7 Expenses That Destroy Your Wealth If You Aren’t Ready

When you’re in your twenties, there are many things that take getting used to. You start taking on many new responsibilities, and often times there are things you don’t think about,  but that doesn’t stop them from coming. One of the many things that happen are expenses that people don’t think about until they are about to undertake them. We decided to make things a little easier for you by compiling a list of 7 expenses to start considering.

Retirement

Retirement may seem like an event that is far away and may not be something that you consistently think about. However, the earlier you start planning for it, the better the chances you will have of supporting yourself when you eventually find yourself in the process of retiring. In 2013, the average age for men to retire was 63.9 and the average age for women was 61.9 (4). This means that if you are 22 you have about 40 years to save and invest before you retire. There are a few ways that you can prepare yourself. The first step is knowing how much you need for retirement. This amount varies from person to person so it’s important to do your research. After figuring how much it takes for you to retire, you need to figure out what to invest in. Examples of tools for retirement include 401ks, and Traditional or Roth IRAs. Finally, after figuring out how much you need to invest, and figuring out where you are going to invest it, you need to find out how much you are going to invest each month to get to your goals.

Insurance

You’ve probably already started paying for some form of insurance whether it be car, life, health, or home. However, it is still something to be aware of especially since it takes a percentage of your paychecks. The key to insurance is finding the right policy that works for you.

Higher Education

For those of you who are looking to get another degree, the cost of graduate school is another thing you should think about when planning your future finances. Depending on what degree you plan on getting, tuition varies widely. Of course it’s possible to get scholarships, or have your job pay for schooling but having a plan before you start applying will put you in a better position to know what you will need to do to pay for your degree.

Wedding/Honeymoon

The bottom line is that weddings and honeymoons are expensive. The average cost of a wedding is $26,444 (1) and the average honeymoon is about $5000 (2) with such a high price, and for an event for most that is generally inevitable, it’s smart to start thinking about how you are going to pay for it. It’s also a good idea to keep in mind that in 2013 the average age for marriage for women was 27, and 29 for men (5), so the earlier these costs are on your radar the better.

House/Mortgage

Buying a house is a major milestone in your life. There are two ways to pay for it. Either with cash up front or with a mortgage. A mortgage is a loan that is lent to a potential home owner so they can finance the purchase of their house. The national average for a mortgage is “$222,261 with a $1,061 average monthly payment for a 30-year mortgage at 4 percent, according to LendingTree” (3). According to Zillow, The average age of a first-time homebuyer is about 33 (5).

Babies

Babies may not be at the forefront of your mind, however they certainly are something to consider financially. According to parenting.com a 2010 USDA report, the average middle-income family will spend roughly $12,000 on child-related expenses in their baby’s first year of life, and that is just the beginning. You still have to account for the cost of taking care of your child for at least 18 years. You are looking at spending over $200,000 over 18 years.

Your Children’s College

The average annual cost of public universities is $30,000, while private universities are $40,000 which is something to consider if you plan to pay for your child’s schooling. For college alone that is a range of $120,000 to $160,000.

The future can be overwhelming, and often we are told by those who came before us that they had wished they had prepared for certain events better. If you know what is coming, you will have a much better opportunity to prepare for these events, and meeting them successfully. We have provided this list so you are sufficiently prepared for the events that will inevitably come your way. Hopefully this will help you prepare as you navigate through your life.

Did we miss any major expenses? Let us know in the comments sections below. Got a great idea or suggestion of what you would like us to blog about? Please send your inquiries to stashadvisor@gmail.com. or comment below We are all about bringing you the most value!

This blog post is provided for discussion purposes, and is not intended as professional financial advice. It’s intent is not to be used as the sole basis for your investment or tax planning decisions. To get more information please speak with a financial planner. Under no circumstances does this information represent a recommendation to buy or sell securities.

Sources:

1 Average Wedding Cost in the United States is $26,444. http://www.costofwedding.com/

2 How to save on a Caribbean honeymoon http://experience.usatoday.com/beach/story/caribbean/2014/06/04/caribbean-value-honeymoon/9970857/

3Realtor Magazine. http://realtormag.realtor.org/daily-news/2012/01/03/what-does-average-home-owner-pay-mortgage

4The Huffington Post. Kelsey Borresen –http://www.huffingtonpost.com/2013/11/14/married-young_n_4227924.html

5 Zillow: Average First-Time Homebuyer 33 Years of Age https://www.linkedin.com/pulse/zillow-average-first-time-homebuyer-33-years-age-carlos-m-moreno

3 Secrets Your Credit Card Company Didn’t Tell You

Credit card companies don’t give you a how to guide, or inside tricks when you sign up for them. But we’re going to.

Charges and Fees

I always hate being hit with  late fees, even when I’m on top of my budget and due dates, however it happens to the best of us. Whether it be travel, work, family or just life that throws us off our game we sometimes miss a payment and suddenly see a late fee of at least $25. When this happens give your credit card company a call, explain the situation, and ask if there’s anything that can be done to waive the late fee (sadly, I have never gotten them to waive interest gained).

Make sure to emphasize the following points:

• The excellence of your payment history (always on time, always paid in full, etc.)
• You have already scheduled the payment of your current bill (possibly in full)
• This was a fluke

Most credit card companies will waive the late fee, as long as you have been in good standing with the company. Of course, this is not something you can do every month, most companies have a rule only allowing this to happen once every 12 or 18 months. This waiver can also be applicable to unknown foreign transaction fees. If you come back from travel and noticed these fees, reach out to your credit card company and explain your lack of knowledge and ask for a one time waiver as you now know for next time.

Increase Credit Limit

You may be thinking, I don’t want to increase my credit limit because I will spend more, however having a higher credit limit is good for your credit score. When your credit score is calculated, 30% of your credit score is made up from available credit being used. The golden ratio for having a good credit score is ⅓. For example, if you have one credit card with a limit of $500 you only want to have a balance of $166 on that card. If you request an increase on the same credit card and have a new limit of $750 the desired ⅓ balance would increase to $250.

That being said, when is a good time to ask for a credit limit increase?

• If you have good credit history with the card (paying on time, paying each month, etc.)
• If you recently got a higher paying job or raise
• If you currently have good credit

When should you not ask for a credit limit increase?

• Don’t request a increase on limit on all your cards at once or after opening a new card
• Ask your company if it will trigger a hard pull on your credit, sometimes a smaller increase will not trigger a hard pull. To learn more about credit inquires check out Hard vs. Soft Credit Inquires by Credit Karma.
• If you just received a limit increase most companies will not grant a limit increase for at least another 3 months.

The next step will be learning control, just because you have a higher available credit does not mean you have to reach the limit. It is not good for you, your budget, or your credit score so check out 3 Easy Budgeting Tips.

Upgrading

Whether you are starting out with your first credit card or already established with a credit history consider thinking about upgrading. When you got your first credit card you may not have been offered the best credit card with the most benefits. But, once you do establish a good credit history with your card company check out what other cards they have. Some companies will allow you to upgrade to a card with greater benefits free of charge.

Two companies that come to mind are Capital One and Chase. Both of these companies have what I call “starter cards” that do not offer many benefits to the card holder but also have cards that offer greater benefits without annual fees. For example, if you start out with or are a currently cardholder of one of Capital One’s basic “starter cards” you could negotiate an upgrade to a Capital One Quicksilver, which provides 1.5% cashback on all purchases with no annual fee. For Chase it would be an upgrade from a Chase Slate to a Chase Freedom, which offers different cashback benefits depending on the quarter with no annual fee. However, most of the sign up bonus you will loose as you are not signing up for a new card but rather upgrading your existing account.

So, how do you actually negotiate an upgrade.

• Explain your research, tell them how you have looked into the other cards they offer and are interested in the greater level of benefits and wanted to know more about upgrading

• Emphasize your good credit history and score (paying each month, paying on time, etc.)
• If they do say no, ask them how you can get an upgrade in the future, they most likely will tell you in more detail the qualifications they are looking for

When it comes to credit cards it is best to ask and be told no, rather than not ask at all.

 

If you have learned any tips in your credit card experience please share with us. Or if you’ve got a great idea or suggestion of what you would like us to blog about? Please send your inquiries to stashadvisor@gmail.com. We are all about bringing you the most value!

This blog post is provided for discussion purposes, and is not intended as professional financial advice. It’s intent is not to be used as the sole basis for your investment or tax planning decisions. To get more information please speak with a financial planner. Under no circumstances does this information represent a recommendation to buy or sell securities.

3 Easy Budgeting Tips

It’s always hard around holiday season to stay on budget. You’re balancing your normal expenses along with added expenses of gifts, dinners or drinks with friends, and travel. Many times it comes to the end of the month and you realize you have spent  more than you intended to. So here are three tips to stay on budget.

Have Small & Large Financial Goals

We all have big financial goals, whether it be buying a car or having a worry free retirement, however many people do not focus on the small goals. Setting smaller financial goals makes larger financial goals more achievable along with helping you stay on budget. After studying my budget I discovered I was spending way more than necessary on coffee. So, I set a small financial goal of only allowing myself to purchase two coffees a week. Setting a small goal of only purchasing two coffees a week when I was normally purchase four, saved me $10 per week, that is $40 per month, and $480 per year. Take a look at your spend habits especially around the holidays can help you figure out where you can compromise, whether it be eating out, entertainment, drinks, or cab rides, you will be surprise when you break things down by category and learn how much you are spending. To learn more about setting financial goals check out our post on Accomplishing Your Financial Goals.

Check Yourself

Set aside 30 minutes each week to check your spending and budget. Doing this allows you to see if you are meeting both your financial goals as well as letting you know where you are at financially.This also creates a much easier end of month calculation of expenses and no surprises when you get your bank statement.

Keep it 100

It is important to have a budget that is not only realistic to your income but also one that best suits you. The main goal of budgeting is to allow for you to pay all you need to monthly and to also save money for your future (either short or long term goals). So, when you are creating your budget take an honest look on where you spend your money. There may be areas where you do need to cut your spending but that does not mean you need to get eliminate a category completely. For example, I love to eat out so my eating out budget is larger than the average person. I also do not have a car so all associated costs with a car I do not have, however I do need to budget money for the metro, buses, and cabs. So keep it 100 with yourself and your budget to make sure you never end up in the red.

Staying on budget can be hard but if you have developed a good budget to begin with and then identify steps to take to stay on budget it becomes a lot easier.

 

Got a great idea or suggestion of what you would like us to blog about? Please send your inquiries to stashadvisor@gmail.com. We are all about bringing you the most value!

This blog post is provided for discussion purposes, and is not intended as professional financial advice. It’s intent is not to be used as the sole basis for your investment or tax planning decisions. To get more information please speak with a financial planner. Under no circumstances does this information represent a recommendation to buy or sell securities.

Accomplishing Your Financial Goals

No matter what stage of life you’re in, you should have financial goals. Your financial goals may be simple or complex, short or long term, small or big. Some more common financial goals are saving money for retirement, purchasing a house, traveling, or paying down debt. So, how do you accomplish these financial goals?

Think of the goal you would like to accomplish and when you would like to accomplish it. Keep in mind many financial goals align with personal goals. Do you want to retire with a certain amount of money, do you want to pay down your debt by a certain date, do you want a car, do you want to travel? Then, consider how much money you need to accomplish your  goal and when you would like to accomplish it. You can discover this number by some simple research on what your goal is.

Once you have a list of your goals, their estimated cost, and when you would like to accomplish them by, you need to prioritize them by their importance to you. When setting financial goals I find it easier to work backwards. Look at the goal at the top of your list and it’s deadline, calculate the number of months between today and your deadline date, this number will tell you how many months you have to save money. Divide the total estimated budget, of your goal, by the number of months till its deadline and you will then have the amount of money you need to save each month.

For instance, I set a personal goal of traveling once a year because it is something I greatly enjoy and it’s something I want in my life. This translated into a short term financial goal of saving $1,500 for my first trip. I estimated this should cover airfare, accommodations, food, transit, etc. Keep in mind, some financial goals take more research than others. I wanted to take my trip in one year, providing me with 12 months to save. To figure out my monthly savings amount I did the simple math of 1500/12=125. I needed to save $125 per month to take my dream trip. My next step was to review my budget and figure out where the $125 per month would come from.

When you really look at your budget, once you have been tracking it for a couple months, you will be surprised to learn where some of your money is going. For instance, how I started saving for my trip was by not purchasing as many coffees per week. I set a small financial goal of only purchasing 2 coffees per week. Setting a small goal of only purchasing 2 coffees a week when I was previously purchasing 4, saved me $10 per week, that is $40 per month, and $480 per year. Yes, this may not be all of the money I needed each month for my travel goal but it brought down my needed amount to $85 rather than $125. Think about where you can compromise, whether it be eating out, entertainment, drinks out, or cab rides, you will be surprise when you break things down by category and learn how much you are spending. Upon further review of my budget I had a little more than $85 per month in my budget not being spent, which gave me my needed total of $125. After reviewing your budget you may not need to compromise on anything.

Keep in mind with some larger long term goals, such as retirement, you should also consider the interest gained in the accounts you deposit your funds into. You can use an estimate of the interest gained to learn how much money you will have by the end of your set deadline. Financial goals should not be overwhelming. The key is to break financial goals down into achievable steps and small goals. Once you break them down they are much more easily achieved.

 

Got a great idea or suggestion of what you would like us to blog about? Please send your inquiries to stashadvisor@gmail.com. We are all about bringing you the most value!

This blog post is provided for discussion purposes, and is not intended as professional financial advice. It’s intent is not to be used as the sole basis for your investment or tax planning decisions. To get more information please speak with a financial planner. Under no circumstances does this information represent a recommendation to buy or sell securities.

 

The Importance of Savings, and How to Start

Do you have a savings account? I ask because doing this small thing can make a big difference in your financial situation. When I first started making money, I would put all my earnings into my checking account. I thought it wouldn’t make a difference if I kept all my money there, or in a savings account. However, this made me disorganized. There was nothing stopping me from spending everything in my checking account. It got to the point where I wouldn’t look at my account because I was scared to find out how much money I had spent. Whenever things such as holidays, vacations, concerts, or birthdays popped up I would just spend what was in my account, which didn’t help my account grow. After having enough, I made a decision to change the way I handled my money, and started reading books on personal finance. I stumbled upon a book called “The Total Money Makeover” by Dave Ramsey that completely changed my perspective, and taught me the importance of saving. Now I have structure in my finances, and can withdraw from my bank account without worry.  All it took was for me to separate my money into different accounts.

Why You Should Get a Savings Account

There are two reasons why you should have a savings account, if you don’t already have one. First you’ll have money in the future when you need it and second, you will have money when you unexpectedly need it.

Have Money When You Need It

The future isn’t certain, but you do know for certain that some events will inevitably happen. We all know Christmas comes around every year on December 25th, so why not plan for it? Would you take a trip to Africa without packing light clothes? Would you go to the beach without packing a bathing suit? No. So, plan for your financial future by stashing away a certain amount of money each month or pay period so that when expected events comes around, you can spend the money you saved instead of the money you need.

Expected Savings Examples

One example of a savings account you can open is for presents. Let’s say you know you are going to spend $200 on presents for Christmas. Starting in January, you could put $17 into your account every month and by December, you will have $204. Another example of a savings account you can open could be for festival tickets. Tickets cost $240 and the concert is in September so in January, you start saving $40 each month. By June, you already have enough for your ticket. With such simple installments made to your savings accounts you’ll have enough money to enjoy the things you like well before you have to pay for them.

Emergency Savings

Life can get hard unexpectedly. That’s why you need a safety net. I remember shaking my head while reading “The Total Money Makeover” and Dave said “It is going to rain. You need a rainy-day fund”. I thought to myself that’s nice but that could never happen to me, I’m careful. I’ll follow his advice because I want to be rich, but I’m positive that I will never have an emergency. Well let’s just say that  thanks to Dave’s advice I didn’t get wet, when it did eventually rain. My emergency savings fund has been  there to protect me from a few unforeseeable events.

Set up Your Emergency Savings Fund

Things can happen to you such as your laptops breaking, all the way up to you losing your job. With life you never know, that’s why it’s important to have a little insurance. Above all other savings, an emergency savings fund should be your top priority. For an emergency savings fund it would be wise to save for the worst case scenario. But this amount can sometimes be a bit overwhelming to consider. So first Dave says to start off with building an emergency savings fund of $500 if your income is equal to or under $20,000 per year, and $1,000 if it is over $20,000 per year. A few  examples of what you can do to establish your initial fund are, putting as much money as you possibly can from your budget into your emergency fund, working extra hours, selling something, or having a garage sale. Use your imagination to come up with  ways to build your initial emergency fund. The point is to establish your initial fund as quickly as possible. After doing so you will have the comfort of knowing that if something were to happen to you, you at least have $1,000 to cover the damages.                       

After building your initial emergency savings, build your account so that you can cover all your expenses for 3-6 months. To accomplish this, you should use all the available cash you have and put it into your emergency savings account. By doing so you will be prepared for just about any inconvenience that may come your way. Once you accomplish your savings goal, your emergency savings fund should ONLY be used for emergencies and nothing else.

Creating savings accounts is a simple thing that can make a big impact on your financial life. The bottom line is that planning your future, by saving, will keep you from spending money that you need, and help you grow your wealth properly. By saving for events you know will happen and emergencies, you will have a greater amount of control over your finances. On top of this you will protect yourself from the uncertainty of the future.

Got a great idea or suggestion of what you would like us to blog about? Please send your inquiries to stashadvisor@gmail.com. We are all about bringing you the most value!

 

Sources:

Ramsey, D. (2003). The total money makeover: A proven plan for financial fitness. Nashville: Thomas Nelson Pub.