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Creating a budget can offer you peace of mind and give you more confidence in managing your finances. A basic budget is all you need to take charge of your money—and help achieve more of your financial dreams.

Intro to Budgeting: What is a Budget?

A budget is a financial outline designed to measure and guide your income and expenditures for a certain period of time, such as one month, a quarter, or a year. With an understanding of the budget basics, you can track the amount you’re making compared to what you’re spending and saving.

Why do I want a budget? Consumer.gov says making a budget can help you determine your spending plan and in turn, show you where you should limit your spending and what you can afford to spend more money on.

There are many ways you can maintain a budget — with a spreadsheet, paper and pen, or through a budgeting app.

Whether you’re new to managing your own finances, never learned how to budget, or are tired of living paycheck to paycheck, this post is for you. In our Budgeting 101 guide, we’ll go over some budgeting basics, show you how to create a budget, teach you how to avoid common budget-related mishaps, and ultimately, give you a budget calculator and some budgeting tips to create a budget that’s efficient and functional for your lifestyle.

Need to know how to create a budget ASAP? Read end-to-end for a comprehensive course in Budgeting 101.

How to Create a Budget: 5 Actionable Steps

To plan your budget, you’ll need a few key pieces of information. With these basic components, you’ll have a foundation for your budget that you can tweak as the months go by and as your financial circumstances change. To get you a step closer to your financial goals, let’s go over how to create a budget step-by-step.

1. Calculate your monthly income after taxes

An accurate monthly income is the cornerstone of a successful budget. Without figuring out how much money you actually have in your wallet, it’s pretty hard to allocate funds towards saving, spending, and settling outstanding debts. But calculating your monthly income takes a little bit more effort than glazing over your monthly paychecks.

To find out how much you’re actually earning, you’ll need to do a little bit of simple math—don’t worry, we’ll walk you through the entire way.

Calculating your monthly income as a salaried employee

One of the benefits of being a salaried employee is knowing exactly what to expect on your paycheck—month in and month out—and this pay structure will serve as an added perk when you’re building a monthly budget. To calculate your pre-tax monthly income as a salaried employee, all you need to do is divide your annual salary by 12.

Now that you have your gross monthly income figured out, you’ll need to deduct taxes and other expenses that may dock your pay—such as medical benefits and contributions to an employer-sponsored retirement plan. We’ll show you how to estimate this number in just a moment, but first we’ll go over how hourly employees can calculate monthly income.

Calculating your monthly income as an hourly employee

If you’re an hourly employee, your monthly income isn’t always as consistent as you might like it to be, but with the proper budgeting technique you can definitely nail down a budget that maximizes your monthly income and gets you closer to meeting your greater financial goals. Here’s how to figure your monthly income as an hourly employee:

Let’s take a look at an example:

Keith is an hourly employee who makes $15 an hour working 40 hours per week, making his gross weekly income $600. Keith multiplies this number by 50 to reflect the weeks he plans to work throughout the year (minus his two-week vacation). Then, he divides by 12 and estimates that his gross monthly pay is $2,500.

Remember, this number does not factor in the deductions that may impact his take-home pay, so now he’ll have to subtract these from his gross monthly income to get an accurate picture to build his monthly budget.

Subtract taxes and other deductions from your gross monthly income

To get the most accurate picture of your monthly take-home pay, you’ll need to subtract taxes and other deductions from your income.

Federal Taxes: To find out your federal tax liability each month, refer back to your annual gross income that you calculated before. Then, compare your income to the federal income tax rates to find out what percentage of your income will go toward your federal income taxes. Once you’ve found this number, divide by twelve to estimate your monthly tax liabilities.
State Taxes: Calculating your state income taxes is essentially the same as finding your federal tax liability, but this time, you’ll need to refer to your state’s income tax rates. Multiply your annual income by your tax rate, then divide by twelve to see how much you’ll owe in taxes each month.
Social Security and Medicare Taxes: According to the IRS, the federal withholding rates for FICA are:
-6.2% for Social Security
-1.45% for Medicare
Misc: Depending on your financial situation, you may have other deductions to consider when calculating your monthly take-home pay. Use previous paychecks to help you determine how much money will be withheld to account for 401k contributions, benefits, etc.

2. Identify fixed and variable expenses

Once you have a clear picture of how much money you’re actually working with each month, it’s time to figure out how you’re spending it…or how you should be spending it. There are two main types of expenditures you need to account for as you build your budget: fixed and variable expenses. The difference between the two is that fixed expenses tend to cost you the same amount each month while variable expenses…vary.

Fixed expenses

Your fixed expenses like rent payment, groceries, transportation, and health care costs are likely to absorb a large chunk of your budget, which makes them all the more important to track as the months go by.

To determine how much of your budget is going towards fixed expenses, start by creating a list of your regular expenditures. Here’s a list of common fixed expenses to help you get started:

Rent
Mortgage
Car payments
Student loans

Once you’ve built a complete list, calculate a monthly estimate for each one, so you know how much of your income should be dedicated to it. If you’re not sure how much something costs, review previous bills and credit card statements to see what you’ve spent in the past.

Variable expenses

Whether you belong to a gym, go on a weekly date, or make a purchase on a shopping app, make sure you account for these costs in your budget. As opposed to fixed expenses that stick to relatively the same cost each month, these miscellaneous items may change month over month.

Some examples of variable budget expenses include:

Entertainment
Groceries
Dining out
Gas
Clothing
Dating
Ride-sharing
Utilities

Determining how much you spend on variable living expenses each month can be tricky since it may be rarely consistent, but it’s important to get a close estimate so that you can determine whether you can maintain the same spending habits or if you need to cut back in certain areas. Use your monthly bank statements to help you estimate your variable expenses, and in turn, set limits for each category.

How to factor expenses into your budget

If you’re using one of our free budgeting templates, simply input the values of these fixed expenses into your budgeting spreadsheet to help plan out your financial strategy each month. In the Mint app, you can connect your bank account to easily identify recurring expenses, or enter in your own budget for fixed expenditures.

3. Set savings and debt payoff goals

As you saw in step two, if you have student loans and credit card balances, you’ll want to attribute part of your monthly budget to paying them off. Each month, allocate a certain amount to these monthly payments. The sooner you pay off debts, the less interest you’ll pay overall, and the closer you are to meeting your greater financial goals.

When creating a personal budget, include these types of debts into your planning:

If you’re all caught up on your bills and want to want to stow away funds for retirement or save up for a new car, it’s helpful to establish concrete goals, then break them down into achievable bite-size chunks. Having trouble coming up with realistic, meaningful financial goals? Take a look at these short-term and long-term examples:

Short-term financial goals

Long-term financial goals

Establish a retirement budget to build a retirement account
Pay off your mortgage or student loans
Start your own business

If you’re using the Mint app, you can set up custom goals for your savings in the budgeting section. Simply add a budget, define a dollar amount, and monitor your progress.

4. Record your spending

You know that feeling when you’re checking out at the grocery store, the cashier announces your total, you swipe your card, and by the time you’re loading your grocery bags into your car, you realize you didn’t even register the total amount you paid. It’s a concerning, out of body experience—but we’ve all been there.

This is why tracking your spending is so important. It’s easy to become complacent about the amount of money you’re spending and end up with revolving debt ruling your finances. Depending on the budgeting method you choose—budgeting app, pen and paper, or online budgeting tool—you can pick a way to record your spending that best suits your lifestyle.

Here are a few tips to make expense tracking easier and more efficient:

Ditch the Cash: Stick to card payments if you have trouble keeping tabs on how much money you spend each month. This way, you can refer to your online bank statements to easily monitor your spending.
Check Yourself Before You Wreck Yourself: Make it a point to analyze your spending habits on a weekly basis. Collect any receipts or statements you have and check to see if you’re on budget or if you need to reel in your spending for the rest of your budgeting cycle. Budgeting will help monitor your spending so you are able to keep living within your means.
Go Old-School: If you’d rather skip the technology and take a more tactile approach to budgeting, a pen and a checking book will do just fine. Just be sure to make a habit of recording your expenses as soon as you’ve swiped your card.
Try the New-School Way: If you can’t be bothered to whip out a pen and paper each time you check out at the register, automated expense tracking might be a better alternative. Using the Mint app, you can connect your bank account to effortlessly record your spending and monitor transaction trends.

5. Track your budgeting progress, review, and revise

Creating a basic budget is a huge financial victory. It helps you ensure you can cover your expenses and reach for exciting milestones, like buying a house or paying off your student loans. As you continue to budget, make adjustments as you see fit. Your income, expenses or lifestyle might change, and it’s important to ensure your budget keeps working for you and your future.

Set up a budget schedule and make it a point to review your budget on a regular basis—each week, every month, or at least every quarter to see if any major changes, or milestones have taken place. Not only will this help you recognize and celebrate your successes, but it will also encourage you to reevaluate and tailor your strategy as needed.

Budgeting Breakdown for Beginners

Now that you know how to make a budget, it’s time to discuss best practices and budgeting basics to ensure your budget works for your money and your lifestyle.

How to Choose the Budgeting Style That Works for You

Here’s the thing about budgeting. There’s not really a one-size-fits-all approach that works for every individual. Depending on your spending habits, financial goals, lifestyle, and your relationship with money in general, one budgeting tactic might make more sense for you than another. Let’s take a look at a few budgeting methods you can try.

Keep tabs on transactions with the envelope method

The envelope system is a simple budgeting approach that involves spending with cash instead of plastic.

If you budget $100 for eating at restaurants, put that amount into an envelope. When the money’s gone, you have to wait until next month to eat out again.

If you budget $200 for groceries, put $200 in a “grocery” envelope. If you’re at the checkout line and the total comes to $203, you’ll need to put something back.

The envelope method helps you be more strict with your budget. The pockets of cash are a visual and tangible reminder of how much money you’re dedicating to each area of your life.

Follow the 50/30/20 rule

Financial experts recommend the 50/30/20 guideline as a basic financial strategy, especially for young professionals. You can also use the new 50 30 20 budget calculator to help create your new budget.

The rule says that you should allocate a 50%, 30%, and 20% of your income to the following categories:

Essentials: 50%
-Rent/Mortgage
-Utilities
-Debt payments
-Bills
-Groceries
Personal Expenses: 30%
-Entertainment
-Dining out
-Date night
-Shopping for non-essential items
Savings: 20%
–Emergency savings
-Retirement account
-Travel fund
–Rainy day fund

50/30/20 Calculator

50/30/20 Budget Calculator

Here’s how much you have for:

Essentials$0.00

Wants$0.00

Savings$0.00

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Consider a zero-based budget

With the zero-based budget technique, each month begins and ends with zero dollars. When you build out your zero-based budget, every dollar has a purpose. Let’s take a look at a sample budget using the zero-based method. If you make $3,500 every month, attribute each dollar to an expense. You might put $1,750 toward living expenses, $700 toward paying off debt, and $1,050 toward personal expenses like going to the movies or saving for vacation. At the end of the month, your balance is zero, because every dollar is accounted for.

Keep in mind, the zero-base doesn’t mean you’re spending every dollar that you earn, but rather, that each one is allocated to a different category—savings account included!

Selecting a Budgeting Tool That Suits Your Lifestyle

As we mentioned before, the one-size-fits-all methodology is a no-go when it comes to personal budgeting. Your financial situation is completely unique to you whether we’re talking about your income, expenses, or your financial goals, so it only makes sense to tailor your budgeting strategy to your individual preferences.

Here are a few tips to help you find a budgeting tool that makes sense for you:

Read reviews, or ask around: Although money can be considered a taboo topic, that doesn’t mean you need to tip-toe around budgeting techniques in your relationship or with your friends. You probably trust their opinions more than anyone else, after all. See which tools they use and ask what they like and don’t like about their current budgeting method.
Test it out: Before buying into any paid budgeting subscriptions, give the free trial a go. This way, you’ll be able to familiarize yourself with the features and decide if it’s a tool you’d continue using.
Consider compatibility: If you’d like to automate your expense tracking, make sure that the budgeting tool you want to use can be integrated with your bank and credit card issuers.
Use a template or tool tailored to your needs: Depending on your financial circumstances, you may need a simple budget, or one that’s specific to your income and expenses. Or perhaps you’ll need additional functionality like investment capability or the ability to make peer-to-peer transactions. According to a recent survey, 55% of Americans use a full-service banking app. As you select a budgeting tool, consider how you’ll use it and how the tool fits into your lifestyle and financial goals. Our budget templates include the following categories:

Common Budgeting Obstacles and Mistakes

Before you set sail on your journey towards better budgeting, it’s time to talk about some of the obstacles you may encounter on your way. Like most things in life (or the sea in this case), budgeting isn’t always clear-cut—there can be aspects that are difficult or ambiguous. Factoring in random, one-time expenses or calculating a part-time gig can complicate your budget, but trust us, your voyage can (and must) continue! Here are a few tips to ensure you have the most accurate budget—no matter the circumstance.

1. Estimating irregular income

If you’re a freelancer or work a side hustle, you likely have an irregular income that can be hard to predict. In these cases, it’s best to estimate a conservative (low) amount, so you don’t overspend. Review the past 3-6 months of income and watch for any patterns. Can you find an approximate hourly rate or weekly rate for what you bring in? If you’re new to a job, like being a waitress, ask a coworker how much they typically make in tips to help you forecast your monthly tip outs. Above all, do your best to create an income estimate—knowing you can tweak it along the way.

2. Paying for emergency expenses

Unfortunately, accidents and unexpected bills happen to everyone. From car troubles to job loss and medical expenses, emergencies can be expensive and having a backup emergency budget can help cut down expenses. An unexpected bill can throw off our budget, and set you back. If an incident does occur, try to factor the expense into your budget while paying your other bills. For instance, you may want to cut back on dining out for the month, or pick up an extra shift to help you cover a bill. If you can, build an emergency fund into your budget to safeguard your finances against future unexpected situations.

3. Forgetting one-time expenses

Items like annual memberships, vacations, and gifts for family and friends are often forgotten when creating budgets. If you can, set aside a small amount of cash every month for these extra expenses. You can estimate the expected cost for the year and account for them in your monthly budget. For example, if you typically spend $300 on Christmas gifts, set aside an extra $25 every month to account for these added expenditures. By the time December comes, you’ll have the cash available to spend on gifts.

Key Takeaways: Budgeting 101

Creating a budget is really as simple as following these five steps:
- Calculating your take-home pay
- Estimating your expenses
- Setting savings and debt payoff goals
- Recording your spending
- Tracking your progress
To find the right budgeting method and tools for you, consider compatibility, ask around, and try out different options
Avoid budgeting pitfalls by preparing for unexpected circumstances and tailoring your budgeting strategy as needed

Sign up for Mint to help you stick to your budget and goals

Let the Mint app do the heavy lifting for you. It can calculate your income, total your spending by category, and help you conquer your savings goals. Tracking expenses with the app is simple and accessible—no matter where you are.

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Answers to 7 Money Management Questions You’ve Been Asking

Manage your money and boost your retirement fund.

Money management takes time, patience and some knowledge. While you don’t need to be an expert, you need to understand a few things to make the best decisions and plans. Here are the answers to the seven most common questions to help manage your money more effectively.

1. When Should I Start Saving for Retirement?

When you’re young, retirement is that thing that old people do and you believe there’s plenty of time to plan for it. However, you’ll soon find that having the income you want in retirement takes time to save, so when should you start? The real answer is as soon as possible. You need to give yourself as much time as possible to make it easier on your current financial budget.

2. How Much Should Go Into My Retirement Pot?

This differs for everydiv. You want to set the percentage of your salary that you will put into your retirement plan based on your current budget. As your budget changes, the amount you save can change. Save as much as you can in your retirement pot to make it easier later in life.

3. Can We Really Afford a Baby?

It’s a big question for those starting a family. You’ll hear people telling you that you’ll never be financially stable enough for a baby, but that doesn’t mean you should stop your money management plan. It’s worth considering the fact that a child costs around $200,000 for the first 18 years of his or her life. Remember that is spread over the course of 18 years; you don’t need it all right now!

4. Do I Really Need the Emergency Savings Fund?

You should have a fund just for emergencies. You never know when something happens and you don’t want to get yourself into debt for the sake of your car breaking down or the washing machine needing replaced. You’ll also need something in case one of you loses your job.

Split your finances up in different pots to make managing it easier.

5. How Much Emergency Money Is Needed?

It can take up to a year to find a new job, especially in the current climate. You realistically want an emergency fund that will cover at least six months of your outgoings. Build that up gradually right now by setting a budget and creating a plan for your emergency fund.

6. Should I Save or Clear Debts?

You want to try and do both at the same time, but clearing off debts is better if you have to choose. Debts rack up higher amounts of interest than you could even save. Work on one debt at a time and then move onto the next to help with money management. If you can, at least save up your emergency fund while clearing debts.

7. What’s the Different between Traditional and Roth IRAs?

There are two types of IRAs: traditional and Roth ones. The difference is when you end up paying tax on the money you save. In a traditional IRA, you pay the tax when you withdraw the money for use in retirement. With a Roth IRA, you pay the taxes when you pay the money in.

Those are the answers to the seven most common money management questions. Budgeting is the main factor in all of this, which is something Mint.com can help with. With the free software, you can track your expenses and see how close you are to your savings goals at a glance.

Alexandria Ingham is a freelance writer with experience in technology, personal finance and budgeting.

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A study conducted by Charles Schwab just last year found that three in five Americans live paycheck to paycheck, yet only one in four has a written financial plan. In fact, the majority of Americans are hesitant to receive any outside help when it comes to managing their money, even though those who do reach out tend to exhibit more positive investing and saving behavior. 45 percent of U.S. adults aged 40 to 59 said they’d rather visit the dentist than make an appointment with a financial advisor, due in large part to the fact that they feel uncomfortable sharing financial missteps with a stranger.

To gain a better understanding of who people trust when it comes to financial advice, we polled 1,000 Americans to find out who, if anyone, they turn to for money-related questions. We found that while those in older age brackets (65+) still enlist the help of a financial planner, many younger demographics actually go to their parents before resorting to the internet. Some key findings included:

23% of respondents would rather go to their parents for financial advice compared to just 19% who would turn to the internet.
33% of men would go to a financial advisor versus 26% of women.
4 out of 10 of those aged 55+ would go to a financial advisor.

Millennials Most Likely to Reach Out to Their Parents for Advice

Each year, the internet continues to grow in staggering amounts, with users utilizing the web for everything from social media consumption to eCommerce. Today, roughly nine out of ten American adults use the internet. Because there are millions of active internet users searching Google daily, we were surprised to find that still, most respondents would go to their mothers for financial advice over the web.

Our survey polled Americans ages 18 to 65+ and found that of those under 24, 44% would go to their parents for financial advice versus just 33% who would trust Google to answer money-related questions.

Men More Likely to Go To a Financial Advisor Than Women

Around 31% of respondents said they felt most confident reaching out to a financial advisor. Of this number, 33% were men versus just 26% women. Conversely, 14% of women are most likely to turn to their mothers versus just 9% of men.

Those Aged 55+ Most Confident in Financial Advisors

It appears the older generation is less hesitant to reach out to certified financial advisors. Of the 29% who listed financial advisors as their go-to, 40% of respondents were 55 and older. This could lean heavily into the fact that those of this age are nearly retired and feel more inclined to consult an expert in things relating to their retirement income strategy.

Studies have shown that a handful of Americans over the age of 30 don’t understand basic financial terminology such as determining their 401k, knowing what interest is, or understanding how inflation works. Many of these people also feel lost when it comes to a long-term, stable financial plan. Financial planning, however, enables you to create an ongoing process that will not only help with current cash flow but also help build a nest for retirement. Regardless of who you visit for financial advice, be it mom, the internet, or a financial adviser, it’s important to become educated on the terminology, processes, and ways to ensure a secured future.

Sources: Charles Schwab | The Motley Fool

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Through unprecedented times like this, the support from our respective communities remains most important to help us come out of this physically, mentally and financially stronger. As we make plans and take the necessary precautions for our physical health, it is also key that we have a plan in place for our financial health.

If the state of your finances is one of your stressors, we’re here to help. Last week, we asked our Minters to share their top personal finance concerns during this time. From smart investing to revising your budgets to building an emergency fund, Brittney Castro, Mint and Turbo’s Certified Financial Planner, shared her top tips and advice to get us through this time. Watch here.

At the end of the day, our health and wellbeing matter the most. While things may seem unpredictable at this time, we are always here as a resource for all things personal finance. For additional COVID-19 related resources, check out our growing list of cost-free resources. If you have any additional questions, tweet us at @Mint and we’ll be sure to support you as best as we can. Stay positive and healthy, Minters!

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Even when you make six figures and save diligently, your finances can create some anxiety.

Ken [name has been changed to assure privacy], a 36-year-old pilot based out of Pittsburgh earns $100,000 a year. The 36-year-old has various savings buckets for retirement and a rainy day, totaling over $150,000.

He’s a conscious spender, too, according to his Mint profile. He caps his expenses at about $4,000 per month. His top monthly costs include his mortgage ($990), food ($600), auto and gas ($450) and travel and occasional vacations (this month was higher than average last month at: $1,200). “I make an effort to not spend money,” he tells me.

Wow. So what’s the problem?

Dig deeper and we discover that Ken also has $45,000 in student loans and although the interest rate is currently at a very low 2.5%, it is a variable rate, which means it can fluctuate. And given that the markets are highly anticipating a rate hike this December and more over the course of the next year, Ken’s rightfully worried about his student loan becoming more expensive to shoulder down the road.

Should I use my savings to pay off most (or all) of my student loans now? Or just let the loan ride? He asks me.

A little more about Ken’s financials:

The monthly minimum on his student loans, which he consolidated a few years ago, is $296. He rounds that balance up a tad and pays $300 a month. The pay off date at this rate is 2031.
He has numerous investment accounts with the following balances:
- 401(k): $78,000
- Brokerage Account: $36,000
- Roth IRA: $20,000
- Traditional IRA: $10,700
- Savings Bond: $5,000
As for rainy day savings he has about $15,750 in a CD, which he can withdraw at any time. He figures this could cover him for four to five months in an emergency. To buy him more time in case things really get bad, Ken says he would also tap his Roth IRA, savings bond and brokerage account ($61,000).
His checking and savings accounts hold about $22,400, spread across three categories (a virtual “wallet” his bank calls it): everyday spending ($10,000), short-term-savings ($2,400) and long-term savings ($10,000).
Ken expects to earn a 7% salary increase in 2017.

We spoke by phone and I offered Ken just a few bits of advice, starting with a strategy for his most pressing concern, his variable rate student loan.

Squash your student loans in 5 years or less.

“I have the money to just pay off all my debt now,” Ken told me. While that is technically true, he’d have to deplete more than half of his emergency savings including liquidate some of his investments. I just didn’t think that was worth it. Heading into a new Presidential term and with so much uncertainty about the economy and all else, this isn’t necessarily the best time to heavily compromise your rainy day account to pay off low-interest debt.

And although interest rates will likely increase in the coming year, even if the rate on his student loan doubled to 5% in the next year or two, the payments wouldn’t be out of control.

Instead, I propose the following plan of attack to pay off the debt more aggressively and in far less time than the 15 years left on the term. This keeps more cash in savings over the short-run and saves him a significant amount on interest.

Here’s how:

Liquidate just the savings bond, worth $5,000 and apply it to the student loan principal. Ken agreed that this bond wasn’t really earning much (if anything) any more. Out of all his “investments” this had the weakest return, less than the 2.5% the student loan is charging. This step knocks down the loan balance to $40,000.

The next move is to pay more than the monthly minimum. I calculated that paying $700 a month or a little more than twice the minimum payment on the student loan he can accelerate the pay off to just five years. This shouldn’t be a stretch to do, given his salary and conservative spending. A note: It’s very important that he apply this extra payment to the principal (not a combination of principal + interest) to chop down that balance.

This plan not only reduces his pay off to just 5 years, saves roughly $5,000 in interest. This calculation assumes his student loan rate stays at 2.5%, though if and when rates go up, I suggest he add an additional $100 a month or more (stemming from that annual raise?) to the principal, which would likely still leave him debt free in 5 years or so.

Take a closer look at investment fees.

Ken’s done an impressive job of saving and investing, but he isn’t sure about fees he’s paying towards the brokerage account worth $36,000. He opened it over a decade ago and never really took a close look under the hood. A traditional, brick and mortar brokerage firm is managing the investment. I suggested he inquire about the fees, both for the account management and for the individual investments. Does the portfolio have mainly low-cost index funds? Or are the investments mainly mutual funds with high expense ratios? If it’s the latter, he could be wasting tens of thousands of dollars (if not more) in fees over the next 30 years.

Instead, I suggest looking into more affordable investment plans that charge very little to manage the portfolio and commit to investing your money in low-cost index funds and exchange-traded funds. Online investment platforms at Betterment, Wealthfront, Charles Schwab Intelligent Portfolio may prove more cost-efficient.

Splurge a little. Or, at least, work towards a 2017 savings goal.

While he admits to making an effort to “not spend,” is he making an effort to save for a tangible goal in the near future? He would like to possibly buy a new home and do some renovations to his current condo, but he hasn’t really saved with that intention, he admits. His short and long term savings accounts amount to over $12,000. That’s a great head start on a down payment on his next home or a renovation project. Pick one goal and start saving more consciously with that in mind. And enjoy the results!

Bottom line: Ken would benefit from paying down his student loans more aggressively to curb rising interest rates, but should do so in a paced manner to buy himself some financially flexibility. By following my gradual five-year pay off plan he can save $5,000 in interest and, along the way, stay more liquid in an uncertain economy.

Have a question for Farnoosh? You can submit your questions via Twitter @Farnoosh, Facebook or email at [email protected].

Farnoosh Torabi is America’s leading personal finance authority hooked on helping Americans live their richest, happiest lives. From her early days reporting for Money Magazine to now hosting a primetime series on CNBC and writing monthly for O, The Oprah Magazine, she’s become our favorite go-to money expert and friend.

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Each month I’ll be helping a Mint user analyze their financials in an effort to offer some strategies and ideas for saving better, squashing debt and in, some cases, earning more. [If you’d like to be considered, just email me [email protected]]

This week we begin with Rebecca [name has been changed to assure privacy] from St. Louis, MO, one of Mint’s original “beta” users since 2006. The 34 year-old government worker says she loves the money tool because it helps keeps her organized and on track.

Still, she’s struggling to boost savings, repay debt and raise her income. She’s living paycheck-to-paycheck and wants to get ahead. [As a homeowner, she’d also like to tackle a few home renovation projects.]

A little more about Rebecca and her Mint profile:

Annual salary: $65,000 (before taxes, health insurance & retirement contributions)
Monthly Expenses: $2,200 a month.
Biggest Monthly Expense Categories:
- Mortgage $986
- Food, Gas, Laundry, Entertainment, Misc.: $760
- Condo Fees: $307
- Student Loans: $22,900 (monthly payment is $285)
- Credit Card Debt: $10,900 (monthly minimum payments total $200)

In our conversation I had the chance to learn a little more about Rebecca’s financial profile and the moves she’s willing to make to create some much-needed breathing room in her budget.

Here are a few of my recommendations:

Cut the Cord on Cable

Of all her expense, Rebecca and I discussed that cable is the least desirable and least needed. [I cut the cord back in August and use mainly Netflix and my Apple TV to access my favorite shows] Her cable bill amounts to $60 a month. Slash it and she can save $720 a year.

Save on the Go

Rebecca is conscious about saving. She uses Digit, a new mobile app that saves nominal amounts for you every few days or once a week. It bases its savings decisions on your flow of income and expenses. Since last fall, Rebecca has saved over $400 using Digit. I recommended she stick with it, since it’s totally painless and can serve as a nice “slush” fund for her when she wants to splurge on herself once in a while.

Take on a Side Gig

Because has a government position, Rebecca’s pay is very structured and it’s not likely she can receive a raise just for asking. She does anticipate a 1.6% raise this year, but I thought that wasn’t really enough to move the needle as far as saving more and squashing debt. (I mean, that’s only a tad better than the year-over-year rise in inflation!) My recommendation: Start looking at private sector jobs. Rebecca has a Master’s degree and could make probably twice what she’s earning now working for a company – or for herself! It’s something she’s considered and will be more proactive about it in 2017.

Meanwhile, how about a side gig? Rebecca works from home some days and has a nice two-bedroom house. While she wasn’t keen on my idea of renting her second bedroom out once in a while via sites like AirBnB, she did think she could have fun dog-sitting once or twice a week. We decided this might be an easy way to not only earn extra income. It can also, depending on the dog, serve as a nice stress relief!

At Rover.com and DogVacay.com, for example, sitters and dog walkers that take on gigs on a regular basis can earn $1,000 or more per month. Per night, pay can range and vary slightly depending on the neighborhood, but you can earn between $25 and $35 per night.

If Rebecca dog-sits twice a week, she could earn an extra $200 to $300 a month. In a year, she’ll have up to $3,600 in her pocket.

Maximize Your Tax Refund

Rebecca says her tax refund – combining Federal, State and Local tax refunds – will be around $4,000. My suggestion was to place most of that or $3,000 towards her credit card debt and save $1,000 in her bank account.

A tax refund can be a huge help in getting you to your financial goals faster. If you have credit card debt, it’s wise to first use the refund to pay that down. And if you lack emergency savings, use some of the IRS windfall to bolster your rainy day account.

Transfer Debt to a 0% Balance Transfer Card

Rebecca pays a little more than the minimum on each of her two credit cards. Together, her cards average an interest rate of about 10%. On a nearly $11,000 balance, she’ll be paying down this debt for the next 6 years.

But if she commits to all of the above and applies to her card debt:

Existing $200 she is already contributing to
Savings from cable ($60)
Earnings from dog sitting ($300)
A majority or $3,000 of her tax refund

AND transfers her credit card debt to a 0% balance transfer card then she could be out of debt in about 15 months or so, by the time some balance transfer cards end their 0% introductory rate. [Her credit score is well in the 800s so she shouldn’t have a hard time qualifying for a great card.[

Audit Conclusion: By transferring her credit card debt to a 0% balance transfer card, cutting cable and taking on a small side gig, Rebecca will be able to be credit card debt free in a little over a year – as opposed to six! After that, my recommendation is to PRETEND the debt still exists and allocate a minimum of $500 a month towards emergency savings. This time next year, I hope she’ll also have found a new job that pays her more for her skills and education. A greater income will mean she can finally work on some of her pet projects around the house!

Have a question for Farnoosh? You can submit your questions via Twitter @Farnoosh, Facebook or email at [email protected].

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What is an NFT?

They’ve generated quite the buzz lately, with many tokens selling for millions of dollars. Let’s take a minute to explore more about NFTs.

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Big goals can carry price big tags. Whether you plan to buy a home, a new car or treat yourself to a much-needed vacation, you’ll need the money. And before you can really start planning for these big expenses, you’ll want to ask yourself, “Can I (or should I) afford it?”

If the answer is yes, then begs the question, “What’s an appropriate amount to spend?”

Here’s some advice on how to tackle a few big-ticket buys. And, if saving money isn’t exactly your strong suit, keep reading. I’ve included some of my favorite resources to get a jump-start at the end.

Buying a House? Cap Monthly Payments at 30%

When it comes to budgeting for housing costs, my rule of thumb is to spend no more than 30% of your take-home pay. That includes the mortgage, property tax and maintenance payments. The truth is that becoming a homeowner comes with hefty responsibilities and often, unforeseen costs.

Should your new home require a repair, you’ll want to be able to comfortably afford it without stretching yourself too thin. A rookie homeowner mistake is assuming you can spend the same monthly cost on a mortgage as rent. But renters aren’t necessarily required you to pay for plumbing damage or repair broken major appliances on their own dime.

Once you’ve calculated how much you can spend per month, figure out what size mortgage that equates to and that should help you narrow down homes by price. Home search website Zillow.com has a calculator that produces your target home price based on your annual income, monthly debt payments and the size of your down payment.

Speaking of, you’ll want to prepare to put down 20%, especially in competitive markets. For more on the specifics of home buying, check out my previous blog post.

Save more: To minimize monthly mortgage payments, be sure your credit is in great standing. Borrowers with high credit scores (often a 760 or greater) are best suited to qualify for the lowest interest rates on a home loan in today’s market.

Eyeing a Car? Ideally, Budget 15%

When it comes to purchasing a new car, aim to spend no more than 15 to 20% of your take-home pay. This includes maintenance and gas. if you pay with cash, take your annual salary and multiply it by .15 to calculate a max spend.

If you plan to finance or lease the vehicle, take your monthly take-home pay, multiply that number by .15 and that is a healthy budget for car payments (assuming you don’t have other major outstanding debt).

Save More: Go pre-owned. If you’re okay with a few scratches and some wear and tear but with the assurance that the car comes with a manufacturer’s warranty, then opting for a pre-owned vehicle could be a great way to save anywhere from probably 10 to 25%. This option can be more costly than going with a regular used car. But CPO’s come with benefits like a longer warranty and proper inspections.

If you’re set on purchasing a new car, wait until the end of the year when dealers are desperate to unload the current year’s models to make room for new inventory.

And for what it’s worth, waving cash at the dealer won’t necessarily earn you any discounts (unlike in years past). I recently purchased a new car and thought we would get a lower price by offering to pay entirely in cash. Wrong. Turns out, by signing up for auto-financing I was able to score a discount. With the loan interest rate at only 2% I decided to finance the car and commit to paying it off within the year (as opposed to four years) to keep interest payments to a minimum.

Fancy a Piece of Jewelry? Or any Luxe Item? Mind Your Savings.

Who doesn’t want to treat themselves to a little something every once in a while? Personally, I’ve been eyeing the new iWatch. But for such discretionary expenses (aka “splurges”) it’s best to pay them with cash on hand. If you can’t pay it off in a month, then I question whether it’s really something you can afford. If it’s a financial stretch, perhaps it’s wiser to hold off on the purchase?

For discretionary or miscellaneous expenses, I think it’s responsible to cap spending at no more than five percent of income and that includes things like luxury items and recreational spending. If you need to tap savings, just be sure you replenish the account within the next month and aim to leave yourself with at least a six-month rainy day cushion at all times.

Save more: Similar to pre-owned cars, what about buying secondhand? Tradesy and Poshmark are two websites that have a large inventory of gently used (or in some cases brand new, but discounted) designer goods. These online vendors verify that items are authentic and match the seller’s description.

Sallie Krawcheck, Wall Street veteran and co-founder and CEO of the online investment platform Ellevest, revealed to me on my podcast So Money that discount site The RealReal is her go-to place to splurge. She calls it “financially savvy.” Hey, if it’s cool for her, then it’s cool for me!

Longing to Getaway? Time it Right.

I always say it’s most rewarding to spend on experiences, especially travel. It’s important to recharge your mind, body and soul or to simply learn about other cultures.

For vacations, again, coming from your discretionary budget, aim to spend within 5% of your take-home pay.

Save more: Depending on when you book your flight you can earn more bang for your travel buck. Data from FareCompare show airfare tends to fall to its lowest level all week on Tuesdays starting at 3pm. That’s typically when airlines release the greatest number of deals and subsequent pricing wars lead to low prices.

Need Help Saving?

All of the above assumes that you have money left at the end of the month after covering your bills to save up and spend on big-ticket items. That may be a big assumption. Many of us live paycheck to paycheck and quite frankly, as humans, we’re not exactly hard-wired to save. As famed behavioral expert Dan Ariely once told me, “We see something, we want it and we go for it without thinking very much. The world is designed to tempt us and we follow and get tempted.”

Here are some free tools that can help us to curb some of that ill-fated temptation.

Digit – Save money without really having to think about it. Sign up for Digit by creating a free account. After a few days, Digit checks your spending patterns and moves a few dollars from your checking account to your Digit account, if you can afford it. Users can easily withdraw money any time, quickly and with no fees.. Over time, you’ll build a nice slush fund for yourself

Qapital –Qapital lets you set a savings goal and then create rules that trigger automatic transfers toward your goal. For example, users can charge themselves a determined amount for a guilty pleasure. Say they choose to charge $5.00 every time they order takeout, that $5.00 will go toward a goal of their choosing. Or, users can round purchases to the nearest dollar and the change will be allocated toward their specified goal. On this platform, the average user saves $44 each month.

SmartyPig – This is a free, high-yield savings account that lets you allocate money toward different financial goals. It can be hard to save for a big purchase if you’re lumping it in with your regular savings or checking account. But by compartmentalizing your savings for a particular goal (e.g. a new car, vacation, etc.) you can better track your progress. Like Digit, you can transfer funds at any given time.

Have a question for Farnoosh? You can submit your questions via Twitter @Farnoosh, Facebook or email at [email protected] (please note “Mint Blog” in the subject line).

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Everyone loves a good deal. Collecting coupons can help you balance your budget and save big, but it can also eat up your time. To succeed at couponing, you’ll need to find a system that helps you get the most bang for your buck without spending all your free time searching for the lowest prices on your favorite products.

Coupons are everywhere

Coupons aren’t just for groceries. In fact, 74.7% of available coupons are for non-food items. Billions are distributed every year, and once you start looking, you’ll begin to spot them everywhere. The bad news? It’s easy to get overwhelmed.

Extreme “couponers” spend huge amounts of time accumulating and using them to amass major savings. While the money saved can add up, collecting paper or online coupons is a time-consuming hobby. It takes time to track down the deals you want or need, organize the coupons based on when you want to buy the product, and find the store carrying the item. You’ll also need to consider the additional time it takes to store the purchased items in your home.

With so many deals to be had, it can be easy to go overboard. The good news? You don’t need to resort to extreme couponing for it to have a positive impact on your budget. It’s easy to find coupons in print publications, on product displays, and posted on coupon-devoted websites. Grocery store websites even let you instantly load their coupons directly onto your loyalty card.

<img data-attachment-id="10576" data-permalink="https://mint.intuit.com/blog/budgeting/how-to-strike-a-balance-in-real-savings-and-extreme-couponing-to-save-time-and-money/attachment/women-couponing-on-computer/" data-orig-file="http://www.hanovermortgages.com/wp-content/uploads/2021/04/how-to-strike-a-balance-in-real-savings-and-extreme-couponing-to-save-time-and-money-1.jpg" data-orig-size="1000,771" data-comments-opened="1" data-image-meta=""aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"0"" data-image-title="How To Strike A Balance In Real Savings And Extreme Couponing To Save Time And Money" data-image-description="

How To Strike A Balance In Real Savings And Extreme Couponing To Save Time And Money

” data-medium-file=”http://www.hanovermortgages.com/wp-content/uploads/2021/04/how-to-strike-a-balance-in-real-savings-and-extreme-couponing-to-save-time-and-money.jpg” data-large-file=”http://www.hanovermortgages.com/wp-content/uploads/2021/04/how-to-strike-a-balance-in-real-savings-and-extreme-couponing-to-save-time-and-money-1.jpg?w=1000″ loading=”lazy” class=” wp-image-10576 aligncenter” src=”http://www.hanovermortgages.com/wp-content/uploads/2021/04/how-to-strike-a-balance-in-real-savings-and-extreme-couponing-to-save-time-and-money.jpg” alt=”How To Strike A Balance In Real Savings And Extreme Couponing To Save Time And Money” width=”536″ height=”413″ srcset=”http://www.hanovermortgages.com/wp-content/uploads/2021/04/how-to-strike-a-balance-in-real-savings-and-extreme-couponing-to-save-time-and-money-1.jpg 1000w, http://www.hanovermortgages.com/wp-content/uploads/2021/04/how-to-strike-a-balance-in-real-savings-and-extreme-couponing-to-save-time-and-money-1.jpg?resize=768,592 768w, http://www.hanovermortgages.com/wp-content/uploads/2021/04/how-to-strike-a-balance-in-real-savings-and-extreme-couponing-to-save-time-and-money-1.jpg?resize=453,349 453w, http://www.hanovermortgages.com/wp-content/uploads/2021/04/how-to-strike-a-balance-in-real-savings-and-extreme-couponing-to-save-time-and-money-1.jpg?resize=414,319 414w” sizes=”(max-width: 536px) 100vw, 536px”>

Couponing time management

Before you start hunting, create ground rules to help manage your time. Remind yourself that your time is as valuable as your money—maybe even more so. These tips can help ensure that the time you spend couponing is worth it.

Clip coupons for products you know you will use and skip the ones you might not use. Clipping and sorting all of them to have “just in case” will eat up your time.
Look for coupons for the brands you prefer. Buying a cheaper product and discarding it because you don’t like it is the opposite of saving money.
Remember, a great deal doesn’t necessarily make it good for your family. For example, a pile of cheap candy isn’t a bargain in nutrition. Purchase products you approve of and skip the ones you don’t, no matter the savings.
Acquire products that you can use in a reasonable amount of time. Stockpiling means time spent organizing what you bought.
Hunt for coupons as needs arise. For example, if your kids need new jeans, look for a coupon to one of their favorite clothing stores.
Be organized. Searching through your clipped coupons is a time drain. Set up a system so you can quickly sort and find them.
As you file your coupons, weed out any that have expired.

Track your payoff

It’s just as easy to track your progress as it is to collect coupons. Create a timecard and keep track of the time you spend couponing for one month. During that same month, keep your receipts. At the end of the month, total up your coupon savings and divide it by your time spent. How much did you make an hour? Seeing the numbers can help you decide how much time you want to commit to couponing.

Even if being a regular “couponer” isn’t for you, occasionally using coupons for big and small purchases is still a smart idea. After all, any money saved is time well spent.

You can find savings and coupons for a variety of home goods on Groupon’s Bed Bath & Beyond page here. 

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Twenty-three year-old Emilie Lima Burke has started to save $20 per day.

It’s not for a vacation or her retirement fund. Instead, she’s preparing for the moment she expects she’ll need to take care of her aging dad and all his expenses. Burke, who runs the site BurkeDoes.com, a financial, health and career resource for millennial women, says that her parents used to joke that she and her sister would be “their retirement plans.”

But that’s seems no longer a laughing matter.

“My dad has struggled with long bouts of unemployment…He has no money saved at all,” says the 23 year-old. “I know that at some point I will be [his caregiver]. When there is no retirement fund or any assets for aging parents to fall on, you just have to make a plan.”

We’re living longer these days, which means that many of us have the great fortune of growing older with our parents. The number of Americans ages 65 and older expected to nearly double by 2050, according to the U.S. Census.

With longevity, though, comes the increasing responsibility and financial pressure to care after our aging family members, especially, if like Burke, our family doesn’t have a financial plan already in place. The average working household has “virtually no retirement savings.”

It’s no surprise then that about one in four Americans (with parents ages 65 and older) is helping a parent with his or her affairs, offering financial help or caring after them.

And not to cause alarm, but more than half of the country – 29 states – have so-called “filial support” or “filial responsibility” laws that could potentially require adult children to pay for their parents’ care if they don’t have the means to do so for themselves.

If you’re struggling to support a family member or anticipate needing to care after a loved one down the road, here are some ways to help make your efforts more affordable.

Know Their Bottom Line

If a family member is turning to you for help, particularly financial help, then it’s more than appropriate to have a candid money talk – no matter how uncomfortable it may be. Ask to see how much they have in the bank, as well as what other streams of income they may be receiving (e.g. social security, a pension, insurance payout, a portfolio distribution, etc.). Create a budget to pay for as much as possible with your parent’s income and assets before tapping your own bank account.

“I see people who take on credit card debt or stop paying their own bills to care for their parents, but a much better option is to first exhaust all of the resources that the parents can have access to,” says Belinda Rosenblum, a financial strategist at OwnYourMoney.com.

Having a paper trail of statements showing income and expenses will also prove helpful if your parent needs to apply for Medicaid, the health insurance program designed to help those with little money. Here’s where you can learn more about Medicaid eligibility. Care facilities sometimes have a Medicaid expert on staff to assist with your application, too.

Reach Out to Local and National Resources

When business coach Amanda Abella’s grandmother was diagnosed with Alzheimer’s a year ago, her family needed to find a way to pay for her extra care. The adult day care alone, she estimates, would have cost $100 per day.

For guidance, they turned to her grandmother’s doctor and the social worker at the hospital and discovered the Alliance for Aging, a Florida-based private, not-for-profit that provides a range of services to older people, including personal care, legal help, transportation, meals, etc. After several rounds of interviews and almost a year of being on the wait list, Abella’s grandmother succeeded and now receives free nursing care.

The lesson: Never assume that you have to go it alone. Help is out there. Local and national resources offer grants and support to seniors. To start your search for funding visit: Family Caregiver Alliance and Paying For Senior Care.

Also worth mentioning: If your aging parents are veterans look into the Department of Veterans. “Often veterans overlook or are not aware of the benefits they are eligible for such as medical care or prescriptions, especially if they’ve been separated from the military for a long time,” says military money life coach Lacey Langford.

Look Into The Family and Medical Leave Act (FMLA)

If you need to take time off work to care for a family member, be it a parent, child or even yourself, but worried about losing your job in the process, you may benefit from the Family and Medical Leave Act (FMLA).

The federal law grants certain workers up to 12 weeks of unpaid leave per year with the promise of getting their jobs back. You can also keep your company health benefits during your time off. Some states such as California, New Jersey and Rhode Island allow qualified workers to earn at least part of their paycheck during this time.

Remember the Tax Deduction

Track expenses and if you afforded more than half of your parent’s needs during the tax year (including utilities, medical bills, food and general living expenses) and he or she earned less than $4,050 (not counting social security), then you may be able to claim mom or dad (or both) as a dependent on your 2016 tax return. Doing so offers you additional tax benefits. You can find more information on how to claim a parent as a dependent on TurboTax.com.

Keep in mind that whether or not your parent qualifies as a dependent, you might be able to deduct the medical expenses (including prescriptions and doctor visits) you paid for on his or her behalf from your taxable income. The IRS requires the total of these expenses to be more than 10% of your adjusted gross income in order to claim the deduction.

Consider Long-Term Care Insurance

If your parents have yet to reach the age where they may need some assistance, see if they’ve looked into long-term care insurance. This can come in handy if they think you may need to afford a nursing home or at-home care later down the road. (And about 70% of Americans who reach age 65 will likely need some time of long-term care before as they age). Medicare does not cover these costs and they can be very expensive.

For example, the average cost of a home health aid, which long-term care would cover, can be anywhere from $34,000 to $57,000 a year depending on where you live. If your parents don’t have enough saved to cover this, it may fall on your shoulders. It’s just as beneficial to you for them to seriously consider long-term care.

You may decide to purchase a policy yourself and have your parent(s) be the beneficiary.

Keep in mind that the ideal time to buy long-term care is when your parents are in their 50’s and 60’s (specifically between 52 and 64). The younger and healthier the beneficiary is, the more likely he or she will qualify (and the lower the monthly premium). For a couple in good health applying for long-term health care in their mid-50s, the average annual cost is about $2,350 (or less than $200 a month).

Create a Family Fund

Finally, like Burke, it pays to start saving early for the financial what-ifs surrounding our family members.

You can hope for the best, but should also prepare for the worst. Tucking away even $10 or $15 a week for the next five or ten years while your parents are still able to take care of themselves could yield an essential nest egg for everybody when life takes a turn.

Have a question for Farnoosh? You can submit your questions via Twitter @Farnoosh, Facebook or email at [email protected] (please note “Mint Blog” in the subject line).

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How To Strike A Balance In Real Savings And Extreme Couponing To Save Time And Money

Coupons are everywhere

Couponing time management

Track your payoff