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Tax Refund Touchdowns
So, you got a tax refund – now what? While you might have morphed into a human version of the “money-mouth face” emoji (🤑), fight the urge to treat yourself. Unless you’re debt free and have a nice chunk of change in your savings and retirement accounts, getting financially fit should be your priority over splurging on big-ticket items.
Here are five ways to use your refund responsibly:
Tackle your debt. If you’re carrying high-interest debt, paying it off should be your top priority. Paying interest sucks, and if you’re carrying a large balance on a credit card but only making the minimum payment each month, you may never feel like you’re getting ahead. Use your tax refund to pay off any debt you have. If your refund doesn’t cover everything, it’s time to figure out a debt-payoff plan.
Save it. More than half of Americans don’t have enough in savings to cover a $1,000 emergency, according to Bankrate. If you’re just starting out, money might be a little tight, making it even harder to build up your savings. Think about tossing your tax refund into your savings account so you’re better prepared for life’s little surprises. If your emergency fund already has enough money to cover at least 3–6 months of expenses, consider setting up another savings account for a specific goal, such as a travel fund or a down payment for a new car.
Donate it. Helping others gives us the warm-and-fuzzies, so why not use your refund for good? When your budget is tight, it can be hard to find extra money throughout the year, so donating the cash from your refund is a perfect opportunity to make a difference. Plus, your charitable donation could be tax-deductible next year.
Spend it (on something you need). The keyword here is need. If you’ve been putting off car repairs or minor medical or dental procedures, your tax refund could help you cover these larger, but necessary, expenses.
Spend it (on something you want). Okay, okay…I know I cautioned against splurging, but if you’ve stuck to your budget, saved, and stayed out of debt all year, you’ve earned the right to buy yourself something nice. Just don’t get carried away, of course!
I didn’t get a huge refund. Did I do something wrong? Nope, not at all! Your tax refund isn’t free money; it’s money you overpaid to the government over the course of the year. If you owe money on your taxes, it means you didn’t pay enough out of each check. Take the time to periodically check your withholding and adjust if necessary (the IRS has a handy calculator on their website that can help you out). Paying attention to your withholding is important for two reasons: 1) if you don’t pay enough from each paycheck over the year, you could face an unexpected bill when you file your taxes, and 2) if you normally get a large refund, you can opt to have less withheld up front—your paychecks will be a little higher, giving you more flexibility each month.
Five side businesses that could earn you extra cash this year
Earning extra cash with a side job can be a huge boost to your finances and improve your quality of life. Whether it’s to pay down debt, save for a vacation, reduce the stress from living paycheck to paycheck, or simply to retire earlier, it’s an option worth considering.
The key to success, though, is doing something that you enjoy, that doesn’t take a ton of extra energy, or that isn’t a huge inconvenience. No one wants to spend their weeknight or weekend doing something they dread. Let’s face it, money earned that way probably isn’t even worth the toll it takes.
Here are a few suggestions that might just fit the bill:
Turn miles into money
If you’re a driver with Uber or Lyft, you can make some extra cash when it’s convenient for you. Early morning hours, evenings, weekends…even on your lunch hour. According to Lyft, some drivers make more than $800 just driving Friday nights and weekends, and Uber guarantees you’ll earn at least $1,400 for your first 200 trips in Atlanta (terms apply). Don’t have a car? Both companies can offer a flexible rental plan. Check out this Uber and Lyft earnings calculator to see how much money you could make.
If you have a car but don’t want to drive others around, why not make it available to others? If your vehicle is listed through Turo and rented just nine days a month by drivers who need to borrow a ride, you could cover your entire car payment, or at least make a pretty good-size dent. You choose your own rates, and you’re covered with $1M in liability insurance. See how much extra cash you could bring in with Turo’s CARculator.
Market your social media
Have a ton of Instagram followers? Major brands that market clothing, makeup, shoes, travel gear, furniture, or food could be interested in leveraging your influence. When you focus your content on a specific topic and successfully establish a loyal following, you could become a brand ambassador and charge anywhere from $100 to $1,000 to $5000 per post. You might also score some free products! Brand sponsorship is big business, especially in this age of digital marketing and social media.
Buy low and sell high
Love to scour Craigslist, haggle at an estate sale, or find a great deal at a garage sale? If you’ve got an eye for value, why not turn that into cash? Resell new, gently used, vintage, or hard to find items on Amazon or eBay. If you want to step up your game, you might even venture into police auctions, liquidations, and abandoned storage sales. Check out how 32-year old Mike Meyer makes six figures a year selling other people’s stuff. Now that won’t be the case for everyone, but if it makes you a few extra bucks each month, it might be worth your time.
Freelance your expertise
Are you skilled in a particular field? Whether you’re a mobile developer, web developer, writer, designer, consultant, accountant, or offer any other specialty, you can find some great freelance gigs on Freelancer, Fiverr , Indeed, or Upwork, or Remote.co. Companies submit their project online, the site suggests qualified candidates, and the client asks freelancers to submit bids. Voila! You’re hired. Take on more jobs when you have time and scale back when your schedule is busy and work from anywhere in the world.
Stock photography is in high demand. From websites to brochures, from social media to editorials, pictures of happy babies, coffee house scenes, and oak-tree shaded drives are available for instant download. They’re less expensive than scheduling a professional photo shoot and ideal for companies and projects with a limited budget. If you’re a photography buff, even if it’s just a hobby, you could sell your images to stock photo companies like ShutterStock, iStockPhoto, or Unsplash and you’ll get paid every time someone downloads your image. Over time, it could potentially lead to more lucrative work from higher paying private companies.
There are tons of ways to make extra cash on the side and big benefits to doing so. Find what you love, or even like a lot, and figure out a way to market those skills. Look around and sell what you don’t need, want, or use, and unclutter your life. In the end, you’ll have more cash in your pocket, more control over your circumstances, and a stronger financial strategy for your future plans.
Do Warehouse clubs save or cost your family money?
The allure of shopping at big warehouse stores like Costco or Sam’s Club is undeniably strong. It’s not only loved by money-conscious consumers who are trying to stretch their budget, but also shoppers who are simply obsessed with perusing the two-football field-sized warehouses. In fact, over one-third of Americans holds a membership with a warehouse club.
It seems a little crazy, and a little counter-intuitive, for someone to spend money on a club membership for the privilege of saving money—or even just to walk in the door—but millions of people do it. Let’s take a look at exactly how it works and if it really does save you money.
The warehouse club business model
In spite of the strategically designed, no-frills environment, warehouse clubs are retail stores. They offer a wide variety of items, from Waterford crystal to cell phones, and from flat screen TVs to paper plates, at discounted pricing.
Unlike traditional retail stores, however, warehouse clubs don’t make the majority of their profits from the markups they charge. Instead, they require each customer to pay a membership fee. They have tremendous buying power and focus on passing those savings on to their customers. Rock-bottom pricing is not the only benefit you gain through membership, though. Members also have access to other deals and discounted services like travel, car buying, insurance, and financial services, to name a few.
Paying a reasonable annual membership fee that can, at the very least, be recouped in savings over the year doesn’t sound like a bad deal. But, there are some pitfalls that need to be considered, and they’re not quite as evident as the savings you see on your receipt.
Big boxes, large quantities
The reason warehouse clubs can offer lower prices is that they buy in bulk, and then they pass the bulk onto their customers. While you may eventually use the 45 rolls of toilet paper, the twin pack of ketchup will likely be expired before you’re halfway through the first bottle. The fresh produce has the same fate. Who can eat 24 apples before one decides to spoil the bunch? We all love the party-size bags of chips, candy, and cookies, but sadly, they don’t stand a chance of expiring, which leads us to a whole other problem.
Take five steps into any warehouse club, and you’ll likely see a giant flat screen TV on sale. Need the new iPhone Xs or maybe an Apple watch? They’ll be there, too. If you make it through the entrance, you’ll also want to steer clear of the center isles. That’s where all the impulse buys are waiting for just the slightest glance. I bet you didn’t know you needed a Vitamix blender or a new set of mixing bowls. Oh look, a 120-pack of Kirkland K-cups!
Limited quantity items
You’re pondering the purchase of a particular item, and then see that it’s marked “Limited Quantity.” Two words that set off the alarms in your head and kick your hoarding tendency into full gear. You’re not even really sure if you need it, but the pressure of missing out, or the fact that this may be your last chance to bring it home has you tossing 3 or 4 of them into your cart.
The free samples at warehouse stores are the perfect snack while you’re wandering the aisles. Hit enough of them, and you can call it lunch. The samples are not necessarily there, however, to keep your belly full. We all know that tasting the product could encourage shoppers to purchase the item on the spot. But, interestingly enough, free samples also work on a customer’s psyche. Ever feel a little guilty just walking away? Yep, a lot of other people do, too. So, out of a sense of obligation or the fear of looking like a freeloader, they head to the checkout with a monster size box of Annie’s Cheddar Bunnies in their cart.
Be a smart shopper
These danger zones don’t necessarily have to spoil your next trip to the warehouse club. Free samples can be good. It’s nice to know that you need to stock up on an item if it won’t be restocked. And, sometimes you do need a new blender.
Because every family shops differently, there’s no definitive answer as to whether a warehouse club membership is worth the money. If its benefit justifies the cost, then go ahead. But, continue to compare prices, don’t buy what you don’t need, and don’t spend the entire afternoon in the center aisle. You’ll definitely find some deals that will save you money, and balanced with your traditional grocery store shopping, your budget should stretch a little farther each month.
6 Financial New Year’s resolutions you can actually keep
It’s the start of a new year, and in keeping with tradition, it’s an ideal time to turn over a new leaf that will lead to positive change. Millions of people will resolve to lose weight, get organized, quit smoking, or spend more time with family.
Right in the middle of the most popular New Year’s resolution pack is financial fitness—in other words, save more, spend less. But, let’s face it. With the glow of the holiday season fading fast and the inevitable arrival of last month’s bills arriving in your mailbox, it’s an admiral goal, but a tough challenge.
Like exercising, though, financial health is something you need to visit every day. It’s not a one-and-done achievement. So, in the spirit of the resolution season, here are some realistic financial goals you can set and keep in 2019:
1. See where you stand
Before you can make any changes, you need to know what you own and what you owe. Use a spreadsheet to record your assets and liabilities including your home, car, savings, and investment accounts, medical, dental, life, auto, and home insurance policies, revolving credit, automated subscriptions, services like pest control, lawn maintenance, TV, internet, and phone charges…and anything else that involves money coming in or going out the door.
Now, what do you need and what can you do without? Talk with your insurance agent to make sure you have enough–or if you have too much–home or car insurance. Can you find a more reasonable internet/phone provider? Is your dental plan worth renewing or should you downgrade your medical coverage? Can you mow your own lawn? Is your Amazon Prime membership worth the annual cost?
Yes, it’ll take time, but knowing how much money you have, where it goes, and what value it brings will be the basis for almost every other financial decision you make this year.
2. Build up your emergency fund
An emergency fund is like insurance. You may not need to use it any time soon, but it’ll save your financial life if you do. You could be living comfortably at the moment, but whether it’s an unexpected home repair, sudden job loss, or large medical expense, it can cripple your financial stability. Start by saving a few dollars a week and keep building until you have at least three months of living expenses. And just so we’re clear, replacing your standard TV with a 65” flat screen does not qualify as a home repair. Just sayin’.
3. Create and stick to a budget
The old “stick-to-a-budget” advice. But listen: the amount of Americans who spend their hard earned money without a budget in mind is astronomical, and it’s a big reason our finances are a major source of worry and concern.
Believe us, we know. In the beginning, budgets are tough. You’re used to whipping out a credit card at Starbucks, buying the newest technology because it’s cool, or spending money on your designer shoe habit. If those things are important to you, you don’t necessarily have to do without them—just budget for them.
A budget realistically balances your earnings with your spending, saving, and investment goals. It helps you avoid overspending, allows you to live within your means, and alleviates financial stress and worry.
When you’re aware of how much money is available, you’re able to make smarter financial decisions that lead to a much happier life. And we all want that, don’t we?
4. Pay down your debt
Life is expensive, you need certain things, everyone has it, so some amount of debt must be fine. Debt can be used for good—like when you need a mortgage, but, it can also spiral out of control.
Revolving debt that continues month after month after month can be detrimental to your financial health and could hinder any financial progress, whether it’s your emergency savings, investments, your mortgage, retirement, or even saving for a vacation.
Be diligent about paying it down every single month and track your progress. It may not be gone by the end of the year, but if you’re committed, you’ll not only make a significant dent, but you’ll be able to sleep a little better at night.
5. Stop buying stuff you don’t need
Selling your unnecessary or no longer used stuff is one way to recoup a small amount of what you’ve spent on these things, but the best way to regain that money is to avoid buying it altogether.
Do less shopping and more relaxing. Use that time for more constructive efforts, like investing it in a hobby or spending more time with friends. The next time you find yourself ready to make a purchase, ask yourself how often you’ll use it.
Is it work the expense? Will it make your life better? Do you own something similar? Is it a real need or just a want? Eventually, you’ll find yourself spending less and living more.
6. Create an additional income stream
Any side hustle can help you pay down debt, increase savings, build your investment portfolio, or even retire at an earlier age. Turn a hobby into a small business, turn your talent into freelancing, sell your stuff on eBay or your creativity on Etsy.
Find something you love and figure out how to make money doing it. Be a personal shopper, a babysitter, or a handyman on weekends. One caution, though. Don’t sacrifice your performance at your full-time job and be careful to balance your work and home life. Making extra money should be a bonus, not a dreaded chore.
It’s not an all-or-nothing mentality
Resolutions aren’t easy to keep. In fact, more than 80% of people give up by February, and we can understand that. When you set unreasonable expectations, the first sign of failure offers you the permission you need to return to your old habits. Each of these financial goals, though, is a work-in-progress. Did you blow you monthly budget on a Super Bowl party? Spent this week’s emergency fund deposit on a Starbucks run for the office? Splurged on some after Christmas shoe sale? Don’t give up, simply get back on track. Practice makes perfect, and one misstep doesn’t mean it’s all over.
Make the commitment, work on getting your finances in order, and 2019 will be a stellar year!
A Quick Guide to Becoming a Freelancer
Freelancing comes with endless freedom, but also endless responsibilities. Businesses have accountants, marketing teams, benefits administrators, and everything in between. However, if you want to be your own boss, then these responsibilities fall on—you guessed it—you! Before taking the plunge into freelancing full-time, consider sticking with your day job with a steady income until you get your footing.
Before you can begin your freelance career, you need to figure out what it is you want to do. What are you good at? What do you enjoy doing? Why do you want to freelance? Can you afford it? How do you plan to present your “brand” to future clients? Who is your target audience? Asking yourself these questions will help set you up for success in your field. Most companies and start-ups want a specialist to complete the job – wouldn’t you? Decide what your biggest selling point is and go from there. If you love graphic design, think of one area that you’re best at. Maybe your niche is designing graphics for t-shirts, but consider who those t-shirts are for. Continue narrowing down your market so you can brand yourself as a specialist in whatever field you’re in. This will allow you to build a dependable reputation and control how clients perceive you.
Showcase your skills by creating a portfolio or a website that features your best work. When a potential client sees your website, they’ll want to see your past experiences, your personality, creativity, and, most importantly, how to contact you. Keep your website domain name and social media handles consistent so it’s easy for potential clients to find you. Your online presence is often the first impression a new client will have of you, so make sure it’s professional, consistent, and on-brand.
Now that you have some of the groundwork out of the way, it’s time to start selling yourself and landing gigs so you can start earning money. If you already have a few clients lined up, great! If not, there are job sites for freelancers to help you get started. Ask friends and family for referrals, and consider reaching out to companies directly to offer your services.
Managing money as a freelancer can be tricky, especially when you’re just starting out, since you won’t know how much income you’ll have and how steady that income will be. Now’s the time to put on your accountant hat and start to develop a monthly budget. Start by tracking your revenues (income) and expenses. Find your monthly income by adding everything you’ve made in a year and then dividing it by 12. This will give you a rough estimate of how much you can spend and save each month. Each time you get paid for a freelance project, write it down, and every time you purchase an item to complete a project (e.g., a Photoshop subscription), write that down, too. Keep track of all of your fixed expenses, like rent, insurance, car payments, etc. Create a spreadsheet or use an app like Mint to track and organize your income and expenses.
If your budget is doing its job, you should be earning more than you’re spending. It’s tempting to use that extra money for travel or fun activities, but it’s more important to start saving some money and funneling at least 30% of every paycheck into a separate account to cover self-employment taxes. Don’t forget about retirement (you do want to retire, right?) – consider contributing to Individual Retirement Account (IRA) each time you get paid for a project. Your future self is already thanking you!
Freelancing is an enticing choice for many reasons, but it’s still a huge career choice that requires a lot of work, especially in the beginning, in order to be successful. If you’re ready to make the leap, congrats! If you’re still on the fence, why not freelance part-time to see if it’s right for you? After all, freelancing is about flexibility and freedom.
With Money Goals, Multitasking Pays Off
Tackling money goals one at a time cost financial literacy expert Barbara O’Neill at least $1 million.
That’s how much O’Neill, a distinguished professor at Rutgers University, figures she lost by starting saving for retirement only after she had created an emergency fund, bought a car with cash and purchased a home.
“I tell students that eventually, 30 years later, I hit the million-dollar mark, but I could’ve had $2 million,” O’Neill says.
Too often, financial experts say, people want to attack their money goals one at a time: “As soon as I pay off my credit card debt, then I’ll start saving for a home,” or, “As soon as I pay off my student loan debt, then I’ll start saving for retirement.”
These folks don’t realize how costly the words “as soon as” can be. Paying off debt is a worthy goal, but it shouldn’t come at the expense of other goals, particularly saving for retirement. Company matches and tax breaks are not retroactive. And the sooner money is contributed, the longer it can benefit from compounded returns. Compounded returns are when your investment gains earn their own gains, which can dramatically increase your balances over time.
“By putting off saving for the future, you are really inhibiting yourself from benefiting from that wonderful magic,” says Kimberly Zimmerman Rand, an accredited financial counselor and principal at Dragonfly Financial Solutions in Boston. “If you can start saving today … you are going to have a lot more five years from now than if you decide to pay off debt for three years and start saving in year four.”
Why people tackle one goal at a time
The desire to laser-focus on one goal at a time is understandable, says financial coach Linda Matthew. People see faster results if they put every spare dollar toward paying down debt, for example.
But much of life requires multitasking, and money is no different, she says.
“I’ve got to take care of the kids, and stay in a relationship with my husband, and keep the house clean, and earn some money,” says Matthew, an accredited financial counselor and owner of Money Mindful, a financial coaching service based in Davis, California. “I can’t get into a relationship with my husband after I finish raising the kids; that’s called divorce.”
Busy lives make it tempting to try to focus on one goal at a time, Rand says. People may pay the most attention to their most immediate need or something that is causing them pain, ignoring the rest of their financial life.
“If you’ve got a bill collector calling, they’ve got your attention,” she says.
“As soon as” thinking can delay progress on any financial goal, Matthew adds. One woman told her the reason her family hadn’t saved was that they planned to start as soon as they had extra money, and they never did.
“You can’t wait for that,” Matthew says.
How to multitask
Financial experts recommend starting and maintaining a regular savings habit, even if it’s only $5 a week.
“I work with very low-income consumers, and I think most people can do this,” Rand says. “And then once your hours start to get more regular, maybe you’ve got a better job, now you can boost that amount.”
Rand also is a fan of making transfers automatic whenever possible.
“Setting it and forgetting it is actually a good thing when it comes to savings because then you don’t have to make that active decision every month,” she says.
O’Neill, who’s co-writing a research paper called “‘As Soon As’ Finances: A Study of Financial Decision-Making,” suggests dividing savings among different “buckets”: one for retirement, one for emergency funds, perhaps one for a home down payment. At the same time, target high-interest debt, such as credit card bills.
Once the system is in place, stick with it, O’Neill says. If a goal is achieved, or an expense such as an auto payment or child care ends, redirect that money to one of the other goals.
“You’re already used to paying that child care or whatever, and it’ll just fund everything a lot faster,” O’Neill says.