Big Hairy Audacious Goal (BHAG)

I’ve actually written down a new goal that I’ve thought about for a while, and finally decided to tackle.  The only thing we still owe is our mortgage, which is now at below half of our home value.  While that’s great news, we are ready to attack the BHAG.  It seems overwhelming, and we “could” sell our investments, pay taxes (of course) on the gains, and pay off the mortgage today.  That would create less risk in our lives, but I don’t feel that’s the best way for us to do it.

It’s important to prioritize financial decisions.  Start investing early, with the goal of investing 15% of your income.  Somewhere along the way, we bought a home.  The payments should be less than 25% of your take home pay.   California has it a bit tougher, and we Californians have been known to stretch our payment to 1/3 of our take home pay, but that’s riskier to keep up with the bills and investments.  Once you start making more income, keep up with the 15% retirement investment, and start adding extra funds to pay down the mortgage principal. 

With the proposed tax reform, mortgage interest is not going to be as attractive as a write-off, since the standard deduction will most likely be the best bet for most Americans.  Interest rates are likely to go up this year, so refinancing will not be as appealing, either. 

If we add $700 a month to our payment, we could have the house paid off in seven years.  That would save us thousands of dollars.  My plan is to take any extra income and any savings earned to pay towards the principal.  So far in May, I’ve already saved $143 by catching a medical billing error on my co-payment, negotiating with my Internet Service Provider to not charge us equipment rental, and coupons I used.  It’s early in the month, and now that I’ve written down the goal, my actions will bring in more results.

Is anyone brave enough to make the same challenge?  What ways do you think you can engage to bring in more funds to pay down the principal?  How would it feel to not have a house payment anymore?  

3 Smart Expenses You Can Avoid

Looking at your spending plan, it’s fairly easy to anticipate the regular monthly expenses, and with a bit of planning, the gift occasions, school activities and annual fees.  What is frequently not anticipated are the expenses that others try to include without our pre-approval.  They offer, and we accept the opportunity to spend our precious money.

Awareness is the key to this conversation, and please understand the choice placed before you is optional.  You can start to realize that commitment or acceptance of others’ expectations can “force” you into an expense you didn’t even realize you wanted! 

Here are some examples that I have experienced in my own family’s finances:

•       When our family plan had an available phone upgrade, they went to our teenage son for a few years as he wore them out quickly.  Now, when the upgrade becomes available, there’s the anticipation of using the latest technology.  As soon as we had a chance, we upgraded my husband from a flip phone to the newest iPhone.  He primarily uses it to make calls.  Should we have waited a little longer, or selected a less expensive phone?  It is not a mandatory upgrade. We had a choice.

• Our kids, or we as parents, want to experience every sport, musical instrument, and community organization available.  Youth build lifelong skills and friends through activities.  Each pursuit has fees, equipment, travel and various expenses to contribute.  We will spend all afternoon and weekends driving them all over the place to participate.  Parents end up with no free time, and a lot less money.  Who says it has to be this way?  Set a limit on time and money for activities, which is VERY important with blended families who need to ensure all guardians are on board with the plan and able to give money and time.       
• Can you politely decline a destination wedding, family reunion of 3^rd cousins, or a weekend in Vegas with friends you don’t really enjoy anymore?  If you truly don’t want to go, save the money and precious time and say no.  Tell them you didn’t budget for it, you don’t have that much time, or whatever honest answer you can give.  Other people’s desires and priorities do not need to be forced onto you.  Feel comfortable telling the truth, and not participating out of guilt or responsibility.  You really have the power to make your own choices.

Wouldn’t it feel delightful to have more control of your cherished time and money?  Could you remove the culpability of not doing the things above, and replace it with the empowerment of making smart choices?  This is my goal at MoneyWise Advisors, to encourage you to take action and power to control your finances, and start achieving your goals and dreams.  Your personal finance strategy becomes the tool to increase your earning power.  What choices do you have in front of you today?

A blog to share celebrating America Saves Week 2016 #ASW2016

7 Ways to Automate Your Savings

by Camilla Cheung, Wise Bread

Sometimes, building a healthy cushion of savings can seem like a daunting task. We all know how easy it is to make a late credit card payment, or to end up spending all of your paycheck without remembering to save part of it. One easy way to get started on saving this America Saves Week is to automate your savings. Having technology work to save money for you takes much of the effort out of the equation, saves time, and makes it easier for you to achieve your goals.

1. Automate Retirement Contributions

If your employer matches retirement contributions to your 401K or retirement plan, be sure to take advantage of the free money! Sign up for retirement contributions to be automatically taken out of your paycheck. This saves you money in several ways. First, it contributes money before you even see your paycheck and get an opportunity to spend that money; and second, it saves you money on taxes as it is withdrawn from your pre-tax income.

Even if you don’t have a retirement plan with your employer, you can still schedule your account to contribute automatically to your own retirement plan. Scheduling your contribution a day or two after you receive your paycheck ensures that saving for retirement is a priority.

2. Transfer Money to Savings Accounts

To prioritize savings, schedule an automatic transfer of a certain amount of your monthly income into a savings account. Your savings will benefit from being set aside from your regular spending, as well as benefitting from a higher dividend rate. Eventually, even just a small amount squirreled aside every month can translate into a healthy buffer of savings to hold you over on a rainy day.

If you are self-employed or a freelancer and you have to pay quarterly or yearly taxes on your income, sending the estimated tax you owe to a separate account every month will help you to avoid an unpleasant surprise at tax time.

3. Pay Bills Automatically

Avoid late fees by paying your bills automatically. Some bills can be put on your credit card, whereas others can be set up to be paid directly from your bank account.

It’s also a good idea to set up your credit card bill to be directly paid from your bank account. That way, you avoid late fees as well as costly interest on overdue amounts. Be sure, however, that you have enough money in your account to avoid overdrawing your account and incurring additional fees.

4. Get Money Back With Credit Card Rewards

There are many no-fee credit cards that offer cash back or rewards points. Use your card for all your regular purchases (and your monthly bills), and you’ll earn free rewards or cash back for your spending. If you plan to spend money on travel, rewards points that allow you to buy airplane tickets or hotel stays can also help save you money. Choosing the right credit card can also net you additional perks like car rental and travel insurance when you pay with your card.

It’s important to use your credit card responsibly, so be sure you can pay your balance in full every month to avoid extra fees.

5. Use Technology to Cut Energy Costs

If you spend a lot on heating and cooling costs, investing in a smart thermostat can automatically save you energy and money, by reducing your energy usage during hours that you are away from home or at night. Many thermostats can also set different zones of your house to heat and cool differently depending on your needs, making your energy usage more efficient.

When your appliances are in need of replacement, replace them with energy-efficient models that will automatically reduce your energy usage every time you use them.

6. Simplify and Save While Shopping

Many people can’t be bothered to cut out physical coupons and fiddle with all those little slips of paper at the store, but with smartphones, it’s much easier to automate the couponing process. Many grocery and big box stores have apps that allow you to choose the coupons you need from the app, and then apply them all by scanning your phone at checkout. Other apps aggregate coupons from many different retailers.

For regular purchases of things like diapers, toilet paper, and other necessities, consider joining an online subscription service, which will deliver your purchases to your door regularly, as well as offer a discount in the process. That way, you won’t be stuck paying full price when you have to run out and buy these items at the last minute.

7. Keep an Eye on Your Accounts

Staying aware of the activities in your accounts helps you to track your spending, as well as detect any fraudulent activity. But it can be a bit of a pain to sign into each individual credit card and bank account separately. Instead, tie your accounts into an app (such as Mint.com) that allows you to see your transactions at a glance. This will help you to rein in your spending if needed, transfer money to savings or investment accounts, as well as save time keeping track of your accounts.

By setting your finances to automatically save for you, you’ll quickly be on your way to saving both time and money.

What will you do during America Saves Week to automate your savings?

Wise Bread is an online personal finance and credit card education magazine. It has won best of the web awards from PC Magazine, Kiplinger, and About.com. 

A Personal money coach can help you implement some of these steps if you need a professional to help you get started.  We offer many resources and support at our MoneyWiseAdvisors website; please check out our new website released this week.