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5 Tips to Rein in Holiday Spending
The overflowing expectations around the holidays can entice us to spend more than we can afford. Not only do we have bills to face once the decorations are put away, but 43% of respondents to an Experian survey say extra expenses also make the holidays hard to enjoy.
Now’s the time to plan so your December spirit doesn’t lead to January bills. We asked five experts on frugality what they do to avoid holiday overspending.
Recognize your triggers
Donna Freedman, author of “Your Playbook for Tough Times,” says you need to recognize your spending triggers. Are you trying to make the holidays more magical for your family? Can you resist anything but a great a deal? Knowing what drives your spending can help you stop. Here’s what she recommends:
- Carry your list with you even after you’ve finished shopping. When you see a killer deal or a gift that’s “more perfect” than the one you’ve wrapped up, use the list to remind yourself you’re done.
- Make a game out of spending little or nothing for a gift. Freedman likes things that represent “a stirring tale of thrift.” She uses one such gift, a vase with a hole in it, to keep money she finds — on the ground, in vending machines, wherever — for giving to charity each holiday season.
- Consider limiting children to four gifts, asking them to choose “something you want, something you need, something to wear, something to read.” It helps children set realistic expectations.
Work with a list
For Tiffany Aliche, aka “The Budgetnista,” step one is making a list of whom you plan to give to and how much you plan to spend. Make sure your gift budget fits into an overall holiday budget that accounts for shipping, decorations, food, travel and entertainment. Her top tips:
- Check that list twice. It’s easy to forget thank-you gifts for coaches, teachers, the letter carrier, party hosts. Decide what you want to give each person. Once the list is set, adjust it as you go to keep planned gifts and your budget in sync.
- Use technology. “Price-check online before you buy or go in a store,” Aliche says. Know your price range for every gift on your list and set up price alerts. One of Aliche’s new favorites is the Chrome extension Wikibuy, which looks for better offers as you shop online and applies the best coupon when you check out.
- Consider making an experience the gift. If you’re already planning a holiday outing with a group of friends, can you agree it will be a gift to one another?
Match your approach to your values
The blogger who writes under the pseudonym Mrs. Frugalwoods says her family’s frugality is “larger than the holidays.” She notes that while the season is “wonderful and it’s fun, it’s not an excuse to dip into your emergency fund.” Her tips:
- Decide what’s most important and spend accordingly. For her, it’s a family gathering. She hosts Thanksgiving and cooks from scratch rather than buying pre-made or going to a restaurant.
- Shop with gift cards or cash-back rewards. She prefers giving an item rather than a gift card but occasionally passes along gift cards that were given to her. It’s regifting at its finest.
- Let your values be your guide. She favors “small, reasonable gifts” and shopping locally.
Know the difference between cost and value
Mary Hunt, the author of “Debt-Proof Living,” blogs at Everyday Cheapskate. She says it’s important to understand that your credit limit is not a license to spend. Try these instead:
- Shop with cash only; leave your checkbook and credit and debit cards at home. Need more cash?See if you can cut your grocery bill temporarily by using up items in your freezer or pantry, or track down unused gift cards to fund holiday shopping.
- Know the difference between a gift’s value and its cost. A $20 toaster that you found on sale for $8 is still a $20 gift. If you budgeted $20 but paid less, that doesn’t mean you owe the recipient $12 more in gifts.
- Define “gift” more broadly. Can you give your expertise, such as setting up a website for a tech-challenged friend? Do you have a treasured possession to pass on? One of Hunt’s favorite gifts was vintage crystal that belonged to her mother-in-law: “She wrapped it up for me for Christmas and got to see me enjoying it, rather than just leaving it to me in her will.”
Plan for thrift
Having a plan is central to being thrifty, says Gary Foreman, founder of The Dollar Stretcher. “If you don’t have a plan, you’ll overspend,” he says, noting that some people don’t finish paying for Christmas until April or May. His tips:
- Subscribe to online price alerts so you’ll know about price drops for a specific item or for travel. (And unsubscribe later so continual alerts don’t tempt you to spend.)
- Regifting is OK, especially when you know someone will love something you can’t or won’t use.
- The thought really does count, and thoughtful gifts can be inexpensive. One of his favorite gifts came when his daughter tracked down an ethnic bakery to get him some kolaches, Bohemian pastries his grandmother used to make. “Once you have needs met, the gifts that make a difference are the ones that say the giver knows who we are. Those are the best and most memorable gifts,” he says.
Millennials saving for uncertain future
How are millennials (we)Â saving for an uncertain future? According to an article by Michael Douglass from CNNMoney, millennials are saving earlier for retirement than their parents were. This is great news for us, but unfortunately the financial outlook is dimmer than in years past. In fact, recent figures from the Employee Benefit Research Institute state that millennials may need to DOUBLE how much we areÂ saving for retirement. This is due in part toÂ expert projections of howÂ the stock market will perform in years, and decades to come. Experts have stated they expect to see a steady decline in average stock gains. In addition to the declining stock market, Social Security might not be available for us when we turn 67.
What to do with such a glum outlook? Well, first things first, you need to have a plan. Do you know how much money you need to save for retirement? Does your job offer a 401k plan with a match? If not, have you considered opening an IRA and investing in mutual funds? Experts say you should beÂ saving roughly 10% to 15% of your income to live comfortably in retirement.Â Some expertsÂ suggest as much as 25% to ward off the potential financial woes of the future economic climate. Starting earlier is better, so the sooner you can start saving, the better off youâ€™ll be. Even a few years can make a substantial difference.
Here are a few quick tips to help you along your path to retirement:
- Have a plan
- Know your retirement savings goals
- Pay yourself first â€“ set aside a planned percentageÂ of money from each paycheck (preferably at least 10-15% or more, if possible)
- Talk to a financial advisor about your situation (they can be free of charge)
- Perform regular assessments of your retirement accounts and contributions to make sure that you’re on track for your goals
- Adjust your contributions as necessary to meet your goals
- Donâ€™t live beyond your means â€“ if you are living paycheck to paycheck, reassess your situation and find ways to make cuts or, better yet, increase your income earning potential
RetirementÂ savings plan
Investment expertsÂ suggest you should save double your annual income by the age of 35.Â The chart below is an â€œestimatedâ€ projection based on a starting annual income of roughly $35k at age 21, with regular 3%Â annual cost of living raises, a regular contribution of roughly 10% of your paycheck, and aÂ 3% rate of return from your retirement account.
*The retirementÂ chart isÂ forÂ illustration purposes only, and not to be used as a guidepost.Â
Note: This blog post is intended as informational only, and is not investment advice, consult a financial advisor before making any financial investment decisions.
Smart ways to encourage kids to start saving early
Are you tired of your kids spending money like it grows on trees? Encouraging kids to save their money in a world that revolves around spending is not necessarily an easy task. Given the fact that many Americans are distressingly under-saving, it’s critical that we instill the importance of saving for the future in the next generation. Here are some excellent ideas to make saving money attractive and, dare we say it, even fun for your kids:
1. Clear the piggy bank
The piggy bank may be synonymous with saving money, but drop a coin in the bank and it’s gone from sight. Use a clear jar so kids can see it visually accumulate. It’s much more exciting and increases satisfaction. Periodically, it might even be fun to change four quarters into dollar bills.
2. Set a savings goal
Save your hard earned money to purchase something, and it typically carries more value and appreciation. When your child finds something they’re just desperate to buy, help them set a savings goal. Might they have some birthday money coming soon or could they do some chores around the house? Be sure to encourage them along the way and celebrate their success when they reach their goal.
3. Match their savings
There’s no better incentive than making money when you save money. Consider matching your child’s saving efforts. Maybe not dollar for dollar, but an amount that’s fair and offers encouragement. You can tweak it as necessary so that it can grow with your child’s needs.
4. Open a savings account
A savings account is a safe place for saving money and it also gives older children an introduction to deposits, withdrawals, compound interest, bank statements, debit cards and banking processes.
5. Set a good example
Do you shop for bargains, use coupons, comparison shop? Your kids will mimic your behavior, so lead by example. Clip coupons and send them to look for the items in the grocery store. Show them how to compare prices as they get older, either in stores or online. Brand name versus generic, is it worth the price? They may sing a different tune when they have to spend their own money.
Your best bet is to start with simple discussions about saving and spending, and needs versus wants. Work conversations into your everyday life, offer lessons, different resources and tools to help them manage their money and you’ll have done your best to set them up for financial success. Starting small and early will help build a stronger foundation for financial health and hopefully lead to a more financially balanced group of savers.
6 tips on how to travel cheap
Memorable vacations can come with a price tag you’d rather forget. But with proper planning, smart research and a flexible attitude, you can travel cheap and still have an experience worth remembering. Here’s how.
1. Cut transportation costs
Before planning your trip, have a rough budget in mind. A vacation calculator can help. If you know how much you’re willing to spend on airfare, this map can give you ideas for destinations that are within your budget.
Traveling cheaply isn’t just about cutting costs — it’s also about getting the most out of what you spend. You may discover, for example, that the $400 you thought could pay only for a flight within the U.S. can actually take you to Paris and back.
If your travel dates are flexible, you may find an even bigger selection of places you can afford to visit. If you’ve already picked a destination, changing the departure dates could lower your airfare.
Setting up alerts for when prices drop should also be a part of your strategy. Try apps such as Yapta or Hopper, which will send you price notifications on flights you’re tracking. (Booking fees may apply.) You can also follow Twitter handles like @theflightdeal or @FareDealAlert for limited-time deals. If you find a price you like, scrutinize the airline’s baggage policy before booking. Some offer cheaper ticket prices, but have strict carry-on requirements or tack on sizable fees for overweight and oversized luggage.
If your destination is within driving distance, consider hopping in a car instead of on a plane. Use a trip calculator, like this one, to make sure it’s worth the tradeoff. Add in the cost of renting a car, if necessary.
2. Compare lodging options
Finding a cheap hotel room can be tricky and takes a bit of effort. Start by shopping around on sites like Expedia, Priceline.com and Kayak to find hotels in the area, and then search for hotel promotion codes online. Contact hotels directly to negotiate a lower price. Also consider staying in a hotel outside the center of the city and looking for last-minute deals.
If you’re open to alternatives, skip the hotel and book a room through a site like Airbnb, Homeaway and OneFineStay. Not only could those be more affordable, but often you’ll stay with a local resident who can point you to cheap restaurants and activities that aren’t in travel guides. Hostels can also be a money-saver if you’re OK with bare-bones accommodations and potentially sharing a room. Keep in mind that they may have age restrictions.
3. Eat wisely (and not just healthy)
Many travelers underestimate the costs of meals, snacks and tips, says guidebook author James Kaiser. He advises bringing your own food or buying it at a store when you arrive at your destination to save money.
That doesn’t mean you have to skip restaurants altogether and haul groceries around. Dining out is one of the most enjoyable parts of travel. The trick is knowing when to indulge and when to save.
Start by looking at your itinerary. Break down your meals each day and identify the times you want to splurge. Then look for ways to save money on the other meals. For example, you can avoid inflated prices at the airport by bringing food and an empty water bottle that you can fill once you’re past security (passengers are prohibited from bringing more than 3.4 ounces of liquids, per container, in carry-on bags at U.S. airports). For breakfast, pack energy bars so you can save time and money in the mornings.
Your spending will likely fluctuate from day to day, so remember to adjust your budget to avoid overspending.
4. Research your currency options
If you’re traveling abroad, find out if the country you’re visiting is plastic-friendly. If so, a debit or credit card that doesn’t charge foreign transaction fees could be your best bet. Otherwise, research your currency exchange options to avoid the poor rates and numerous fees common at airport kiosks. Those will shrink your vacation fund before you’ve even had the chance to unpack.
Visiting your bank or credit union to exchange money before you leave may be the best option. Assuming it has that currency, you’ll likely get better exchange rates and lower fees. And, just in case you end up needing more cash once you’re abroad, ask if your financial institution has international branches or a partnership with a bank overseas. If so, you may be able to withdraw cash from those ATMs with low or no fees.
5. Get a prepaid phone or SIM card
A cell phone can be useful for navigating new cities, as well as staying connected to travel companions and life back home. But for international travelers, it may also come with data roaming fees. You’d save the most money by ditching the phone during your trip, but that may not be realistic. Your best option will likely be buying a prepaid phone once you arrive or having your carrier unlock your phone, if possible, so you can use a foreign SIM card when you land.
6. Keep souvenir spending in check
Like everything else, set a budget for souvenirs. Also consider doing some research on the best souvenirs and shops, so you’ll have a sense of what you might buy and the prices to expect.
If you find yourself on the verge of an impulse purchase, try an abbreviated version of the 72-hour shopping rule, in which you put off buying something for three days to see if you still want it. That amount of time is probably impractical when you’re on vacation, but if your schedule allows you to return to the store the next day or even later that same day, you may find that you can easily live without that $150 wool sweater from Iceland. You were only going to wear it once, anyway.
Average Wedding Cost Reaches $35k
Thinking about having a wedding soon? Are you prepared for the cost? According to The Knot’s 2016 Real Weddings Study, the average cost of a wedding in the US is $35,329. The study goes on to say that weddings today are less about the bride and groom, and instead are geared more towards entertaining guests. From the venue to food, decorations, and entertainment, couples are providing guests with unforgettable experiences. Don’t let this number scare you — it’s just an average, so there’s room for you to spend less (or more).
If you haven’t started saving for a potential wedding, now might be the time.
How Much 20-Somethings Should Save for Retirement
Your 20s may seem like an odd time to think of saving for retirement, but it’s actually the perfect moment to start planning for your later years. That’s because the earlier you start saving, the more time your money has to grow.
Savers who begin setting aside 10% of their earnings at 25, for example, could amass significantly more by retirement age than those who wait just five more years to start saving. You can use a retirement calculator to see how much you should start saving now to reach your retirement goal.
Building a nest egg on a starter salary and a shoestring budget can seem daunting, though. Focusing on the incremental savings, rather than the goal, can help your savings objectives feel more manageable.
How much to save for retirement
For those earning around $25,000 a year, the median income for 20 to 24 year olds in 2015, saving the recommended sum of 10% amounts to a little more than $200 a month.
It may seem like a reach, but consider this: If you start saving $100 a month at age 25 and invest it to return 7.7% a year — the average total return of the Standard & Poor’s 500 Index of U.S. stocks over the past decade — you’ll have more than $378,000 available at retirement age. And it could be tax-free.
If you wait until you’re 30 to start and save the same monthly amount at the same rate of return, you’ll wind up with less than $253,000.
Several vehicles can help you build a retirement fund. A 401(k) plan, typically offered by your employer, is often the most convenient and easily accessible of these. Contributions you make usually aren’t taxed, which helps reduce your income tax liability.
Pre-tax 401(k) accounts make up around 80% of retirement plans offered by employers, according to the American Benefits Council. Roth 401(k) accounts are another option, though these are less widely available, and money contributed to a Roth 401(k) account goes in after it’s taxed. Money withdrawn from this type of account — including earnings — is usually tax-free.
Companies that offer a 401(k) plan often match employee contributions, up to a certain percentage. This is essentially free money toward your retirement.
If your employer will match your contributions, try to take full advantage and commit a large enough percentage to get the full benefit.
Beyond a 401(k), individual retirement accounts, commonly referred to as IRAs, offer another solid option. There are two types: traditional and Roth.
Money put into a traditional account is tax-deferred, similar to funds put in a traditional 401(k) plan. That means those funds aren’t taxed until they’re taken out. But typically any earnings you make with the money are also subject to income taxes on withdrawal.
Money put into a Roth IRA has already been taxed when you earn it, so there’s no immediate tax benefit. When it’s time to withdraw the cash, however, you usually don’t pay taxes on it. And anything the money earns also can be taken out tax-free.
Contributions to both types of IRAs are currently capped at $5,500 a year for those under age 50, and $6,500 for older workers.
How much to save for emergencies
In addition to retirement, it’s also wise to save for a rainy day. Ideally, your emergency fund should be enough to cover three to six months of living expenses.
Some experts suggest setting aside even more for savings and investments: 20%. That’s roughly $415 a month on an annual income of $25,000.
That’s not always feasible, especially if a big chunk of your monthly income goes to student loan and credit card payments. Consider saving what you can, even if it’s just $10 a month.
Making a habit of saving now could serve you well down the road. And, as your income increases, the percentage you save can as well.
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