Save more, spend smarter, and make your money go further
The advent of fall serves as a good reminder that you may need to correct course and keep your financial responsibilities in mind. On the first day of fall, the autumnal equinox, the lengths of day and night are roughly equal, and the daylight grows shorter from there. Use the diminishing sunlit hours to get you and your money back on course after a summer of sun and fun.
Start over
Every year at back-to-school time, there are ads for notebooks, fancy pens and backpacks. Even if you don’t have children, the fall season brings to mind stacks of blank paper, waiting for you to write your story….or re-write it! Are you financially off-track and your money goals are nowhere in sight? Start with a clean slate and get back to basics. Create fresh goals. Redo your monthly budget. Commit anew.
Become a night owl
We turn our clocks back on November 1. Use that hour to reflect on your day, unwind and set action items for tomorrow that will keep you on the right financial path.
Spring cleaning isn’t just for spring
If you live in a cold climate, now is the time you are pulling winter gear out of storage. Purge ill-fitting or never-worn garments and gear and have a fall yard sale. You’ll clear space in your life and earn a bit of money you can put towards your saving goals.
Give your bills a checkup
Scrutinize your bills. Are you paying the right amount for utilities, cable or broadband, phone, and other recurring monthly expenses? Are there any hidden fees? This is a good time to get organized, adjust your data plan or cut some channels out of your satellite TV package to save a few more bucks.
Pay attention to open enrollment
Many employees benefit plans run open enrollment — the period when you can make changes or sign up for new benefits — at this time of year. Instead of ignoring those flyers or emails, open them! Make sure you are taking advantage of vision, dental, and health insurance, and contributing to your employer’s retirement plan. Look at how much you spent this year on healthcare costs and see if a healthcare savings account may benefit your family. Keep in mind that Health Insurance Marketplace open enrollment for 2016 is from November 1, 2015 through January 31, 2016.
Stock up for next year
Now is the time to purchase used summer gear like patio furniture, pool toys and bikes. When others are deciding what doesn’t get to stay in the garage for another year, you can snag a great bargain on something you’ve wanted to add to your warm-weather activities. Grab it now and look forward to using it next year.
Resist the pumpkin spice latte
You can’t open your eyes in September without seeing an ad for a pumpkin spice something. It can be tempting to embrace the fall flavor, but did you know that a pumpkin spice latte can be as much as $5.25? I don’t know about you, but every year I succumb to the advertising pressure and long for the tasty warm treat. It’s a good reminder to skip the coffee stop and make your latte at home and save a fiver. Or at least custom order yours, which could save you half the cost!
Watch the calendar
The countdown to Christmas is alive in social media feeds. Whatever winter holiday you celebrate, plan accordingly. They happen at the same time every year, so now’s the time to make your plan — don’t let them sneak up on you and force you into overspending on food, travel, or gifts at the last minute.
Snuggle and save
When it gets cold outside, we tend to stay in, watch movies or invite friends over. While this routine may get old by March, at least you’re not out somewhere spending money! Silver lining, right?
Kim Tracy Prince is a Los Angeles-based writer. If she didn’t have a husband and 2 young boys who love sports, she’d save money by staying in and reading all the books that she never has time for.
Save more, spend smarter, and make your money go further
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My New Financial Reality in the “Real World”
Earlier today I provided a statistical snapshot of minimum wage earners. The numbers indicate that in the United States:
Most minimum wage earners are young.
Most minimum wage earners work in food service.
Most minimum wage earners have never attended college.
Statistics are one thing, but real-life is another. There are still millions of older college-educated Americans who earn minimum wage in jobs outside the food service industry. Many of these people want to escape their situation, but don’t know how.
More than pinching pennies Over the weekend, Trent at The Simple Dollar shared ten steps to financial success for a minimum wage earner. His advice is excellent, but emphasizes frugality and cutting costs. I want to look at another approach to escaping minimum wage — earning more money.
Here’s what one minimum wage earner once wrote at Get Rich Slowly:
There are definitely [minimum wage earners] who casually spend beyond their means without regard to or serious consideration of consequences. There are also those who are living frugally yet are squeezed financially, perhaps by high rents and utilities (the homeownership rate of the working poor is close to zero), falling real wages, or health and medical expenses…I make minimum wage and have student loan debt. I can’t think of any spending I can cut out without feeling deprived.
The fundamental law of money still applies to those who make minimum wage: to gain wealth, you must spend less than you earn. But it’s more difficult for a person making minimum wage to spend less than she earns. Even after cutting luxuries — cable television, eating out, etc. — there are certain minimum costs associated with living in our culture. If you’re in a situation where you’ve reduced expenses as far as they will go, it’s time to focus on the other component of the wealth equation: increasing your income.
Breaking free from minimum wage A minimum wage job can seem like a prison — you can’t imagine you’ll ever break free. You can’t imagine you’ll ever earn more money. However, opportunities do exist. Here are several approaches to escaping the shackles of a low-wage job:
Work two jobs. If debt or living expenses are keeping you down, take a second job. This may not help you escape from minimum wage in the short-term, but it will alleviate some of the financial pressure you’re facing, which will eventually allow you to focus on long-terms solutions.
Seek a promotion. Find a way to advance in your current job. What would it take for you to move into some sort of management position? What about moving to another department where the pay is better? Be the sort of employee that managers can’t live without: show up on time, be efficient, do quality work. Watch for advancement opportunities with your current employer.
Change companies. If there’s no path to higher income at your current job, what about a similar job with another company? Not all employers have the same pay structure. Scout the competition, and see if they can offer a better opportunity.
Change professions. You may need to leave your current field altogether. If you’re working at the counter in a convenience store, you’re better off taking another line of work. What sorts of jobs are you qualified for? “None,” you might say, but many employers need unskilled laborers. An unskilled laborer who shows up for work on time, is agreeable, and makes an effort will usually be earning more than minimum wage in just a few months.
Steer clear of corporate giants. As a small business owner, I’m biased against big corporations. Publicly held companies have huge motivations to keep worker wages and benefits low. It’s true that your top-end advancement may be limited with a small business, but they’re generally more flexible than corporate giants. Many small business owners go out of their way to look out for their best employees.
Educate yourself. Finally — and most importantly — do what you can to increase your education and marketability. Make yourself appealing to employers. Develop skills that they can use.
In fact, education is so vital to escaping minimum wage that it deserves a closer look.
The importance of education Education makes a huge difference in your earning potential. The median income for a U.S. male who dropped out of high school is $18,990. The median income for a high school graduate is $28,763. The median income for a man with even some college is $35,073. Education opens doors. And it’s not just about the piece of paper — if you take practical classes, you can learn skills that will have a direct effect on how much you can earn.
I am a huge fan of community colleges. They’re an excellent place to pick up additional training. What can you learn at a community college? Here are a handful of the programs that my local community college offers:
Alcohol and drug counseling
Automotive service and repair
Business administration
Computer programming
Construction
Dental hygiene
Electrical trades
Graphic design
Landscaping
Real estate
And much, much more
Make no mistake: these classes will not get you a top-paying job in the field. They will, however, help you land entry-level positions, positions that will pay more than the minimum wage, positions that will help you find a career path with advancement opportunities. It might take you a couple years to reach this point, but you can reach it. How do I know? Because I did it myself.
In 1998, I was fed up with working for the box factory. I decided to become a computer programmer. While still working full-time, I began to take classes at the local community college. Most of the time I could only afford one class per term, but sometimes I squeezed in two. Within eighteen months I had developed the skills to be hired as an entry-level computer programmer. My pay was $25 an hour, which was at the low end of the spectrum for that kind of job (but appropriate for the skill-set I had acquired).
If you decide to use education to break free from minimum wage, be sure to choose practical classes in order to increase your earning potential. A philosophy class might sound cool, but it’s not going to get you a job. Nor will creative writing.
Don’t forget that school is an excellent place to make contacts with people who might serve as references for future job applications. Most community college instructors have connections in their fields. Make a good impression, and follow through with class requirements. Meet deadlines. Take pride in your work. People will notice.
Ask yourself the hard questions If you’re in a minimum wage job and would like to escape, it’s important to ask yourself why you’re in a minimum wage job. Are the reasons obvious? Is it because you’re young? If you’re just out of school, minimum wage is a rite of passage. It’s something most people experience. Keep moving in the right direction and you will leave it behind.
Are you in a minimum wage job because you lack education? Make education a priority. Pick a career that interests you and is in demand. Obtain the skills necessary to enter the field.
But if you don’t know why you’re in a minimum wage job, or if your answer is that your boss, co-workers, or life won’t give you a break, then you may need to look inward. I had a friend who was trapped in a low-paying job that he hated. He had a long list of external forces that kept him stuck there (and in the crummy jobs he’d had before). He couldn’t understand why he wasn’t able to break free. To everyone around him, the reasons were obvious, but he didn’t want to hear them. He’s still trapped in a low-paying job.
Final thoughts Perhaps I’m naive, but I believe most minimum wage earners can find a path out of their plight. In most instances, hard work, patience, and education can counter the forces of history and bad luck.
I’d love to hear how former minimum wage earners managed to graduate to higher incomes. (Or how they didn’t, if that’s the case.) If I collect enough stories, I’ll post them in a separate entry. If you’d like to share your story, please drop me a line, or post it in this forum thread.
Nobody wants to be paying as much as they do on a month-to-month basis. Home payments can make up a large portion of your monthly payments, but there’s a good chance you have other recurring expenses as well.
If you’re looking to save some money, monthly payments are where you should be looking. Depending on your current spending and payments, you could end up saving hundreds of dollars each month.
Some changes you should make to reduce your monthly payments won’t be fun, but others are going to be so easy that you’d wished you made the change months ago.
Here are some of the best ways to save money on your monthly payments:
Click to check today’s rates.
Improve the energy efficiency of your home
One of the quickest ways to reduce your monthly payments is to look at your bills. There’s a decent chance that your electric bill is a little larger than it should be.
Changing out lightbulbs and some appliances for more energy efficient versions can save you some decent cash pretty quickly. If you have the cash for it, replacing your windows with more energy efficient windows will also reduce your monthly payments while increasing the value of your home.
To further reduce the size of your energy bill, unplug devices when they aren’t on. Anything that’s plugged in is using “ghost power,” which basically means you’re paying for your devices to be off!
Get a VA refinance
The quickest way to reduce your monthly payments is to get a refinance, and, if you’re able, to get it through the VA.
There are two types of VA refinance: streamline and cash-out. Both will lower your monthly payments in the most important way: reducing your mortgage rate. Also, you’re able to use cash on both refinance options to make your home more energy efficient. This will save you money in two ways.
Refinances save people plenty of money on their monthly payments, and the VA gives homeowners different options for refinancing.
Click to check your VA refinance eligibility.
Non-Housing Ways To Save Money
Yes, your housing payment is likely the biggest expense you have each month. But that doesn’t mean you don’t have other expenses which could save you some cash.
The more you save each month, the easier it is to make mortgage payments while storing a little extra. To take the pressure off your mortgage payments, here are some ways to save money each month:
Change your cell phone/cable plan
Most cell phone carriers have similar reliability, so now they’re forced to compete with each other for lower rates and fees. You can take advantage of that. Shop your cell phone plan around and see if there’s an option that can save you some quick cash.
Another place to look is your cable plan, or whatever you use for TV. Many people have channels they don’t need, and some people could get by without cable completely. Reevaluate how badly you need all those channels – it could save you money.
Find lower insurance rates
If you’re a safe driver, odds are you can get a lower rate somewhere. Shopping insurance rates isn’t fun, but it saves you money.
The same applies to just about every type of insurance. Take a closer look at what you’re paying for and ask yourself if you really need it. Don’t try to get too skimpy with payments here, though – better safe than sorry at the end of the day.
Pay attention to monthly subscriptions
A monthly payment of $10.99 doesn’t seem like much, but when you have multiple subscriptions going on, this can add up pretty quickly. Services like Netflix, Hulu, subscription gaming and other streaming services are booming in popularity, and one reason the subscription service works is because you forget about it.
Go through your finances and look at services you pay for. Do any of them really add that much value? Just cutting out a few subscriptions could save you $25 a month, or $300 a year. The more you cut out, the more you’re bound to be saving.
Cutting your monthly payments isn’t always glamorous, but these methods will take you to your main goal: saving money. Refinancing is the most effective way to cut monthly payments without sacrificing too much (or anything), but if your goal is to save money, you shouldn’t stop with a refinance.
Save more, spend smarter, and make your money go further
Our #MyMintMoment Instagram contest has come to an end. We are grateful and inspired by all of you who shared special moments when your life and finances aligned.
Your moments included everything from visiting the Grand Canyon and glaciers, to celebrating a new home or the last student loan payment, and starting a new family or that new college fund! And we were proudly celebrating your accomplishments right along with you.
And the winner of the $1,000 Visa gift card to help fuel their next dream is Kathryn Dyer!
Kathryn had this to say about winning and her finances: “I’ve never been good at sticking to a budget. It seemed like a complicated process and I had trouble keeping it up on the go. This past year a budget became more necessary for me as I was diagnosed with cancer and spent the year traveling for treatments and adding in unexpected expenses. Thankfully, with Mint everything you need is in one easy to use app! I set a goal to spend Thanksgiving, after completion of my chemotherapy, at the beach with my husband. With Mint I was able to watch myself get closer and closer to this goal and finally meet it! My husband and I spent Thanksgiving being thankful for so many things!”
And while there could only be one winner, we wanted to share a few more of our favorite entries. We hope these stories will inspire you to keep working toward and celebrating your future Mint moments.
@mrileyjm: “Mint.com has helped me to be a better steward over my own finances. There is no better feeling than knowing exactly where you stand with your cash, debt, and investments! One of my most memorable moments using Mint.com was setting a goal to save for a destination wedding in Jamaica with the love of my life, Kellie. We watched our cash balance go up and up as we cut back on all unnecessary purchases, and in less than a year we were on the beach…hand in hand…kissing as husband and wife!”
@jaime_jetaime: “I have been a Mint.com user since 2013. Through keeping track of my spending habits I am able to see how tangible actions like DIY car maintenance, brewing coffee at home, forgoing cable and many other financial saving actions can add up to much sweeter financial rewards, like a down payment for a car or a vacation.”
@kristine.whittington: “Mint has helped me to be aware of my spending habits, and alerts me to any spending that is out of the ordinary. My money saving habits and budgeting has definitely improved thanks to Mint. I almost have the money to go to Japan even though I am living on the income of a graduate assistant & paying my way through graduate school. Thank you, Mint! :)”
The contest may be over, but we know you have more financial goals to conquer! Please continue to share your special #MyMintMoment with us on Instagram, Twitter and Facebook.
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Because of economic uncertainty, some companies have resorted to pay cuts to help cut costs. For the workers affected, it likely means scouring their budgets to trim some of their expenses. Taking a pay cut means facing the reality of no longer living the same financial life.
If you’ve just taken a pay cut — or you’re worried that you might soon be facing one — here are four strategies to handle your finances after your salary is reduced.
1. Update Your Budget
First and foremost, create a budget if you don’t already have one. List all your expenses for weekly purchases, from groceries to gasoline and parking fees. Add monthly bills, including rent or mortgage, car loan, streaming services or cable, cellphone, utility bills, credit cards, student loans, and any other debt such as personal loans.
Next, examine all your expenses to see which ones you can lower or eliminate for the next six months. Add your income and include part-time jobs or side hustles, tax refunds, bonuses, and any child support or alimony. This will help you determine how much money you can spend for necessities, expenses, entertainment, and other things such as doctor visits.
In addition to a budget, create a plan for both short-term financial goals and long-term goals. A plan will help you determine when you can pay off any loans and how much you want to save for something like a down payment on a house.
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Open a SoFi Checking and Savings Account and start earning 1% APY on your cash!
2. Track Your Spending
You could use a free money tracking app that can help you keep tabs on your spending and help manage your debt. To track your spending, decide if you want to track it daily, weekly, or biweekly. You might try different time periods before you decide on one.
After you track your spending for two or three months, you’ll see a pattern emerge that indicates where most of your money goes.
3. Cut Expenses
One place many consumers can cut costs is from entertainment, such as their streaming services. These can really add up. Canceling all or some of these services can improve your cash flow, which is how much money you have left over at the end of the month.
Another place where you can slash expenses is from your food budget. Consider using digital coupons, shopping at warehouse clubs, or going out to eat for lunch instead of dinner to save money on food.
Your expenses include debt such as credit cards, student loans, and personal loans. Paying more than the minimum balance, refinancing to a lower interest rate. and making extra payments can help you pay down the loan sooner.
Consider refinancing your student loans by checking out both fixed and variable rates. Interest rates are at historic lows. You might be able to pay down your credit card bills faster by taking out a personal loan; those interest rates are often lower. And if that’s the case, the debt could be paid sooner.
Automating your finances can make your life easier. This will also help you avoid paying late fees. You can either have your bills paid automatically through your checking account or set yourself a reminder on your calendar if you have some bills such as utilities that are a different amount each month.
You can also automate your savings. You can have money taken out of your checking or savings account each month and have it automatically invested into your workplace 401(k) plan or an individual retirement account (IRA).
In addition, you could consider opening an online bank account with a high-yield APY. That way, your savings could earn money for you as it’s sitting in your account.
Ways to Save
When your salary has been slashed, there are several ways you can save money immediately and long term.
Call your mortgage, auto loan, utilities, credit card, and student loan companies to see if you can defer loan payments for several months. Skipping a few payments can help you get back on your feet sooner. If the company cannot provide this option, see if the interest rate can be lowered on, say, credit cards.
Check with your local nonprofit organizations. Many provide food or partial payments for utility bills. Look online to see if stores are offering deals. Stock up on staples such as beans, rice, and pasta if they are on sale.
If you are still short of money, you might consider talking to family members and friends about obtaining a short-term loan.
Now might be the time to use credit card rewards for cash, food, or gift cards.
People who have been saving credit card rewards for a vacation might want to go ahead and use them now. Some credit card companies will let you transfer the rewards for cash to your statement or use them for food delivery.
Other companies let you use your rewards to receive gift cards. Using these gift cards at retailers that sell staples and necessities such as food, detergent, and other personal items can help you spend less money.
Many credit cards will give cash back on purchases such as food and gasoline. See which credit cards are the most beneficial for your financial needs before signing up for a brand-new credit card.
Another way to save money is to use cash for gasoline. Some gas stations offer a cheaper price for consumers who use cash. The savings can add up quickly, especially if you have a longer commute.
Finally, each month, look for other ways you can save money. If your credit card company denied your request last month to lower your interest rate, try calling again. Rules can change often.
4. Save for Retirement
While you could skip saving for retirement, it’s ideal to continue socking away some money each month from your paycheck into a 401(k) plan or IRA. The money you stash away for retirement can lower your taxable income, meaning you’ll owe the IRS less.
Continuing to save money for retirement is a good habit, especially if your salary reduction is temporary. Once you stop contributing to a retirement account, it can be difficult to catch up on your retirement savings. If you have your retirement contribution automatically deducted from your checking or savings account, saving for your future is easier.
The Takeaway
While it can be difficult to navigate a pay cut, creating a budget, tracking your spending, shopping for deals, and cutting expenses can help you save and get through a tough time.
In addition, opening a new savings account could help you maximize your money. With SoFi Checking and Savings you’ll earn a competitive APY and pay no account fees.
See how SoFi Checking and Savings can help your money do more.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.
SoFi members with direct deposit can earn up to 4.20% annual percentage yield (APY) interest on Savings account balances (including Vaults) and up to 1.20% APY on Checking account balances. There is no minimum direct deposit amount required to qualify for these rates. Members without direct deposit will earn 1.20% APY on all account balances in Checking and Savings (including Vaults). Interest rates are variable and subject to change at any time. These rates are current as of 4/25/2023. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet. Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners. Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances. SOBK0523015U
Save more, spend smarter, and make your money go further
If you dream of having a baller bank account and the freedom to kick back without a financial worry in the world, it’s possible to hack your spending habits until you’re sitting on a comfy cushion of cash. And since studies show most of us can adopt new, long-lasting behaviors after just three weeks, you could be well on your way to a richer life by the end of the month.
Let go of any worries about your bank account balance, and start living your best life today. We challenge you to take the next 21 days to establish new spending habits! Which of these money-saving ideas will YOU commit to?
WEEK 1 – Establish a Baseline
Start the 21-Day Challenge by figuring out where you stand financially and which expenses you can temporarily trim without shocking your system.
Identify what’s dragging you down
Take a good look at last month’s expenses to get an idea of how much you spent and what you bought. Budgeting apps like Mint can help you by importing and categorizing your electronic transactions in minutes, making it easy to spot areas where you’re overspending.
Identify Unnecessary Expenses: Keep an eye out for businesses you regularly spend small sums of money with and put them on a blacklist. Keep that list on your phone or in your wallet.
Don’t Tempt Fate: Avoid temptation by not carrying cash or taking a different route to work.
Buy needs, not wants
It’s no secret that the best way to save money is to cut out impulse shopping, and only buy absolute necessities.
Feast Affordably: Go food shopping once a week and stick to the list you brought with you. Eat breakfast at home, pack your lunch for work and prepare dinner in your own oven.
Pass on Premium Products: From clothing to electronics to the type of gas you put in your tank, skip the top-shelf items in favor of their more-affordable alternatives.
Use what you’ve got
Another great way to cut expenses is to be resourceful about what you’ve got lying around the house. You don’t need to start making your own soap like you’re the newest member of Fight Club, but you’ve likely got some stuff you could be putting to good use.
Expand Your Recipe Repertoire: Make homemade meals using sites like MyFridgeFood.com that let you to plug in the ingredients you have before telling you what recipes you’re equipped to cook.
Pay in Other Ways: Don’t eat out anywhere without a coupon or gift card.
Enjoy Entertainment You Own: Skip the theater this week and dust off an old DVD instead. Or start reading a new book if it’s been a while since you cracked one open.
WEEK 2 – Cut Off Some Companies
Making a few quick phone calls during the second week of this 21-Day Challenge might save hundreds on recurring expenses, and save you a mountain of money over the years.
Explore your options
Odds are that a talking gecko and an aproned brunette have been jockeying for your insurance dollars for quite some time. Maybe one of them can save you some scratch?
Inquire about Insurance: Collect quotes from competing insurance companies to see if another company offers you a better deal.
Channel Your Inner De Niro: Test your acting skills by threatening to cancel your cable or cell service because your bill’s too high. Most companies will cut you a deal before letting you leave.
Chat up Creditors: Got credit card debt? Call up your card issuer and ask for a reduced rate, or transfer your balance if it means long-term savings.
Break up with brands
Why buy the paper towels with the highest thread count or use the same sandwich bags as the Kardashians, when brand XYZ does the same job? Choosing store-brand products is an effective cost-cutting method that can save you a bundle at checkout.
Focus on Price, Not Packaging: From paper towels and cleaning supplies to painkillers, opt for more affordable off-brand products on your next trip to the store.
Ditch some subscriptions
Now that you’ve watched Beyoncé’s Lemonade, do you still need that subscription to Tidal? Canceling your underused memberships could supercharge your savings.
List Your Memberships: Make a list of any subscriptions or memberships that renew on a monthly or annual basis. Only keep the ones you can’t live without.
Flex for Free: Instead of renewing your gym membership, exercise outdoors, or take advantage of free or donation-based classes offered by many yoga studios and gyms.
Opt Out of Annual Fees: If you have a lengthy credit history and not a lot of debt, consider canceling any credit cards with an obligatory annual fee.
WEEK 3 – Hone New Habits
The home stretch of our 21-Day Challenge is all about the little things. Making small, subtle changes in your daily life and routine can lead to big savings over time.
Slay some vampires
Cut your electricity bill by unplugging “vampire appliances” that suck up power even when they’re not being used.
Stop Paying for “Standby”: If you only use your printer, stereo, or video game console a few times a week, don’t leave those bad boys plugged in day and night. The same goes for any appliance with a digital clock or standby mode.
Unplug Your Internet: No one at home surfing the web while you’re at work? Wireless routers rack up kilowatt hours faster than just about any other appliance. Turn off or unplug your modem and router before leaving home and you could save a chunk of change.
Adjust Your Temps: Turn off your heater’s pilot light during warmer months, and learn to use your thermostat’s built-in timer to reduce your bill. Raising your refrigerator temp a few degrees can also make a measureable difference in your electricity usage.
Go swapping, not shopping
Itching for something new in your life? Instead of whipping out your wallet, tap into your network of friends, family and coworkers to find a slew of items you can breathe new life into.
Exchange Entertainment: See if any of your friends are open to trading books, DVDs or video games.
Purge, Not Splurge: Take items you haven’t worn in a year to a thrift store or consignment shop, some of which offer store credit for something new to you.
Trade Your Threads: Rather than hitting up the mall, organize a clothing swap to trade outfits and accessories with your friends.
Financial freedom starts today
Start Mint’s 21-Day Challenge today and see how much of a difference you can make on your bank account’s bottom line. Tweet or comment about your cost-reduction strategies this month, and stay tuned for our recap.
Save more, spend smarter, and make your money go further
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There’s been a lot of talk about budgeting here at Get Rich Slowly. For instance, Kristin recently wrote about her adventures using the envelope system. I wrote about the reasons your budget might be failing. And, a variety of guest posters and staff writers have touched on the topic with articles like these:
How I kept to my budget and still have everything I want
Budgeting: The Most Important Thing You Can Do With Your Money
How to Build a Better Budget
When One Partner Won’t Budget
However, among the articles on budgeting systems and strategies, there has been very little written on using a zero-sum budget, which happens to be the budget that I use and love. So, I wanted to write about why I’m a zero-sum budget enthusiast, why I think they work so well, and how you can harness the power of the zero-sum budget for your own financial well-being.
Why Should You Use a Zero-Sum Budget?
In my opinion, a zero-sum budget is superior because it forces you to “spend” every dollar that you make. And, no, I don’t mean you should spend it on dinner at Outback or a weekly mani/pedi. Instead, you allocate all of your earnings into the different categories that your finances require. You don’t need an Excel spreadsheet or a complex software program to use a zero-sum budget. In fact, all you really need is a pen, paper, and the desire to begin budgeting for your benefit. So, how do you begin using a zero-sum budget?
Follow these simple steps:
Step 1: Determine how much you make Whether you’re paid hourly or salary, you need to figure out how much money you make on any given month. So, you need to ask yourself a few questions. For instance, “How many paydays fall within this month?” And, “How much will each paycheck be?” For salaried workers, this should be fairly easy. For those with a fluctuating income, it can be much more difficult. However, one of the easiest ways to make a zero-sum budget work for your family is to get all of your finances “one month ahead.” Easier said than done, I know. But, using that method, a fluctuating income won’t matter as much. Since you’re using this month’s income for next month’s bills, it will be much, much easier to plan.
Step 2: List your bills Once you determine how much money you’ll make this month, you need to figure out how much money you need to spend next month. Using pen and paper, write out all of your monthly bills, estimating bills that fluctuate, like utilities. You’ll also need to set a reasonable allowance for spending categories that you’re trying to keep under control (like groceries and gas). And, don’t forget about bills that are paid quarterly or seasonal expenses. The best way to make a zero-sum budget work is to include everything.
I’ll use a generic version of one of my old budgets as a real-life example:
Mortgage: $1,426
Electric: $200 (estimate)
Gas: $25 (estimate)
Groceries: $500
Daycare: $500
Internet: $35
Fuel/Miscellaneous: $200
Cell Phone: $55
Health Insurance: $377
Life insurance: $77.31 (paid quarterly)
Trash: $56.25 (paid quarterly)
Total: $3,451.56
Of course, everyone’s categories will be different. Obviously, you’ll need to include all of your bills including any debt payments that you make on a monthly basis. Make sure to list all of your bills (even the ones that you’re trying to forget!). Confronting them is the first step to making them disappear for good!
Step 3: Compare and contrast This is where it gets fun, I think, and why using a zero-sum budget can be life-changing for so many people. Once you see your monthly income and your monthly bills on paper, a clear picture of how much money is left over emerges. You might find that thousands of dollars are being spent on “wants” each month. And, you could use that knowledge to begin saving that money instead. Regardless, once you determine how much money is left over after you pay all of your required expenses, you can decide what to do with the rest.
If my husband and I earned a net income of $7,000 for the sample month, we would update our zero-sum budget to reflect the overage:
Mortgage: $1,426
Electric: $200 (estimate)
Gas: $25 (estimate)
Groceries: $500
Daycare: $500
Internet: $35
Fuel/Miscellaneous: $200
Cell Phone: $55
Health Insurance: $377
Life insurance: $77.31 (paid quarterly)
Trash: $56.25 (paid quarterly)
Short-term savings: $1,500
Long-term savings: $1,500
Vacation Fund: $548.44
Total: $7,000.00
But, what if nothing is left? If you’re spending every penny you earn, it’s probably time to reconsider that strategy. Start by making a list of things you could live without. Some possibilities include cable television, eating out, or excessive entertainment spending. And remember, everyone’s priorities will be different. Although I do just fine without cable television, I have no desire to feed my family on a bare-bones grocery budget. You may feel exactly the opposite. And, as J.D. so eloquently put it, you have to do what works for you, whatever that is.
Step 4: Spend all of your money on paper Once you determine your own excess cash flow, you can decide where that money will serve you best. For instance, if you’re still in debt, you can decide to pay X number of additional dollars toward those debts. Many people, including me, tackled their debts using the snowball method. Using this method, you focus on one debt at a time, paying over as much as you can until that debt is demolished. Then you can move on to the next.
Or, if you don’t have any debts to contend with, you can allocate all of your extra cash toward your savings or investments. Obviously, it doesn’t have to be all or nothing. You can choose to tackle your debts and continue saving at the same time. It’s up to you. However, the key is to go ahead and transfer the money you have allocated to savings right away. That way it doesn’t get squandered on those dinners at Outback, weekly mani/pedis, or anything else.
Step 5: Track your spending If you have a preset spending limit for your zero-sum budget categories, you’ll need to check in periodically throughout the month to “see where you’re at.” I’ve found this to be particularly helpful when it comes to grocery and miscellaneous spending. I have a tendency, in fact, to completely blow through my grocery budget if I don’t watch myself. ($8 organic oregano, anyone?) So, to combat my grocery spending weakness, I usually check my spending about once a week. And for the most part, when it’s gone, it’s gone. This often means that we’re eating freezer food and leftovers by the end of the month, which seriously annoys my kids. But, it works!
Step 6: Make adjustments Your zero-sum budget may be an epic failure for the first few months. And, that’s OK. You’ll probably need to make some adjustments to get it just right. Maybe you need to add a little buffer to your grocery category. Or, add some wiggle room to the entertainment portion of your budget. Whatever it is, making adjustments shouldn’t be seen as a failure. In fact, it’s just part of the budgeting process.
One More Thing
Unless you want to have a specific budget category just for emergencies, an emergency fund is a crucial part of using a zero-sum budget. Having an adequate emergency fund means that a surprise car repair or medical bill won’t knock your entire financial plan off track. And, whenever you have to tap into your emergency fund, it’s important to replace the funds you use. You can do this by budgeting to add to your emergency fund in the following month (or months) until it’s back to its former glory.
Have you ever used a zero-sum budget? If so, did it work? Also, please feel free to share your favorite budgeting strategies below.
Inside: Are you thinking about moving out? This guide will help you figure out how much money you need to save and where to find affordable housing. Will $5k be enough to move out?
Moving out for the first time is a huge milestone. It’s a chance to start fresh, create your own space, and live on your own terms.
But it can also be a daunting prospect, especially when you’re trying to figure out how much it will cost.
You want to know if $5,000 is enough to move out?
But there are a lot of factors to consider before making the decision to move out, and we’ve laid them all out for you in this ultimate guide.
So whether you’re just starting to think about moving out, or you’re ready to start packing your boxes, read on for everything you need to know about making the big move.
How much money do I need to move out?
Experts recommend having at least $6,000 to $12,000 saved up before moving out.
However, it’s possible to move out with as little as $5,000 if you focus on knowing how to live cheap and have a stable source of income.
However, if you don’t have a job before moving out, the need for a huge savings account is huge.
How much money should I have if I want to move out?
The minimum amount of money required to move out will depend on where you plan to live and your living expenses.
Shortly you will learn factors to include initial moving costs, rental deposit, and ongoing costs like rent, utilities, and food.
If you are looking to move out in an HCOL area, then you will need more than an LCOL city. At this point in your life, it is important to understand HCOL vs LCOL and how it affects your finances.
This post may contain affiliate links, which helps us to continue providing relevant content and we receive a small commission at no cost to you. As an Amazon Associate, I earn from qualifying purchases. Please read the full disclosure here.
What are the expenses you should consider when moving out?
Moving out on your own can be a daunting and expensive task.
There are many expenses to consider when budgeting for your new place especially when you are learning how to move out at 18.
This guide will help you estimate the cost of moving out and provide tips on how to save money.
1. Rent/Utilities
The cost of rent varies depending on the location and size of the apartment or home, with the median rental cost in the US being around $1700 per month.
Along with rent, utilities like electricity, gas, water, and internet can cost around $400 per month.
To save money on rent and utilities, consider finding roommates to split costs or negotiating with landlords for a lower rent.
Rent is your biggest expense when figuring out the ideal household budget percentages.
2. Rent Deposit
When renting an apartment, you will typically need to provide a rent deposit. This deposit is a sum of money paid upfront to the landlord to cover any damages or unpaid rent at the end of the lease.
The cost of a rent deposit can vary depending on the location and the landlord’s requirements, but it can range from $1,000 to $5,000 or one to three months of rent.
To save money on a rent deposit, consider looking for apartments with lower deposit requirements or negotiating with your landlord for a lower amount. A clean rental history will help you with this.
3. Moving Expenses
Moving out can be an expensive process, but with some planning and budgeting, you can keep costs under control.
When considering moving expenses, be sure to factor in the costs of moving truck, packing supplies, such as boxes and tape, as well as the cost of hiring movers
To save money on these expenses, try finding free packing materials on Buy Nothing groups or ask friends and family to help you move. You can also minimize your possessions and have less to move.
4. Renter’s Insurance
When moving out and renting a home or apartment, it’s important to consider getting a renter’s insurance policy to protect you from unforeseen events.
Home insurance, also known as renter’s insurance, is a special type of insurance policy that protects your property against losses or damage stemming from covered perils, including fires, storms, or theft. It can give you peace of mind and help you repair or replace your possessions in the event of unforeseen situations.
Insurance premiums are based on various factors, including where you live, how much you choose to insure, and your deductible. Your credit score and history may also affect your insurance rates.
5. Furniture and Appliances
When moving into a new home, it’s important to consider all the necessary expenses for furnishing the space. This includes appliances like a refrigerator, stove, oven, and microwave, as well as daily living items such as a mattress, table, and couches.
I remember when I moved into my first apartment by myself and there wasn’t a washer or dryer in the apartment. Just hookups. I had one of two choices: 1) rent from the management company for $35 a month or 2) buy new appliances with 0% interest for $35 a month. I choose option #2 and it saved me money in the long term.
To save money, consider buying used furniture from thrift stores or online marketplaces like Facebook Marketplace. You can also find plenty of free furniture if you are not picky.
By being thrifty and smart with your purchases, you can furnish your new home without breaking the bank.
6. Housewares
When moving out on a budget, it’s important to consider the essential housewares you’ll need to make your new place feel like home. Here’s a list of must-haves and their estimated costs:
By prioritizing these essential housewares, you can make your new place feel like home without breaking the bank.
Don’t forget to check out thrift stores and Facebook Marketplace for gently used furniture and household items. With a little creativity and resourcefulness, you can furnish your new home on a budget.
7. Internet and Phone Bills
The average cost of internet and phone plans varies depending on the provider and the plan you choose. However, you can expect to pay around $50 to $100 per month for internet and $40 to $80 per month for a mobile phone plan. In addition, there may be additional fees, such as equipment costs or activation fees, which can add up quickly.
To minimize these expenses, consider bundling services with one provider. Many companies offer discounts for bundling internet, phone, and cable services.
8. Credit Card Payments
If you thinking about moving out and are currently swaddled in debt, then you probably don’t have enough money to move out. If you have high-interest credit card debt, prioritize paying it off before moving out.
Automating savings on essential bills using Truebill can also help you manage your credit card payments while covering the costs of moving out.
Additionally, ensure that you have an emergency fund and enough money to stay a year to handle unexpected expenses.
Things may get harder if you have to pay for college without help from parents.
How to calculate your moving out budget
Moving out on your own requires careful planning and budgeting.
To calculate your moving-out budget, start by determining your monthly expenses once you move out. Make sure to include the factors discussed above.
Then, decide on your target move out date.
Now, figure out how many months you have to save.
For example, if your target move out date is in 6 months and you need to save $5,000 to cover your expenses, you’ll need to save about $833 per month.
Additionally, create an emergency fund to cover unexpected expenses such as medical bills or car repairs. Aim to save at least 3-6 months’ worth of expenses in your emergency fund.
By creating a detailed monthly budget and sticking to it, you can ensure that you can afford to live on your own and achieve your goal of moving out.
Tips and tricks on how to move out
So, you’re finally ready to move out and start your life as an independent adult.
But before you can start your new life, there are a few things you need to take care of first – like, you know, finding a place to live and figuring out how to pay for it.
Learn the lessons from those who did not move out with enough cash – like me.
Tip #1: Create a Budget and Stay Within Limits
Moving out with only $5000 can be challenging, but creating a budget and sticking to it can make the process much easier.
To start, subtract your monthly bills from your monthly income to determine your basic budget.
For instance, if you make $2500 per month and pay $1500 for rent and bills, you have $1000 left for living expenses.
Allocate $400 for groceries and other necessities, $200 for transportation, and $100 for utilities.
This leaves you with $300 for entertainment and other non-essential expenses.
To stay within your budget, consider using a budget binder to track your income and expenses.
Be mindful of living within your means and avoid overspending by resisting the temptation to spend your first paycheck on new household items or entertainment. Instead, opt for more affordable options such as walking around your new neighborhood or having a picnic in the park.
Tip #2: Reduce Expenses Where Possible
One of the hottest topics is becoming frugal green. To save money and the environment at the same time.
When it comes to furniture, try buying used or refurbished items or borrowing from friends and family. Additionally, cutting back on unnecessary expenses such as dining out and entertainment can free up more money.
By being resourceful and creative, it is possible to move out on a budget without sacrificing quality or comfort.
Remember to allocate 50% of your monthly pay towards necessary expenses, 30% towards things you want, and 20% for debt repayment and long-term savings.
Tip #3: Look for Low-Cost Rentals
Finding low-cost rentals can be a challenge, but there are several options available to those who are willing to be flexible and creative.
Renting a basement suite or studio apartment can be a more affordable option.
Consider couch surfing, subletting, or home-sharing arrangements.
Home-sharing can be particularly attractive as it allows you to pair up with an elderly homeowner who needs a little extra help in exchange for low rent.
Find a tiny home rental.
If you don’t mind sharing the space, you can also consider getting a roommate or looking into pod shares. Pod shares are co-living spaces where individuals rent a bed in a shared room, with access to other community spaces like a bathroom and kitchen.
Become a housesitter and be paid to move out. Learn more with Trusted Housesitters.
With a little bit of research and creativity, it is possible to find low-cost rentals that fit your budget and lifestyle. Remember to determine exactly how much you can spend on rent and be open to alternative housing solutions to help keep your costs at a minimum.
Tip #4: Look Into Getting Renters Insurance
When renting you are more than likely going to live closer to others, which means more things can go wrong. Don’t skip out on renter’s insurance, as it can provide the peace of mind and protection you need as a first-time renter.
Without renter’s insurance, unexpected disasters such as fires, storms, or theft can leave you with thousands of dollars in damages that you would have to pay out of pocket.
Renter’s insurance typically costs around $20 per month and can save you a lot of money in the long run. Some affordable options for renter’s insurance include Lemonade, State Farm, and Allstate.
It’s important to shop around and compare policies to find the best one for your needs and budget.
Tip #5: Plan for Emergencies and Unexpected Expenses
It is crucial to plan for emergencies and unexpected expenses.
Start by setting aside a minimum of $1000 for an emergency fund.
Ideally, you should aim to save at least three to six months of living expenses in a rainy day fund. Remember, having a contingency plan and emergency fund can provide peace of mind and protect you from financial hardship.
Tip #6: Start Saving for a Security Deposit
Remember to prioritize saving for a security deposit by setting a specific savings goal and putting aside a portion of your income each month before you move out!
With dedication and discipline, you can reach your goal and move out with confidence.
More than likely, if you are a good tenant, you should get your full security deposit back after your lease is over.
Tip #7: Start a Side Hustle
Starting a side hustle can be a great way to earn extra money while still maintaining your full-time job. You can earn extra income through various side hustles depending on your skills and interests.
The most common side hustles are online jobs, such as transcription, virtual assistance, proofreading, blogging, freelance writing, data entry, graphic design, and web design. These jobs are flexible and eliminate the need for driving anywhere, requiring only a laptop or computer and a good internet connection.
In fact, learning how to make money online for beginners is a trending topic.
As you start your side hustle, put in as much time as you have available to maximize your earnings. Remember that a side hustle is unlikely to replace the need for a real job, but it can provide a great way to earn extra money and pursue your passions.
Tip #8: Plan Ahead and Create a Timeline
When planning to move out on a budget, it’s important to create a realistic timeline.
Start by mapping out all the expenses you’ll need to cover, such as rent, utilities, food, and transportation. Along with how much money you have already saved for unknown expenses.
Stay organized by keeping a checklist of everything you need to do and when it needs to be done. Don’t rush the process – take your time and make sure you have everything in order before making the big move.
Remember the millionaire quote, failing to plan is planning to fail, so take the time to plan ahead and create a realistic timeline.
Is 10000 a good amount to move out with?
According to various sources, $10,000 is generally considered enough to cover moving out expenses and leave room for emergencies.
However, the actual cost of moving out can vary depending on location, rent prices, and cost of living.
Learn how to save 10000 in a year!
FAQ
There are a couple of different ways to save more money including:
Cut back on frivolous expenses like eating out and buying new clothes.
Sell anything you have that you don’t want or need on websites like Craigslist, Facebook Marketplace, Depop, or eBay.
Consider getting an extra part-time job or side hustle to increase your income.
When it comes to furnishings, be thrifty by asking friends and family if they have anything extra they’re getting rid of or checking out second-hand or discount stores.
Set saving goals and track your expenses using a spreadsheet. That will give you a clear picture of what is and is not possible.
Renter’s insurance is highly recommended, and in some cases, required by leases. It provides protection against unforeseen disasters such as fires, storms, or theft that can damage or destroy your possessions.
While it may seem like an unnecessary expense, it is usually affordable and can save you a lot of money compared to paying out of pocket for damages.
Not having renters insurance can leave you vulnerable to unexpected expenses and potential financial ruin.
You should not spend more on your rent payments than you are comfortable.
Just like with getting a mortgage, you should spend no more than 30% of your take-home pay on rent payments.
You don’t want to be stressed about finances, so you should set a realistic budget for rent that allows you to comfortably cover all of your expenses while still having some money left over for savings.
So, is 5000 enough to move out?
It really depends on your situation.
If you’re moving to a cheaper area and don’t have many expenses, you might be able to make it work.
However, if you’re moving to a more expensive city or have a lot of bills, you might need to save up more money.
When determining how much money is needed to move out, there are several factors to consider, which we covered above. These include where you plan to live, your living expenses, initial moving costs, ongoing costs, and emergency funds.
It’s essential to have a budget and do the math to determine the minimum amount required for a smooth transition to independent living on a tight budget.
Ultimately, it’s important to do your research and figure out what’s best for you.
Know someone else that needs this, too? Then, please share!!
Save more, spend smarter, and make your money go further
Being a homeowner comes with a steep learning curve, and many first-time homebuyers struggle financially in their first year of owning a home. After years of saving for a down payment, they are blindsided by the extra expenses that come with buying and owning a house. It’s frighteningly easy to exhaust your cash reserves before you even move in.
Misunderstandings about the costs of owning a home can push people even further into financial distress. You can avoid a lot of this trouble by doing your research and determining how much house you can actually afford. Develop a sample budget to help you prepare for the cost of homeownership and the expenses that come along with it.
Hidden Costs of Homeownership
Here are some expenses prospective homeowners often forget to consider while they are shopping for a new place to live. Keep these figures in mind as you set your budget for a home.
Utilities
If you’re used to paying for utilities and other costs of living as a renter, it can be tempting to think that homeownership won’t alter your budget significantly — especially if your estimated mortgage payment will be less than what you’ve been paying for rent. However, your new home may use substantially more electricity and gas than an apartment, townhouse, or smaller rental house. Plus, your monthly rent may have included utilities like water or internet.
Mortgage Payment
Each month, most of your mortgage payment will go toward your principal and interest. However, you’ll also pay additional expenses such as property taxes, homeowners insurance and mortgage insurance. Insurance companies assess these expenses annually, but your lender will collect the fees each month with your mortgage payment and hold the funds in escrow. If you choose a home in a neighborhood with a Homeowners Association (HOA), you’ll also have HOA dues to include in your budget.
Furniture and Decor
New rooms could mean new needs. When you buy a house, the furniture you used in your rental may not be a perfect fit for your new home. Paint, curtains, furniture, and other decorative items can personalize your new home but can be a strain on your budget. If the thought of all new furniture and decor is overwhelming, choose one room to finish at a time.
Lawn Care
As a first-time homeowner, you may find yourself with a whole new set of outdoor responsibilities — mowing grass, trimming hedges, and keeping weeds at bay. If you buy a home in a neighborhood with an HOA, you may face strict lawn care standards. Whether you choose to do it yourself or hire a service to take care of it for you, lawn care can get expensive. If you go the DIY route, you’ll need to purchase equipment and supplies to get the job done, such as:
Lawnmower
Weed-eater
Hedge trimmer
Weed killer
Fertilizer
Grass seed
Pest control products
If you hire a company to take care of your lawn, expect to pay between $100 and $200 per month for basic care.
Renovations
Once the excitement of buying a new house starts to subside, your focus may shift to how your new home meets your needs. Unless you built a home with custom options, you may eventually want to update or renovate.
Renovations are becoming increasingly common among first-time buyers. According to a 2017 study by Houzz, first-time homebuyers spent an average of $33,800 on home renovations in 2016 — up 22% from 2015. Among all homeowners surveyed, the greatest motivating factor for renovating was a desire to customize their home.
Maintenance and Repairs
Maintenance and repairs can be a major budget killer for new homeowners. Many first-time homebuyers overlook the age of the roof, exterior paint, AC unit, and furnace when they buy a home. Even if you buy brand-new construction, you should begin saving for necessary maintenance updates and unforeseen repairs.
Don’t exhaust your savings to purchase your home; keep some money aside for necessary or unexpected repairs. Some financial experts suggest saving 1-4% of the home’s purchase price each year, depending on the age of your home.
Your homeowner’s insurance should cover damage due to fire or weather, but you’ll still need cash to cover the deductible, which could be anywhere from $200 to $2,000, or more. If you’re concerned about having enough cash on hand in the event of an emergency, look into plans with a higher monthly premium and a lower deductible.
A Sample Budget for Your First Year of Home Expenses
The price for a starter home will vary widely depending on where you live. Looking at average starter home prices around the country and landing somewhere in the middle, here’s a sample budget.
The following sample budget is an example of what your monthly home-related expenses would look like if you purchased a $200,000 home with a 5% down payment. For this sample, we used an online mortgage calculator and the average 30-year fixed mortgage interest rate of 5.10%.
Mortgage Payment
Monthly mortgage payment: $1599
Utilities and Lawn Care (based on national averages)
Gas
$82
Electricity
$183
Water
$40
Sewer / Garbage
$20
Internet / Cable
$147
Lawn Care
$150
Monthly utilities expense:$622
Recommended Maintenance/Repair Fund
Repairs/ Maintenance
$4,000 (based on 2% of purchase price)
Monthly repair/maintenance savings: $333
For this sample budget, your expenses would work out to $2,554 per month. That’s nearly $1,000 more than your monthly mortgage payment.
The Takeaway
Don’t make the mistake of asking how much house you can buy — instead, examine your income and projected expenses to figure out how much you can afford. If you’re buying a home with a spouse or significant other, be sure you’re on the same page.
An experienced real estate agent is an excellent resource. Ask lots of questions: inquire about the home’s roof and exterior, as well as appliances and heating or cooling systems. Your agent can also request information about HOA fees and utility usage from the seller.
For more information on home buying and selling visit Owners.com.
Save more, spend smarter, and make your money go further
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Money Moves to Make During Cold Spells
Anybody that has tried to change their satellite or cable service knows how much of a pain in the butt it can be.
You’ll spend at minimum an hour on the phone and most likely by the end of it you’ll be so disgusted that even a hot shower won’t make you feel any better.
One of the biggest fears that investors have when starting with a new brokerage firm is what happens if you want to quit or break up with your financial advisor.
Are you going to be stuck in the same situation as trying to transfer your satellite service and are you going to be hit with massive amount of surrender fees?
Is this something that you worry about?
Let’s take a look how it works if you want to transfer your brokerage account.
If you’re in the process of hiring a new financial advisor or opening an online brokerage account, the first thing you want to do is ask,
“What happens if I ever want to leave? What type of cost or transfer out charges would I incur?”
If it’s really a concern of yours, I wouldn’t accept the explanation verbally. Get it in writing. Make sure you can see exactly how much you would pay if you had to pay anything at all.
Many people don’t realize how easy it is to actually transfer your brokerage account elsewhere. It’s easier than switching banks. It’s easier than dropping your cable. It’s easier than changing your cell phone provider. Yes, that easy!
The beautiful thing about transferring is that you actually don’t even have to talk to the institution that you’re currently with. Say,”What?” Yes, that’s right. You can actually transfer out without ever having to notify them that you’re leaving. How beautiful is that?
Brokerage Account Transfer Example
Let’s say for an example that you have a brokerage account with Edward Jones and you’ve been with them for four years. You’ve now decided that you want to work with XYZ Financial. Instead of contacting Edward Jones and telling them why you’re leaving, you would actually go to XYZ Financial, open the same type of brokerage account that you have opened at Edward Jones and then sign XYZ Financial’s transfer paperwork.
XYZ Financial’s back office should then contact Edward Jones’ back office and the transfer is all done for you. The reason that this is so simple is that most brokerage firms use an account transfer process called the automated customer account transfer service or ACAT.
The rules that govern the ACAT system require firms to complete various pages in the transfer process and in a very specific period of time window. If the transfer is made using the ACAT system, then the transfer should take no more than six business days.
Here’s brief description of the ACAT process directly from the SEC website:
Most account transfers between brokerage firms are made using the Automated Customer Account Transfer Service (or “ACATS”) system. The National Securities Clearing Corporation operates ACATS, and both the New York Stock Exchange and the National Association of Securities Dealers, Inc. require their member firms to use ACATS.
These rules require firms to complete various stages of the transfer process within a limited period of time. If the transfer is made through ACATS, and there are no problems, the transfer should take no more than six business days to complete from the time your new firm enters your form into ACATS.
There are situations where the accounts may not be able to utilize the ACAT system. In those cases, you can expect upward to two weeks for the transfer to take place. In the last couple years, I’ve only encountered a few situations where an account could not be transferred utilizing ACAT. Most likely, you won’t run into this situation.
Brokerage Transfer Out Fees
What about cost?
All brokerage firms are going to charge some type of transfer out fee.
That fee can range anywhere from $55 on up to $95, at least what I’ve seen.
It may also be more for an IRA. Another potential cost that you may incur is an IRA custodial fee.
I know some firms will charge you both for the transfer out fee and a prorated cost of the IRA custodial fee. I know in one case a client had to pay $115 to transfer out his IRA. Ouch!
The only other issues that may come up is depending what type of investments you hold. I’ve seen some mutual funds that aren’t able to be transferred “in-kind” so they have to be sold at the brokerage firm that you’re currently with before the account can transfer. In that case you would have to contact them to give them instructions to sell what can’t be transferred. If you want to avoid the phone, you can always draft a letter with your instructions to liquidate the investments and then transfer the account upon settlement of those funds.
Please also note that insurance or annuities are a whole other animal when it comes to transferring. It’s pretty simple to change the broker record on annuity accounts, but there also may be surrender charges on the actually policy itself. Be sure to verify with the insurance company before liquidating any annuity contracts.