3 Ways to Save Money – Part Three

During this series, I’m sharing PROVEN and PRACTICAL techniques that have helped people save money.

PART ONE – Automatic Draft From Paycheck

PART TWO – Create an Escrow Account For Known, Upcoming Expenses

PART THREE – Establish Accountability

Find someone who is (1) winning with money, (2) not trying to sell you something, and (3) available to help you. Ask them to hold you accountable to your saving goal.  I have seen some people go to the extreme length of actually giving the money to the other individual to hold for them because they cannot trust themselves to keep their own hands off of it.

Accountability can also be created by your written spending plan that you prepare every month before the month begins (you do prepare one, right?).  This plan helps cement your goals in your mind and helps you connect the fact that if you spend money on unplanned items, you will literally be robbing yourself of your savings goals.

I am married – this means I have built-in accountability.  Jenn is a huge saver.  She keeps me (the spender) in control. Establish accountability – it works!

3 Ways to Save Money – Part Two

During this series, I’m sharing PROVEN and PRACTICAL techniques that have helped people save money.

PART ONE – Automatic Draft From Paycheck

PART TWO – Create an Escrow Account For Known, Upcoming Expenses

For those unfamiliar with an escrow account, it is a savings account that is generally established by a mortgage company.  The mortgage company totals the annual cost of property taxes and homeowner’s insurance and divides it by the number of payments being made each year.  The mortgage company then pays for the taxes and insurance from this escrow (savings) account.  For example, if the property taxes are $1,200/year (sorry Northern folks – this is how low they are in the South) and the insurance is $600, then the total amount needed each year is $1,800.  The mortgage company will collect $150 extra with each monthly payment to place into the escrow account.

An escrow account smooths out the cost over a year – instead of having to pay for it all in one month.  It tightens the monthly budget, but having a fully funded escrow account sure is AWESOME when vacation arrives and the money has already been saved to pay cash for it!  Those who have a mortgage with an escrow account will testify to the fact that they never worry about paying for the taxes and insurance – ask someone!

Take it from one who has lived it – if you do not plan for your known, upcoming expenses, your ability to save money will be tremendously hampered!

Related Tool – Known, Upcoming Expenses Calculator

 

3 Ways to Save Money – Part One

One of the largest issues I see during one-on-one financial coaching is the inability to save money. Saved money is essential to long-term sustainability.  Saved money relieves stress and allows you to take a chance.  Saved money allows life to happen (job loss, disability, pay cut, injury, etc.).

But you already knew that part.  Yet, even though we KNOW how important it is to save money, most people fail to do so.  So, I wanted this series to focus PROVEN and PRACTICAL techniques that have helped people save money.

If you have negative savings (no money plus overdrafted accounts and debt), the goal is to bring you to zero.  If you are at zero, the goal is to get to at least $2,500.  If you have been able to save a substantial amount of money, it is my hope that you will participate in the discussion and share your own tips that have worked well for you!

PART ONE  Automatic Draft From Paycheck

Establish a savings account and have the money drafted from every single paycheck.  Whether it’s $25 or $250 per pay period – just SAVE!  You KNOW that the car is going to break down.  You KNOW that the school is going to send home a surprise expense.

By establishing this draft, it allows the money to be “out-of-sight.”  When money is out-of-sight, it can be out-of-mind.  This allows the account to grow without being robbed.

Now, I personally had a problem with this when I did not have a monthly budget.  I would ROB my own savings account about 2.1 microseconds after I was paid.  My account did not start growing in a healthy manner until after Jenn and I developed a plan that we agreed on.

How about you?  Is your paycheck set up for an automatic draft into your savings account?

“I Just Don’t Have Enough Time” (and other poor excuses for not having a budget)

“I just don’t have enough time.”

I can’t tell you how many times I’ve heard a person tell me this when discussing the importance of preparing a written budget each and every month.

But it’s not true. It’s a lie we tell ourselves. You see, if we can come up with an excuse, then it stands to reason that it is okay to avoid doing what we know we should be doing to maximize our money – a budget!

Here is a list of items of which at least one is true for nearly every single person who has told me, “I just don’t have enough time to prepare a budget.

  1. They have enough time to watch their favorite TV show each week
  2. They spent at least 45 minutes sitting on the sideline of their child’s sporting event (before and after the actual event)
  3. Facebook consumption exceeded 4 hours each week (probably looking at funny Cat and dog videos)
  4. They stressed out over money for at least 30 minutes each day (checking bank account balance each day and worrying about an expense clearing the bank too early)

Here is a fact: You DO have 1,440 minutes each day.

Here is a good question: What do you need to eliminate from your life so that you can prepare and follow a budget?

To help you get started, we’ve created a helpful set of budgeting tools as well as an instructional video for you HERE.

Other poor excuses for not having a budget:

  1. “I hate dealing with money.”
  2. “Money stresses me out.”
  3. “There’s just not enough money.”
  4. “I just need to make more money.”
  5. “I have no idea how much money I’m going to make this month because my pay is so crazy.”

Financial Tool Spotlight ==> Savings Account Balance Tracking Tool

Have you ever been saving up for multiple purchases and holding it all in multiple accounts? The list of items my family saves for ranges from vacations to car replacement funds to property taxes to life insurance payments. When you look at the account(s), it’s hard to tell what money is for what. Well we have a great FREE tool to help! Let me introduce you to the Savings Account Balance Tracking Tool.

Here’s how it works. Let’s say you are saving for the following items:

  • Emergency Fund
  • Christmas
  • Property Taxes
  • Annual Car Insurance Premium
  • Life Insurance
  • Vacation

And, let’s say that the money is being saved in three different accounts – a Christmas Fund, Savings, and Checking Account. The Savings Account Tracking Tool can help you tackle what each dollar is for! In this example, there is $1,000 in Checking, $5,000 in Savings, and $200 in the Christmas Fund.

Saving Account Tracker 1

 

 

 

What is the $6,200 in the accounts for? Using this tool, you can clearly give a name for every dollar you have!

Saving Account Tracker 2

 

 

 

 

If all of the money has not been give a name, the BALANCED sections turns yellow with a LOW and show you the amount you still have left to name.

Saving Account Tracker 3

 

 

If too much money has been given a name, the BALANCED sections turns red with a HIGH and show you the amount you’ve overspent.

Saving Account Tracker 4

 

 

When the total amount matches the total amount named, the BALANCED section turns green with a YES. Here is what it will look like when it is balanced!

Saving Account Tracker 5

 

 

 

 

 

 

 

 

 

One huge benefit of having your savings account completely named is that you AND your spouse will KNOW what the money is for. It eliminates disputes (yes – this is what the money was for), it provides encouragement (yes – we get to take vacation), and it make sure the necessities get paid.

Ready to try it out? – Savings Account Balance Tracking Tool (Excel)

 

Is Your Money Making Money For You?

As I described in my book, Oxen: The Key to an Abundant Harvest, you truly begin winning with money when your “money makes money for you”.

With that said, here’s a great question to ask yourself: “How much interest is my bank paying me for the money in my savings account?”

Chances are high that the number is 0.01%. In fact, I checked several large banks and here’s what I found for their basic savings accounts:

  • Bank of America – 0.01%
  • Wells Fargo – 0.01%
  • Bank of the West – 0.01%-0.02% (Depending on the state you live in)

This is why I hold all of my business and personal savings in ONLINE BANKS. This is not a “bank with website access”. They are banks that exist almost exclusively online. Since they do not have physical buildings, they have to do extraordinary things to attract customers, like offer higher interest rates. You can check out my top 5 reasons why I use online banks HERE.

Let’s look at an example. Let’s say you put $2,500 (one month’s of expenses – Rung 2 of the IWBNIN Ladder) into a savings account today. In one year you could earn almost $25.00 in interest from an online bank vs. $0.25 from one of the large banks. I’d say that’s a great deal! Now that might not seem like a significant amount of money to you but it’s free money and every little bit helps! Also, remember this is your savings account, not an investment account.

With this information, I’d encourage you to do 2 things:

  1. Find out how much interest your bank is currently paying on your savings.
  2. Check out the online banks that we recommend HERE.

 

5 Reasons to Open a Savings Accounts with Online Banks

If you have ever heard me speak or teach about saving money, then you have undoubtedly been introduced to online banks. I’m not talking about banks that have websites but about banks that have little to zero physical “bricks & mortar” locations.

Here are 5 reasons why I use online banks (over a local bank) for my savings accounts:

  1. High Interest – These banks pay interest equivalent to a 30-month CD, but none of the CD restrictions exist (early withdrawal penalty, terms, etc). Currently, these accounts are paying interest between 0.75% – 0.99%. That’s WAY BETTER than the .01% that most local banks are paying on simple savings accounts!
  2. No Minimum Balance – While most of these banks require a small minimum amount to open an account, they do not have a minimum balance requirement going forward. This makes it perfect for any and every saver.
  3. Sub-Accounts – These banks allow you to create “named accounts” within the main account so you can better track your savings for various items. For instance, I have sub-accounts named: “Business Operating Reserves”, “Christmas”, “Vacation”, “Property Taxes”, “Life Insurance”, and “Emergency Fund”. When I log in to my account, I can instantly see how much I have saved for each of these items.
  4. Customer Service – I’ve experience nothing but the best service from my online banks. If you think about it, they have to have really amazing customer service. After all, they don’t have local branches. The only way they can attract and retain customers is by serving each customer extremely well.
  5. No Fees – I’ve never been charged a fee by my online bank. No once.
  6. BONUS – Automatic savings – you can create automatic transactions that draft money from your regular bill paying bank account on a frequency that works best for you. I have established automatic monthly drafts so I don’t have to “feel like it” to ensure I save money each month! These banks are also FDIC insured so your deposits are protected.

I encourage you to click HERE for the banks that I recommend. Choose the one that suits you best and get your savings automated!

Already use a Savings Account with an Online Bank? Tell us what you like most about them?

Monday Money Tip: Online Bank Savings Accounts

Welcome to another addition of Monday Money Tip! I’ve used online bank accounts since 2007. They have been incredible for me, and I think they can be a very helpful way for you to maximize your savings as well! You can check out the online banks I recommend HERE.

Want to automatically receive a helpful and practical money tip every Monday? Just sign up HERE (It’s FREE)!

 

Sneak Peek: Credit Scores – Part 2

Well we have officially entered graduation season! Students are graduating from both high schools and colleges all over the country. This is an extremely exciting time in ones life, but it can also come with lots of questions. I’ve written a book that’s specifically for high school students, college students and twenty-somethings – What Everyone Should Know About Money Before They Enter The Real World. So many of us have experienced a time where we have learned a financial principle or tool and said, “I wish I had learned that before I entered the real world”. One of these questions is in regards to credit scores.

I wanted to share with you an excerpt from my book that addresses the subject of credit scores.

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Everyone Should Know About Money Before They Enter The Real World:

What number is a good credit score?
According to Fair Isaac, a credit score can range from 300 to 850. The higher the score, the lower the risk. This means you want a higher number.

Companies establish their own criteria as to which credit score is a good credit score. As a general rule, any FICO score greater than 750 is an excellent credit score. Anything more than 800 is considered outstanding. As credit scores drift into the 600 range, credit might still be available, but it will come at a higher cost. Credit scores in the 500 range might prevent you from obtaining reasonable lending rates and terms.

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Learn more about the book and order your copy HERE.

Sneak Peek: Credit Scores – Part 1

Well we have officially entered graduation season! Students are graduating from both high schools and colleges all over the country. This is an extremely exciting time in ones life, but it can also come with lots of questions. I’ve written a book that’s specifically for high school students, college students and twenty-somethings – What Everyone Should Know About Money Before They Enter The Real World. So many of us have experienced a time where we have learned a financial principle or tool and said, “I wish I had learned that before I entered the real world”. One of these questions is in regards to credit scores.

I wanted to share with you an excerpt from my book that addresses the subject of credit scores.

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Everyone Should Know About Money Before They Enter The Real World:

Your credit score will have an impact on your life.
Credit scores are a measure of one’s ability to manage debt. The dominant credit scoring system which is used by most lenders was created by Fair Isaac. This system provides a measure of an individual’s credit worthiness and is commonly known as a FICO Score.

A credit score impacts many things. It determines whether or not you can obtain a loan. If you qualify for a loan, the credit score dictates the interest rate charged.

Credit scores also impact insurability. When you obtain auto, renter’s or homeowner’s insurance, the credit score directly impacts the insurance cost. The lower your credit score, the higher the insurance premium will cost. I have seen insurance premiums doubled because of poor credit.

Credit scores also impact the ability to obtain a cell phone contract or an apartment lease. It can affect utility connections. Utility providers usually require much larger deposits from people who have low credit scores. If you have an excellent credit score, a deposit might be waived entirely.   Credit scores can even impact your ability to obtain a job.

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More about the subject of credit scores, in my next post! Stay tuned!

Learn more about the book and order your copy HERE.

What Everyone Should Know About Getting A Degree

I could never have attended Purdue University had it not been for student loans. I began dating Sallie Mae right away, and it took years for me to break up with her.

As we continue our discussion surrounding graduation, here are some points about getting a degree and student loans from my book – What Everyone Should Know About Money Before They Enter The Real World. This is a great resource for those currently graduating high school or college.

  1. Go to school for 4 years for a 4 year degree (or for 2 years for a 2 year degree). Not six years for a four year degree. This can have substantial financial consequences. For example, if you attend college for two years more than required for the degree, you will have to pay for two extra years of school PLUS you will forfeit the salary you could have earned during that two year period. For many people this is a $100,000 financial swing!
  2. Obtain a degree that will help you repay the loan. There are many people who go to prestigious private colleges to obtain a degree that is the equivalent to underwater basket-weaving. While I think that underwater basket-weaving would be amazingly cool, it probably won’t help repay the loans. My mechanical engineering degree from Purdue University and MBA from Clemson University certainly helped me repay my student loans.
  3. Tech or Community College for the first two years can really lower costs. Most states have established programs that allow all credits earned during the first two years of community college to transfer directly to the state schools. I have seen the costs for community college. They are much lower than state or private universities. The local community college where I live is literally one-third the cost of the state school.
  4. Obtain subsidized loans, if possible. Subsidized loans do not accrue interest while the student maintains at least half-time student status. They also do not accrue interest while the loans are in grace periods or deferment.
  5. The name of the college does not matter nearly as much as the effort you put into your studies. Many students fall in love with a particular college and feel that they just must attend only that institution. I have discovered that no one really cares about the fact that I went to Purdue and Clemson – all they want to know is if I can help them accomplish their stated objective.

Print this out and have a conversation about it with your student or future student. My bride and I have been talking about this with our daughter since she was six or seven. I know it might seem like boring conversation, but I promise you that it has had a positive impact on our daughter and the plans she has made for education.

I have written an entire chapter on this topic in my book for high school and college students – What Everyone Should Know About Money Before They Enter The Real World – I promise you it will help financially prepare your student for the real world. You can purchase that book HERE or for your e-reader HERE.

Monday Money Tip: How to Pay Off Student Loan Debt Faster

Happy Monday! In today’s tip, I wanted to share how you could eliminate your student loans faster! While you may believe you will still be paying on your loans in your 50s – or even later, it doesn’t have to be the case. I was able to eliminate all of my student loan debt in my 20s by using these techniques!

Want to automatically receive a helpful and practical money tip every Monday? Register FREE at MondayMoneyTip.com.

Financial Tool Spotlight ==> Early Pay-Off Calculator

Well it’s that time of year again…graduation time! I feel like the school year just started, yet my family is already participating in end of school celebrations for each of my kids!

Graduation season is such an exciting time but it can often be weighed down by the enormity of student loans and other debts. So I wanted to spotlight one of our free tools that can provide significant guidance when tackling these debts – the Early Pay-Off Calculator. This tools is a HOPE-GENERATOR! This tool will get you fired up!! You’ll be able to see how a little extra money towards your debt can make a huge difference.

I have found that the Early Pay-Off Calculator is most impactful when used to calculate how much quicker a student loan, car payment, mortgage, etc., could be paid if one were to begin paying extra principal each month.

As an example, consider a $30,000 student loan financed for 10 years at 6.5% annual interest. The principal and interest payment would be $341/month.

  • Pay $441/month ($100 extra), the early pay-off calculator shows that the loan would be eliminated in 7 years (34 months sooner) and save you over $3,300 in interest!
  • Pay $500/month ($159 extra), the pay-off would occur in a little over 6 years and save you over $4,400 in interest.
  • What if one were able to make two payments per month ($682/month)? Pay-off would occur in a little over 4 years and save you $6,500 in interest!
    Don’t think it’s possible to make two payments per month? Think again! Most people could make two, three or even four payments per month if they eliminated all of their other debts! I challenge you to pull up the Early Pay-Off Calculator, punch in your numbers and discover why this tool will be one of your favorites too!

TOOL: EARLY PAY-OFF CALCULATOR

RESOURCE: I Was Broke. Now I’m Not. – This is a great resource to help you attack debt and make it leave your life!

5 Essentials to Paying Off Debt – Step 5

In this series, I want to equip you to become debt free!! Jenn and I became debt free in just 14 months by following this process. I can tell you this – there is NOTING like living life without the weight of debt!

STEP 1 – Understand the WHY before the HOW

STEP 2 – Calculate your Debt Freedom Date

STEP 3 – Accelerate your debt elimination

STEP 4 – Use the Debt Snowball Technique 

STEP 5 – Establish Accountability
The strongest among us can still fall to temptation! You could be making fantastic progress toward debt freedom and then a new truck pulling a new boat passes you on the road. If you’re not careful, you’ll also be pulling a new truck and boat down the road!

There are two key ways to ensure you are held accountable to your goal of debt freedom!

  1. If married, work together with your spouse. If unmarried, have someone you trust (someone who has won with their money) hold you accountable!
    There is incredible power when you work together with your spouse towards debt freedom! It is a common goal that will unify your marriage and cement your commitment to managing your resources together.I have also found that when I have a bad case of the “I wants” and “I gotta-have”, Jenn does not. She shuts me down! Then, when Jenn gets a bad case of “I really want this”, I do not. I shut her down! Why? Because we are not doing debt! We are THROUGH with it!!
  2. Plan your spending every single month!  
    Planned money goes farther than unplanned money! Every single month, Jenn and I still down TOGETHER and spend every single dollar on paper before we are paid. Don’t miss this!! Every. Dollar. On. Paper. BEFORE. We. Are. Paid.I can tell you this. I HATED the idea of budgeting and now all I do is yell from the mountaintops about how important it is and how EZ it is to budget! There are FREE budget tools that are available HERE. Use one of them to start your journey to debt freedom! Your budget will hold you accountable. I wouldn’t be surprised if it helped you free up $200-$500 per month to attack your debt even harder.

Also, make sure to add some FUN into your liberation from debt! I know that money can make you so frustrated that you want to pull all your hair out, but add some fun into it! You could make your debt pay off visual. Check it out HERE.

To learn more about becoming debt free, check out my book, I Was Broke. Now I’m Not.

 

5 Essentials to Paying Off Debt – Step 4

In this series, I want to equip you to become debt free!! Jenn and I became debt free in just 14 months by following this process. I can tell you this – there is NOTING like living life without the weight of debt!

STEP 1 – Understand the WHY before the HOW

STEP 2 – Calculate your Debt Freedom Date

STEP 3 – Accelerate your debt elimination

STEP 4 – Use the Debt Snowball Technique 
We can all agree that debt is a drag. It hangs on like a bad relationship or a fixer-upper money pit house. Anyone, when given the choice, would choose to be debt free over paying debt payments every month.

The average family possess credit card debt, student loan debt, furniture debt, vehicle debt, and a personal loan or two. Then a house payment enters into the picture. Every single month, 40% or more of the family’s income is “dead on arrival” because it must immediately be sent out to lenders. Let’s work on changing that!

With Steps 1-3 complete, we can now focus on actually paying off the debt using the Debt Snowball Technique!

Let me explain the process for using the Debt Snowball Technique.

  1. List ALL debts from the smallest balanced owed to the largest.
  2. Pay the minimum payment on all debts except the smallest one.
  3. Pay as much as you can on the smallest debt.
  4. When the smallest debt is eliminated, take the monthly payment you were paying for that debt and add it to the monthly payment you’re making on the second smallest debt.
  5. Continue this process with a vengeance until you are debt free!!

I highly recommend this technique because you will see individual debt payments disappear more swiftly from your monthly budget. For more information on the Debt Snowball Technique, grab a copy of my latest book, I Was Broke. Now I’m Not.

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