Solar net energy metering in California (NEM 3.0) is a billing mechanism through which utility companies compensate customers (via credits on their electric bill) for electricity their residential solar systems send to the grid. NEM can make solar more affordable, but some state NEM policies make it less beneficial.
California is one of those states; however, solar panels in California can still be worth it for homeowners. Understanding how net metering works in California can help you get the most out of your solar system.
How net metering has evolved in California
NEM in California has gone through three major versions:
NEM 1.0
California’s first NEM program was implemented in 1996. Under NEM 1.0, solar customers could sell their extra electricity back to the utility at the retail rate (the price at which the utility charged consumers for electricity), they could choose any electric rate plan the utility offered and they didn’t have to pay extra fees for connecting to the grid.
NEM 2.0
NEM 2.0 was introduced in 2016–2017. This version of NEM still compensated customers for excess power at the retail rate, though customers couldn’t offset 100% of the charges (some were “nonbypassable”). It also required solar customers to be on a time-of-use (TOU) rate plan in which the price of power depends on when it’s used, and it introduced an interconnection fee
.
NEM 3.0
Officially called the Net Billing Tariff (NBT), NEM 3.0 is the current version of NEM, adopted by the California Public Utilities Commission (CPUC) in December 2022 and implemented in April 2023. The NBT cut the rate utilities pay to buy excess solar power by about 75%
.
5 things to understand about net metering in California
These provisions affect many solar installations and related electric bills in California.
Low payment for your excess electricity. This is the biggest factor affecting NBT solar customers. Under the NBT, you are paid for the electricity you send back to the grid according to a complicated “avoided cost” formula that takes into account the value of that electricity to the grid at the time you send it to the grid. Your system will likely send excess electricity to the grid during the middle of the day, which is when lots of other people are also sending excess solar power to the grid. That means the utility will buy your electricity for a much lower rate than it would have under NEM 2.0.
Time-of-use (TOU) rate plan. Under TOU rates, what you pay for electricity depends on when you use it. The NBT requires solar customers to pay specific TOU rates that, compared with other TOU rates, are lower at off-peak use times and higher at peak times. That will further affect your electricity costs and solar savings.
Nonbypassable charges. As the name suggests, solar customers pay these charges even if they generate enough extra power to offset them. Under the NBT, nonbypassable charges are based on all electricity you pull from the grid.
Monthly billing, annual true-up. The utility keeps a running tally of whether the value of the power you’ve used from the grid is more than the value of the power you’ve sent to the grid. If you took more than you gave, you’ll get a bill from the utility; if you gave more than you took, the utility gives you a credit on your bill. This reconciliation exercise used to happen once a year; now it’s once a month. “Under NEM 2.0, residential customers of investor-owned utilities do not pay more than the roughly $10 minimum bill if they owe more than that at the end of a month. They pay the cumulative amount owed at their annual true-up date,” said Brad Heavner, policy director at the California Solar and Storage Association (CALSSA), in an email. “Under NBT, if customers owe an amount at the end of a month, they pay that full amount. This avoids surprise annual true-up bills.”
Solar system size limit. Under the NBT, customers can install enough solar to offset up to 150% of their electricity use. To do this, they must sign a statement acknowledging that they are getting more solar than they need to serve their rate of consumption, Heavner said. However, utilities have been inconsistent in implementing this, said Barry Cinnamon, CEO of California solar company Cinnamon Energy Systems, in an email. Be aware of size limits if you already have solar and want to add more, which might bump you from NEM 1.0 or NEM 2.0 to the NBT. “There are ways for customers to increase the size of their existing NEM 1.0 or NEM 2.0 system without triggering a change to the NBT,” Cinnamon said. “Contact your local installer for more information on these solar expansion possibilities.”
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How to make California net metering (NEM 3.0) work for you
Even with the drawbacks of the NBT, solar may still make sense for your California home. Here’s how you can make NEM 3.0 work for you.
Add a battery
A solar battery can make a big difference in the cost-effectiveness of your solar under the NBT. Instead of sending excess electricity back to the grid at a low rate, you can store it in your battery and use it later. You can also avoid high TOU rates by charging the battery when you’re generating the most electricity, then using that electricity during expensive peak TOU hours.
For these reasons, many new solar customers in California are turning to batteries. According to the Energy Information Administration, the number of California solar customers installing batteries with their solar panels jumped from just over 20% in October 2023 to well over 50% in April 2024
. A May 2024 study by the Lawrence Berkeley National Laboratory found that the percentage of California solar installations that were paired with energy storage rose from 10% to 60% .
Batteries are expensive, however. In California, the average cost is $7,706 after the 30% federal tax credit, according to EnergySage
.
Shift your energy use
If you can, use energy when you’re generating the most solar or when rates are low. For example, do laundry in the middle of the day or charge an electric car after peak evening hours. If you work from home, you may already use more electricity during the day, when your system is generating the most.
🤓Nerdy Tip
Solar leasing allows homeowners to rent solar panels. Instead of a big upfront investment, homeowners typically make monthly lease payments. However, the homeowners don’t own the panels, so they typically don’t qualify for tax incentives or rebates, and the lease contract may make it more challenging to sell their houses.
Go solar before export rates go down
Every two years, the CPUC updates the avoided cost calculator, which determines what the utility will pay consumers for their excess electricity.
“Customers lock in the currently calculated export rates for the next nine years,” Heavner said. “These numbers change each year, but you know what they are according to the current calculation of export rates. This lock-in will no longer be available to customers installing after 2028.”
Export rates have been coming down, Heavner said. They could also go up in the future, becoming more favorable to NBT customers, as the value of energy sent to the grid increases because of rising electricity demand.
“It is not clear how the utilities will change the NBT export rate,” Cinnamon said. “The original export rates were already effectively reduced by utilities, so I expect that these export rates will continue to change in the utilities’ favor.”
Look at the big savings picture
Solar panels usually last 20–30 years. Although the NBT lengthened the solar payback period (now nine years, by some estimates), you may still save money over time. In addition, rapidly rising electricity costs could shorten that payback period
.
Frequently asked questions
What’s the difference between net metering and net billing?
Under net metering, you sell solar-generated electricity to the grid at the retail rate. Under net billing programs, you sell your excess energy to the grid at a below-market rate.
In California, this lower rate is based on a calculated value of the electricity at the moment it’s sent to the grid. This is also known as the “avoided cost” rate because it reflects the costs the utility avoids by buying power from you instead of producing that power or purchasing it elsewhere.
Can I install solar now and add a battery later?
Yes. If energy storage isn’t right for you at the moment, you can still go solar now and add a battery later if costs come down.
Will there be a new version of the NBT in California?
NEM policies have been shifting across the nation, and it’s possible that the NBT in California will change.
Bank reserves refer to the amount of funds a financial institution must have on-hand at any given time. These reserves are a percentage of its total deposits set aside to fulfill withdrawal requests, and comply with regulations and can also provide a layer of trust for account holders.
Bank reserves act as assurance to depositors that there is always a certain amount of cash on deposit, so the scenario mentioned above doesn’t happen. No one wants to ever withdraw some cash and be left empty-handed. As a consumer with a bank account, it can be important to understand the role bank reserves play in the financial system and the economy.
What Are Bank Reserves?
Bank reserves are the minimum deposits held by a financial institution. The central bank of each country decides what these minimum amounts must be. For example, in the United States, the Federal Reserve determines all bank reserve requirements for U.S. financial institutions. In India, as you might guess, the Reserve Bank of India determines the bank reserves for that country’s financial institutions.
The bank reserve requirements are in place to ensure the financial institution has enough cash to meet financial obligations such as consumer withdrawals. It also ensures that financial institutions can weather historical market volatility (that is, economic ups and downs).
Bank reserve requirements are typically a percentage of the total bank deposit amounts determined by the Federal Reserve Board of Governors. Financial institutions can hold their cash reserves in a vault on their property, with the regional Federal Reserve Bank, or a combination of both. This way, the financial insulation will have enough accessible funds to support their operational needs while letting the remaining reserves earn interest at a Federal Reserve Bank.
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How Do Bank Reserves Work?
Bank reserves work to ensure that a certain amount of cash, or percentage of overall deposits, is kept in a financial institution’s vault.
Suppose you need to withdraw $5,000 to purchase a new car. You understand savings account withdrawal limits at your bank and the amount you need is within the guidelines, so you head to your local branch. When you arrive, you’re told they don’t have enough money in their vault to meet your request.
This is what life could be like without bank reserves. The thought of not being able to withdraw your own money might be upsetting, worrisome, and deeply inconvenient. To prevent this kind of situation is exactly why banks must have a certain percentage of cash on hand.
In addition to ensuring consumers have access to their money, bank reserves may also aid in keeping the economy functioning efficiently. For example, suppose a bank has $10 million in deposits, and the Federal Reserve requires 3% liquidity. In this case, the bank will need to keep $300,000 in its vault, but it can lend the remaining $9.7 million to other consumers via loans or mortgages. Consumers can use this money to buy homes and cars or even send their children to college. The interest on those loans is a way that the bank earns money and stays in business.
Bank reserves are vital in helping the economy control money supply, interest rates, and the implementation of what is known as monetary policy. When the reserve requirements change, it says a lot about the economy’s direction. For example, when reserve requirements are low, banks have more opportunity to lend since more capital is at their disposal. Thus, when the money supply is plentiful, interest rates decrease. Conversely, when reserve requirements are high, less money circulates, and interest rates rise.
During inflationary periods, the Federal Reserve may increase reserved requirements to ensure the economy doesn’t combust. Essentially, by decreasing the money supply and increasing interest rates, it can slow down the rate of investments.
There are two types of bank reserves: required reserves and excess reserves. The required reserves are the percentage of deposits the institution must have in cash holdings and deposit balances to abide by the regulations of the Federal Reserve. Excess reserves are the amount over the required reserve amount that the institution holds.
Excess reserves can provide a larger safety net for the financial institution and enhance liquidity. It can also contribute to a higher credit rating for institutions. On the other hand, excess reserves can also result in losing the opportunity to invest the funds to yield higher returns. In other words, since the extra money is sitting in cash, it will not generate the same returns it might yield by lending or investing in the market.
Recommended: What Is Quantitative Easing?
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History of Bank Reserves
Reserve requirements first came about in 1863 during the passing of the National Bank Act. This act intended to create a national banking system and currency so money could flow easily throughout the country. At this time, banks had to hold at least 25% reserves of both loans and deposits. Bank reserves were necessary to ensure financial institutions had liquidity and money could continue circulating freely throughout the nation.
But despite the efforts to establish a robust banking system, banking troubles continued. After the panic of 1907, the government intervened, and in 1913, Congress passed the Federal Reserve Act to address banking turmoil. The central bank was created to balance competing interests and foster a healthy banking system.
Initially, the Federal Reserve acted as a last resort and a liquidity grantor when the banks faced trouble. During the 1920s, the Federal Reserve’s role expanded to playing a proactive role in the economy by influencing the credit conditions of the nation.
After the Great Depression, a landmark in the history of U.S. recessions and depressions, the Banking Act of 1935 was passed to reform the structure of the Federal Reserve once again. As part of this act, the Federal Open Market Committee (FOMC) was born to oversee all monetary policy.
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How the 2008 Crisis Impacted Bank Reserves
Prior to the global financial crisis of 2008, financial institutions didn’t earn interest on excess reserves held at a Federal Reserve Bank. However, after October 2008, the Federal Reserve was granted the right to pay interest to banks with excess reserves. This encourages banks to keep more of their reserves. The Board of Governors establishes the interest on reserve balances (IORB rate). As of July 2024, the IORB was 5.4%.
Then, after the recession subsided in 2009, the Federal Reserve turned its attention to reform to avoid similar economic disasters in the future.
Recommended: Federal Reserve Interest Rates, Explained
How Much Money Do Banks Need to Keep in Reserve?
Reserve requirements vary depending on the size of the financial institution. As of July 2024, reserve requirements are 0%, where they’ve been since early 2020 and the onset of the COVID-19 pandemic.
Prior to this revision, banks with between $16.9 to $127.5 million in deposits were required to have 3% in reserves, whereas banks over this amount had to have at least 10% in bank reserves.
Recommended: Investing During a Recession
What Is Liquidity Cover Ratio (LCR)?
Bank reserve requirements aside, financial institutions want to ensure they have enough liquidity to satisfy the short-term financial obligations if an economic crisis occurs. This way, they know they will be able to weather a crisis and not face complete bankruptcy. Therefore, financial institutions use the Liquidity Coverage Ratio (LCR) to prevent financial devastation resulting from a crisis.
The LCR helps financial institutions decide how much money they should have based on their assets and liabilities. To calculate the LCR, banks use the following formula:
(Liquid Assets / Total Cash Outflows) X 100 = LCR
Liquid assets can include cash and liquid assets that convert to cash within five business days. Cash flows include interbank loans, deposits, and 90-day maturity bonds.
The minimum LCR should be 100% or 1:1, though this can be hard to achieve. If the LCR is noticeably lower than this amount, the bank may have liquidity concerns and put the bank’s assets at risk.
The Takeaway
Financial institutions must have a certain amount of cash on hand, referred to as bank reserves. These assets are usually kept in a vault on the bank’s property or with a regional Federal Reserve Bank. These cash reserves ensure financial institutions can support consumer withdrawals and withstand a financial crisis.
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FAQ
Are bank reserves assets or liabilities?
Bank reserves are considered an asset since they’re an item the bank owns. Other bank assets can include loans and securities.
How are bank reserves calculated?
Bank reserve requirements are calculated as a percentage of the institution’s deposits. So, if the reserve requirement is 3% for banks with $10 million in deposits, the bank would have to hold $300,000 in its reserves.
Where do banks keep their reserves?
Financial institutions usually keep a certain amount of their cash reserves in a vault to meet operational needs. The remaining amount may be kept at Federal Reserve Banks so the balance can generate interest.
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SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.
As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.
SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.
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Do you want or need to learn how to get free diapers? Diapers are one of the biggest expenses for parents, and they can last for years! The average child can go through over 5,000 diapers, so that is a lot of money. Finding ways to get free diapers can help you save money and…
Do you want or need to learn how to get free diapers?
Diapers are one of the biggest expenses for parents, and they can last for years! The average child can go through over 5,000 diapers, so that is a lot of money. Finding ways to get free diapers can help you save money and make sure your baby always has what they need. There are many options available that can make this possible.
By exploring different programs and resources, you can find free diapers for your baby. From diaper banks to local giveaways, many organizations are ready to help. It’s important to know where to look and what’s available to you so that you can save money and get more free things.
Related content:
Best Ways To Get Free Diapers
Below are the best ways to get free diapers:
1. Ask in a Buy Nothing group on Facebook
One great way to get free diapers is to ask in a Buy Nothing group on Facebook. Buy Nothing groups are local groups where people give away items they no longer need.
Join a group in your area and make a post saying you need diapers. Many parents have extra diapers their baby outgrew and would love to give them to someone who needs them. Make sure to mention the size of diapers you need because this helps others see if they have what you’re looking for. And don’t forget to check the group’s rules before posting.
Or, you can also wait to see if anyone shares that they are giving away diapers too. Many kids outgrow their diaper size or become potty-trained and no longer need diapers. I see free diapers being given away in my local Buy Nothing group all the time.
It’s that simple! These groups can be very helpful and you may find other baby items, too (like free baby clothes and toys).
2. Join rewards programs
Many diaper companies have rewards programs that can help you get free diapers.
Pampers has a rewards program called Pampers Club. By using their app, you can scan your receipts and get points for each purchase. These points can be redeemed for free diapers, baby food, toys, and more. For example, you get $0.20 Pampers Cash for every diaper code you enter and $0.05 Pampers Cash for every wipes code you enter.
Huggies also has a loyalty program. You can earn points when you buy Huggies diapers or wipes. Just take a photo of your receipt using their app, and these points can then be exchanged for free diapers and other baby items.
Other major diaper companies, like The Honest Company and Seventh Generation, also have a rewards program for purchasing their products. Signing up is usually free and can save you lots of money.
Rewards programs might also send you free samples of diapers and discounts, which can be nice to get.
I do want to mention that diaper rewards programs can take a long time to earn enough points for free diapers. So, I wouldn’t look at this method to be your only way to get free diapers – instead, it’s simply a way to save a little bit of money on diapers.
3. Sign up for diaper coupons
Getting free diapers can be as simple as signing up for diaper coupons. Many diaper companies, like Pampers, have special promotions and deals for joining their mailing lists or clubs, and you can get coupons sent right to your inbox.
Having these coupons can cut down on the cost of diapers. Some companies even give free samples along with their coupons.
To get started with this, simply go to your favorite diaper brands’ websites and look for any sign-up options.
Related to this: Don’t forget to browse coupon websites. They sometimes collect deals and coupons from various diaper and baby brands in one place, so that you can see who currently has the best diaper deals. This makes it easier for you to find what you need without having to visit multiple websites.
4. Use cash back apps
Cash back apps can help you save money on diapers. These apps give you a percentage of your money back on purchases. Apps like Ibotta, Rakuten, and Fetch Rewards tend to have deals on baby products. You can use these apps to buy diapers and earn money back.
For example, I just logged into my Ibotta account to see what diaper deals they currently have. These are constantly changing, but right now you can get $6.00 on Huggies, $3.00 back on Luvs Diapers, $3.00 back on Pampers Swaddlers, $2.00 back on baby wipes, and more.
Fetch Rewards currently has diaper deals too, such as earning 2,000 points for buying Luvs Diapers.
These diaper deals are easy to get. First, download the app and create an account. Then, browse the deals for diapers. When you find a deal, follow the app’s instructions to activate it before you shop, and make sure to save your receipt.
After buying the diapers, upload your receipt to the app. The app’s system will check your purchase and add the cash back to your account. You can accumulate money over time and transfer it to your bank or use it for more purchases.
What’s great about cash back apps is that strategy can be stacked so that you can earn even more points and free diapers. For example, you can use both Ibotta and Fetch Rewards at the same time for the same box of diapers, and you can even scan those same diaper boxes to add them to any diaper rewards programs you’re a part of too (such as Pampers Club and Huggies Rewards).
5. Follow diaper brands on social media
Diaper brands sometimes give away free samples and coupons through their social media pages. If you follow them, you can be among the first to know about these offers.
Brands also share special promotions and discounts on their social media. By keeping an eye on their posts, you can grab these deals before they expire.
This isn’t exactly the best way to get free diapers (I like many of the others on this list more), but it is a possible way to get free diapers.
6. Check online marketplaces
You can find free diapers on online marketplaces. Sites like Craigslist, Facebook Marketplace, and Freecycle tend to have people giving away baby items they no longer need.
Search in the “free” section or post your own request for diapers. Many parents are happy to pass on extras rather than throw them away.
I also recommend joining parenting Facebook groups. You can find them by searching “your town name + parents” or something similar, or even just asking other parents you know. Even the smallest towns have these, so there is a good chance yours does too. Members tend to share tips on where to get free diapers or may even have some to give away. For example, I am a part of a parenting group in my local area, and free diapers are given away at least a few times a week by parents whose child outgrew them.
Of course, you’ll want to be careful when meeting strangers for free diaper pickups. Always choose public places and, if possible, bring a friend with you for safety. Check the condition of the diapers to make sure they are still usable.
7. Visit local diaper banks
Local diaper banks are a valuable resource for families in need. These organizations collect and distribute free diapers to families who can’t afford them.
Diaper banks often have partnerships with community centers, churches, and other local organizations. They can help connect you with additional resources to support your family.
Always call ahead to check the hours and requirements of the diaper banks. Some may need proof of income or residency, so bring any necessary documents with you.
8. Join parenting forums
Joining parenting forums is a great way to find free diapers (such as the What To Expect forum). These online communities are full of parents sharing tips and resources. Some forums have threads dedicated to diaper giveaways and swaps.
On these forums, you can also learn about local diaper banks and other community resources. Parents share details and experiences, helping you find the best options so that you can save money and time.
9. Apply for government assistance
If you need diapers for your baby, government programs can help.
One way is through the Temporary Assistance for Needy Families (TANF) program. Some states also give diaper allowances too.
For example, California’s CalWORKs program provides diapers to certain families who qualify. Washington State also has a diaper allowance for families getting TANF.
10. National Diaper Bank Network
The National Diaper Bank Network (NDBN) can be a big help if you need free diapers. They work with over 225 community-based diaper banks across the U.S. These diaper banks collect, store, and give out free diapers to families who are struggling.
To find a diaper bank near you, visit their website at NationalDiaperBankNetwork.org. They connect families to resources that help provide diapers and other baby necessities. This can be a lifesaver if you’re having trouble buying diapers for your child.
If you need help quickly, you can call 2-1-1. Specialists are available 24/7 and can help you find local resources, including diaper banks. They can also guide you toward other basic needs, like food and housing support.
11. Reach out to nonprofit organized playgroups near you
Nonprofit local playgroups have more than just fun activities for kids. Many also provide essential items like diapers to families in need.
I am a part of two local playgroups, and they both constantly have diaper drives and are giving out diapers. While I am personally not in need of free diapers, I do know how helpful these types of groups are for our children and families. For the playgroup that I am in, you can simply put in a request for diapers and someone will contact you right away about your options.
You can start by searching for playgroups in your area, asking around in local Facebook groups, or talking to other parents in your neighborhood. You might find listings online or through community centers too.
When you contact these groups, ask if they have any diaper assistance programs. Some playgroups partner with charities to distribute free diapers to families who need them.
Joining one of these playgroups has other benefits too. Your child will get to socialize and play, and you might make some new friends with other parents. It’s a win-win!
12. Add diapers to your registry
Adding diapers to your baby registry is a smart move. You can get a good supply of diapers at your baby shower.
You could also ask for different sizes as babies grow quickly, so having different sizes will help you be prepared.
You can also create a diaper fund. Friends and family can contribute money so you can buy diapers as needed.
I have even seen a new trend lately where people have a raffle at their baby shower for a new TV or something else that is expensive. For each box that a guest brings, they are given one raffle ticket. I’ve seen some parents get a TON of free diaper boxes this way!
13. Reach out to parenting nonprofits near you
Parenting nonprofits are a great resource for getting free diapers. These organizations often provide supplies to families in need.
Nonprofits like Help a Mother Out and Baby2Baby work to increase access to diapers and other baby essentials.
Finding these nonprofits in your area is simple. Try searching online or asking for recommendations from local community centers or hospitals.
14. Contact nonprofit organizations
Nonprofit organizations that aren’t related to babies can be a great resource for getting free diapers too. They sometimes distribute diapers to families in need.
This can include local churches, food banks and food pantries, the Salvation Army, and shelters.
15. Use cloth diapers
Cloth diapers are a great way to save money. They can be reused many times, which means you don’t have to keep buying new ones.
There are many types of cloth diapers. Some have inserts you take out and wash separately. Others come as one piece. Find what’s easiest for you.
Using cloth diapers might seem like more work. However, they can save you thousands of dollars over time. Plus, they are better for the environment since they reduce waste.
Frequently Asked Questions
There are many ways to get free diapers. Some programs provide them for low-income families, while others give samples or help through government services. Here are answers to common questions about how to get free diapers.
What programs give free diapers to low-income families?
Many states have diaper programs for families in need. Reaching out to programs like TANF, diaper banks, and local nonprofits can be a good way to get free diapers for low-income families.
How can I get free diaper samples sent to my home?
You can get free samples by reaching out to diaper manufacturers. Many companies, like Pampers and Huggies, send free samples if you join their rewards programs or sign up for their newsletters.
How to get free diapers from the government?
Some government programs, like TANF, give diaper support. Specific states, such as California and Washington, have allowances for families with young children. Check with your local social services office to learn more.
Can I get help with diapers through the WIC program?
The WIC program mainly focuses on providing nutritious food (like baby formula and other grocery items) to low-income families. It does not usually cover diapers. However, some local WIC offices might be able to share information with you on nearby organizations that can give you diaper assistance. Also, unfortunately, you cannot use the Supplemental Nutrition Assistance Program (SNAP) for free diapers either.
How to get Pampers for free?
Sign up for Pampers’ rewards program and follow them on social media. They sometimes have promotions and giveaways where you can earn points that can be redeemed for free diapers.
Does Huggies send free samples?
Yes, Huggies offers free samples. Join the Huggies Rewards program and keep an eye on their social media for any sampling events or promotions. If you sign up for any baby boxes while you’re pregnant, there are typically a few free Huggies diapers as well.
What can be used instead of diapers?
If you’re out of diapers, cloth diapers can be a good alternative.
How To Get Free Diapers – Summary
I hope you enjoyed this article on how to get free diapers.
As you can see, there are many ways to get free diapers. No matter the quantity of diapers that you need, you may be able to get help affording diapers.
What do you think is the best way to get free diapers?
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.
Saving money is key.
If you have been around Money Bliss long enough, you realize the importance of saving money. If you are brand new here, welcome we are happy to have you.
Either way you are going to learn something important. In fact, what you are going to learn today will be transformational. (guaranteed)
Saving money is the long term key to financial success.
But, you may be thinking, I am living paycheck to paycheck. Well, that may the case now, however, if you stick around long enough that life that is your norm now won’t be your norm later.
We strive for you to find success with money. That place you aren’t constantly worried and stressing about paying bills.
You need to learn how to save money.
This goes beyond the question of “What percent should be savings?”
Your savings percentage today will dictate your decisions tomorrow.
That statement may seem overwhelming, but it definitely shouldn’t it. Shaving extra savings as a percentage of income is completely doable, and more than likely, you probably won’t even notice.
Money Bliss will help get you to the life you dream of…promise.
So first, let’s figure out how much of your income should you save every month?
How Much To Save Monthly
The traditional recommendations from financial experts have you saving 20% a year.
Even when you look at our Cents Plan Formula, you will see we recommend to save 20% each year. However, when you look closer, you notice we recommend to save greater than 20%.
Those words “save greater than” are key to long term success and financial independence.
The traditional recommendation of the 50-30-20 rule is wrong and very outdated. That breaks down into 50% on basic expenses, 30% discretionary (or fun spending), and 20% saving. Maybe it worked well when everyone had a pension in retirement, but social security isn’t enough for many people to survive.
You need to save money each month. But, how much to save monthly is dependent on many more factors.
How much to save monthly depends on your:
Current personal finance situation
Your lifestyle
Your spending habits
Desire to retire earlier
What season of life you are in
Your ability to save more money (ie: debt is out of the picture)
Your income
By giving you a flat dollar amount to save, it wouldn’t be based on you.
This is about your money journey and how much to save monthly depends on you, your money goals, and your financial decisions. Everyone will have a different savings ratio based on their life choicesx.
Is saving $500 a month enough?
If you are young and swaddled in debt, then saving $500 a month is a milestone.
If you desire to stay living paycheck to paycheck cycle, then that isn’t enough to save each month.
However, don’t get down on yourself, if you haven’t ever saved $500 or can only save $500 a month. That is a great starting point if you are just starting out saving money monthly.
We will discuss shorting a better tool on how much of your income should you save every month.
What is Saving Percentage?
Saving percentage is a great way to know how much you are saving overall.
This is when you decide on how much to save monthly based on your income. It is the most personal way for you to decide how much you should save each month.
Written as an equation, this is how you determine your savings ratio based on your income.
Saving percentage = (your overall savings divided by your overall income) * 100
That equation will give you your savings percentage.
Example #1: you saved $7,000 in the last 12 months and your income was $85,000.
(7,000 / 85,000) * 100% = 8.23%
Example #2: you saved $22,000 in the last 12 months and your income was $155,000.
(22,000 / 155,000) * 100% = 14.19%
Should I Base My Savings On Gross or Net Income
Honestly, it doesn’t matter either way. You can choose to base your savings percentage number on gross income or net income. Just make sure to stay consistent and calculate it either way.
Whichever way you choose, you want the savings percentage to increase year over year.
If you use gross income, your saving percentage will be lower because taxes will take a big chunk out of your total percentage.
If you use net income, your savings ratio will be much higher because taxes aren’t included.
Personally, I calculate our savings percentage on gross income since there are ways to lower your tax bill. For instance, by moving to a lower cost of living area.
Why Saving Percentage is a Better Tool
When you look at the retirement rules of thumb (rule of 4 and multiply by 25), you may feel a little bit overwhelmed with the prospect of saving money. However, if you just keep increasing your savings percentage you will get there without all of the sterss.
Remember, slow and steady always wins the race.
So, instead of using retirement guidelines on how much to save monthly, there is another tool that will help you stay on track and not give up.
Use your saving percentage.
Each year you want to increase your saving percentage.
You can do the same thing for monthly when starting your savings percentage journey.
This is something manageable where you can see real results. Stay focused on the percentage. Keep your head down and keep saving away.
That is why your saving percentage is a better tool.
What Percent Should You Save Of Your Income?
This is something we detailed in the Money Bliss Budgeting method found here.
You need to start with how much you want to save this year.
Need motivation, then check out the Money Bliss 52 week money saving challenges or the monthly money saving challenges.
If you are out of debt, then you need to start with a 20% savings percentage. That is the first thing you do is save money from each paycheck. Then, you figure out how to live on the remaining money.
If you are still struggling with debt, then you need an emergency fund in place until you are debt free except your mortgage. Any debt will always hold you back from your full potential and a higher savings percentage. There is too much drag holding you back.
The more you are able to save today will change your financial future tomorrow.
Each year, evaluate how much you can increase your saving percentage. Can you reach 30%, 40% or maybe even 50%?
Savings Percentage in Real Life Examples
Okay, now that we have laid out all of the above information, let’s tie them together into one.
So, is saving 10% enough? No.
Well, what about saving 30 percent of income? Maybe given your age.
Meet Anna
Anna makes $4000 per month or $48,000 per year. She is 25 years old and plans to save a percentage of her income for the next forty years.
Anna
Income is $4000 per month
How Much to Save Monthly
Total Saved
Balance at Age 65
10%
$4000 x 10%
$400
$192,000
$1,288,432
15%
$4000 x 15%
$600
$288,000
$1,932,648
20%
$4000 x 20%
$800
$384,000
$2,576,863
30%
$4000 x 30%
$1200
$576,000
$3,865,295
Assumption of 8% rate of return. No inflation and doesn’t account for taxes.
Assuming no increase in income, Anna will give her a nice nest egg for retirement.
She is right where she needs to be for how much should I have saved by age 25.
Meet Sue & Joe
Sue and Joe feel very behind the game in saving money. They realized lifestyle creep invaded their family life and now are cutting expenses and prioritizing saving money.
This couple with kids makes a combined income of $150,000. They are both 34 and want to see how soon they will be millionaires.
Sue & Joe
Income is $12,500 per month
How Much to Save Monthly
Total Saved
Balance at Age 60
10%
$12,500 x 10%
$1,250
$390,000
$1,288,432
15%
$12,500 x 15%
$1,875
$585,000
$1,864,020
20%
$12,500 x 20%
$2,500
$780,000
$2,485,360
30%
$12,500 x 30%
$3,750
$1,170,000
$3,728,040
Assumption of 8% rate of return. No inflation and doesn’t account for taxes.
Obviously, the more you save, the faster you will watch your account balance grow. If Sue and Joe chose to save 30% of their income, they would reach millionaire status in 13 years or at age 47.
If they saved only 10% of their income, they would be 58 years old when they reach their first million dollars.
Sue and Joe are behind in how much should I have saved by 30.
Meet Brian
Brian is sick and tired of the rat race of working. He doesn’t love his job in his degree field, but it pays well. He wants to save for 10 years and move on with life.
Brian makes $105,000 per year.
Brian
Income is $8,750 per month
How Much to Save Monthly
Total Saved
Balance after 10 years
20%
$8,750 x 20%
$1,750
$210,000
$315,217
30%
$8,750 x 30%
$2,625
$315,000
$472,826
40%
$8,750 x 40%
$3,500
$420,000
$630,435
50%
$8,750 x 50%
$4,375
$525,000
$788,044
Assumption of 8% rate of return. No inflation and doesn’t account for taxes.
Brian realizes he has to save a higher savings percentage each month if he wants to leave his job and take a lower paying job that he enjoys.
He decides that he will save 40% of his salary over the next 10 years, then leaves his nest egg alone for another 15 years. His saving efforts should pay off and will net him around the $2 million dollar mark.
Savings Percentage Calculator
Are you ready to figure out your saving percentage?
Grab a calculator and figure out how much you are saving in the following ways:
Emergency Fund
Rainy Day Fund
Retirement (401k, Roth IRA, or IRA)
Health Savings Account
Other savings accounts
Without downloading our free spreadsheet in our free resource library, you can figure this out very simply with a pen, paper, and calculator.
Add up all of your savings and divide that number by your income.
For instance, you are saving $1200 each month and your income is $5000.
$1200 / 5000 = .24 or 24% savings percentage rate
How Much Do You Save a Month?
Wow! That is a lot of useful information.
Personally, I wish someone would have discussed the concept of saving based on income percentages. It just simplifies how to save money on a consistent basis.
Your savings percentage is a great way to track your financial progress!
In conclusion, there is no right or wrong number to save each month.
Your personal litmus test is to increase your savings percentage month over month, year over year.
Don’t forget to download our spreadsheet to help you with quick calculations!
Up Next:
Know someone else that needs this, too? Then, please share!!
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More importantly, did I answer the questions you have about this topic? Let me know in the comments if I can help in some other way!
Your comments are not just welcomed; they’re an integral part of our community. Let’s continue the conversation and explore how these ideas align with your journey towards Money Bliss.
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.
Budgeting is such an adulting term.
Nothing can make you feel more like an adult when you need to learn how to budget your money, stop buying frivolous things, and save for retirement.
A budget just sounds like no fun.
Is it possible to learn how to budget money and still enjoy life?
However, the bright side to budgeting (and normally overlooked aspect) is by setting up a budget is you start to live within your means and start your path to financial freedom. Here are all the advantages of budgeting.
Personally, financial freedom is way more enticing!
So, that means a budget is necessary. A budget is key. A budget will change your life forever.
Just FYI…Here at Money Bliss, we like to call it a Cents Plan. Why? A budget sounds constricting. Take your money cents and put it with your head sense to make your Cents Plan.
We will detail what is the proper way to budget for money.
But the question remains how to budget money without pulling out your hair and still enjoy life. (It is easier than you think!)
Do you Need a Budget?
First, let’s answer this age-old debate. Do you really need a budget?
The simple answer is it depends on what you want out of life.
Do you want to live paycheck to paycheck, struggling with money, straddled with debt? Or with financial independence where you control your destiny?
Stress vs. joy. The choice is yours.
With human nature, our tendency is to spend money. While there are some savers in the room, it is typically a learned trait. Society wants quick results and with material items so cheap, it is easy to go overbudget.
Does extra income really solve someone’s money problems?
Last I checked, there are plenty of people who made millions are in bankruptcy because of overspending, not living within their means, and a budget wasn’t a term they used.
Here is a quick test…
If you have read this far into the post, then you need a budget. Keep reading. We have plenty of information to help you succeed. Also, you will learn various ways to budgeting that work for you.
Longer Answer & Must Read: Money Bliss Steps to Financial Freedom – this is the long term answer to “Do You Need a Budget?”
Purpose of a Budget
Okay, so we figured out that you need a budget. But, you aren’t truly convinced about why you need a budget.
What is the reason or main purpose of a budget?
The purpose of a budget is to first decide where you plan to spend/save money and then, see if you followed through on your plan.
Are you under budget? Are you over budget? Specifically, are you making progress to your life’s vision?
That is the role of a budget.
It is a guide for your money. Like we have said many times before you can manage your money or have your money manage you.
Personally, we use a budget to reach financial freedom faster and to make sure we have money set aside to travel. We have chosen to live a little more frugal than our neighbors (some might say much more frugal). However, the trade off for us is to travel now. Not wait until “retirement.”
For us, the purpose of a budget helps us to travel each year plus work our way towards financial freedom.
For you, what is the purpose of a budget? What do you want out of life?
Use on of these methods of budgeting as a guide to develop your budget.
Importance of Budgeting
There are many benefits of budgeting. However, most people struggle with a budget because saying no to yourself can be hard.
Let’s look at the bigger picture.
Do you want to manage your money? Or have your money manage you?
The choice is yours.
A budget is just a spending plan written out in advance.
You manage money your way!
That is a huge importance of budgeting. Personally, I would much rather decide how I want to spend my money. That is one of the biggest reasons we decided to pay off our debt in one year.
The importance of budgeting is to make sure you are living within your means and have the ability to pay for your expenses.
A budget doesn’t have to be complicated. It helps you lower big ticket expenses like housing, food, and transportation and then make sure you have enough remaining for the rest of your expenses.
If debt is a part of your life, then you are able to pay off debt faster by knowing where you spend money (and specifically what is worth spending money on). If you are debt-free, then you can continue paying in cash rather than racking up debt.
By moving towards a budget, then the foundation is laid to build a solid money journey.
You know where and how your money is spent. Then, you’re not left at the end of the month wondering if and when you will run out of money.
Another key importance of budgeting is it forces you to be organized with your finances. Then, you know where your money is going.
Creating a budget shouldn’t be overcomplicated or hard. That is something we will teach you how to do.
Benefits of Budgeting
Too many times people have good intentions of creating a budget and give up too quickly, then they never finally understand the benefits of budgeting.
It will take a few months or paycheck cycles to truly notice the benefits of budgeting (AKA spending less than you make).
You need to learn how to budget money and get into the groove of it.
No matter what we do…we can’t change how fast the days move. This is hard when you are working hard on your budget for the first time and want to see progress faster.
Consistency makes budgeting actually work.
A few of the benefits of budgeting include:
Stop fighting about money
Ability to reach your goals faster
Prioritize spending
Did you realize we only listed a few of the benefits of budgeting? Learn all nine Surprising Advantages of Budgeting your Money. (#7 may save your marriage)
As paychecks roll in and the months go by, you start seeing the bigger and bigger picture on the benefits of budgeting.
How to Manage Money
Now, that you read you need a budget, the purpose of a budget, the importance of budgeting plus the true benefits of budgeting, let’s learn how to manage money.
Specifically, how to manage your money.
Remember you have the choice to manage your money or have your money manage you. The choice is yours.
So, how can you manage your money?
One place to start is look at what others are doing. What makes them successful or not successful.
You can manage your money based off percentages like the Cents Plan Formula.
You can look at the household budget percentages to see how people spend money according to the statistics.
Ask a friend or family member how they manage money. (Some may tell you others won’t say a word.)
You can also go in depth with My Ultimate Money Blueprint.
Just remember, in the end, you want to manage money your way.
Steps on How to Budget Money
Managing money is more than just a budget.
It is about giving you choices in life.
These steps on learning how to budget money are very global. They aren’t specific tactics for budgeting. You can learn that in the 7 steps to making a budget.
These is the overarching themes that guide you on how to budget your money. Let’s budget your life and change your finances.
1. Life’s Vision
Before we starting truly budgeting, we just tracked our spending. Without fail each and every month, there wasn’t money leftover to do what we wanted in life. Things just didn’t seem fair.
Then, I got this hair-brained idea to pay off all of our debt in 1 year.
Let me tell you…it was the best decision we ever made. You can read about our journey to be debt free.
By paying off our debt, we decided to put us first and what we wanted in life.
Extra money was going towards all of debt each month. So, that meant everything else was hacked to make paying off debt possible.
During that time, we truly understood what we wanted in life, what was important to us, and how we would get there. I guess you could say we began to budget our life.
Do you know what your life vision is? Your why? Your next money goal?
If not, then start here on making money goals.
2. Live Within Your Means
While this seems blatantly obvious, it is one of the hardest things for people to do.
Simply put…
Income > Spending
Your income is greater than your spending (and hopefully savings is included in that number too).
One of the fastest ways to start living within your means is with a no spend challenge.
Plus it will help you uncover your life’s visions and what truly matters to you.
If you have been spending more than you make, then you are letting money manage you.
By living within your means, then you are managing your money your way.
Learn Exactly… How to Live Below Your Means and Love Life
3. Be Okay Being Different
The comparison trap is real.
With social media, it is hard to escape any type of comparison game. It used to be “Keep up with the Joneses’” and that just meant the neighbors and friends around you. Now, it is comparing yourself to influencers and people you will never meet in your lifetime.
The key to long term success on how to manage money is doing it your way, which means that your priorities will be different than everyone around you. And you have to be okay with being different.
Need ideas to stay on budget? Find 101 Fun Things To Do With No Money.
Need the motivation to live in a minimalist home? Could You Live In a Minimalist Home? (Real Life Minimalists) Hint: We were featured because while less is more.
4. Find a System to Work for You
The recommendation I always make when starting out with a budget is to use paper and pencil. Something tangible that you can touch and feel. Then, it becomes a constant reminder of your new ways of managing money.
Over the long-term with budgeting, you must find a system to work for you. Maybe an app? Maybe a spreadsheet? Possibly a software?
The key is finding a system that will work for you. And if you combine finances, it has to work for both of you.
This is where most people fail.
There are so many options for free and paid budgeting apps today. It may seem overwhelming. But, you can’t go back to other habits.
Today, we use Quicken and a personalized spreadsheet. Thankfully, Quicken does all of the hard work of downloading transactions, categorizing them, and creating reports.
5. Celebrate Successes
This is something that doesn’t happen as much as it should with money goals. Too many times, we are so focused on saving money and living frugally, we forget to live and enjoy life.
You need to stop and smell the roses.
In this case, you need to celebrate your wins along your journey.
Here at Money Bliss, we like to focus on…
Life. Money. Enjoy.
Life is first. You need to enjoy your life and figure out how money relates to your life. You need to budget your life.
Don’t be afraid to celebrate your success. And if you don’t believe us…One of the steps in the Money Bliss Steps to Financial Freedom is about celebrating success and doing something for you.
How to Set up a Budget
Setting up a budget shouldn’t be hard or complicated.
Don’t overanalyze. Don’t give up.
Most people have to work on setting a budget that works for them over a couple of months. Each month making small refinements.
The end goal is to set a budget that works for you.
A High-Level View of Budgeting:
Determine what your money goals are
Figure out your income
Track how much you are spending
Set up a Budget or Spending Plan
Track your progress
Yes, this is a very high-level view of setting up a budget. At this point, you don’t have to divide up into budgeting categories if you don’t want to.
There are plenty of resources on our site to help you finalize a budget that works for you.
Find detailed resources on how to make a budget.
The key to setting up a budget is be realistic.
You want to set yourself up for success – not instant failure.
One of the key ingredients to make you a success is pocket money. Personally, I believe this one category can make or break your budget. Understand how pocket money (AKA slush money) works.
When setting up a budget for the first time, set aside time to work through the budgeting process. A solid budget that will work (remember that is a key ingredient for success) needs to be based on your life’s visions. Not just slapped together in 5 minutes.
Learn How to Budget Money
Learning how to budget money is completely doable.
Budgeting shouldn’t be cumbersome or overwhelming. In the long run, the benefits of budgeting outweigh living paycheck to paycheck or stressed about money.
A budget makes sure your expenses (and savings) are below your income. From there you can decide how detailed you want to get with your budget.
The purpose of a budget is to help you successfully reach your life’s visions. The point where you start managing your money and not being managed by your money.
Further resources on budgeting:
Make sure to download our free budget printables!
From all of the free and paid budgeting apps, here are our top budgeting apps to check out!
This section may contain affiliate links, which helps us to continue providing relevant content and we receive a small commission at no cost to you. Please read the full disclosure below.
Empower Personal Wealth, LLC (“EPW”) compensates Money Bliss for new leads. Money Bliss is not an investment client of Personal Capital Advisors Corporation or Empower Advisory Group, LLC.
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Know someone else that needs this, too? Then, please share!!
Did the post resonate with you?
More importantly, did I answer the questions you have about this topic? Let me know in the comments if I can help in some other way!
Your comments are not just welcomed; they’re an integral part of our community. Let’s continue the conversation and explore how these ideas align with your journey towards Money Bliss.
Discovering financial independence doesn’t have to be complicated. In this guide, we’ll explore 10 incredibly simple methods to help you achieve financial freedom effortlessly. Whether it’s through saving, budgeting, or increasing your income, these easy strategies will set you on the path to financial independence in no time. Then, you can enjoy time freedom and not stress about the 9-5 grind.
How to Become Financially Independent to Create the Life you Want
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Learn the essential steps to achieve financial independence and build the life you desire. Take action today to build wealth and secure your financial future. With the right strategies and tools, financial independence is within reach, and you can take control of your financial destiny.
Find more ideas: How to Become Financially Independent: Create the Life You Want
Become Financially Sound
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Achieving financial soundness is the first step towards effective money management. Learn how to improve your financial health and become financially sound within the next 30 days. Take proactive steps to enhance your financial stability and secure a brighter financial future starting now.
Learn How: How Quick can you Become Financially Sound?
Are you Financially Stable?
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Discover the exact habits needed to achieve financial stability and take control of your finances. Financial stability means being in charge of your money, and this guide provides easy ways to attain it. Explore these simple yet effective tips to achieve financial stability and transform your financial future.
To learn more: 32+ Simple Hints Someone is Financially Stable + How You can be too!
Money Mantras to Repeat to Boast Your Mindset
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Harness the power of these top money mantras to cultivate a mindset of wealth and achieve financial freedom. Affirm your success and transform your financial situation with these powerful mantras. Pick your money mantra and unlock the keys to ultimate financial freedom with these empowering affirmations.
To Pick Your Money Mantra: Top 50 Money Mantras to Boost Your Financial Freedom
What is Your FI Number?
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Discover your FI Number Calculator and unlock the path to financial independence. You may be surprised you are closer than you thought! This tool is crucial for anyone seeking to change their financial future. Learn how to calculate your FI number and take control of your financial destiny today.
To calculate yours: How to FI and Know Your FI Number Calculator
Become Debt Free to Grow Wealth
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Discover the keys to financial independence by uncovering why living debt-free might lead to true wealth. Gain practical insights and strategies for achieving lasting financial security without the burden of debt. Perfect for individuals seeking to take control of their finances and build a solid foundation for future wealth.
To read more: Is Being Debt Free the New Rich & Secret to True Wealth?
What Are Your Smart Financial Goals?
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Gain valuable insights into setting smart financial goals and transforming your financial future. Learn how to create a roadmap for success with our downloadable financial goals worksheet. Start taking control of your finances today and pave the way towards achieving your financial aspirations.
To learn more: 10 Smart Financial Goals That You Need
Do You Use the Key Components of Successful Budgeting?
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Welcome to NerdWallet’s Smart Money podcast, where we answer your real-world money questions. In this episode:
Learn why estate planning is important even if you don’t own a lot of assets, along with when to ask for professional help.
Why is estate planning important? What happens to your assets when you die without an estate plan? Hosts Sean Pyles and Dalia Ramirez discuss the essential aspects of estate planning and the common misconceptions that often deter people from creating an estate plan. They begin with a discussion of the critical importance of having a will, with tips and tricks on keeping updated records, managing assets, and understanding the role of a will in preventing lengthy probate processes.
Then, RK Law PC Managing Attorney Regina Kiperman joins Dalia to discuss various tools and strategies available for effective estate planning. They discuss the importance of clearly identifying witnesses in a will, the scenarios where hiring an attorney is essential, and the necessity of advance directives, power of attorney and healthcare proxies. The conversation features actionable advice on managing your will and advance directives, highlights the emotional and financial relief that estate planning can offer surviving family members, and encourages proactive steps to ensure peace of mind for loved ones.
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Episode transcript
This transcript was generated from podcast audio by an AI tool.
Sean Pyles:
Nobody wants to think about the worst case scenario. To put it more bluntly, nobody wants to think about dying, but if you don’t think about it at all and don’t plan for it, your entire financial life could end up in someone else’s hands, from a distant family member to your state’s court making decisions about your money. Today, what to do to keep that from happening.
Welcome to NerdWallet’s Smart Money Podcast. I’m Sean Pyles.
Dalia Ramirez:
And I’m Dalia Ramirez.
Sean Pyles:
Dalia Ramirez:
Doesn’t get more exciting than this, Sean.
Sean Pyles:
Well, Dalia, welcome to the host chair here at Smart Money.
Dalia Ramirez:
Thanks. I’m really glad we’re tackling this topic.
Sean Pyles:
Yeah, it’s something we talk about every so often on the show, sometimes in response to listener questions, but in this episode we’re going to go through why it’s so important to have an estate plan, who needs one and what happens if you don’t have one.
Dalia Ramirez:
Yeah, that’s really the key here. I think a lot of people don’t realize what happens to their money and belongings, their estate, if they don’t have a plan. And there are a lot of misconceptions about estate planning, that it only matters if you’re rich, that you don’t need one if you don’t have kids, that it’s expensive and takes a lot of time to do this kind of planning, and that’s not all true.
Sean Pyles:
And when we take a look at the numbers we definitely see some concerning trends. Caring.com does an annual wills and estate planning survey, and in 2024 they found that only 32% of Americans even have a will, and that’s down 6% from 2023.
Dalia Ramirez:
Yeah, for the first time since 2020, the number of Americans with a will declined. And this is despite the fact that 64% say having a will is important. So we kind of know that this is something we should do, but then we don’t do it.
Sean Pyles:
And I think some of what we’ve already cited makes sense. People are worried about cost, they think it’s just for rich people, and I would imagine that in some cases folks just don’t want to think about their own death.
Dalia Ramirez:
But here’s the thing, the consequences of not doing any planning will fall on your surviving family members. If you don’t have a plan, your family can end up having to deal with a long, expensive probate and all kinds of other legal issues all while they’re mourning your death, which is hard enough on its own.
Sean Pyles:
Yeah. Dalia, this is not fun to talk about.
Dalia Ramirez:
No, it’s not. But we’re going to forge through anyway.
Sean Pyles:
Okay, so is there a specific reason that you wanted to come on and do an episode with us about this?
Dalia Ramirez:
I think in a weird way it’s comforting to make peace with things like death. It’s a part of life, it happens to everyone, and there are some surprisingly simple ways to make it easier on your loved ones when it does happen. A document or two, which you can make inexpensively or even for free, can really spare your family from having to make painful decisions during an already difficult time.
Sean Pyles:
Well, I’m glad to know that I’m not the only person with somewhat morbid proclivities at NerdWallet. While thinking about death can be scary and grim, there is something about planning for the inevitable that makes this part of our lives a little easier to grapple with. Well, we want to hear what you think too, listeners. Do you have an estate plan in place? If not, why not? If so, what prompted you to do it? Share your stories with us by leaving us a voicemail or texting the Nerd hotline at 901-730-6373. That’s 901-730-NERD. Or email a voice memo to [email protected]. So Dalia, who are we hearing from today?
Dalia Ramirez:
Today we’re talking with Regina Kiperman. Regina is a managing attorney with the estate planning firm RK Law PC in New York.
Sean Pyles:
All right, we’ll hear from Dalia and Regina in just a moment. Stay with us.
Dalia Ramirez:
Regina Kiperman, nice to have you on Smart Money. Let’s start with what might seem like an obvious question, but we’re going to ask it anyway. Why is it important to have a will?
Regina Kiperman:
It’s important to have a will because a will acts as an instruction manual to set forth your wishes in the event that you pass away. All states have typically provisions for what happens to your assets if you pass away. For example, New Jersey says if you pass away married, everything goes to your spouse, and if there’s no spouse, then to your kids. New York, on the other hand, says if you pass away and you have a spouse and kids, $50,000 plus the first one half goes to your spouse and the rest goes to your kids. Some people want to deviate from the basic rules that are put forth by these different states and they might want to create a will so that they can have their proposed and desired way of distributing the estate assets. Sometimes you need to do it for tax planning, sometimes you want to do it because you want to give to a friend or a charity or a different person than you would have to give if you just followed the strict laws of the state.
Dalia Ramirez:
So what are some of the things that can happen if you don’t have an estate plan? Where could your estate end up?
Regina Kiperman:
If your next of kin are your parents and they are on government benefits, not having a will could lead to those parents inheriting the estate assets and being kicked off their benefits. Actually, I have a case in point. One of my clients, his dad, is his next of kin, and his dad is a Russian immigrant, and his dad is on all sorts of government benefits, but because the person who passed away didn’t have a will, now all the assets passed to dad and now dad is in danger of losing all of his benefits because he’s now going to inherit this amount of money. And had the person who passed away actually had a will, then the dad could have had the benefits and been able to use the money to supplement his care, which could have benefited him more.
I have another client whose aunt passed away, and at the time she passed away, she had nine siblings, and some of the siblings had died before her. And because it took so long to administer the estate, some have now died after her. And when someone dies after and they have children or even the ones that died before, they also had children, so now the court will require jurisdiction over all these different people, making the administration process a complete nightmare. And in that case, the person has a house, that house has tax liens and other problems associated with it. And so if there was a will, even though there’s all this different family over whom we have to get jurisdiction, it’s easier to get something called preliminary letters to at least temporarily administer the estate, and it’s easier to get that than temporary letters.
Dalia Ramirez:
What are the other tools that might be needed for these circumstances?
Regina Kiperman:
Okay, so a will is fine. You can have trusts inside of wills. Trusts by themselves, they’re just contracts. And a revocable trust is often perceived of as a will substitute. And for basic estate planning purposes, a will is perfectly fine, and even sometimes for tax planning a will is perfectly fine. The creation of the sub trust could be done under the will, which is just another trust that’s formed under the will with the spouse who had no will. Even if he had just said “everything to my spouse,” that is not the best tax planning, but that’s something, because that then defers all of the tax until the death of the second spouse and creates more flexibility and does not cause difficulty for the family, who now has to raise money to pay the estate tax.
Dalia Ramirez:
Is it fair to say that in most circumstances or even all that something is better than nothing? Or are there any types of people who really need something specific or nothing is better? How do you know which tools are necessary?
Regina Kiperman:
So typically when a family calls and they say, oh, we’re newlyweds, we want to make sure everything goes to each other. If that’s their only thinking, I’ll say, well, you don’t really need a will, because if you die, everything will go to the survivor anyway. So that’s an example where you don’t necessarily need one. Although if they think three steps ahead and they say, well, what happens if we both die and we want to give everything to, again, a charity or our cousin or our friend, then you would need a will. So anytime you want to override the default state law, you need a will. Anytime you’re just thinking, I just want it to go to my spouse, you don’t necessarily need a will. Anytime you have two children or one child and that’s your only child and you don’t have a spouse, you don’t need a will because everything’s going to go to that person anyway.
If you want to build in more foresight and more planning… So for example, I have only one child, but they’re not super trustworthy. I have only one child, but they have creditors. I have only one child, but I don’t trust their spouse. Then you want to do planning. But if it’s like, I have one child, they get everything and I don’t care what happens when I pass away, you don’t really need a will in that situation.
Dalia Ramirez:
Okay. That helps. I mean, people have a lot of different circumstances, so there would be different tools that fit. Could you, again for us, name the most common estate planning tools? We don’t have to go into far detail, but maybe the top five.
Regina Kiperman:
Okay, so estate planning, there’s only a finite number of permutations, right? There’s a will, which basically overrides state law of what happens upon your death. And then there’s a trust. And then a trust is a contract between “parties” and sometimes if it’s a revocable trust, it could be a contract between yourself and yourself because in a revocable trust typically you’re the one that creates the trust and you’re the manager of the trust, also known as the trustee. There’s various types of irrevocable trusts which are trusts that you set up with a different type of purpose. Like for a revocable trust, you usually set it up for privacy or because your heirs are unknown or because you want to treat people differently or because your assets are volatile, it’s a different type of planning. It’s like probate avoidance planning. That’s a revocable trust.
An irrevocable trust, which is another estate planning tool, is where you’re starting to think more about not just probate avoidance but specific purpose. So there’s a qualified personal residence trust where you’re gifting your property away, but being able to take advantage of the present value of it. There is a Medicaid trust where you are giving away your assets in order to qualify for Medicaid. There’s a credit shelter trust where you’re essentially trying to figure out what goes into the trust to reduce your taxable estate. So the irrevocable trusts get broken down into a number of different trusts that depend on what your purposes are and what your facts and circumstances are.
And then another estate planning tool is advanced directives, which is power of attorney, healthcare proxy, living will, HIPAA, appointment of agent to control remains, and that is, in my opinion, everybody needs those documents. Those are the most basic documents you can get and everybody needs them because everybody is going to go through a process where they become sick and where they need help and where they need someone to make decisions for them. And in the absence of these types of documents, which are very simple and easy to get, people find themselves in guardianship or more complex processes that then require a lot of time to have someone appointed to make the right decision for you on a medical or a financial level.
Dalia Ramirez:
So these medical estate planning tools are fairly straightforward, right?
Regina Kiperman:
They’re extremely straightforward. For the most part, you can get them online. Like a healthcare proxy, you can just download it online, every state has its own form. A HIPAA, download it online, every state, it has its own form and also federal has its own form. A power of attorney can be more complex, but the most basic version is typically available online. An appointment of agent to control remains, also available online. A living will, and most people think a living will is a will, it’s actually not. A living will is the document that says we authorize our agent to pull the plug and it’s not a will. And that living will is not really available online, it’s not just a statutory formula. But you could have somebody create for you or if you go to I think CaringKind or one of these kind of organizations, they usually have some version of a living will.
Dalia Ramirez:
So most people can pretty easily get the medical estate planning together. The financial stuff could be a little more complicated, right? Do you have to change the name on your accounts? Your bank accounts become accounts under the trust? Do you need new checks? What are the steps after you create something like a trust on the financial side?
Regina Kiperman:
Okay, so for a will, obviously you don’t have to retitle anything. For a trust, after you create the trust, you have to fund the trust. I have countless examples of people who created the trust, not me, not me, we fund all of our trusts. But they’ve come to me because they’ve created a trust and I say, “Okay, what’s in it?” And they blank stare at me, like “What do you mean what’s in it? I have a trust.” And I’m like, “That’s great. What’d you put inside?” And then there’s silence, just absolute silence.
For a trust to have any… I don’t want to use the word legitimacy, that’s not right. For a trust to have value and make any sense, you should fund it. Here’s how you fund the trust. The statute requires you to fund the trust by re-registering assets into the trust. If you have a deed, you need to do a new deed to transfer ownership of the property into the trust. If you have retirement accounts, you can either transfer ownership, just get the forms to either transfer ownership or transfer the beneficiary designation. For a retirement account, you don’t have to necessarily say, oh, the trust is the owner. In fact, because it’s a retirement account, you may not even be able to do that. But you can designate the trust potentially as a beneficiary. If you have stocks, you might want to re-register those stocks. If you have life insurance, you might, depending on the type of trust, either transfer ownership of the life insurance or change beneficiaries on the life insurance to be the trust. And there’s always forms that every financial institution has to help you re-register the asset into the trust.
And I always tell people, you should have the spreadsheet and then you should continue to update it as you get new assets because everything you put into the trust you should have a record of. I actually have stories where people have put almost everything into the trust and then they left out an account. Otherwise, if you have everything in the trust and you’ve left an asset out, when you pass away, now you have to probate your will, which might not have been your goal in the first place. If you were trying to avoid probate, you just failed.
Dalia Ramirez:
Right. And some of this sounds like it’s for people with a lot of money, a lot of assets, and I think a lot of people assume that you need to be really wealthy to need an estate plan. Is that true?
Regina Kiperman:
It’s more about tax planning if you have a lot of assets. Estate planning is just an orderly way to distribute what you do have. So some people just have maybe a house and maybe some cash in the bank and maybe some retirement accounts. You just want to make sure that when something happens to you, those assets are distributed in the way that you want them to be.
Here, I have a great example. A woman recently came to my office with her niece and she actually does not have a lot of assets. She has a co-op in New York City and one bank account. And really she was older and needed care and she was struggling with how to finance that care. And she has a son. When I asked about the son, she said, “I don’t have a relationship with my son.”
So in her case, she wanted to make sure that she gave everything that’s left to her niece, and also they wanted to make sure that there was a way to finance her cost of care. So we talked about setting up maybe a reverse mortgage, which by the way is also an estate planning technique. We talked about transferring the co-op into a Medicaid trust. And then we talked about just doing a will, leaving her whole asset to her niece, because that was the one person who took care of her during her lifetime and that’s the one person she wanted to make sure everything went to. So she doesn’t have a lot of assets, but she just wants to make sure it doesn’t go to her son, who she hadn’t seen in like 20 years.
Dalia Ramirez:
I have a sort of separate question now on a different note. What kind of life events should trigger people to think about their estate plan? Anything that could happen in someone’s life where you would say, now is the time?
Regina Kiperman:
People call us for the following. We just had a baby, and if they just had a baby, they want to make sure that there’s a guardian who could be charged with taking care of the baby in the event something happens to them. People call us because they want to potentially shift their assets because they are afraid of creditors. People call us because they want to pass their businesses down to their children and they’re ready to retire. People call for retirement planning. People call because they’ve bought property in multiple states and they want to avoid probate in multiple states. And then people call because a family member has fallen or the spouse has fallen and they’re in rehab and they need to figure out what to do to shift assets for government benefits.
Dalia Ramirez:
Gotcha. Once you get married, would you want to create estate planning documents together? A joint will, a trust together?
Regina Kiperman:
That one’s a little different because if you’re just married, you don’t necessarily need the type of basic estate planning because everything goes to that spouse anyway. But if you are married and have a lot of assets or if you’re married and have disparate assets and you want tax planning or you want to deviate, again, you don’t want everything to go to the spouse, then you would want estate planning. So it really depends on the facts and circumstances. But just being married by itself isn’t necessarily enough reason.
Dalia Ramirez:
I was wondering how people can make sure their wills, trusts, any estate planning document is valid. Because having a will is one thing, but having a will that actually passes through probate court successfully and quickly is another thing. And I know this might vary by state, but what can we tell people to make sure they know what they need to do to get their will certified?
Regina Kiperman:
In most places, to have a will, you need a person, two witnesses and a document, and the person can say, this is my will, this is what I wanted. Will you guys be my witnesses? Yes. Yes. Okay. Everyone sign. And for the most part, most wills are not contested. There are nuances and some specific requirements that people need to meet in order for their will to be admitted to probate. So the names of the witnesses should be really clearly spelled out. I have now a case where I cannot for the life of me figure out the name of the second witness and the law firm where the person had the will done is now closed. It’s literally a squiggle. The signature is a squiggle. It could be like John Doe and I don’t know what to write. And so I actually called the court and I’m trying to figure it out. But that’s a really very small thing that could turn into a big thing. Just legibly write very neatly the names of the witnesses.
Dalia Ramirez:
I’m wondering on that note when is it necessary to hire an attorney for estate planning? Who is in a position to DIY it and who really needs the professional help?
Regina Kiperman:
Again, this is personal. Because the law is some part art, part science. And so I think that if you have a house, a couple of bucks, a retirement account and you’ve got a wife and a couple of kids and there’s nothing, you’re not setting up any trust, it’s just a will that says to my spouse, and if not, to my children, you can DIY it. You don’t need a fancy lawyer. You don’t even need a lawyer at all. You can go on LegalZoom, Rocket Lawyer, Trust.com, whatever site you want. And if that’s your specific situation, you do not need a lawyer.
If your situation is more substantive and it’s not necessarily that you have more assets, it’s more substantive. So for example, your wife is sick, you don’t trust one of your children, you’re going to treat your children unequally. You need to create a sub-trust. You want to do Medicaid planning. You want to do tax planning. You want to do business succession planning. If you want something more substantive, you want to give to a charity because there’s different rules on charity, then you might want to speak with an attorney because they can help guide you on the nuances.
If you believe your will will be contested, you should go see an attorney. Not only that, you should do 10 versions of your will. Not 10 of the same, you might strategically want to execute multiple wills saying the same thing, because if you set aside one, you haven’t set aside the other. Those are probably some times where you DIY versus not.
Some more examples. You should staple your will. And once you’ve stapled your will, if you want probate to go simple, don’t unstaple the will. You should not keep your will in a safe deposit box because if you do, then someone’s got to go search the box, because the bank will seal the box. So don’t keep your will in the box, don’t unstaple your will. And even by the way, staple it. Don’t leave it unbound because then the court wants to know why is it unbound? Make your witnesses really clear. Have a self-proving affidavit. A lot of wills from these other like online DIY, the thing is they don’t always have a proper self-proving affidavit. And if they don’t have a proper self-proving affidavit, you have to hunt down the witnesses, which sometimes is a problem.
Dalia Ramirez:
I’m sure for some people cost is a factor here, they’re going the DIY route because it might be cheaper. Could you ballpark estimate how much an estate plan would cost people with an attorney?
Regina Kiperman:
People ask me all the time when right before they hire me, how much I’m going to charge them. And it’s hard to quantify. It really depends on your facts and circumstances. It could be anywhere from $2,500 to $25,000, depending on the complexity. If it’s a basic will with some trusts for the minors and some powers of attorney, all that stuff, it might be $2,500. If you’re getting into trusts, trust funding, deeds, transfers of assets, re-registration of assets or transferring your co-op into a trust, that becomes a pricier venture.
Dalia Ramirez:
So cost can be a factor depending on your circumstances. I also read a survey by Caring.com that found that only 32% of Americans have an estate plan. So what do you think are the other factors that keep people from doing estate planning?
Regina Kiperman:
The fact that people think, “Okay, well I don’t have a lot of money, therefore I don’t need it.” That people say, “Okay, I’ll do it, I’ll do it.” And then they don’t get around to doing it because it’s just not a priority. Some people are superstitious about doing it. They think that if they’re going to do it, that means they’re going to die. For some people, they can’t even talk about it, again because it’s superstition. And some people start the process and don’t finish it. And then there’s the people who don’t have anyone to leave it to and they say, “Well, whatever, the state will figure it out.”
Dalia Ramirez:
Are there any warnings that you would say to encourage someone who you think really could benefit from estate planning but is hesitant for any number of reasons?
Regina Kiperman:
So again, in my opinion, the most important thing that you absolutely 100% need to do is advance directives. Everyone hears me say this, power of attorney, healthcare proxy, the most, most, most important thing, because I am telling you, these documents are extremely cheap to do, and if you don’t do them and if something happens to you, there’s going to be 100 times more dollars spent on reacting to the consequences of not having a simple power of attorney.
As for a will, I personally think that it’s important to do it to set forth your wishes, but the will is just one piece. The thing that I think is the most important is to have a conversation about what do I want to happen if I’m sick or if I pass away. Where do I want my stuff to go? That conversation is the most important one to have. Even if you’re superstitious, you have to face it. You have to face that conversation. And if you don’t, unfortunately you’ll wind up with a mess, and it’ll be a bigger mess if it happens while you’re alive. Because if you’ve passed away, the mess is on your kids. But if you haven’t taken care of estate planning while you’re alive, then the mess is on you.
And I’ve got countless examples of that where the person’s alive, got sick, is incapacitated, can’t sign a power of attorney, and their kids are both grieving, dealing with the mental difficulties and anxiety of their sick parent and scrambling to try to figure out where everything is and properly structure a plan where their parents can be taken care of. I have those and I have countless examples of the same set of facts, but the parent has now passed away and the kids have property, but no way to pay the estate tax. That’s a big problem as well, and that leads to fighting. And the thing that most parents don’t want is they don’t want their kids to fight. Or, here’s a great one, a person passes away, they have three kids, they have a house, they didn’t do a plan. One kid lives in the house. What’s going to happen now? The parent should have been more proactive to think about, what will I really do with my house? Who do I really want it to go to so that my children don’t fight? Which by the way, as a parent, I hate when my children fight. I will do anything for them not to fight.
Dalia Ramirez:
And that should be motivation enough to call up a lawyer. Those are such great examples. Thank you and thank you for helping us out today with all of these questions. I really appreciate it.
Regina Kiperman:
No problem.
Sean Pyles:
Anyone who knows me knows that estate planning is my favorite morbid hobbyhorse. People really don’t want to think about or engage with this stuff, and I get it, it can be scary. But I think about it a little bit differently. I see estate planning as an act of love and generosity. Spending a few hours sorting out how you want to be cared for when you get sick or injured, and what you want done with your stuff after you die, can bring tremendous peace of mind and solace to your family in the middle of a very stressful time. So please give this gift to your loved ones.
Dalia Ramirez:
Absolutely, Sean. And I think it’s important to remember that no one can read your mind about what you want the end of your life to look like. Taking the time in advance to reflect on what matters to you and get it into writing makes it a lot more likely that your wishes will be respected and that your family might even have the pleasure of fulfilling them instead of the burden of guessing.
Sean Pyles:
Well, I hope our listeners have a better feel now for why it’s important to do this even if you don’t think you want to or you don’t want to think about your own demise. If you’re having trouble with that, just remember the aftermath is hardest on the people that you leave behind. So if nothing else, think about them.
Dalia Ramirez:
And I really hope listeners come away with the knowledge that this doesn’t have to be complicated or complex and it doesn’t have to cost much money. In fact, you can DIY it if you want to. But if you don’t want people who aren’t you to decide where all of your money and belongings end up, it’s really important to get this done. Do you have one, Sean?
Sean Pyles:
I do. My partner and I both have our estate plans and advance directive sorted. We did this a few years back after we got engaged because we knew it would be a number of years until we got married, but we wanted to ensure that we were taking care of each other now before we were legally bound together. What about you, Dalia?
Dalia Ramirez:
Well, it feels silly because I don’t have a spouse or kids or much in the way of property, but I spend a lot of time reviewing estate planning software, so I’ve helped my whole family draft wills and I did mine for good measure. Hopefully at some point I’ll have some more things to put on there.
Sean Pyles:
I like that. You are practicing what you preach. Well, Dalia, thanks for coming on Smart Money and doing this episode with us.
Dalia Ramirez:
Thank you, Sean.
Sean Pyles:
For now, that’s all we have for this episode. Do you have a money question of your own? Turn to the Nerds and call or text us your questions at 901-730-6373. That’s 901-730-NERD. You can also email us at [email protected]. Visit Nerdwallet.com for more info on this episode. And remember to follow, rate and review us wherever you’re getting this podcast.
Dalia Ramirez:
This episode was produced by Tess Vigeland. Sean helped with editing. Claire Tsosie helped with fact checking. Sara Brink mixed our audio. And a big thank you to NerdWallet’s editors for all their help.
Sean Pyles:
Here’s our brief disclaimer. We are not financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances.
Dalia Ramirez:
And with that said, until next time, turn to the Nerds.
The minimum credit score required for a conventional loan is 620, while other mortgages require scores between 500 and 700.
A higher credit score usually translates to a lower interest rate.
Paying bills on time, keeping credit card balances and number of accounts low, and becoming an authorized user on another’s account can improve your credit score.
Your credit score is one of the primary factors mortgage lenders consider when you apply for a loan. If your score needs work, there are steps you can take to improve it before you apply. Here’s everything you need to know about how to improve your credit score to buy a house.
Mortgage credit score requirements
The minimum credit score needed to qualify for different types of mortgages ranges.
Type of Loan
Minimum Credit Score
Conventional
620
Jumbo
700
FHA
580 (or 500 with 10 percent down)
VA
620 (VA doesn’t require a minimum credit score, but lenders do)
USDA
640
Still, it’s best to have the highest credit score possible before you apply for a mortgage. In fact, the average credit score for a borrower getting a purchase loan is 738, according to Optimal Blue’s May 2024 Market Advantage report.
How to improve your credit score before getting a mortgage
Check your credit reports and scores
Pay all your bills on time
Reduce your credit card balances
Avoid opening new accounts
Get help from a responsible credit user
1. Check your credit reports and scores
Get a copy of your credit report from each major credit bureau (Equifax, Experian and TransUnion) through AnnualCreditReport.com. Aside from reviewing your scores, make sure there are no mistakes, especially regarding late payments or closed accounts. If there is an error, contact the bureau to dispute it as soon as possible.
2. Pay all your bills on time
To improve your credit score for a mortgage, keep all your accounts in good standing. Missing a payment can lower your credit score, and late payments can stay on your report for up to seven years. If you’re currently late on a payment but still within the grace period, contact the creditor right away to see if you can get things back on track (and the late charge erased). If you do have a late payment on your record, strive to make payments on-time moving forward.
3. Reduce your credit card balances
Your credit utilization ratio is the amount you owe against your total available credit, and it accounts for 30 percent of your score. The lower the ratio, the better. As a rule of thumb, if your utilization is over 30 percent, work to pay down those balances so you’re under that threshold.
4. Avoid opening new accounts
Applying for new credit will affect your score. If you can, avoid opening new credit card accounts or taking out more loans before you apply for a mortgage. Follow this tip during the application and mortgage underwriting process as well. By the same token, don’t close any old accounts, either — this can raise your utilization ratio and have a negative effect on your score.
5. Get help from a responsible credit user
If you’re a younger first-time buyer, you might not have a very long credit history. One way to improve credit to buy a house: Become an authorized user on a parent’s or relative’s credit card. The primary cardholder (your parent or relative) will continue to make the payments, but you’ll benefit from the positive payment history.
What factors determine your FICO credit score?
There are several categories of your credit history that inform your current score. Some things affect your score more than others. According to Equifax, one of the major credit bureaus, your FICO score is determined using a formula that roughly looks like this:
On-time payment history: 35 percent
Amount of debt: 30 percent
Length of total credit history: 15 percent
Number of new accounts: 10 percent
Type of credit utilized: 10 percent
The national average FICO score as of October 2023 is 717, down one point from July 2023, according to FICO.
Credit bureaus tend to assign “good debt” and “bad debt” labels to your current debt. Home loans and other debt that can increase your financial worth in the long term are considered good. Credit card debt and other revolving accounts that don’t go toward a valuable asset are more likely to decrease your FICO score.
Why is a higher credit score beneficial when applying for a mortgage?
The higher your credit score, the better chance you’ll have of being approved for a mortgage. This is because lenders want to ensure you’ll repay the owed amount, and your credit score is one factor they look at to determine your risk level. A higher credit score will usually get you a lower mortgage rate.
Even a small difference in the mortgage rate you get affects your monthly payment and overall loan cost. For example, using Bankrate’s mortgage calculator, let’s say you buy a $300,000 house with a 6.875 percent fixed rate and put 3 percent down. Your monthly payment would be about $2,176. If you had a 7 percent fixed rate, your monthly payment would be $2,200. While the difference looks small at first, over the course of a 30-year mortgage, you’d save over $8,000.
Next steps in the mortgage process
Improving your credit and saving for a down payment are two of the biggest steps in getting ready to buy a home. Next, you’ll need to:
Get your financial paperwork together.
Shop around for a loan.
Get preapproved.
Have an offer accepted on a house.
Go through the underwriting process.
Close on the home.
To get the full details on the mortgage process, read our guide on how to get a mortgage.
FAQ
Items like a missed payment or bankruptcy will stay on your credit report for up to seven years, but the impact decreases after a few years. If you want to improve your credit score fast, pay down your current debt and avoid opening new accounts. Ideally, you want your credit utilization ratio to be 30 percent or less. If you can increase your credit limits on card accounts, that can help within a month or so, too — it improves the credit utilization ratio from the opposite end.
It’s still possible to get a mortgage with bad credit or less-than-ideal credit. However, the lower your score, the harder it will be to secure a mortgage. For instance, you may be able to get an FHA loan with a credit score as low as 500, but you’ll need to put 10 percent down. If you can get your score up to 580, you can get an FHA mortgage with 3.5 percent down. Know also that some lenders have stricter requirements, so it’s smart to compare lenders who specialize in low-credit-score mortgages.
Inside: Learn what 15 an hour is how much a year, month, and day. Plus tips to budget your money. Don’t miss the ways to increase your income.
You’re probably wondering if I made $15 a year, how much do I truly make? What will that add up to over the course of the year? Is $15 a living wage?
Is this wage something that I can actually live on? Or do I need to find ways that I can increase my hourly wage?
In this post, we’re going to detail exactly what $15 an hour is how much a year. Also, we are going to break it down to know how much is made per month, bi-weekly, per week, and daily.
That will help you immensely with how you spend your money. Because too many times the hard-earned cash is brought home, but there is no actual plan for how to spend that money.
By taking a step ahead and making a plan for the money, you are better able to decide how you want to live, make sure that you put your money goals first, and not just living paycheck to paycheck struggling to survive.
The ultimate goal with money success is to be wise with how you spend your money.
If that is something you want to do, then keep reading. You are in the right place.
$15 an Hour is How Much a Year?
When we ran all of our numbers to figure out how much is $15 per hour is as an annual salary, we used the average working day of 40 hours a week.
40 hours x 52 weeks x $15 = $31,200
$31,200 is the gross annual salary with a $15 per hour wage.
As of June 2023, the average hourly wage is $33.58 (source).
Let’s breakdown how that number is calculated.
Typically, the average work week is 40 hours and you can work 52 weeks a year. Take 40 hours times 52 weeks and that equals 2,080 working hours. Then, multiply the hourly salary of $15 times 2,080 working hours and the result is $31,200.
That number is the gross income before taxes, insurance, 401K or anything else is taken out. Net income is how much you deposit into your bank account.
That is just above the $30000 salary, which is a lower starter salary, but well below where you want to start about a $35000 salary.
Work Part Time?
But you may think, oh wait, I’m only working part time. So if you’re working part time, the assumption is working 20 hours a week at $15 an hour.
Only 20 hours per week. Then, take 20 hours times 52 weeks and that equals 1,040 working hours. Then, multiply the hourly salary of $15 times 1,040 working hours and the result is $15,600.
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.
How Much is $15 Per Month?
On average, the monthly amount would average $2,600.
Annual Amount of $31,200 ÷ 12 months = $2,600 per month
Since some months have more days and fewer days like February, you can expect months with more days to have a bigger paycheck. Also, this can be heavily influenced by how often you are paid on and on which days you get paid.
Work Part Time?
Only 20 hours per week. Then, the monthly amount would average $1,300.
How Much is $15 per Hour Per Week
This is a great number to know! How much do I make each week? When I roll out of bed and do my job, what can I expect to make at the end of the week?
Once again, the assumption is 40 hours worked.
40 hours x $15 = $600 per week.
Work Part Time?
Only 20 hours per week. Then, the weekly amount would be $300.
How Much is $15 per Hour Bi-Weekly
For this calculation, take the average weekly pay of $600 and double it.
$600 per week x 2 = $1,200
Also, the other way to calculate this is:
40 hours x 2 weeks x $15 an hour = $1,200.
Work Part Time?
Only 20 hours per week. Then, the bi-weekly amount would be $600.
How Much is $15 Per Hour Per Day
This depends on how many hours you work in a day. For this example, we are going to use an eight hour work day.
8 hours x $15 per hour = $120 per day.
If you work 10 hours a day for four days, then you would make $150 per day. (10 hours x $15 per hour)
Work Part Time?
Only 4 hours per day. Then, the daily amount would be $60.
$15 Per Hour is…
$15 per Hour – Full Time
Total Income
Yearly Salary (52 weeks)
$31,200
Yearly Salary (50 weeks)
$30,000
Monthly Wage (173 hours)
$2,600
Weekly Wage (40 Hours)
$600
Bi-Weekly Wage (80 Hours)
$1,200
Daily Wage (8 Hours)
$120
Net Estimated Monthly Income
$1,985
**These are assumptions based off simple scenarios.
Paid Time Off Earning 15 Dollars an Hour
Does your employer offer paid time off?
As an hourly employee, you may or may not get paid time off.
So, here are the scenarios for both cases.
For general purposes, we are going to assume you work 40 hours per week over the course of the year.
Case # 1 – With Paid Time Off
Most hourly employees get two weeks of paid time off which is equivalent to 2 weeks of paid time off.
In this case, you would make $31,200 per year.
This is the same as the example above for an annual salary making $15 per hour.
Case #2 – No Paid Time Off
Unfortunately, not all employers offer paid time off to their hourly employees. While that is unfortunate, it is best to plan for less income.
Life happens. There will be times you need to take time off for numerous of reasons – sick time, handling an emergency, or even vacation.
So, let’s assume you take 2 weeks off without paid time off.
That means you would only work 50 weeks of the year instead of all 52 weeks. Take 40 hours times 50 weeks and that equals 2,000 working hours. Then, multiply the hourly salary of $15 times 2,000 working hours and the result is $30,000.
40 hours x 50 weeks x $15 = $30,000
You would average $120 per working day and nothing when you don’t work.
$15 an Hour is How Much a year After Taxes
Let’s be honest… Taxes can take up a big chunk of your paycheck. Thus, you need to know how taxes can affect your hourly wage.
Also, every single person’s tax situation is different.
On the basic level, let’s assume a 12% federal tax rate and a 4% state rate. Plus a percentage is taken out for Social Security and Medicare (FICA) of 7.65%.
Gross Annual Salary: $31,200
Federal Taxes of 12%: $3,744
State Taxes of 4%: $1,248
Social Security and Medicare of 7.65%: $2,387
$15 an Hour per Year after Taxes: $23,821
This would be your net annual salary after taxes.
To turn that back into an hourly wage, the assumption is working 2,080 hours.
$23,821 ÷ 2,080 hours = $11.45 per hour
After estimated taxes and FICA, you are netting $11.45 an hour. That is $3.55 an hour less than what you planned.
This is a very highlighted example and can vary greatly depending on your personal situation. Therefore, here is a great tool to help you figure out how much your net paycheck would be.
Plus budgeting on a just over $11 an hour wage is much different.
$15 an hour Salary Calculator
Now, you get to figure out how much you make based on your hours worked or if you make a wage between $15.01-15.99.
This is super helpful if you make $15.25 or $15.35.
You are probably wondering can I live on my own making 15 dollars an hour? How much rent can you afford on 15 an hour?
Using our Cents Plan Formula, this is the best case scenario on how to budget your $15 per hour paycheck.
When using these percentages, it is best to use net income because taxes must be paid.
In this example, we calculated $15 an hour was $11.45 after taxes. That would average $1,985 per month.
According to the Cents Plan Formula, here is the high level view of a $15 per hour budget:
Basic Expenses of 50% = $992.55
Save Money of 20% = $397.02
Give Money of 10% = $198.51
Fun Spending of 20% = $397.02
Debt of 0% = $0
Obviously, that is not doable for everyone when living so close to minimum wage. So, you have to be strategic in ways to decrease your basic expenses and debt. Then, it will allow you more money to save and fun money.
To further break down an example budget of $15 per hour, then using the ideal household percentages is extremely helpful.
recommended budget percentages based on $15 per hour wage:
Category
Ideal Percentages
Sample Monthly Budget
Giving
10%
$130
Savings
15-25%
$312
Housing
20-30%
$780
Utilities
4-7%
$130
Groceries
5-12%
$208
Clothing
1-4%
$26
Transportation
4-10%
$104
Medical
5-12%
$130
Life Insurance
1%
$13
Education
1-4%
$26
Personal
2-7%
$48
Recreation / Entertainment
3-8%
$78
Debts
0% – Goal
$0
Government Tax (including Income Taxes, Social Security & Medicare)
15-25%
$615
Total Gross Income
$2,600
**In this budget, prioritization was given to basic expenses. Thus, some categories like giving and saving were less.
A great way to lower your transportation costs is to buy a beater car.
Can I Live off $15 Per Hour?
Living off close to minimum wage can be a very difficult situation.
Is it doable? Absolutely.
You just have to be wiser (or frugal) with your money and how you spend the hard-earned cash you have been blessed with.
A lot of times when people are making under near the minimum wage mark or slightly above, they feel like they are in this constant cycle that they can never keep up. They are not good enough to make more money. Feeling like they are constantly struggling to keep up with bills and expenses. And things just keep adding on top.
You need to do is change your money mindset.
This is what you say to yourself… Okay, this is my season of life right now. I have aspirations and goals to change how much I make, but for now, I am going to make sure that I am able to live on my 15 dollar per hour. No going into to debt for me.
In the next section, we will dig into ways to increase your income, but for now, is it possible to live on $15 an hour?
Yes, you can do it, and as you can see it is possible with the sample budget of $15 per hour.
Living in a higher cost of living area would be more difficult. So, you may have to get a little creative. For example, you might have to have a roommate. Move to a lower cost of living area where rent is cheaper.
Also, you must evaluate your “fun spending” items. Many of those expenses are not mandatory and will break your budget. You can find plenty of free things to do without spending money.
5 Ways to Increase Your Hourly Wage
This right here is the most important section of this post.
You need to figure out ways to increase your hourly income because I’m going to tell you…you deserve more. You do a good job and your value is higher than what your employers pay you.
Even an increase of 50 cents to $15.50 will add up over the year. Even better $16 an hour! The goal is $20 an hour or more!
1. Ask for a Raise
The first thing to do is ask for a raise. Walk right in and ask for a raise because you never know what the answer will be until you ask.
If you want the best tips on how specifically to ask for a raise and what the average wage is for somebody doing your job, then check out this book. In this book, the author gives you the exact way to increase your income. The purchase is worth it or go down to the library and check that book out.
2. Look for A New Job
Another way to increase your hourly wage is to look for a new job. Maybe a completely new industry.
It might be a total change for you, but many times, if you want to change your financial situation, then that starts with a career change. Maybe you’re stressed out at work. Making $15 an hour is too much for you and you’re not able to enjoy life, maybe changing jobs and finding another job may increase your pay, but it will also increase your quality of life.
3. Find a New Career
Because of student loans, too many employees feel like they are stuck in the career field they chose. They feel sucked into the job that they don’t like or have the potential they thought it would.
For many years, I was in the same situation until I decided to do a complete career change. I am glad I did. I have the flexibility that I needed in my life to do what I wanted when I needed to do it. Plus I am able to enjoy my entrepreneurial spirit.
4. Find Alternative Ways to Make Money
In today’s society, you need to find ways to make more money. Period.
There is no way to get around it. You need to find additional income outside a traditional nine to five position or typical 40 hour a week job. You will reach a point where you are maxed on what you can make in your current position or title. There may be some advancement to move forward, but in many cases, there just is not much room for growth.
So, you need to find side hustle – another way to make money.
Do something that you enjoy, turn your hobby into a way to make money, turn something that you naturally do, and help others into a service business. In today’s society, the sky is the limit on how you can earn a freelancing income.
There are so many legit ways to make 300 dollars fast today!
5. Earn Passive Income
The last way to increase your hourly wage is to start earning passive income.
This can be from a variety of ways including the stock market, real estate, online courses, book sales, etc. This is where the differentiation between struggling financially and being financially sound happens.
By earning money passively, you are able to do the things that you enjoy doing and not be loaded down, with having a job that you need to work, and a place that you have to go to. And you still make money doing nothing.
Here is an example:
You can start a brokerage account and start trading stocks for $50. You need to learn and take the one and only investing class I recommend. Learn how the market works, watch videos, and practice in a simulator before you start using your own money.
One gentleman started with $5,000 in his trading account and now has well over $36,000 in a year. Just from practice and being consistent, he has learned that passive income is the way for him to increase his income and also not be a slave to his job.
Tips to Live on $15 an Hour
In this last section, grasp these tips on how to live on $15 an hour. On our site, you can find lots of money saving tips to help stretch your income further.
Here are the most important tips to live on $15 an hour. Highlight these!
1. Spend Less Than You Make
First, you must learn to spend less than you make.
If not you will be caught in the debt cycle and that is not where you want to be. You will be consistently living paycheck to paycheck.
In order to break that dreadful cycle, it means your expenses must be less than your income.
And when I say income, it’s not the $15 an hour. As we talked about earlier in the post, there are taxes. The amount of taxes taken out of your paycheck is called your net income which is $15 an hour minus all the taxes, FICA, Social Security, and Medicare are taken out. That is your net income.
So, your net income has to be less than your gross income.
2. Living Below Your Means
You need to be happy. And living on less can actually make you happier. Studies prove that less is better.
Finding contentment in life is one thing that is a struggle for most.
We are driven to want the new shiny toy, the thing next door, the stuff your friend or family member got. Our society has trained you that you need these things as well.
Have you ever taken a step back and looked at you really need?
Once you are able to find contentment with life, then you are going to be set for the long term with your finances.
Here is our story on owning less stuff. We have been happier since.
3. Make Saving Money Fun
You need to make saving money fun.
Save money with the popular 100 envelope challenge.
It could be participating in a no spend challenge for the month.
Start a billionaire morning routine to build a wealth mindset.
Maybe changing your habits and not picking up takeout and planning meals.
Whatever it is challenge yourself.
Find new ways of saving money and have fun with it.
Even better, get your family and kids involved in the challenge to save money. Tell them the reason why you are saving money and this is what you are doing.
Here are things to do with no money. Free activities without costing you a dime. That is an amazing resource for you and you will never be bored.
And you will learn a lot of things in life you can do for free. Personally, some of the best ones are getting outside and enjoying some fresh air.
4. Make More Money
If you want if you do not settle for less, then find ways to make more money. If you want more out of life, then increase your income.
You need to be an advocate for yourself.
Find ways to make more money.
It could be a side hustle, a second job, asking for a raise, going to school to change careers, or picking up extra hours.
Whatever path you take, that’s fine. Just find ways to make more money. Period.
5. No State Taxes
Paying taxes is one option to increase what you take home in each paycheck.
These are the states that don’t pay state income taxes on wages:
Alaska
Florida
Nevada
New Hampshire
South Dakota
Tennessee
Texas
Washington
Wyoming
It is very interesting if you take into account the amount of state taxes paid compared to a state with income taxes.
Also, if you live in one of the higher taxed states, then you may want to reconsider moving to a lower cost of living area. The higher taxes income tax states include California, Hawaii, New Jersey, Oregon, Minnesota, District of Columbia, New York, Vermont, Iowa, and Wisconsin. These states tax income somewhere between 7.65% – 13.3%.
6. Stick to a Budget
You need to learn how to start a budget. We have tons of budgeting resources for you.
While creating a budget is great, you need to learn how to use one.
You do not have to budget down to every last penny.
You need to make sure your expenses are less than your income and that you are creating sinking funds for those irregular expenses.
Budget Help:
7. Pay Off Debt Quickly
The amount that you pay interest on debt is absolutely absurd.
Unfortunately, that is how many of these companies make their money is from the interest you pay on debt.
If you are paying 5% to even 20-21% or higher, you need to find ways to lower that debt quickly.
Here’s a debt calculator to help you. Figure out your debt free date.
Make that paying off debt fast is your target and main focus. I can tell you from personal experience, that it was not until we paid off our debt that we finally rounded the corner financially. Once our debt was paid off, we could finally be able to save money. Set money aside in separate bank accounts and pay for cash for things.
It took us working hard to pay off debt. We needed persistence and patience while we had setbacks in our debt free journey.
Jobs that Pay $15 an Hour
You can find jobs that pay $15 per hour. Polish up that resume, cover letter, and interview skills.
Job Search Hint: Always send a written follow-up thank you note for your interview. That will help you get noticed and remembered.
First, look at the cities that require a minimum wage in their cities. That is the best place to start to find jobs that are going to pay higher than the federal minimum wage rate. Many of the cities are moving towards this model so, target and look for jobs in those areas.
Possible Ideas:
Customer service representatives
Paraeducators at schools
Warehouse workers
Retail workers
Cashiers
Housekeeper
Delivery Drivers
Overnight Stockers
Companies that pay more than $15 per hour:
L.L. Bean
Chick-Fil-A
Panera Bread
Torchy Tacos
McDonald’s
Five Guys
Costco
Wayfair
Amazon
Many grocery stores
Best Buy
Target
Wells Fargo
Disney World
Disney Land
Bank of America
JP Morgan
Cigna
Aetna
Maybe working as a virtual assistant with no experience is right for you??
$15 Per Hour Annual Salary
In this post, we detailed 15 an hour is how much a year. Plus all of the variables that can impact your net income. This is something that you can live off.
How much is 15 dollars an hour annually…
$31,200
In this post, we highlighted ways to increase your income as well as tips for living off your wage.
Use the sample budget as a starting point with your expenses.
You will have to be savvy and wise with your hard-earned income. But, with a plan, anything is possible!
Now, find low stress jobs that don’t need a degree and pay well!
Know someone else that needs this, too? Then, please share!!
Did the post resonate with you?
More importantly, did I answer the questions you have about this topic? Let me know in the comments if I can help in some other way!
Your comments are not just welcomed; they’re an integral part of our community. Let’s continue the conversation and explore how these ideas align with your journey towards Money Bliss.
Inside: Learn what 26 an hour is how much a year, month, and day. Plus tips to budget your money. Don’t miss the ways to increase your income.
You’re probably wondering if I made $26 a year, how much do I truly make? What will that add up to over the course of the year when working?
Is $26 an hour good?
Is this wage something that I can actually live on? Or do I need to find ways that I can increase my hourly wage? How much more is $26.50 an hour annually?
When you finally start earning $26 an hour, you are happy with your progress as an hourly employee. Typically, this is when many hourly employees start to become salaried workers.
In this post, we’re going to detail exactly what $26 an hour is how much a year. Also, we are going to break it down to know how much is made per month, bi-weekly, per week, and daily.
That will help you immensely with how you spend your money. Because too many times the hard-earned cash is brought home, but there is no actual plan for how to spend that money.
By taking a step ahead and making a plan for the money, you are better able to decide how you want to live, make sure that you put your money goals first, and not just living paycheck to paycheck struggling to survive.
The ultimate goal with money success is to be wise with how you spend your money.
If that is something you want too, then keep reading. You are in the right place.
$26 an Hour is How Much a Year?
When we ran all of our numbers to figure out how much is $26 per hour is as an annual salary, we used the average working day of 40 hours a week.
40 hours x 52 weeks x $26 = $54,080
$54,080 is the gross annual salary with a $26 per hour wage.
As of June 2023, the average hourly wage is $33.58 (source).
Let’s break down how that number is calculated.
Typically, the average workweek is 40 hours and you can work 52 weeks a year. Take 40 hours times 52 weeks and that equals 2,080 working hours. Then, multiply the hourly salary of $26 times 2,080 working hours, and the result is $54,080.
That number is the gross income before taxes, insurance, 401K, or anything else is taken out. Net income is how much you deposit into your bank account.
That is super close to the $55000 salary threshold, which is just below the median salary for a middle-income worker.
Work Part Time?
But you may think, oh wait, I’m only working part time. So if you’re working part time, the assumption is working 20 hours a week at $26 an hour.
Only 20 hours per week. Then, take 20 hours times 52 weeks and that equals 1,040 working hours. Then, multiply the hourly salary of $26 times 1,040 working hours and the result is $27,040.
How Much is $26 Per Month?
On average, the monthly amount would average $4,507.
Annual Amount of $54,080 ÷ 12 months = $4,507 per month
Since some months have more days and fewer days like February, you can expect months with more days to have a bigger paycheck. Also, this can be heavily influenced by how often you are paid and on which days you get paid.
Plus by increasing your wage from $21 an hour, you average an extra $867 per month. So, yes a few more dollars an hour add up!
Work Part Time?
Only 20 hours per week. Then, the monthly amount would average $2,253.
How Much is $26 per Hour Per Week
This is a great number to know! How much do I make each week? When I roll out of bed and do my job, what can I expect to make at the end of the week?
Once again, the assumption is 40 hours worked.
40 hours x $26 = $1,040 per week.
Work Part Time?
Only 20 hours per week. Then, the weekly amount would be $520.
Here are jobs that pay weekly.
How Much is $26 per Hour Bi-Weekly
For this calculation, take the average weekly pay of $1,040 and double it.
$1,040 per week x 2 = $2,080
Also, the other way to calculate this is:
40 hours x 2 weeks x $26 an hour = $2,080
Work Part Time?
Only 20 hours per week. Then, the bi-weekly amount would be $1,040.
How Much is $26 Per Hour Per Day
This depends on how many hours you work in a day. For this example, we are going to use an eight-hour workday.
8 hours x $26 per hour = $208 per day.
If you work 10 hours a day for four days, then you would make $260 per day. (10 hours x $26 per hour)
Work Part Time?
Only 4 hours per day. Then, the daily amount would be $104.
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.
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$26 Per Hour is…
$26 per Hour – Full Time
Total Income
Yearly Salary(52 weeks)
$54,080
Yearly Wage (50 weeks)
$52,000
Monthly Salary (173 hours)
$4,507
Weekly Wage (40 Hours)
$1,040
Bi-Weekly Wage (80 Hours)
$2,080
Daily Wage (8 Hours)
$208
Net Estimated Monthly Income
$3,441
**These are assumptions based on simple scenarios.
Paid Time Off Earning 26 Dollars an Hour
Does your employer offer paid time off?
As an hourly employee, you may or may not get paid time off.
So, here are the scenarios for both cases.
For general purposes, we are going to assume you work 40 hours per week over the course of the year.
Case # 1 – With Paid Time Off
Most hourly employees get two weeks of paid time off which is equivalent to 2 weeks of paid time off.
In this case, you would make $54,080 per year.
This is the same as the example above for an annual salary making $26 per hour.
Case #2 – No Paid Time Off
Unfortunately, not all employers offer paid time off to their hourly employees. While that is unfortunate, it is best to plan for less income.
Life happens. There will be times you need to take time off for numerous reasons – sick time, handling an emergency, or even vacation.
So, let’s assume you take 2 weeks off without paid time off.
That means you would only work 50 weeks of the year instead of all 52 weeks. Take 40 hours times 50 weeks and that equals 2,000 working hours. Then, multiply the hourly salary of $26 times 2,000 working hours, and the result is $52000 per year.
40 hours x 50 weeks x $26 = $52,000
You would average $208 per working day and nothing when you don’t work.
$26 an Hour is How Much a year After Taxes
Let’s be honest… Taxes can take up a big chunk of your paycheck. Thus, you need to know how taxes can affect your hourly wage.
Also, every single person’s tax situation is different.
On the basic level, let’s assume a 12% federal tax rate and a 4% state rate. Plus a percentage is taken out for Social Security and Medicare (FICA) of 7.65%.
Gross Annual Salary: $54,080
Federal Taxes of 12%: $6,490
State Taxes of 4%: $2,163
Social Security and Medicare of 7.65%: $4,137
$26 an Hour per Year after Taxes: $41,290
This would be your net annual salary after taxes.
To turn that back into an hourly wage, the assumption is working 2,080 hours.
$41,290 ÷ 2,080 hours = $19.85 per hour
After estimated taxes and FICA, you are netting $19.85 an hour. That is $6.15 an hour less than what you thought you were paid.
This is a very highlighted example and can vary greatly depending on your personal situation. Therefore, here is a great tool to help you figure out how much your net paycheck would be.
Plus budgeting on over $19 an hour wage is much different.
$26 an Hour Salary Calculator
Now, you get to figure out how much you make based on your hours worked or if you make a wage between $26.01-26.99.
This is super helpful if you make $26.40 or $26.44.
You are probably wondering can I live on my own making 26 dollars an hour? How much rent or mortgage payment can you afford on 26 an hour?
Using our Cents Plan Formula, this is the best-case scenario on how to budget your $26 per hour paycheck.
When using these percentages, it is best to use net income because taxes must be paid.
In this example, we calculated $26 an hour was $19.85 after taxes. That would average $3,440 per month.
According to the Cents Plan Formula, here is the high-level view of a $26 per hour budget:
Basic Expenses of 50% = $1720.42
Save Money of 20% = $688.17
Give Money of 10% = $344.08
Fun Spending of 20% = $688.17
Debt of 0% = $0
Obviously, that is not doable for everyone. Even though you would expect your money to go further when you are making double the minimum wage. So, you have to be strategic in ways to decrease your basic expenses and debt. Then, it will allow you more money to save and fun money.
To further break down an example budget of $26 per hour, then using the zero based budget template is extremely helpful.
recommended budget percentages based on $26 per hour wage:
Category
Ideal Percentages
Sample Monthly Budget
Giving
10%
$315
Savings
15-25%
$766
Housing
20-30%
$1,082
Utilities
4-7%
$225
Groceries
5-12%
$315
Clothing
1-4%
$45
Transportation
4-10%
$180
Medical
5-12%
$225
Life Insurance
1%
$23
Education
1-4%
$45
Personal
2-7%
$83
Recreation / Entertainment
3-8%
$135
Debts
0% – Goal
$0
Government Tax (including Income Taxes, Social Security & Medicare)
15-25%
$1,066
Total Gross Income
$4,507
**In this budget, prioritization was given to basic expenses. Thus, some categories like giving and saving were less.
Can I Live off $26 Per Hour?
At this $26 hourly wage, you are more than likely double the minimum wage. Things should be easy to live off this $26 hourly salary.
However, it is still slightly below the median income of over $60,000 salary. That means it can still be a tough situation.
Is it doable? Absolutely.
In fact, $26 an hour is higher than the median hourly wage of $19.33 (source). That seems backward, but typically salaried workers earn more per hour than hourly workers.
Can you truly live off $26 an hour annually?
You just have to have the desire to spend less than your income. Plus consistently save.
If you are constantly struggling to keep up with bills and expenses, then you need to break that constant cycle. It is possible to be smart with money.
You need to do is change your money mindset.
This is what you say to yourself… Okay, I have aspirations and goals to increase how much I make. This is the time to start diversifying my income into multiple streams and start investing. I am going to stretch my 26 dollars per hour.
In the next section, we will dig into ways to increase your income, but for now, is it possible to live on $26 an hour?
Yes, you can do it, and as you can see it is possible with the sample budget of $26 per hour.
Living in a higher cost of living area would be more difficult. So, you may have to get a little creative. For example, you might have to have a roommate. Move to a lower cost of living area where rent is cheaper.
Also, you must evaluate your “fun spending” items. Many of those expenses are not mandatory and will break your budget. You can find plenty of free things to do without spending money.
5 Ways to Increase Your Hourly Wage
This right here is the most important section of this post.
You need to figure out ways to increase your hourly income because I’m going to tell you…you deserve more. You do a good job and your value is higher than what your employers pay you.
Even an increase of 50 cents to $26.50 will add up over the year. An increase to $27 an hour is even better!
1. Ask for a Raise
The first thing to do is ask for a raise. Walk right in and ask for a raise because you never know what the answer will be until you ask.
If you want the best tips on how specifically to ask for a raise and what the average wage is for somebody doing your job, then check out this book. In this book, the author gives you the exact way to increase your income. The purchase is worth it or go down to the library and check that book out.
2. Look for A New Job
Another way to increase your hourly wage is to look for a new job. Maybe a completely new industry.
It might be a total change for you, but many times, if you want to change your financial situation, then that starts with a career change. Maybe you’re stressed out at work.
Making $26 an hour is too much for you and you’re not able to enjoy life, maybe changing jobs and finding another job may increase your pay, but it will also increase your quality of life.
3. Find a New Career
Because of student loans, too many employees feel like they are stuck in the career field they chose. They feel sucked into the job that they don’t like or have the potential they thought it would.
For many years, I was in the same situation until I decided to do a complete career change. I am glad I did. I have the flexibility that I need in my life to do what I want when I need to do it. Plus I am able to enjoy my entrepreneurial spirit.
This is a great way to find success and deny all of the naysayers.
4. Find Alternative Ways to Make Money
In today’s society, you need to find ways to make more money. Period.
There is no way to get around it. You need to find additional income outside a traditional nine-to-five position or typical 40 hour a week job. You will reach a point where you are maxed on what you can make in your current position or title. There may be some advancement to move forward, but in many cases, there just is not much room for growth.
So, you need to find a side hustle – another way to make money.
Do something that you enjoy, turn your hobby into a way to make money, turn something that you naturally do, and help others into a service business. In today’s society, the sky is the limit on how you can earn a freelancing income.
Must Read: 20 Genius Ways on How to Make Money Fast
5. Earn Passive Income
The last way to increase your hourly wage is to start earning passive income.
This can be from a variety of ways including the stock market, real estate, online courses, book sales, etc. This is where the differentiation between struggling financially to becoming financially sound.
By earning money passively, you are able to do the things that you enjoy doing and not be loaded down, with having a job that you need to work, and a place that you have to go to. And you still make money doing nothing.
Here is an example:
You can start a brokerage account and start trading stocks for $50. You need to learn and take the one and only investing class I recommend. Learn how the market works, watch videos, and practice in a simulator before you start using your own money.
One gentleman started with $5,000 in his trading account and now has well over $36,000 in a year. Just from practice and being consistent, he has learned that passive income is the way for him to increase his income and also not be a slave to his job.
Tips to Live on $26 an Hour
In this last section, grasp these tips on how to live on $26 an hour or just above a $50k yearly salary. On our site, you can find lots of money saving tips to help stretch your income further.
Here are the most important tips to live on $26 an hour. More importantly stretch how much you make, in case you are in the “I don’t want to work anymore” mindset. Highlight these!
1. Spend Less Than You Make
First, you must learn to spend less than you make.
If not you will be caught in the debt cycle and that is not where you want to be. You will be consistently living paycheck to paycheck.
In order to break that dreadful cycle, it means your expenses must be less than your income.
And when I say income, it’s not the $26 an hour. As we talked about earlier in the post, there are taxes. The amount of taxes taken out of your paycheck is called your net income which is $26 an hour minus all the taxes, FICA, social security, and Medicare are taken out. That is your net income.
So, your net income has to be less than your net income.
2. Living Below Your Means
You need to be happy. And living on less can actually make you happier. Studies prove that less is better.
Finding contentment in life is one thing that is a struggle for most.
We are driven to want the new shiny toy, the thing next door, the stuff your friend or family member got. Our society has trained you that you need these things as well.
Have you ever taken a step back and looked at what you really need?
Once you are able to find contentment with life, then you are going to be set for the long term with your finances.
Here is our story on owning less stuff. We have been happier since.
3. Make Saving Money Fun
You need to make saving money fun. If you’re good, since you must keep your expenses low, you have to find ways to make your savings fun!
Find new ways of saving money and have fun with it.
Even better, get your family and kids involved in the challenge to save money. Tell them the reason why you are saving money and this is what you are doing.
Here are 101 things to do with no money. Free activities without costing you a dime. That is an amazing resource for you and you will never be bored.
And you will learn a lot of things in life you can do for free. Personally, some of the best ones are getting outside and enjoying some fresh air.
4. Make More Money
If you want if you do not settle for less, then find ways to make more money. If you want more out of life, then increase your income.
You need to be an advocate for yourself.
Find ways to make more money.
It could be a side hustle, a second job, asking for a raise, going to school to change careers, or picking up extra hours.
Whatever path you take, that’s fine. Just find ways to make more money. Period.
5. No State Taxes
Paying taxes is one option to increase what you take home in each paycheck.
These are the states that don’t pay state income taxes on wages:
Alaska
Florida
Nevada
New Hampshire
South Dakota
Tennessee
Texas
Washington
Wyoming
It is very interesting if you take into account the amount of state taxes paid compared to a state with income taxes.
Also, if you live in one of the higher taxed states, then you may want to reconsider moving to a lower cost of living area. The higher taxes income tax states include California, Hawaii, New Jersey, Oregon, Minnesota, the District of Columbia, New York, Vermont, Iowa, and Wisconsin. These states tax income somewhere between 7.65% – 13.3%.
6. Stick to a Budget
You need to learn how to start a budget. We have tons of budgeting resources for you.
While creating a budget is great, you need to learn how to use one.
You do not have to budget down to every last penny.
You need to make sure your expenses are less than your income and that you are creating sinking funds for those irregular expenses.
Budget Help:
7. Pay Off Debt Quickly
The amount that you pay interest on debt is absolutely absurd.
Unfortunately, that is how many of these companies make their money is from the interest you pay on debt.
If you are paying 5% to even 20-21% or higher, you need to find ways to lower that debt quickly.
Here’s a debt calculator to help you. Figure out your debt-free date.
Make that paying off debt fast is your target and main focus. I can tell you from personal experience, that it was not until we paid off our debt that we finally rounded the corner financially. Once our debt was paid off, we could finally be able to save money. Set money aside in separate bank accounts and pay for cash for things.
It took us working hard to pay off debt. We needed persistence and patience while we had setbacks in our debt-free journey.
Jobs that Pay $26 an Hour
You can find jobs that pay $26 per hour. Polish up that resume, cover letter, and interview skills.
Job Search Hint: Always send a written follow-up thank you note for your interview. That will help you get noticed and remembered.
First, look at the cities that require a minimum wage in their cities. That is the best place to start to find jobs that are going to pay higher than the federal minimum wage rate. Many of the cities are moving towards this model so, target and look for jobs in those areas.
Possible Ideas:
Virtual Assistant
Freelance writer
CDL Truck Driver
Managers
Entry Level Marketing Jobs
Data Entry Clerks
Customer service managers
Bank tellers
Maintenance workers
Freight broker – Learn how easy it is to start!
Administrative assistants
Athletic Trainers
Event Planners
Security guard
Movers
Warehouse workers
Certified Nursing Assistant
Companies that pay more than $26 per hour:
Costco
Wayfair
Amazon
Best Buy
Target
Wells Fargo
Disney World
Disney Land
Bank of America
JP Morgan
Cigna
Aetna
$26 Per Hour Annual Salary
In this post, we detailed 26 an hour is how much a year. Plus all of the variables that can impact your net income. This is something that you can live off.
How much is 26 dollars an hour annually…
$54,080
This is right between $50,000 per year and $56k a year. In this post, we highlighted ways to increase your income as well as tips for living off your wage.
Use the sample budget as a starting point with your expenses.
You will have to be savvy and wise with your hard-earned income. But, with a plan, anything is possible!
Still thinking I don’t want to work anymore, you aren’t alone and need to start to plan for your early retirement.
Learn exactly how much do I make per year…
Know someone else that needs this, too? Then, please share!!
Did the post resonate with you?
More importantly, did I answer the questions you have about this topic? Let me know in the comments if I can help in some other way!
Your comments are not just welcomed; they’re an integral part of our community. Let’s continue the conversation and explore how these ideas align with your journey towards Money Bliss.