Yesterday was Labor Day and the unofficial end of summer. Scores of students headed back to school in recent weeks, and many of those students are college students. In the spirit of “back to school,” we’ll be focusing on money and kids this month, and we’re kicking it off with a few thoughts on student loans.
Many people would classify student loans as “good debt” because it allows someone who otherwise couldn’t afford an education to go to college. On the spectrum of “good debt” vs. “bad debt”, student loans fall somewhere between a mortgage (“good debt”) and credit card debt (“bad debt”). I am all for getting a college education, and even took out some student loans myself, but oftentimes students end up taking on more debt than they should.
Here are three things you can do for your son or daughter who is off to college to minimize the student debt burden that plagues far too many young working adults today:
- Community College. Consider having your child start their higher level education at a community college. Attending a local community college for two years can cut the cost of a four-year university education in half. Community colleges also typically offer programs that allow for easy transfer to a four-year university after earning an associate degree.
- Free Money. If your son or daughter is accepted into a more expensive school, then put in the extra effort to apply for as many grants and scholarships as possible. Having $100,000+ of debt coming out of college is not the best starting point of a career. Minimize the expenses as much as possible with the resources available to you. If you can’t obtain scholarships or grants (or pay for that prestigious school out of pocket) then ask yourself if it is worth the extra money compared to your local State university.
- Don’t Use Student Loans for Pizza. If you must take out student loans, then only borrow enough for tuition and/or books. Don’t use loans for living expenses such as food, housing, transportation, etc. Find a way to cover these expenses without debt. As a parent you could help your son or daughter by paying some of those expenses, and having them contribute by working a part-time job. The bonus of working while in college is that it builds a more well-rounded student, which is an advantage for the freshly minted graduate looking for a career-oriented job.
The decisions you and your kids make about college today will affect them financially for the rest of their lives. Take the time to weigh your options in order to minimize the amount of debt your children will have to pay at the start of their career. Debt, when used properly, can allow you to do things that enhance your life. If used improperly, it can cause a lifetime of financial stress. What are your thoughts on student loans? Please let us know in the comments section below or on our Facebook or Twitter page.
- Published in Debt
Last month’s blog had some tips on saving money from a woman’s perspective on things that are trendy, utilized infrequently, or not that important. This month, I’m excited to present part II of last month’s blog with my tips on when to save and when to spend from a male’s perspective! By working with my clients (and in my own experience), I’ve learned that men may not make as many small purchases that add up over the year, but sometimes we spend thousands of dollars on things that we end up replacing in a few years.
Below are some examples both big and small.
When to Spend: Last Year’s Gadget
When to Save: Newly Released Gadget
As guys we want the newest, best, and coolest gadgets, but spending money on all the “latest and greatest” technology can really destroy your budget. Deep down you know that last year’s gadgets (cell phone, television, digital camera, video game system, etc.) can do pretty much the same things as this year’s technology, but you will save a lot of money by purchasing last year’s model. You can have a house full last year’s technology, save lots of money, and barely notice a difference!
When to Spend: Nice Suit
When to Save: Dress Shirts
A nice suit should be a staple in every man’s wardrobe. You will be wearing this suit for business meetings and nice social events, so spend the money on a high quality suit that will last a long time, rather than buying a low quality suit that only lasts a few years (and probably doesn’t look great). Be sure to buy one that has a classic look, rather than a trendy one that will go out of style in a few years. Finally, pick a color that is versatile like black, navy blue, or dark gray. Save your money when you buy dress shirts. You can purchase quality shirts at JC Penny or Macy’s during one of their many sales throughout the year.
When to Spend: Shoes
When to Save: Trendy Shirts
Spend the money on a good pair of shoes for daily use. Your feet will appreciate it, and so will the rest of your body. Go ahead and pass on the trendy “in season” shirts. You can get nice quality shirts without breaking the bank. If you spend $50 for a T-Shirt, you’ve spent too much (thank you, Macklemore!). Instead put that money toward your shoes. Bonus: Women notice a guy who wears nice shoes.
When to Spend: 2-3+ Year Old Car
When to Save: New Car
Next to buying a house, a car is one of the most expensive things we buy. And typically we don’t pay attention to the overall cost of the car, we just focus on whether or not we can swing the monthly payment. A car depreciates the most during the first few years, so you can get a 2-3 year old car that is “almost new” for significantly less than a new car. If you are really itching for that “new car smell,” then go out and buy an air freshener with a “new car scent” with all the money you saved!
When to Spend: 2nd Date
When to Save: 1st Date
I’ll wrap up these tips for my single readers out there. Before I met my beautiful wife on Match.com, I went on many first dates. If I had wined and dined each of those women on the first date I would have gone broke! My go-to first date was to meet at a coffee shop. This way we could talk and get to know each other in a low pressure environment. If we hit it off, like I did with my wife on our first date at Starbucks, then I would step it up on the second date. If the first date goes nowhere, then at least you have an easy out while spending very little money.
So those are my tips on when to save and when to spend. What do you think? Do you agree or disagree? What are some of the areas where you think you should save or spend? Please share your thoughts with me in the comments section below!
- Published in Spend Wisely
By Jeannie Riess | Dr. Budgets
Working within a budget doesn’t mean you can’t spend money – it’s quite the opposite! A budget brings awareness to your spending and encourages you to spend money on what’s really important to you. If an annual vacation is a top priority for you, then divert the $20/week ($1,040 a year) you are spending on coffee drinks into a travel fund.
When you save money on things that are trendy, utilized infrequently, or flat out not that important, you can splurge on what really matters.
Below are some examples.
Spend: Workout Shoes (OR Pants)
Save: Workout Tops
Your feet need to be supported if you’re a runner or hiker, and a good pair of shoes will outlast a few pairs of cheap shoes. Good shoes can prevent injury to your ankles and knees and are worth the investment. If your exercise of choice doesn’t involve shoes (Yoga, Pilates) or doesn’t require good shoes (the elliptical or cycle machines), then put your money toward good workout pants. Workout tops are simply not worth spending a lot of money on – you can find very cute tops at Target and Forever 21, or wear the free shirt you earned from your last half marathon!
Save: Trendy Tops
Trends in jeans tend to have longer cycles, so they’re worth the investment. Although boyfriend jeans are the new “it” jean, skinny jeans had a good run for at least five years. Before that, bootcut jeans were the go-to jean for a few years. Trends in tops cycle through much faster, so your money is better spent on jeans. I say “Nordstrom for jeans and Forever 21 for tops.” Nobody cares that your shirt was inexpensive if your butt looks good in your expensive jeans.
Spend: Boots and Heels
Save: Flats, Flip Flops, and Tennis Shoes
Skip the $50 flip flops and put that money toward the shoes that make a statement (and you’ll wear most often): boots and high heels.
Spend: One Fantastic Bikini
Save: Extra Bikinis
Spend your money (and time in the dressing room) on a bathing suit that makes you feel great and that you love. Unless you’re a beach bum, you just need one fantastic suit – so don’t spend your money on a few less-than-stellar suits (which can quickly add up).
Spend: Your Everyday Bag
Save: Clutches, Beach Bags, and Trendy Purses
You want the purse you use every day to be on trend, versatile, and something you love – that’s a tall order for a cheap bag! Investing money in a purse you love is worth it since you’ll use it pretty much every day. Spend some time finding a great bag that fits your needs and lifestyle, and opt for a style that is more classic than trendy. When it comes to bags and purses, you can skimp on beach bags, clutches you only use a few times a year, and super trendy purses for a night out.
Spend: Foundation, Moisturizer, Cleanser
Save: Mascara, Lipstick, and Blush
The rule I like to follow here is to invest in the products that really make a difference in how your skin looks (foundation, moisturizer, and cleansers), because there are significant differences between cheap moisturizers, that are one-size-fits-all, and a good moisturizer made for your skin type. The differences between expensive mascaras, lipsticks, and blushes compared to the drugstore brands aren’t enough to justify the (sometimes) $25 price difference.
So, there you have some of my personal guidelines for when to save and when to spend. What do you think? Do you agree or disagree? Do you have your own guidelines for when you save and when you splurge? Please share your thoughts with me in the comments section below!
Please share this post with someone who you think will benefit from these tips, or send them to our Facebook page (www.facebook.com/drbudgets) for more information on when to save and when to spend. Also, check out our blog next month for the “guy” version of this blog.
- Published in Spend Wisely
So you married the love of your life, but are unsure of how to merge your finances? Yes, talking about money can get emotional, and sometimes it is not easy to express yourself in a way that doesn’t hurt your spouse’s feelings. There is no right or wrong way to merge your finances. Whatever works for the both of you is the best way. It is important to openly communicate with each other about your goals and what is important to you, then build a financial strategy and structure around that conversation. Sometimes it really helps to talk with a neutral third party who can take some of the emotion out of the discussion. You should both be involved and know where the money goes, even if only one of you has a detailed overview of the finances. If one person pays the bills, make sure the other person is kept in the loop so that you are both on the same page. Here is how we structured our household finances:
First, a percentage of income automatically goes into retirement plans (i.e. 401k) and into our joint savings account for long-term expenses (i.e. down payment for our future home, down payment for our next car, a bathroom remodel, our trip to Europe, etc.).
The rest of our income flows into our joint checking account. Most of our joint expenses are paid out of this account, including:
*Health & fitness expenses
*Day-to-Day expenses (groceries, toiletries, joint gifts, dog expenses, etc.)
Finally, we each have a separate checking account that we use for our own personal expenses. These separate accounts allow us to spend money on what is important to each of us without having to consult with the other person. This gives me the freedom to buy Aztecs basketball tickets, and it gives her the freedom to take a girls trip to Las Vegas. How this money is spent is really up to each of us. We each have the same amount transferred to our individual checking accounts every week from our joint checking account. Examples of what we spent from these accounts include:
*Personal Care Services (i.e. hair, nails, spa)
*Shopping (i.e. clothing, technology, gadgets, movies, music)
*Gifts for each other
This system has been working for us, so hopefully it gives you some guidance when you are setting up your own system. Dr. Budgets works with many couples and has seen other options for deciding how much money to transfer to each person. Here are some other options:
*Each person receives a percentage of his/her income instead of equal amounts
*Transfers are made once a month instead of once a week
*Instead of depositing all income in the joint account, each person has income deposited into his/her individual account, then transfers a set amount to the joint account for savings and household expenses.
If you need a neutral third party to help you navigate through the emotional side of setting up your financial system, give us a call at 619-800-3030 for your complementary consultation. Also check out our Facebook page (www.facebook.com/drbudgets) in June for more financial tips for married couples. If you have any questions or comments, please post them in the comments section below or e-mail me directly at email@example.com.
- Published in Love and Marriage
Congratulations on your engagement! You’ve found the love of your life, and are now somewhere in the process of planning your amazing day. Whether you and your soon-to-be spouse are paying for the affair yourselves, or you have help from family members, you’re probably working within a budget. How do you manage to stay within that amount and still have your dream event? My fiancée and I were faced with this same question, many months ago, when we started to plan our wedding that is coming up here in June. Based on my experience, here are 10 tips on how to have the most wonderful day without going deep into debt:
The best thing you can do to help with the planning process is to start with a vision of your wedding day. What is important to you? How do you want your big day to go? What are your “must haves,” and what is not so important? Pick a few words that sum up how you want your wedding to be (Creative, fun, and colorful? Intimate, romantic, and sweet?), then refer back to these words whenever you have a decision to make. For our wedding, we want our guests to have fun and enjoy the celebration of our marriage, so every decision we have made has aligned with that vision.
Create a wedding budget. It will help keep you out of debt, or at the least minimize the amount of credit you need to use for your wedding. Find a budget template online (or email me and I’ll send you my template), and refer to your vision as you assign dollar amounts to each category. Once you have created your budget, be sure that the people who are helping you plan your wedding know your budget too! Take a look at this infographic that does a great job of laying everything out: http://visual.ly/ultimate-wedding-cost-checklist-infographic. We created our budget right away, and it has truly helped us out with our decision-making.
The greatest influence on your budget is how many guests you are going to invite. Each guest adds at least $100 to the cost of the wedding, and most guests come with a “plus one,” so the overall cost can add up fast! Here is an excellent flowchart to help you through the process: http://noeyehasseen.com/blog/borrowed-and-blue-the-dreaded-guest-list. My fiancée and I decided we didn’t want to meet too many people for the first time at our wedding. If there is a friend of mine who she hasn’t met in the two and a half years we have been together, then they didn’t make it onto the guest list, and vice-versa. This made the decision-making process much easier, and didn’t favor either one of us.
This is an area that can quickly get away from you. Band, DJ, photo booth, disposable cameras, fireworks, and whatever else you can imagine. Since our vision centered around the guest experience, we could have easily spent a fortune on all sorts of different ideas. A band is much more expensive than a DJ, so we picked a great DJ, which saved us $5,000 that we could use on other areas to enhance the guest experience. This was a tough decision, especially for my fiancée, but ultimately there were other aspects of the wedding that were more important.
There are ways to save money on alcohol without diminishing the guest experience. Our venue doesn’t allow shots, which is saving us some money. We were also able to purchase our alcohol from BevMo, and have it chilled and delivered to the venue the day of the wedding. We saved between $1,000-$2,000 purchasing the alcohol this way, even though we have professional bartenders. Finally, we decided to serve only beer, wine, and a signature drink, which also keeps costs down without affecting the overall wedding day experience.
It’s easy to justify spending a lot on photography because, after your wedding is over, photos (and/or videos) are what you’ll have left to capture the memories. But that doesn’t mean you need to spend a fortune. Aim to spend no more than 10% of your budget on photography. Check out different photographers and their styles, and confirm what is included. Some photographers may charge less to photograph the big day, but make their money on selling prints after the wedding. Others may have a larger fee, but will provide a CD of all the images so you can print them yourself. So again, set your budget and stick to it.
Shop around for a florist! Prices vary widely. Often you can get a better price from a florist who is newer to the business. Flowers are more affordable when they are in season, and if you move flowers from the ceremony site to the reception area, you can save several hundred dollars.
When evaluating invitations, remember to factor all costs associated with them: postage (to mail to your guests and on the RSVP envelopes), embellishments, calligraphy or labels, and envelopes (inner, outer, and RSVP). If your invitations don’t have to be super fancy, you can save some money by using services like Vistaprint. My fiancée is very creative, so she designed really nice ones for a fraction of the normal cost. If invitations rank really low on your priority list, you may want to consider a nice email invitation.
The wedding industry plays on emotions, and there might not be any aspect of a wedding that has more emotion than the dress! If you’re open to it, there are lots of ways to save on your dress: you can borrow a beautiful dress or accessories from a friend, you can purchase a new dress from a sample sale or pre-owned dress online (many dresses sold online have never been worn because brides changed their minds, got pregnant, or called off the wedding), or “copycat” dresses from seamstresses on Etsy.com.
Have you been thinking of hiring a wedding planner? Do it! A great wedding planner can save you thousands of dollars because of their connections and creativity. Our wedding planner’s connections and ideas have saved us lots of money! As an added bonus, a professional who does this all the time is taking care of everything and thinks of everything, so you can enjoy the planning process and your wedding day.
These are the top 10 tips from my experience in planning our wedding. How did you save money without affecting the overall wedding experience? Please share in the comments section below or on www.facebook.com/drbudgets.
If you are saving money for a wedding, planning a wedding, or need help merging your two households after getting married, give us a call at 619-800-3030 for your free consultation. In celebration of my wedding next month, we are currently running a special of $50 off a budget package through June 30, 2014!
- Published in Love and Marriage
Is credit card debt bringing you down? There is a way out. Read on to learn how Jane* managed to become debt free. Here is her story…
I bought my condo during the housing boom, and, as many people at the time, I had a five-year fixed interest rate. After five years my mortgage payment almost doubled, so I started putting more and more of my everyday expenses on my credit card. When that card maxed out, I got another credit card (and then maxed that one out too).
Deciding to Work with Dr. Budgets
I heard about Dr. Budgets about 1 1/2 years after my mortgage payment had doubled, at the age of 28, and decided it was time to change my financial future. I had just succeeded in obtaining a home loan modification, which reduced my housing expenses significantly. I had been trying to pay down my debt on my own for about six months without any success, and I knew I would do better with a budget coach.
Working with Dr. Budgets
Things improved dramatically after I started working with Dr. Budgets. My budget coach asked me to set a specific financial goal. I told him that I wanted to pay off all of my credit card debt by my 30th birthday, which at the time was only 18 months away. I knew this was an ambitious plan, but I wanted to start my 30s with a clean slate! I knew what the credit limit was on each of the two cards (and I knew I was close to the limit on both), but I had never added those two numbers together to know how much credit card debt I actually had. Perhaps I was scared? My budget coach created a debt repayment plan for me, and through that I learned that my total credit card debt was $18,000. Wow.
The next step was to find enough savings within my spending to achieve my goal. Some of the suggestions were easy, such as eliminating bank fees. Others were more challenging, like reducing my purchases at Target and not going out so much. The most significant change was one that I couldn’t do by myself – my budget coach suggested that I stop adding to my credit card debt. I had been keeping my credit cards in my wallet “in case of emergency,” but that made it too easy for me to whip out my Visa anytime I wanted something. My budget coach recommended I place both of my credit cards in a drawer and only use my debit card and checks for monthly expenses. I inherently knew that I should do this, but prior to working with Dr. Budgets, I just didn’t do it. I needed a budget coach to hold me accountable to myself.
The other thing that we did was identify areas where it was important for me to spend money…yes, SPEND money! With a goal of paying off $18,000 in 18 months, it’s easy to focus on all the things I COULDN’T buy, but my budget coach asked me to tell him what I REALLY WANTED to buy. Since I had big birthday coming up, I wanted to celebrate all of my friends’ birthdays in a BIG way. My budget coach helped me to develop a spending plan that allowed me to have enough in my “gift budget” to make that a reality, while simultaneously paying down my debt. Every time I wished to splurge on myself, I remembered instead that I’d rather send flowers to a friend for an upcoming birthday. After a while, it became easy!
After putting my credit cards away and following my healthy spending plan, I immediately began to make progress toward my goal. Working with Dr. Budgets made a huge difference! Yes, at times I struggled to stay within my budget, but my budget coach would be there to nudge me in the right direction again by re-focusing me on my goal. That monthly accountability kept me on track; it is just too easy to spend money when nobody is watching. I paid off one credit card within a few months, and paid the balance on my second card the day before my 30th birthday…and I couldn’t have done it without Dr. Budgets. I had at least some credit card debt throughout my 20s. My 30th birthday was that much sweeter because I was entering the next decade of my life debt-free! Today I am still out of debt, I have increased my 401(k) contributions to 10% of my income, and, for the first time ever, I have an emergency reserve fund (actual savings!) to help me stay out of debt! I am now saving for a car, which I hope to buy soon. Thank you Dr. Budgets!
Thank you for sharing your success story, Jane. It motivates us to continue helping others reach their financial goals! If Jane’s story resembles your own and has inspired you to act, give us a call at (619) 800-3030 to schedule your complimentary consultation.
*For client confidentiality, we changed the name of the person to “Jane.” Everything else is factual.
- Published in Success Stories
Have you heard of the Rule of 72? According to Wikipedia, it is a method of estimating an investment’s doubling time. This rule is useful for quick calculations.
For example, if you invested $10,000 today at a 6% return, the Rule of 72 determines that your investment would double to $20,000 in 12 years (72 ÷ 6 = 12). Taking this a step further, your investment would double to $40,000 in 12 additional years. So in 24 years your investment would have quadrupled from $10,000 to $40,000! As you can see, this is a very simple and easy way for you to determine how quickly you can grow your wealth.
Unfortunately, when you hold high interest DEBT, such as credit card debt, the Rule of 72 works against you. Let’s say you carry $10,000 in debt today at an 18% interest rate, and you don’t pay down the balance. In this scenario your debt would DOUBLE to $20,000 in 4 short years (72 ÷ 18 = 4), then DOUBLE again to $40,000 in 4 more years. After 12 years your original $10,000 in debt would have ballooned to $80,000!
If you were to compare the $10,000 investment to the $10,000 debt balance over time, this is what it would look like in 36 years:
This table illustrates why it is so important to pay off your high interest credit card debt before you do anything else. This is also why it is so difficult to get out of credit card debt when you get in it too deep.
Is getting out of debt one of your goals? You are not alone – over 70% of Dr. Budgets’ clients contacted us to help them create a healthy spending plan to pay off their debt once and for all. Most often, though, “staying on track” with your plan is the hard part – so, to be successful most clients rely on a budget coach to hold them accountable to their spending plan.
Are you ready to get out of credit card debt and start making the Rule of 72 work FOR you? If so, call us today at 619-800-3030 to get started. For easy savings tips, “Like Us on Facebook” and subscribe to our monthly newsletter.
- Published in Debt
By Daniel Rodriguez | Dr. Budgets
Here is a simple way you can save between $500-$2,000 per year: drink water when you eat out.
According to the National Restaurant Association, Americans eat out about five times per week. And, whether at a fast-food restaurant or a fancier locale, people typically order a drink with their meal, usually a soda.
So how much can you save if you substitute water (not expensive bottled water) for that soda you order every time you eat out? Assuming a soda costs about $2, the average person spends $10/week, or about $500/year, on soda when eating out. To take it a step further, a couple spends about $1,000/year, and a family of four spends about $2,000/year on drinks when they eat out. That’s a lot of money sitting on the table!
Let’s also look at what is really important in life: living it to the fullest and staying healthy. The good news is that drinking water not only saves you money, but it is healthier too! Soda can have a harmful effect on your brain, teeth, heart, lungs, bones, kidneys, and digestive system. It also doesn’t favor your waistline. Water, on the other hand, will give you the purest form of hydration you need each day without all the extra “stuff” that is bad for you. If you are ready to take the leap and stop drinking soda, check out this article.
Fortunately, you don’t have to give up soda completely to see the financial benefits! All you have to do is replace it with water when you go out to eat. Anecdotal evidence suggests that once you build that habit, it is hard to go back to NOT drinking water. Wouldn’t it be nice to have an extra $500, $1,000, or $2,000 per year? One small change can equal big results. Many small changes can equal life-changing results!
Give it a try, then share your results in the comments section below.
- Published in Health and Wealth
By Daniel Rodriguez | Dr. Budgets
“Budgets are awesome!” says pretty much no one…ever! Except maybe a particular doctor with “Budgets” in their name. For many people, the word “budget” is often associated with negative images, so let’s use a different term: “spending plan.” A spending plan details how your money will be spent over a particular period of time. A spending plan not only helps you plan for your upcoming expenses, it also brings an acute awareness to where your money is going so you can consciously choose where you want your money to go.
Many people treat a budget like a crash diet – they cut out so many expenses that they financially starve themselves. Unfortunately, like crash diets, “crash budgets” don’t work for very long. They may see amazing short-term results for a few weeks, or even a few months, but then they spend in excess the following months, putting on the “financial weight” again and reversing the progress they made at the beginning.
If one of your resolutions for 2014 is to have a spending plan and to stick with it, try taking a different approach in the New Year. Instead of a “crash budget,” consider creating a healthy spending plan for yourself in 2014. A healthy spending plan does not mean you have to stop spending money on your daily latte, eating out with friends, shopping, or fun. With a healthy spending plan you are allowed to spend money on what is important to you. And with our coaching program, you don’t have to do it by yourself. We will be by your side; step by step, milestone by milestone, and we can adjust whatever needs adjusting. To develop a healthy spending plan you want to follow these 5 Steps:
Step 1: Set Financial Goals
Only pick the 1-2 goals that are most important to you.
Step 2: Identify Current Spending
Simply seeing where your money disappears can give you that “aha” moment.
Step 3: Evaluate Current Spending
You decide what is important to you and what is not, so you can redirect funds to your goals in Step 1.
Step 4: Create Your Spending Plan
You develop a spending plan that helps you reach your goals.
Step 5: Monitor Your Spending
Steps 1-4 are useless if you don’t monitor your spending to stay on track.
When you construct a budget this way, you end up with a healthy spending plan where you see results happen over time, and unlike a “crash budget,” you are much more likely to see permanent change. Having a healthy spending plan also influences every part of your life: you feel less anxious because your debt balance is going down, you feel more secure because your checking and savings account balances are going up, and arguments with your spouse or partner are reduced because you are both on the same page financially. You are finally saving enough to buy a home, you can take that trip without going deeper into debt, and you have more motivation for every aspect of your life.
A crash diet never works – neither with food nor with money. So set out to build your healthy spending plan for 2014. If you begin with your end goal in mind and have someone hold you accountable to that goal, you will see, like many of our clients, a success cycle that then builds confidence and motivation in you, which will propel you to achieve your goals faster and faster every month.
May the New Year bring you awareness in your spending so you can consciously move in the direction of your financial goals! And then, maybe, you too will say, “Budgets are awesome!” Have a healthy and happy 2014!!!
- Published in Spending Plan