying to use my head and not just my heart (which says to start stomping the student loans NOW), and make our first priority re-building our emergency fund.

If you don’t remember, our EF was slowly whittled away the second part of 2015. As was our “living on last month’s income” fund. Hubs’ business wasn’t doing so hot in 2015, so whenever I needed that extra little boost for paying debts, I’d “borrow” here and there. First from the “last month’s income” fund, and then when hubs had a no income month I used our EF and, well, now we’re down to basically nada in either of those accounts (note:  not entirely true…we still have a few hundred in the EF, but not nearly what we’d like to have).

We have 3 big goals for 2016:

  1. Save up $10,000 for a house down payment.
  2. Save $5,000 for an emergency fund.
  3. Put $30,000 toward debt.

Starting in February, we’ll begin chipping away at items #1 and #2. We’ll still be paying toward debt, too, of course. But we’ll be doing so at a much less aggressive rate as we, instead, try to restock some money in the bank.

The plan is to put nearly $2,000 a month into savings. This will be $1250/month toward the house down payment fund (our goal is to buy by the end of summer, so we need to save heavily the first half of the year), and another $500/month into our dedicated Emergency Fund.

In addition to that, we’ll still be making debt payments in the range of $1500-$2000 per month.

It’s going to be tough. That’s a pretty aggressive rate of savings and debt payment. We’re talking about $3500/month between the two, which is more than what our average monthly debt payments were last year (see here for a quick-view breakdown of the majority of last year).

But when you have something so meaningful that you’re working toward, it definitely helps put the fire under your pants. That, plus this will be our first full year both working full-time (and I still have the part-time job, too). It’s just going to be astronomical earnings compared to 2 years ago. Even compared to the first half of last year. So I think we can do it.

The first half of the year will, admittedly, be a little heavy on the savings side of things. Then the second half of the year we’ll make up some ground and really start making some good headway with the student loan debt.

But it won’t be all savings and no debt until then! It wouldn’t make sense to blog for a getting out of debt blog if I wasn’t actively working on the debt!

I’ve got a few tricks up my sleeve to try to make some good progress even while in savings mode! I’ve GOT to have the balance transfer student loan paid in fully by April (that’s when the interest sky rockets from 0% to 13%!!!) But right now my projections show it being paid in full by March. Then I plan to initiate a second balance transfer to do it all over again (they still have the deal with 0% APR for a year, and only a 2% initiation fee; this is half the initiation fee of other offers I’ve received).

I also may consider some type of consolidation program a little bit down the road. I like having my loans separated currently because it gives me a big psychological boost every time I pay off one of the loans (and I target them one-by-one, paying minimums on all others). However, I hate Navient with such a fiery passion that it may be worth it to consolidate with an outside company just to get them out of my life. We’ll see. I’m not jumping on anything now, but keeping my mind open to the possibility down the road.

Anyway, that’s it for now. I just wanted to dedicate a post to the question I’ve been seeing, “What’s next?”

Also…counting down the days until the all-cash paid Cruise 2016 vacation in April! We’ve been planning and saving for it since February 2015 (over a year!!!), so we’re beyond ready! I can’t wait! Whoever said you can’t have a little bit of fun while in debt-repayment mode certainly never read here! It may be a controversial stance, but I’m a believer in balance in life. We’ve worked HARD the past two years to dig ourselves out of the giant debt hole we were stuck in. Yes, we have a long way to go. But it’s precisely because this is a MARATHON (and not a sprint) that I think it makes sense to build some fun into the budget. Otherwise it’d just be impossible to stick to for so long! That’s my view on the matter.

What are your plans once you get out of consumer debt? Tackle student loans? Your mortgage? Get your savings up to snuff? Or are you going to go beyond? Perhaps save enough to retire early? Do some traveling, etc? I’d love to hear YOUR plans!

 


Well Crap…Extra Expenses

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Isn’t this just Murphy’s Law? Anything that can go wrong will go wrong? Especially when a HUGE goal is just on the horizon, mere weeks away!

So I guess this is just life but I’ve got to report to you all with some disappointing news today. News that may impact our January 2016 target date for becoming consumer debt-free. Sigh.

We’re going to have some big unanticipated expenses this month.

First (and the smaller of the unexpected expenses)….I broke part of our dishwasher, and almost caught our house on fire in the process. I really can’t explain it well because I don’t know what all the parts are called, but I tried to take apart some of the inside pieces in the dishwasher to clean them. When I put it back together, apparently I didn’t do it correctly. The next time I washed a load of dishes, the part came apart and landed on the heating mechanism, which caused the dishwasher part to melt (and smell like an electrical fire!!!) Luckily, I caught it in time before major damage had occurred and the dishwasher isn’t totally ruined. However, to replace the broken part it cost $100!! What the heck!? Seems like price-gouging to me, but it’s a necessary replacement.

Dishwasher fix = $100

The second (and larger) expense really, really bums me out to have to talk about. Basically, hubs was in a car accident. It wasn’t terrible, and no people were hurt. He was driving home and stopped at a red light with cars in front of and behind him. The car behind him plowed into him and pushed his truck into the car in front of him. From hubs’ perspective, the entire wreck was the fault of the person behind him. But the police officer who responded to the scene cited the driver behind hubs for causing the incident (not sure what the official citation was) and cited hubs for being too close to the car in front of him. So, ultimately, the person behind hubs is responsible for the damages to our vehicle and we are responsible for the damages to the vehicle in front of hubs.

Deductible = $1,000. We had $250 in our car repair account. This leaves $750 to be paid out of pocket.

Vehicle fix = $750

Can you say OUCH?

And now I’m left doubting myself. We’ve had this super thin emergency fund. It’s continuing to be stripped so we now have no buffer in our car repair fund, only a couple hundred in our annual expenses fund (should be revolving closer to $500ish), $400 in our dental/health/vision fund (should be revolving closer to $1,000ish), and that’s basically it. Still some small balances in other various accounts (pet expenses, birthdays, and travel/Christmas – though the Christmas fund will be depleted this month), but very little buffer between us and disaster. That was all well and fine when I was hoping to be consumer debt-free this month and start re-building our savings in January but that’s no longer going to happen.

In fact, with these huge expenses (particularly the vehicle one), we may not be able to hit our debt free goal in January either. And now we’re talking about pushing back these dates far enough that I start to be nervous about not having a good EF security net.

Also, I’ve been working on some projections for 2016 and am a little disappointed in myself. Even if we hit the consumer debt-free mark in January, it would take us probably an additional 2-3 months to re-stock our savings to a level where we feel comfortable. So we’re talking about being nearly a third of the way through the year before we’re really able to start wailing on some debt again.  I wish we had big Christmas bonuses or something that could really jump-start the savings and get us back into debt-reduction mode faster, but neither of us has a job like that.

Soooo, yeah. I’m a bit torn. Continue on our current path, pay these new debts, and try to become consumer debt-free as soon as possible (January or February at the latest, knock on wood), or sloooooow down just a step so we can get some Emergency Funds back into our bank account so that we are better equipped to deal with any unforeseen disasters.

Also, as an aside, pretty sure our insurance is going to go up. Boo!

But all this being said, I like to count our blessings. We have done a kick-butt job this year with paying down debt and we are proud of our hard work! We’re in a great position for 2016 to be our year! Becoming consumer debt-free, building up some savings, buying a house (!!!) and starting to tackle the student loan mountain. It should be a great year!


Panic Mode to Inspiration – The Nuts and Bolts (Part 2 of 3)

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So yesterday I woke up with a vengeance, time to look at the reality this job loss puts us in. The first thing I did was get to work.  I completed my tasks for the existing clients and put some work into a new website I am working on, sent out bills and THEN I sent a thank you note/reference request to these clients:

Thank you for the advance notice of your downsizing. I cannot express how sad I am about this for you both and XXXXXX but also for myself as I have been truly gifted by working for and with you both for these last 7 or so years! I certainly would love to be kept in mind for further projects or on-going work if the need should arise again.

In the meantime, would you mind doing me a favor….would you please write a reference for me on LinkedIn as a consultant under my EPOH business and also provide a letter of reference I can include in job applications (or take blurbs from for website presence.) I would greatly appreciate it.

I full intend to continue work as normal through the end of the month, please let me know if there are specific tasks you want me to complete….on my list are: ….

They responded in the affirmative that they would be happy to do this for me.  For that I am truly grateful.

Then I started looking at the money.  THANK GOD for MY EMERGENCY FUND!!!  Based on a cut throat budget and estimated income from all existing clients and projects, I figure we are good through the end of the year, maybe a bit longer depending on what we do with holidays and the twins’ birthday this month.  I can BREATHE!

And then I exhaled for the first time since the call on Monday.  And I started poking around on the internet looking at local jobs…just a tiny bit.  And then I started making lists.  I made a list of:

  1. Things I could sell
  2. What are my passions in rank order
  3. What are my priority in rank order
  4. What are needs I see around me that my skill set could meet
  5. What other resources can I reach out to for temporary assistance

And I decided to give myself a small break from panic mode.  I need to process and decide what the next step is without rushing into a wrong decision.  Not that I am going to sit back and twiddle my thumbs.

 


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