4 Ways Frugality Is A Fool’s Errand

The One Major Mistake You're Making When Getting Out of Debt

I discovered the wonders of frugality when I was paying off debt . In my previous life, I spent money on any whim that surfaced. Whether it was large or small, I made the purchase with little thought to how I could pay for it. After a few years, my spend crazy ways forced frugality into my life.

All of a sudden I had to live by a budget. I had to find ways to save money on virtually everything. While a shock at first, I learned to embrace frugal living and all the benefits it brings. What I’ve learned over the years is that frugality can often be a fool’s errand. Here’s why.

You Can Only Cut So Much

Frugality, at its core, is being economical or sparing. That sounds great. I like to save money like everyone else, but you begin to learn something along the way – you can only save so much money. At a certain point, you’re unable to save anything of significance.

The value received begins to deteriorate, and your return is minimal. This is not to say you shouldn’t find ways to save money on your bills but realize it is possible to have a happy balance.

You Give Up Too Much of Your Time

This is something I learned early on in my new life. Frugality, when taken to an extreme, takes a lot of time. You become consumed with finding the cheapest price or best value. Saving money is great, but when you give up too much time to get that savings you end up losing.

You Sacrifice Quality

This is a commonly overlooked area of frugality. You need to buy an item and find two possibilities – one is significantly cheaper than the other, so you choose that item. To your dismay, the item you bought breaks down within a few months, not lasting the expected duration, forcing you to buy a replacement. This is not a guarantee, of course, but often times the cheaper item is of lower quality and does not last – costing you more money in the long run. I know it hurts to spend more at the outset, but the quality of the item must come into question in many cases.

Growth is Overlooked

This is the key argument against frugality. You spend so much time finding ways to cut back and save money you forego finding ways to earn extra money and grow your wealth. This is the “big win” mentality that so many promote in the personal finance world. These individuals want to save money but they also realize you don’t become rich by cutting your spending.

Cutting expenses has its place and time, but it should take a backseat to growing wealth. By no means should you spend aimlessly, but combine efforts to save money with wealth production to get to the next level.

Balance is Possible

This is something I learned after a few years of frugal living. Saving money and wealth production can live together if you seek balance. This is when the pursuit of financial independence becomes clear.

Frugal living is noble to pursue. There are many ways to save money that take little effort. Pursuing it to an extreme, however, will only take you so far.

The post 4 Ways Frugality Is A Fool’s Errand appeared first on ReadyForZero Blog .

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I Just Axed My Final Budget Killer and It Feels Amazing

I Just Axed My Final Budget Killer

Last month my wife and I finally got rid of our final budget killer – our DirecTV subscription. At $105 per month, I’m glad to see that bill go by the wayside and am dreaming of the ways we can better use that savings each month.

We can all be guilty of budget leaks on occasion though this was a budget killer. Although the number of cord cutters is on the rise, a recent study reveals that 83 percent of American homes still have some form of pay television. As has been our experience over the past month, you don’t need to spend much to enjoy quality content. The benefit of cutting the cord on cable TV for us is that it brings our family one step closer to a major goal we want to reach.

How Much We’re Saving

As I mentioned, our monthly DirecTV plan was $105. We did have a number of price reductions but eventually those all ran out. We also have Netflix at roughly $10 per month. The grand total…$115 for television programming each month!

We now spend $25 per month since cutting the cord, or a savings of $90 per month. We kept our Netflix plan and added HBO Now so we can still see some of our favorite shows.

The Behavior is the Issue

A savings of $90 per month may seem like nothing, especially given the fact that we can “afford” the expense. However, how many times have you wondered at the end of a month why you don’t have the money you’d like to do something?

The problem? It’s our behavior. We’re guilty of short-term thinking , which hurts our financial livelihoods in the long run. We don’t stop to realize that aimless spending on items that return no value holds us back. Aimless spending may make us feel good; maybe that’s why we do it. It allows us to keep up with the Joneses. But the sad result is that aimless spending holds us back from accomplishing the things we really want in life.

Spend on What Returns Value

Since I’ve become debt free, I’ve had the conviction of spending on items that only return value. Any other spending holds you back. You do need to have balance, of course, but a careful analysis is needed to make sure your spending is on things that provide value.

Personally speaking, we want to buy a new home in the next year. By analyzing our budget, we discovered two significant budget killers that were holding us back from that goal – our cell phone and DirecTV subscriptions. We were hemorrhaging $190 per month we had no business spending. Thus, we switched to a cheap cell phone plan and got rid of the pay TV subscription. The extra savings will go towards our house fund each month.

Your situation will likely be different, but the value aspect is just as important. If you’re paying off debt , for example, the value in cutting is debt freedom. That should be motivation enough.

The Purpose of Cord Cutting

Streamlining a budget has one clear goal in mind – financial independence . Financial independence means lots of things to different people. It might mean the ability to retire in your 60s and travel around the world. For some it may mean early retirement or starting a business.

To me financial independence means the ability to take opportunities when I want and as they present themselves. It also means being free from financial worry. It’s exercises like killing off needless expenses that get us one step closer to that goal.


We can all be guilty of having budget killers. It pays, literally and figuratively, to be cognizant of the value your spending creates so as to not be wasting money you shouldn’t be.

The post I Just Axed My Final Budget Killer and It Feels Amazing appeared first on ReadyForZero Blog .

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Grow A Money Tree: Create Wealth As Easy As 1, 2, 3

money treeGrowing up, I remember watching cartoons where the main character would go out into his backyard and get money from a money tree. I was fascinated by this idea so much that I wondered if we had a money tree in our backyard.

I set out one summer afternoon looking at all of the trees we had in our backyard. Unfortunately, I did not find a money tree.

As I’ve grown, I’ve come to realize that a money tree was more of a metaphor than an actual thing. But then I got to thinking, could you really create your own money tree?

The answer is yes, you can! With a little bit of work, you can plant your own money tree and instead of it bearing fruit, it will bear money! How great is this?

Now, you might think I’ve lost my marbles, but hear me out. I will grant you that you won’t have a physical tree in your backyard that you can go out to and pluck a few $100’s off of whenever the mood strikes you.

But you can create a system in which you grow your wealth and money will not be an issue or a stress in your life. To understand how this is possible, we need a quick lesson on how a tree grows .

For a tree to grow, seeds need to be planted. These seeds take root and with sunlight and water, they slowly grow into a sapling. From there, the roots grow deeper into the ground and become stronger, and the tree responds by growing to its full potential.

So what does the life cycle of a tree have to do with becoming wealthy? Just like with a tree, it takes time for you to grow your wealth. You don’t just start out with $5 million, just like that huge tree in the backyard didn’t start off that size either.

Planting The Seeds of Your Money Tree

In order for you to grow your wealth, you have to plant the right seeds. In other words, you need to create and follow the habits that will lead you to wealth. After all, you can plant as many seeds as you want, but a tree will not grow if the seeds are not given water and sunlight. You have to make sure you make good habits a routine if you want to achieve wealth.

So what are the money tree seeds of growing your wealth? They include:

  • Creating a budget: I said the B-word. A budget is your key to wealth. Most people ignore a budget because they look at it as a bad thing. They see it as something painful that will restrict their spending. This is not the case at all. Look at a budget as your tool to grow your wealth. It isn’t stopping you from spending, it is helping you to spend smarter so that you can save and grow your wealth.
  • Having 8-12 months worth of cash in an emergency fund: things happen. It is a part of life. To make sure that when life happens you aren’t put in a worse financial situation, you have to have a stash of cash in the bank. Yes I know that interest rates stink right now, but the goal of this money isn’t to grow into a trillion dollars. It is to be there if you should ever need it. Stop focusing on the interest rate and start focusing on making sure you have enough in that account to cover you should something happen.
  • Having no credit card debt/living within your means: you will never grow your wealth if you are spending more than you make. You have to learn to live within your means and this means not having credit card debt. You can still use a credit card all you want, you just have to be certain you pay it off in full each month.
  • Saving at least up to the match in your 401k: if you have a 401k plan at work and your company offers you a match, you HAVE to invest at least this amount. They are giving you money!
  • Saving 20% per month: if you want to grow your money tree, you have to save a decent amount of money each month. Work on reaching the goal of saving 20% of your income each month.

All of these things are great in theory, but what about actually putting them into practice? How do you go about that?


When it comes to budgeting, there are some choices you need to make. Mainly, what type of person are you? I ask this because it will determine the best budget for you. If you like a hands on, manual approach, then an excel based budget is for you. In this post , I share with you 9 great free budgets. You can use them as-is or modify them as you see fit.

Alternatively, if you like a more automated approach, then software like You Need A Budget (YNAB) or Power Wallet is for you. While Power Wallet is free, YNAB costs money. Luckily the link I provide above gives you a 10% discount!

Emergency Fund

As for an emergency fund, all that matters is that you are adding to it each month to get it fully funded. When is it fully funded? When you have between 8-12 months worth of living expenses.

To figure this amount out, look at your monthly bills, total them and then multiply that number by 8 or 12. Yes this will be a lot of money, but you will be thankful you have it on hand should you ever need it.

As for the bank to use, I like to use online banks. They are safe and they do pay a decent amount of interest. (I know I told you not to worry about this and it shouldn’t be your main focus, but it is nice to earn a little bit on your savings.)

Personally, I use Capital One 360 (formerly ING Direct). They are super easy to work with and I haven’t had any issues in the years I’ve been with them. You can open an account through this link . If you open your account with $250 or more, they will give you a $25 bonus!

Ridding Yourself of Debt

Debt is a wealth killer and when it comes to a money tree, it is a deadly disease. You will never reach your financial goals or be wealthy if you are in debt. It just can’t be done. Once you learn to live within your means by using a budget, then you can take the steps to start to slash your debt .

What is the best way to accomplish this? There are a few options and like budgeting, the tool you use depends on the type of person you are. I detail all of the options to get out of debt in this post .

Saving Some Money

I am combining saving 20% and investing in your 401k up to the match into one. In order to grow your wealth, you need to save some of it from the start. Most people save what is left at the end of the month.

As it stands right now, most Americans are saving nothing. This means they are spending everything (and in some cases more) than they bring home. You have to flip this and start to save first and spend what is left over.

I realize that 20% is a decent chunk of change, so don’t think you need to be there tomorrow. Start out by saving 10%. This should be doable by most people.

First, you save up to your employers match in your 401k plan. That should be between 3-5% each month. All you have to do then is to save another 5-7%.

If you don’t have an emergency fund, your savings should go there first. If you do have your emergency fund set, then you can either save this amount in your 401k plan or in a general savings account to be used for something else like investing or even a house down payment.

Lastly, if you really need help with saving, check out Digit . It’s a free app that will transfer money from your checking account to your savings account automatically for you. They analyze your income and spending and then transfer about $5 at a time.

It’s such a small amount, you never realize it was moved from your checking account. In almost a year with them, I’ve saved an additional $900 by using Digit.

While these are some important money tree seeds to plant, there are a couple more seeds that I want to mention because they are very important to growing your wealth over time.

Go without: related to the point above, is to go without. Take a no-spend challenge where you spend no money for a week. But don’t just do it because I said to. Do it and learn from it. How does it feel to not buy things? When is your urge to buy the strongest? Learn from this and you will become a smarter shopper and keep more of your money.

Buy quality: you have to buy quality items. They will cost more upfront, but they will last you longer making them a smarter buy in the long run. That is the key to this point – the long term. If you want to grow a money tree and your wealth, you need to focus on the long term.

By ensuring you make these habits routine, you increase your chances of growing a strong healthy money tree that will last many years. Without this foundation, you may see success in the short term, but over the long term, your money tree and your wealth will not survive.

Growing Your Money Tree

Now that you have the seeds to your money tree planted, the goal is for it to grow into a large tree. In order to do that, it needs nutrients – namely water and sunlight. When growing your money tree, there are four easy things I want you to do that will act as the water and sunlight for growing your wealth:

  • Be patient
  • Save and invest
  • Think through purchases
  • Be resourceful
  • Become invaluable at work

It Takes Money To Make Money

I bet you have heard of this one before. To make money, you need to start with something. To apply this to your money tree, you need to simply save and invest. If you do this, over time you will create wealth.

The key word here is time. You won’t become wealthy in a week or 6 months or even 2 years by saving and investing. But in time, you will create loads of wealth. This is because of the power compounding.

I’ve talked about compounding before , and encourage you to read that post. But in a nutshell, as you save money, you earn interest on that money. As time passes, you start earning interest on both the money you save AND the interest you earn.

How long are we talking? It all depends on how much money you save in the first place. The more you save, the faster compounding will work in your favor. Here is a chart showing you both a savings amount and the interest earned, assuming a 5% return:


As you can see, when you don’t have much in savings, you won’t earn a whole lot in interest. But look further down the list and you start seeing some big interest numbers. That has to be exciting! Of course we all have to start at the beginning, so that means small interest earnings at first.

But this chart should give you the motivation to save as much as you can so that you can start earning nice amounts of interest.

Saving and Investing

When saving your money, you have a few options, namely just saving – meaning putting your money into a savings account/keeping it as cash – or investing it in the stock market. You should be using both avenues to your advantage. Keep some savings in cash and invest more for the long-term.

If you understand investing and stick with it over the long-term, you can earn on average 8% annually. This doesn’t mean each year you will earn 8%, but over time, you will average 8%. Some years will see you earn more, some years you will earn less or even lose money. But over the long-term, if you stick with it, you can realistically see 8%. If you need help sticking to investing for the long-term, check out this post .

One great simple formula will help you to see how quickly you will be creating wealth in the stock market. It is called the rule of 72. Simply take the interest rate you expect to earn and divide that by 72. So in our case we would take 72 divided by 8. The answer is 9 and this means we can expect our money to double in roughly 9 years. If you have $10,000 invested, you can estimate it will be worth $20,000 in 9 years.

Want more than $20,000? Simply save and invest more money. While it will still take roughly 9 years to double, if you have saved $20,000 this means you will have $40,000 in 9 years. Don’t fall for the trap of trying to earn a higher return. You add too much risk to the equation and instead of creating wealth you will be destroying wealth.

Where do you invest? There are a lot of options. If you are a seasoned investor, you can check out my online broker chart that will help you pick the right broker for your needs. If you are new to investing, the key for you is to keep things simple.

Don’t fall for a complicated investing plan or trying to time the market for buying stocks. Simply stick to low cost index mutual funds and ETFs. They will earn you the return you need.

I encourage you to read my post on becoming a stock market millionaire to fully understand the steps for success when investing. But if you just want to invest, then I encourage you to start with Betterment . They will do everything for you. All you have to do is take 10 minutes to set up an account and a monthly transfer. I use them and love them.

Finally, you should use a free tool like Personal Capital to track your investments. With this tool you can see your allocation, return and how much you are paying in fees. As with Betterment, I use it and it has made me a smarter investor.

Think About Every Purchase

The next tip for growing your money tree and your wealth is all about spending and it is easy to do. All I want you to do is to question any purchase before you make it. Simply ask yourself if buying the item is going to get you closer or farther away from your goal, in this case, creating wealth.

This little trick works magic. The reason is because we have 2 sides to our brain – the emotional side and the rational side. When we buy on impulse, this is the emotional side working. Unfortunately for us, this is the part that works first and the fastest. Advertisers know this and attempt to get us emotionally connected to the product so we buy.

After a few days pass and you regret the purchase, this is your rational side kicking in. By taking a moment to think about the purchase first, you can calm the emotional side down and help the rational side fire up.

To prove this, try this little test. Next time you are watching TV or shopping and see something you want, write it down on a piece of paper. Then put the paper in a drawer. A week later look at the piece of paper. Chances are you forgot about the item completely. This shows you that the advertisers were able to connect with you emotionally and you never really needed the product.

So the next time you are looking at buying something, stop and simply ask if it will help you to create wealth or not. Will you use the item once or twice and never again? Or will it become a staple item you use all of the time? Will it help you to save time or cause you to waste time?

By answering these questions you will get a good idea if it is a good buy or not.

Be Resourceful

There is a simple way we can create more wealth (meaning we can save more money) that many of us overlook. This is being resourceful. If something breaks, we toss it and buy new. In some cases we might hire someone to do the work for us.

Before we go down either of these roads, take a minute to see if you can fix or repair the item yourself. While it might sound overwhelming at first, many things are easy to do yourself. In fact, YouTube has a video for how to do just about anything.

For me, I learned how to turn my yellowed car headlights clear again by simply buying a kit to buff them. This saved me a couple hundred bucks. Another time, our pull down attic stairs weren’t closing all the way. The springs were giving out. I watched a video and replaced the stairs myself. That saved me another couple of hundred bucks by not hiring a handyman.

Learn to fix things yourself and give yourself more credit than usual. You can do a lot more than you think. With the money you save, just add it to your saving/investing accounts and let compound interest take over.

Become Invaluable

Did you know you are your greatest asset? Most of us will generate more wealth from our careers than we will from investing. Because of this, it is critical that you earn the most money over the life of your career.

How do you do this? You have to find a way to become invaluable at work. You have to stand out from the crowd so that you can earn a healthy raise each year. You may be wondering why a healthy raise is important.

It’s all because of our friend compounding. Let’s assume you are making $40,000 a year. What is the difference between earning a 3% raise each year and a 5% raise each year?


As you can see, the difference is huge over time. This is because of compounding. When you have a larger base (your salary) your raises have a greater impact. The greater your raise, the greater your base for the upcoming year.

Now, I realize that you can’t stay in the same position your entire career and expect to earn the top end of the chart above. All jobs have limits to salary. But you can move up in the company and earn promotions and thus a higher salary.

So how do you become invaluable at work? I lay out the entire plan in this post . But in a nutshell, you have to make it so that your manager can’t live without you. Take tasks from them that they don’t want to do. Develop a new process that is more efficient than the current way of doing things. Find ways to cut costs.

The more things you do to stand out, the greater the chance you will become invaluable and increase your chances for larger raises each year.

On the off chance you work in an industry where you can’t get raises each year, you still have an option for growing your money tree. Understand that I still want you to be invaluable at work so that you lessen the odds of suddenly losing your job.

But for you to grow your money tree, you need to work on the side. No, this isn’t some boring part time job that pays virtually nothing. You need to find something you enjoy doing and do it on the side.

If you can do this, you can increase your earnings greatly. How do you start? Make a list of the things you enjoy doing and then see if there is a way to earn an income from that. This will take some time and research, but if you put in the effort, you should be able to find something you enjoy doing to generate a side income.

I’ll use myself as an example here. I enjoy personal finance. I ended up writing about them here on this blog. The funny thing is that in high school and college, I never enjoyed English class. But I now love writing because I get to write about a topic I am passionate about.

My point is, don’t be too quick to dismiss something because you don’t like a part of it. If I did that, I never would have started this blog. And when I got laid off in 2013, I probably would have found another full time job. Instead I turned my side income into my main income.

While there are all sorts of options out there, the internet is a good place to turn for ideas. You can read my write up on how to make money online for a complete guide to online income. While it isn’t for everyone, it is a good place to get the wheels turning as they say.

So those are the steps for growing your money tree over time. By earning more, you can save and invest more. When you do this, you have more money to compound over time, which speeds up the compounding process and grows your wealth at a faster pace.

Final Thoughts

So now you have the steps you need to take in order to grow your money tree. Remember, you cannot just skip the first steps and work on growing your money tree. While you may succeed in the short term at growing it, your tree and your wealth will never last because you ignored the key first steps of budgeting and living within your means.

If you want the biggest and strongest tree and the greatest wealth and chance of keeping that wealth over time, you have to start at the beginning. It will take time to grow your wealth, but it will be worth it in the end.

Don’t fall for the con artists that sell you on getting rich tomorrow. If it was that easy, we all would be billionaires. It takes time and work and this is why so many don’t have money trees. They don’t want to wait. Be patient and wealth and your money tree will exceed your expectations.

The post Grow A Money Tree: Create Wealth As Easy As 1, 2, 3 appeared first on MoneySmartGuides.com .

Source: Money Smart Guides

When Do You Cut The Cord on Your Adult Children?

When Do You Cut The Cord on Your Adult Children

As a parent of three young children, I want to do all I can to provide for them. That’s as simple as providing food and shelter to more long-lasting needs. In every case, we want to do all we can for our kids, which includes sacrificing our own needs or wants as parents. There comes a point, however, when you need to let your children fly solo.

A recent study from a professor at North Carolina State University reveals 40 percent of adult children (those aged 25-32) still receive some kind of financial assistance from parents. While not really surprising, given the recent economic climate, it begs the question of when to cut the cord on your adult children. This is an issue far larger than a single blog post, but consider some of the following as you think about when your adult children need to be on their own.

You Need to Start Earlier Than You Think

I’m a big proponent of teaching children about money at home . It’s one of the most loving things you can do for a child. Putting off financial responsibility for your adult children will have the opposite effect. It can make them more reliant on you, not less. In short, it does not set them up for future success.

You may think it’s unloving to start once they move back home (assuming they do) or when they first start out, but that’s the exact time you should start – if you’ve not done so already. It can be as simple as charging them rent to live at home, or some other financial contribution. If they’re on their own, you can give them a deadline for when they’ll be financially on their own. Wisdom is needed, of course, but you need to start as soon as possible to help them become independent.

You Need to Be Selfish

As a parent, it feels contradictory to be selfish. It’s not. I would argue it’s very much needed for the long-term financial health of you and your child. Just as with the saving for retirement vs. saving for college debate, it’s not an easy choice but one you need to make.

Think of it this way. Your desire to help your adult child is noble. However, are you putting yourself at risk to depend on them later in life because you were not prudent in previous years? I want to help our children, but the last thing I want is to be a burden on them later in life. Thus, selfishness is needed, to a certain extent. It sounds harsh. It isn’t. It’s prudent while also causing them to find ways to develop the kind of life they want and need.

You Can Have Balance

While I believe you need to have a healthy level of selfishness when adult children are concerned, balance is necessary. The last thing you want is to embitter your child. You can help them prepare for their adult lives in many ways that aren’t strictly financial in nature.

Some of those ways can include dealing with student loans , helping them reduce bills and keeping more money in their budget. It can also include helping them out financially when they have need. As an adult child who benefitted from that several times, sometimes this is the best option. Again, use wisdom and seek a healthy balance for both you and your child.

Cutting the cord on an adult child is rarely an easy decision. There are many factors at play. The key is to find ways to set them up for long-term success.

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Good News: Financial Resolutions Might Actually Work

Good News- Financial Resolutions Might Actually Work

New Year’s resolutions have gotten a bad wrap over the years, but for good reason – according to studies, the success rates for some of the most commonly made resolutions are dismal.

One such study conducted by Richard Wiseman , a psychologist at the University of Hertfordshire, found that, out of 700 participants, only 22% managed to see their resolutions through to the finish line.

“Of the 78% who failed, many focused on the downside of not achieving the goals; they had suppressed their cravings, fantasized about being successful, and adopted a role model or relied on willpower alone.”


But while eating healthier and getting fit might not keep people interested and motivated past February, a new study suggests making financial resolutions actually works for a significant portion of those who make them.

The Fidelity study found 46% of participants who make financial resolutions kept them for at least six months and found marked improvement in their overall financial health by the end of the year.

‘“Financial resolutions are actually relatively easy to achieve,” said John Sweeney, Fidelity’s executive vice president for retirement and investing strategies. “With diet or exercise, you have to get up every single morning and resolve all over again, but with something like a 401(k) payroll deduction, you just set it up once at the beginning of the year, and then it becomes part of your lifestyle.”’

So if getting your fiscal house in order next year is at the top of your to-do list, follow these tips to ensure your resolutions actually stick.

 Create a resolution that speaks to you.

Setting a resolution simply because it seems like the responsible thing to do is a surefire way to kill your motivation before even starting on the journey.

The best resolutions will help you alleviate a pain point with your finances or will get you closer to achieving a specific life goal. Say, for instance, you’ve wanted to buy a house but your credit score is low. Setting a resolution to improve your credit score and overall habits surrounding your use of credit is easier to stick to because it’s tied to a larger life goal – becoming a homeowner.

If debt is a significant pain point in your life, creating a debt payoff plan is another power resolution because the outcome is huge – a better quality of life for you and your family.

Get specific.

One of the biggest stumbling blocks when it comes to turning resolutions into habits with some staying power is knowing where to start. If your resolution is simply, “fix my credit score,” that doesn’t identify any essential elements of an achievable goal: the who, what, when, why, and where.

The first step would be to understand the work involved or, in this case, why your credit score is low to begin with. Is the information on your credit report correct, or are there items that need to be disputed? Is your score low because of late payments, a high credit utilization, or something else entirely?

Start with the problem at hand and determine what specific steps you need to take, or habits you need to address in order to be successful.

Set up systems for smooth sailing.

According to the Fidelity study, one of the reasons financial resolutions stick is because it’s far easier to establish systems that take the reliance on willpower out of the equation.

So why not take advantage of this knowledge and set up some systems of your own?

Perhaps your credit score is down in the dumps because your report is littered with late payment marks from various creditors. Addressing that problem going forward is relatively easy – try automating your payments or setting alarm notifications that will let you know a few days before a bill is due. Plenty of apps can also help take this issue off the table.

Find an accountability partner.

While 64% of participants cited self-motivation and a sense of accomplishment as the biggest motivator in achieving their financial resolutions, it’s helpful to have someone else pushing you when things get tough. Sometimes it’s simply a mental thing – knowing you have to report your progress to a third party means you actually have to stick to your word, or risk having to admit defeat.

Find a friend or family member you trust to take on this role for you, preferably someone who is looking for the same accountability on their own resolutions. This ensures you create a network of support in which you are both on common ground.

What financial resolutions do you plan on achieving in 2016?

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Credit Monitoring: Is It Worth It?

Credit Monitoring- Is It Worth It

Are you considering a fee-based credit monitoring service?

Makes perfect sense, considering the prevalence of identity theft in the U.S. alone. In 2014, 17.6 million U.S. residents experienced one or more incidents of identity theft, according to the Bureau of Justice Statistics . That’s 7 percent of the population age 16 and over! We’ve even witnessed several big-box retailers fall victim to security breaches.

But before moving forward, you have to consider if the monthly cost outweighs the benefits, and if there are better cost-efficient alternatives.

What Is Credit Monitoring?

It is a service that is used to monitor your credit profile around the clock and provide you with a credit score each month.


1. Instant Alerts

 Subscribers are immediately notified of any credit activity impacting their credit profile.  In the event you are victimized by an identity thief, knowing this information sooner than later could save you tons of time, money and headaches.

 2. Credit Score Simulator

This tool enables you to gauge how a particular action will impact your credit score over time. You can estimate the impact the on your FICO score if any of the following occur:

  • Receive a denial for a credit card of loan
  • Open a new credit card or loan
  • Transfer balances to a new credit card
  • Reduce outstanding balances by a certain amount
  • Make Timely payments over a specified period of time
  • Receive Credit line increase
  • Have an account sent to collections

The impact of tax liens, wage garnishments and foreclosure can also be determined using this tool.

 3. Educational Resource

Most credit monitoring platforms include a credit overview explaining the five components of a FICO score and how you’re performing in each area. Not only is this great way to determine which actions are needed to boost your score, but it is also a great way to educate yourself on how credit works in a nutshell.


1. Reactive

Although credit monitoring enables you to stay on top of what’s occurring in your credit profile, it’s reactive in nature. Simply put: the damage is already done once you’re notified. By contrast, a security freeze is proactive and restricts access to your credit profile without express permission. You can learn more about security freezes here.

2. Inconsistencies in FICO Scores

The FICO score provided by your credit monitoring service isn’t necessarily the one lenders will use. In fact, each type of lender has their own unique formula as they are evaluating your creditworthiness using different factors. For example, an auto loan company or mortgage lender will not analyze your credit profile in the same way that a financial institution making a personal loan would.

This could be very problematic when applying for a loan because you may be under the impression that you qualify for a more competitive product with a lower interest rate than you actually do. And unfortunately, lenders will not consider the score received through the credit monitoring service provider.

The Verdict

Why pay for something you can get for free or do on your own? My advice: monitor account activity and review statements received from lenders and financial institutions for unusual activity.

Access Your Free Credit Report

You can retrieve a free copy of your credit report annually from the three credit bureaus via AnnualCreditReport.com . I recommend accessing one report from each bureau every four months to maximize the benefit.

Free Credit Monitoring Services

Upon discovering other free credit monitoring services offered online, I test drove them for a few months and decided to drop my paid subscription. Reasoning: their services were actually a step above what I was paying for and they went the extra mile to offer product recommendations best suited for my financial situation. ReadyForZero also recently rolled out a new fee-free credit monitoring service  that is definitely worth a test drive.

Other Free Options

Select financial institutions and credit card providers offer free tools to help you stay on top of your credit. Inquire directly to learn more about credit resources that may be available to you.

A Final Thought

If you are set on purchasing some form of credit monitoring, confirm it is from a reputable provider that displays a score provided by one of the three credit bureaus. Lastly, if subscribing gives you a peace of mind and outweighs the monthly cost of having to deal with a tattered credit profile after the fact, go for it.

The post Credit Monitoring: Is It Worth It? appeared first on ReadyForZero Blog .

Source: http://blog.readyforzero.com

Top Posts of 2015: A Year In Review

new years times squareHappy New Year!! I hope everyone enjoyed themselves over the holidays and are now getting back into a routine after days off from work. Today I am going to highlight my most popular posts from 2015.

I started doing this year in review last January and had many readers comment on how much they enjoyed it. I personally enjoy doing this post for three reasons:

  • first, everyone is busy and as a result, you might miss a great post.
  • second, I have new readers find my site all of the time. By having a quick review post, they can get up to speed rather quickly.
  • third, sometimes a post might not connect with you at the time of reading it, but now you are in a place where you want to get out of debt and might find the information helpful.

If you are new or even a regular reader, I encourage you to sign up for my emails. I only email you new posts and it helps to not miss anything. You can sign up at the end of this post.

With that said, below are my top posts of 2015. As with last year, I have them listed from in reverse order, so the biggest post is listed last. You might be wondering how I came up with this list. Well, it’s a complicated formula that is still locked in a vault in Fort Knox. In other words, it’s just a combination of page views, comments, and buzz.

11. It’s All About The Budget

In order to be successful financially and reach your goals and dreams, you have to lay the foundation. Just like with a house, a poor foundation and your finances will crumble. As such, in this post I provide you with 9 free excel based budgets to get you to start budgeting. They are all easy to follow and you can even customize them to fit your exact needs.

And if you aren’t an excel fan, don’t worry, I cover a few other options to get you started with budgeting .

10. Bad Advice

Everyone out there is offering your their two cents when it comes to personal finance. One the one hand, this is good. But on the other hand, it is bad because you don’t really know who to trust. I wrote a post about the 12 worst pieces of financial advice and what you should do instead.

9. Slash Your Bills

This post is actually a repeat from last year. How is this so? I originally wrote it in 2014 and it was a hit. I then updated it to make it even better in 2015 and wouldn’t you know, readers loved it even more!

In it, I talk about the various ways to cut your monthly expenses – from the big ones like your mortgage or rent, to the smaller ones like groceries and gas – and then I follow that up with what you should be doing with that money you saved. After all, there is no point in going through the steps to cut your expenses if you aren’t going to save the money and better your financial life.

8. The Skinny On Taxes

A popular tax post? What is going on in the world?!? In all seriousness, I wrote a post talking about the truth of tax deductions . Too many people make the mistake of thinking that since they can write something off on their taxes it is a smart financial move to make. While in some cases this is true, it isn’t true 100% of the time. I encourage you to read this post and really learn about tax deductions. Don’t worry, I worked hard to keep it an easy read.

7. Guide To Debt

I wrote this post late in 2015 and it was a big hit. If you are struggling with debt, you have to read this post . I talk about my struggles with getting out of debt (and landing right back in debt) and what I learned. I then apply this information in a step-by-step guide to help you avoid the same mistakes I made and not get stuck in the debt payoff cycle.

If you follow this action plan, you will overcome your debt once and for all.

6. Make Millions In The Stock Market

As with my post about cutting your monthly expenses, this post is also a repeat from last year. Again, it was a hit and so I took some time to make it even better than before. Reading this post you will learn how to truly make money in the stock market over the long-term. These are the principles I used to go from being in debt and having nothing to saving and investing in the stock market and being well on my way to a comfortable retirement.

5. Save Money Without Effort

Digit came along in 2015. I was one of the first ones to try it out. At first, I was a little skeptical about it really working. Boy was I wrong! I love this free service to help me save money. Since I have started to use it early in 2015, it has helped me to save close to an extra $1,000. That is some serious money.

It works by taking advantage of automation and trust me when I tell you that you don’t notice the few dollars here and there that get transferred to a savings account. But you will notice that savings account balance grow! You can read all about Digit here .

4. Did You Know 80 People Control The World’s Wealth?

I found this story fascinating and decided to write about it before I even finished reading the survey. In this post you will learn how 80 people (yeah, just 80 people) control close to half of the global wealth. You also will learn who these 80 people are and interesting facts about their lives.

3. Facebook Is Stealing Your Money

This post was a trend I noticed about Facebook and many people I interact with on Facebook. After spending some time and doing some research, I realized that Facebook is essentially stealing your money . Not in the sense that they are hacking into your bank or credit card accounts and stealing your money, or stealing your identity. But rather, the site is stealing your money by wasting your time and even making you think you need to keep up with your friends and neighbors.

If you want an interesting look at Facebook, you should read this post. Heck, you should read this post regardless as it may open your eyes to what is really going on.

2. Fun Money Facts

This was a fun, lighthearted look at money and various not well known facts about money . You’ll learn all sorts of interesting facts here and who knows, you might even be able to use some of these facts as answers when you are out playing Quizzo with friends!

1. Things I Learned Managing $500 Million Dollars

Before I was laid off in 2013, I worked at a small financial planning firm that worked with clients who had at least $2 million in investable assets. It was a great job and I learned so much about money, investing and the rich. I decided to share these lessons in this post I wrote .

The funny thing was that the post was just meant to be something that you could take some information from and hopefully apply it to the way you handle money. That changed though as this post was picked up by various media outlets nationally and internationally. The post was featured all over the world, thus making it the most popular post from 2015.

Final Thoughts

So there are the top posts from 2015. What makes them popular is that they are important lessons and steps everyone needs to take in order to take their finances to the next level. I encourage you to read through all of the posts as they all contain key information for improving your finances.

I also encourage you to stick around as I am going to be starting off this year with more great posts to help you get your finances in order and help you to stick to your new years resolution of improving your finances.

[Photo Credit: Anthony Quintano ]

The post Top Posts of 2015: A Year In Review appeared first on MoneySmartGuides.com .

Source: Money Smart Guides

Understanding the Psychology Behind Cash and Credit

Understanding the Psychology Behind Cash and Credit

When it comes to making a purchase, does the method of payment really impact how much you’re willing to spend? It might sound far-fetched at first, but studies show a strong correlation between how you pay and the total amount you’re willing to shell out.

According to a 2000 study titled, “Always Leave Home Without It: A Further Investigation of the Credit-Card Effect on Willingness to Pay,” the number of cases in which credit cards appear to have some impact spending habits are many.

“…it is known that people who own more credit cards make larger purchases per department store visit (Hirschman 1979), and that restaurant tips are larger when payment is by card (Feinberg 1986). There is also evidence that credit card users are more likely to underestimate or forget the amount spent on recent purchases (Soman 1999).”

The study’s authors go on to explain an even more troubling trend – people report being willing to spend 50-200% more on a purchase made with credit vs. with cash.

Whether you are aware of a shift in spending habits based on your payment method, or you’ve never noticed the correlation before, understanding the psychology behind this phenomenon might just help your wallet in a relatively painless way.

Here are a few things to be aware of:

Credit cards give you the option of making impulse purchases.

If you enter a store with, say, $100 cash and the intention of sticking below that self-imposed spending cap, you have very little wiggle room. Yes, you could leave to find an ATM, but the effort required to do so would probably be a deterrent.

Say instead you enter the same store with the same spending cap but with a credit card in hand instead of cash. Suddenly it becomes easy to justify scooting that cap a little higher. It’s only an extra $10…or $20. If the money is so easy to access, you’re forced to rely soley (typo: should be solely) on your willpower to stick to the original plan.

When money is at your fingertips, impulse purchases can quickly become an everyday struggle.

Credit cards shift the focus away from cost.

A 2011 study published in the Journal of Consumer Research found that consumers tended to focus on a laundry list of other things aside from cost when confronted with the option to buy an expensive item with credit.

“When (consumers are) exposed to new products and thinking about paying with credit, they tend to focus on the good things about the product – the aesthetics of it, the features that are better than other products they’re considering, the sexiness and luxury of it….That’s as opposed to details related to cost, like the price, shipping cost, installation cost and effort.”

Credit cards offer immediate satisfaction without immediate consequences.

An empty wallet is the immediate consequence when you purchase something with cash. The consequence for purchasing with credit, however, isn’t felt for awhile after the fact. So long sometimes that the pain of the original purchase is almost non-existent.

Take this example discussed by NerdWallet:

“Amy Finkelstein’s EX Tax: Tax Salience and Tax Rates found that states with highway tolls would raise the cost of the toll rate when the debit occurred using electronic toll collection versus cash payments. These states realize that they can get away with charging more because an electronic debit isn’t seen as “real money” until the statement arrives.”

Get smart in the credit vs. cash game

 Not everyone’s spending habits are impacted by the same external factors. However, if switching payment methods would help you cut your spending without noticing much of a difference, wouldn’t it be worth it?

Switch to all-cash spending for a week, two weeks, or, if you’re up for it, a month. Compare this to your credit card spending. If you notice a difference, you might have just given yourself an unexpected cushion in your budget – and isn’t that a great way to start the New Year?

The post Understanding the Psychology Behind Cash and Credit appeared first on ReadyForZero Blog .

Source: http://blog.readyforzero.com

New Years Resolution: Stop Living Paycheck to Paycheck (and How to Do It)


Scraping by between paydays is a common way of life for a huge portion of the population – even among segments you wouldn’t suspect.

A recent survey found one third of households earning at least $75,000 per year are living on the edge financially. One fourth of those earning at least $100,000 per year find themselves without much left over at the end of the month.

The reasons for the discrepancy in income vs. expenses are varied. Some cite overspending as the culprit, others point to student loan debt or astronomical medical bills. Many found their savings depleted during the Great Recession and they haven’t managed to regain their financial footing.

While living paycheck to paycheck is clearly a huge financial burden, it also creates an endless cycle of stress that is extremely hard to shoulder.

If you know this struggle all too well, here are a few ways you can turn it around and make 2016 a year for building a financial cushion.

Get a grasp on what your financial obligations are.

 When the end of the month is fraught with stress because the money never quite seems to stretch that far, you know there’s a problem. While low income may be one of the culprits, understanding exactly why you are living paycheck to paycheck starts with the numbers.

So the first step is to get acquainted with the numbers of your specific situation – how much you’re bringing in, what’s going out and to where. It sounds simple, but we often never take a full-picture look at our finances. We simply bring money in, send payments out and hope there’s something left over afterwards.

Once you have broken down your financial picture number by number, you can start to recognize where the problems lie.

Find ways to live on less and save the difference.

How much of your money is allocated to bare bones necessities each month? How much of your current expenses are simply masked as necessities?

Creating a balanced budget and a cushion should unexpected emergencies arise means being discerning about what expenses your current income level can support.

Go through your budget items one by one with the mindset that virtually anything could be on the chopping block. Some expenses might need to be scaled back temporarily, others might need to be cut entirely.

Next, take your income, cut of a percentage – say, 10% — and work to divvy up the remainder between the expenses you have deemed necessary. Lowering your own income and learning to live off of what’s left means you can slowly build up a cushion for the unexpected emergencies that exacerbate the paycheck-to-paycheck lifestyle.

Finally, make a plan to save unexpected or expected monetary windfalls, like tax returns. That money isn’t usually accounted for in a budget, so keeping it untouched is relatively painless.

Don’t forget about financial obligations you don’t pay monthly.

Not taking into account expenses that must be paid yearly, quarterly, etc. can be a huge financial burden that ruins budgets for months to come. One of the simplest, yet most beneficial changes you can make to your budget in the upcoming year is to plan for these expenses by divvying them up amongst all 12 months.

Not only is this huge for planning purposes, but it can have a money-saving impact as well. For instance, many car insurance companies will offer a lower premium if it’s paid in full every six months. If you’ve planned ahead, this could finally be an option for you.

Make a list of the expenses that fall into this category, and determine how much extra needs to be saved each month to cover these in full when they arise.

Know when to automate and when not to.

If you’re living paycheck to paycheck, automating all of your bills might not be a convenience you can currently afford. When every dollar counts, you need to be aware of where it’s going and this ensures you don’t keep unnecessary spending – like subscriptions, for instance – on autopilot when they should be axed altogether.

However, there is one thing that should be automated: your savings. Those living the paycheck-to-paycheck lifestyle put savings last on the list of financial obligations, and that money often goes elsewhere. Instead, treat your savings like a bill and create a system that pulls it from your account at a designated time each month.

Systems like automatic withdrawal often lessens the financial pain we would feel if we were simply relying on willpower to aid in the change process.

How do you plan on getting out of the paycheck-to-paycheck lifestyle this year?

The post New Years Resolution: Stop Living Paycheck to Paycheck (and How to Do It) appeared first on ReadyForZero Blog .

Source: http://blog.readyforzero.com

6 Lies About Credit Cards You Actually Believe

6 Lies About Credit Cards You Actually Believe

When it comes to credit cards, I’ve heard it all. There are so many myths floating around about the magic plastic that you may be tempted to avoid them altogether. Even worse, a lack of knowledge could lead to irresponsible use that could haunt you for years. Unfortunately, I was a part of the latter group and it ended up costing me a ton of cash to get out of the hole.

But you don’t have to fall into the same trap that I did. Here are some credit card myths you should be aware of:

1. Credit card applications are bad for my credit score.

Whether you’re seeking a temporary money fix or looking to take advantage of an irresistible introductory offer, chances are you’ve been warned to proceed with caution when applying for credit cards. And rightfully so; obtaining too many credit cards at once can be a disaster waiting to happen if the cards are not used responsibly or if you’re a credit newbie with limited credit history. Plus, new credit accounts account for ten percent of the unique FICO algorithm used to calculate your credit score. 

By contrast, having a stellar credit profile will minimize the damage done to your FICO score. Hard inquiries resulting from credit card applications do have a negative impact on your score, but it is very minimal as the decline will likely only be a few points.

2. It’s okay to exceed the credit limit.

Debt-utilization ratio, anyone?

While your credit card issuer may not assess an over-the-limit fee, that doesn’t necessarily mean it’s OK to continue swiping away even if you’re over the limit. In fact, maintaining a balance that exceeds your credit limit may hurt your credit since the amounts owed account for 30 percent of your FICO score. You could also find yourself with a higher APR for failing to exercise sound debt-management habits.

3. Not carrying a balance is detrimental to my credit health. 

To boost your credit score, it is necessary to show lenders you can responsibly manage your debt over time. However, it is not necessary to carry a balance each month. A smarter alternative: once the statement is released, pay the balance in full prior to the end of the grace period. That way, your credit utilization will remain low, you won’t pay interest, and the activity will report to the credit bureaus.

4. All I have to do is make the minimum payment to remain in good standing.

While making the minimum payment by the due date each month will reflect positively on the payment history portion of your credit report, your wallet will take a hit. To illustrate, the minimum payment on Bank of America credit cards only covers 1% of your balance, with the remainder allocated to interest and late fees (if applicable). The higher the balance, the longer it will take to eliminate the outstanding balance.

5. Credit cards come with a 30-day grace period before interest accrues.

If you think all cards come with a 30-day grace period until interest is assessed to your credit card balance, think again. You may be fortunate to have a card that gives you this lengthy time span to eliminate the balance before interest is applied, but some grace periods are 20 days or less.

6. Closing idle accounts will boost my credit score.

“By closing an old or unused card, you are essentially wiping away some of your available credit and there by increasing your credit utilization ratio,” says myFICO . Therefore, it’s best to keep idle accounts open for the sake of this ratio, which significantly impacts your credit score. Also, remember that closing a credit card won’t make it go away. 

Have you been tricked into believing any of these lies about credit cards? Please share your experiences in the comments below.

The post 6 Lies About Credit Cards You Actually Believe appeared first on ReadyForZero Blog .

Source: http://blog.readyforzero.com

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