Tag Archive for Budgeting

4 Reasons Millennials May Have Trouble Budgeting

4 Reasons Millennials May Have Trouble Budgeting

4 Reasons Millennials May Have Trouble BudgetingAccording to many studies, Millennials seem to have trouble?creating or sticking with a budget. Unfortunately, this also means that other areas of their lives may be suffering as well. Millennials who don’t have a solid budget and financial foundation may not be saving for retirement as they ought to either.

But why do Millennials have trouble budgeting? Is it that they don’t know how? That they don’t care? Or some combination of both? Here are four reasons why Millennials may have trouble budgeting.

1. Millennials Are Underemployed

With the economy still not being back at its full strength after the recession, many Millennials are working jobs that do not pay what their degree is worth. Some Millennials are even underemployed, begin able to only find a few part-time jobs to string together to make ends meet.

They are taking these positions in order to have?a job, but they aren?t earning high salaries. It?s harder to pay off debt and live on your own when one?s paycheck isn?t enough to meet expenses. So, many Millennials don’t even bother with a budget.

2. Many are Living at Home

There have been multiple articles and expos?s on why this generation is living at home longer or returning to live at home after college. But no matter the reason, it’s happening.

One of the main points of budgeting is to make sure your bills are paid and you are letting your money work for you. But, some parents do not charge rent or other bills to their adult children. So, when you bring home a paycheck you don?t really need to divvy out and worry if there is enough, because your expenses are hardly any. Theoretically it should be easier to budget, but it can be difficult habit to adopt when you don?t have to worry about living expenses.

3. High Amounts of Student Debt

According to numerous sources, the average student loan debt for college graduates is around $35,000. Pair this with underemployment and budgeting is harder to do. Higher student debt is holding Millennials back from purchasing homes, automobiles and possibly even?marriage and having children. You may begin feeling deprived if a large portion of your budget is being put toward student loans. Plus, it’s harder to stick with a budget when you don’t feel like you’re making a dent in your debt.

4. Other Economic Factors

The rising cost of the national debt is staggering. As the government?s debt increases, the option of using social security for retirement is dwindling. Combined with?increasing costs of living, higher student debt, and a slowly recovering economy, budgeting gets harder for even the most financially savvy. Unfortunately, many Millennials are focused on the now to live and pay their bills, making the thought of saving for the future daunting at best.

Millennials aren?t the only ones facing tough economic times. But as more of them emerge into adulthood, it?s becoming clear that this generation is struggling financially. That’s not to say Millennials can’t or shouldn’t budget. However, it does make things difficult when the odds are stacked against you. It will simply take more of an effort to stick to your budget and get your personal finances in order.


Why do you think millennials have a hard time with budgeting? Do you struggle with budgeting?


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3 Reasons a Cash Budget May Save You More Money

3 Reasons a Cash Budget May Save You More Money

3 Reasons a Cash Budget May Save You More MoneyHopefully, you already understand the importance of having a budget. Using a budget is a great way to keep your financial life on track, as it helps you to make day-to-day buying decisions based on your income and other financial commitments. However, just a basic budget might not always do the job, depending on your situation. In some cases, it may be necessary to develop a cash budget.

What is a cash budget? Basically, a cash budget is one that is going to not only identify how much money you have available and how much you can spend, but also it is going to attach a time line to those points.

So, for example, your cash budget would outline exactly when you expect to receive income, and when you expect to pay bills. In this way, you can see the flow of your money throughout the month, and you will be able to identify any problems that might be ahead.

Not only is a cash budget a great way to get a complete picture of your finances, but it can also help you to save money over the long term. Here are three specific examples of how a cash budget may help you save more money.

Avoid Paying Interest

What happens when you run out of cash to pay specific bills? Most likely, those bills go on a credit card until you have the money available to pay them off. Unfortunately, that may mean paying interest, which is simply a waste of your money.

If you have a cash budget, you can avoid running out of money at the wrong time, meaning you can leave your credit cards alone most of the year. Steering clear of spending money on interest is one of the most important things you can do for your financial well-being.

A Realistic Picture

Charting out the flow of cash you will have in your personal bank account over the course of a month can provide you with a realistic ? and perhaps, sobering ? picture of your financial reality. With that information in front of you, it is possible that you will be more compelled to strictly stick to your budget all month long. Knowing that even a couple of minor extra purchases could put you in trouble from a cash flow perspective may be all the motivation you need to be disciplined.

Long-Term Savings

Budgeting is not only about making ends meet from month to month, but it is also about saving money over the long haul. With that in mind, having a cash budget can help you to keep an eye on the future by ensuring there is also enough cash on hand to move into a savings account or emergency fund. Place an emphasis on savings in your personal budgeting plan and you stand a great chance to follow a path toward a great financial future.

Adjusting to a cash budget can be difficult at first, but over time it will become easier to adjust to not using credit or debit cards for your spending. The benefits of a cash budget far out weigh the hassles for most people.


Have you ever used a cash budget? Did it help you save money?


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3 Steps to Start Living On Last Month’s Income

Living on Last Month's Income

Living on Last Month's IncomeWhen you first start looking at how to budget, you’ll see that there are many ways you can go about doing it.

But, no matter how you decide to budget,?the same general principles apply. You should spend less than you make, build up savings and work toward your personal money?goals.

One way to budget that is great for those with a variable income, or those who like to have a buffer besides just their emergency fund, is to start living on?last month’s income. This can also prevent you from ever being stuck in the paycheck-to-paycheck cycle.

If you aren?t able to save an entire month’s worth of income right away, you can work toward living on last month’s income with these three steps.

Calculate the Amount Needed to Pay a Month?s Expenses

If you’ve already been budgeting, you probably have a pretty good idea of how much money you need to pay the bills each month. But if not, sit down and figure it out by seeing how much your bills typically cost each month. Once you have this amount calculated, this is what you will work to save up so you can start living on last month’s income.

For example, if you need $2,500 for your monthly expenses, then you?ll need to save at least that much in a separate savings account.

Create a ?Buffer? for Expenses

Some people recommend you build up a buffer in your checking account, but I’ve found that having a savings account separate from my checking account works better for me so I don’t end up spending the extra money in my account.

In order for this to work well, you should probably open your savings account at the same bank that holds your checking account. This way you’ll be able to transfer the money into your checking account each month with a same-day transfer so you don’t have to wait several days for a transfer to come from an external bank.

It might take you a while to build up to $2,500?since most people can’t just come up with that much extra to start their monthly buffer right away. You could save $625 a month to have?$2,500 in?four months. This will take some discipline to cut back on expenses during that time in order to save up. You might also have to pay off some debt first.

Build a New Monthly Budget

Once you’ve saved $625 for four months, you’ll have $2,500 set aside. This will serve as the buffer for your expenses.

Now that you have a month?s worth of expenses saved?for, you will then be able to budget this month?s income for next month. As long as you don’t end up with an unexpected expense, you should be a month ahead with your savings and be confident you can always pay your bills for the next month.

In fact, since you’ve been making sacrifices to live $625 under your monthly income (to build the buffer), you now need to decide how to use that surplus. Of course, it’s best to redirect that amount toward paying off any existing debt, building other savings accounts or invest it in the stock market.

Again, the main goal for living on?last month?s income is to create a safety net so you don’t have to worry about where the money will come for bills or any unexpected expenses. By having the next month?s expenses allotted from the savings of this month?s income you can rest assured that your bills are covered.

If you have your buffer set up and are not having the stress of paycheck-to-paycheck living, then you can start to focus on larger savings goals. Remember, budgeting is about reaching your financial goals and finding the freedom to live the life you want.


How do you budget? Have you ever tried living on last month’s income?


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How to Budget When Your Income Fluctuates

How to Budget When Your Income Fluctuates

How to Budget When Your Income FluctuatesOne of the scariest things about leaving my job to run my own business was learning how to budget when your income fluctuates.

Having a steady income that comes in every two weeks like clockwork makes it easy to set up a budget. You know exactly how much money you’ll earn, when you’ll get paid and how you need to spend it according to your budget.

But when your income fluctuates from month to month because you are self-employed, or you have a commission-based job, it can be more difficult to budget. Notice however that I did not say it’s impossible to budget when your income fluctuates. Because it’s not. Here’s how you can budget when your income fluctuates.


Record All Monthly Expenses

Recording all of your monthly expenses is the first step in any budget, no matter if your income fluctuates or is steady from month to month. Start with the necessities such as your rent or house payment, utilities, loans and debt payments, groceries, etc. Once this is completed be sure to include additional expenses such as clothes, eating out, trips, etc.

Note which expenses are monthly and which are weekly. Once tallied subtract these from your current income. This is how much you have left or how much you need to make up. From here you can decide what can go and what stays in your monthly budget.

Average Your Lowest Income

This sounds simple, but when your income fluctuates, it can be more tricky. The hardest part about a fluctuating income is having low months. So when you budget, make sure you aren’t budgeting off of a high income month.

Take a few of the months where you have made the least and average it out. This will the basis for your bare-bones budget, the lowest you have to have to live?off of. This way you’ll be able to cover you budgeted expenses as long as your income doesn’t drop below the current low average.

If your income doesn?t fluctuate too severely, or your income is continually growing, you might be able create a rolling 12 month average to use for your budget instead. But, there is more risk in using this method.

Open a Holding Account

This budgeting method is great for those who don’t earn the same amount all year and have known periods when work and income may be slow. Open a new account and deposit all of your income into it each month. Then take a set amount from the account each month to cover the budget you created. Don?t take more when you have a good month so?you aren?t tempted to spend it or splurge.

If you continue to out-earn your monthly pull, or you no longer have a slow season, you may be able to use the “extra” in the account to make a lump sum payment toward debt, or as a savings for a large purchase, like car or a down payment on a house.

Start an Emergency Fund

Everyone should have an emergency fund, no matter how much money they have or earn. By saving three to six months of expenses, you can use this to live off of should the unexpected happen or if an emergency pops up. Work your way up to this amount by putting money into your emergency fund every month. Add?a line item into your budget for saving so you don’t forget to do it.

Stick to Your Budget!

This is the most important thing to do when your income fluctuates. Stay within your budget even if you happen to have a good month of income. Without splurging during high income months, you will continue to have savings and money for when things get slow. Be wary of elevating your lifestyle based on?a month of inflated income. This can be unsustainable if you don?t earn the same the next month.

You can make your budget work even though your income may fluctuate?from month to month. By planning ahead and sticking with it, you can meet your financial goals and be set for whatever comes your way.


Does your income fluctuate? How do you handle budgeting with a fluctuating income?


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Why You Shouldn’t Request a Tax Refund Advance

Why You Shouldn't Request a Tax Refund Advance

Why You Shouldn't Request a Tax Refund AdvanceTax season is officially upon us. As we scramble to collect all of our W-2s, 1099s, receipts, etc., we start to think about our tax refund.

Remember that getting a tax refund from the government means you paid too much money in taxes throughout the year. They are giving you back the money that they borrowed.

If you are getting a large tax refund, you should discuss your withholdings with your tax preparer or accountant so you can lower them. Lowering your withholdings will decrease your tax refund next year, but it will give you more money in your take home pay every month.

Getting a large tax refund is bad enough, but I’ve gotten several advertisements in my mailbox over the past few days encouraging me to borrow against my expected tax refund by requesting a tax refund advance. If you are expecting a refund and need money immediately, you could apply for a tax refund advance. But, here’s why getting a tax refund advance is NOT a good idea.

It?s a Short Term Fix

If you are strapped for cash and need money now you can get it with a tax refund advance. This advance is similar to the payday advance loans. You?ll get the money now, but when you need it later you won?t have it.

Getting advances of money is a?the struggle because you’ll have to come up with more money to pay off the advances when they come due. Chances are high that you won’t have any money then either. It’s a vicious cycle that’s best avoided. Start budgeting and saving an emergency fund so you can avoid these options and have the relief knowing you are covered should something come up.

Your Taxes Must Be Prepared by That Company

Due to a law passed in 2012, these tax refund advance companies can?t charge fees or interest in order to protect you. To get around this companies have made it mandatory you have them file your taxes. The gotcha is that they can charge you more for their services, and they may try to get you to pay for unnecessary services you don’t even need. Once your tax refund comes in, you won?t get the full amount. Instead, you?ll get the amount minus what you were advanced.

What Happens If Your Tax Refund Advance is Denied?

Even if your tax refund advance is denied, you still have to pay the tax preparer for their services. If you think you?ll get a tax refund advance and you have your taxes prepared, you may not have the cash to pay the preparer is you are denied an advance. This can put you farther in the hole as you?ll need more money that you don?t have.

Fees Add Up

A tax refund advance is usually placed on a debit card of some sort. Most ATMs charge a $2.50 to withdraw your money. If you make multiple withdrawals, your fees can easily add up and the amount you?ll have to spend is less.

While there are no lending fees or interest due for a tax refund advance, it is still like a loan. It is still money you will have to pay back when you get your actual tax refund. A tax refund advance should only be used as a last resort.?Even then, it should be used with caution.

It?s easy to get swept up in the cash you have now and not plan ahead for when you’ll have to repay the advance. A better alternative is to budget and save up an emergency fund, so you never have to count on a tax refund to help your finances. This way any refund you get will be a cherry on top of your already good personal finances.


Have you ever gotten a tax refund advance? Do you expect a tax refund this year?


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