General Finance Archives — Page 13 of 38

What the Pandemic Has Taught Me About Our Spending

June 22, 2020 By MelissaB 1 Comment

The pandemic has changed our American way of life. More people work from home now. Kids go online to complete their schooling. Many of us are wearing masks now. And, our month or two quarantined at home has given us time to reflect on what are life used to be like. . .and whether or not we want to fully go back to that life. I’ve spent some time considering what the pandemic has taught me about our spending.

What the Pandemic Has Taught Me About Our Spending

Sometimes you get complacent in life and just do things the way that you’ve always done them. This pandemic has allowed me to look at our finances with fresh eyes to discover what we did well and what needs improvement.

My Bargain Shopping Was a Boon to the Family

What The Pandemic Has Taught Me About Our Spending — Photo by gemma on Unsplash

I used to drop by the grocery store three or four times a week, scouring the store for clearance mark downs. I bought probably 1/3 to ½ of our weekly food this way. I used to worry that I was spending too much money shopping this way, but now I see how much I was really saving us.

Since the pandemic, I’ve relied on grocery store pick up, which means paying full price for everything. Our grocery bill has shot up by 30%. When the pandemic is over, you can bet I’ll be back to stopping by the store a few times a week to pick up the bargains.

We Drove Around Way Too Much

Before the pandemic, we were a busy family with three kids. We spent our time, like many American families, in the car driving from activity to activity. Gas was a large line item in our budget, especially since our town is very spread out. We easily spent 2 to 2.5 hours in the car a day, dropping off and picking up a child from school, taking another child to therapy, going to horseback riding lessons, gymnastics lessons, religious education lessons. On and on.

Since the pandemic, our gas consumption has dropped to nearly nothing. I’ve bought gas for my vehicle twice in three months; my husband hasn’t had to buy gas at all. We find we’re happier with more time at home. Whenever things are more normal, we don’t plan to be as busy, which means less gas consumption.

Our Emergency Fund Is Not Large Enough

We’ve been working on building our emergency fund from a tiny $1,000 to a six-month emergency fund. When the pandemic hit in mid-March, we had a two-month emergency fund. While that’s certainly better than a $1,000 emergency fund, I really wish it was larger.

We’re lucky that my husband was able to keep his job and work from home, but he did get a pay cut. While we have rearranged the budget to accommodate the pay cut, we won’t be able to grow our emergency fund like we had previously. And, depending on the way this pandemic rides out, we’re both aware that he could lose his job next year. I’d feel much more confident if we had a bigger cushion.

Final Thoughts

These three are what the pandemic has taught me about our spending. I’m quite sure when this pandemic is over, our family won’t go back to the way things were. I think we’ll drive a little less and try to save even more.

How has the pandemic changed the way you look at and spend money?

MelissaB

Melissa is a writer and virtual assistant. She earned her Master’s from Southern Illinois University, and her Bachelor’s in English from the University of Michigan. When she’s not working, you can find her homeschooling her kids, reading a good book, or cooking. She resides in New York, where she loves the natural beauty of the area.

www.momsplans.com/

Why You Should Have Both a Checking and Savings Account

March 19, 2020 By MelissaB Leave a Comment

In the interest of financial simplicity, you may think it would be easier to consolidate your money into one checking account. After all, having a standard savings account seems to have gone the way of the dinosaur since most banks pay no or very little interest on principal. Yet, there are some good reasons why you should have both a checking and a savings account:

The Differences Between Checking and Savings Account

Each Account Has a Different Use

For most people, keeping their money in two accounts based on uses and goals make sense, especially for people with little financial restraint.

Checking Account

Each account has a different use. A checking account is meant to be used for regular, monthly expenses. You can pay via check, debit card, or automatic withdrawal. You can get the money out via ATM or walk-in at the bank. Most people find a checking account necessary, even if they do typically use their credit card for most purchases.

Savings Account

A savings account is used to store your money that you’re saving for long-term goals such as a full-funded emergency fund, a new car, a down payment on a house, or whatever other savings goal you have. Most of these accounts do not pay interest, or if they do, they pay a low interest amount, but some do offer more interest if you have a high savings account balance.

Each Account Has Different Rules

Saving accounts may have a limit on the amount of withdrawals you can make. Typically six withdrawals a month are allowed.

Why You Should Have Both a Checking and Savings Account

As mentioned above, there are significant differences between checking and savings accounts. Having both allows you more financial freedom and helps you meet your financial goals.

More Financial Restraint

If you struggle with financial restraint, having both a checking and savings account is imperative.

Can’t Fool Yourself

Some people with just a checking account must also put their money they are saving for larger purchases in the checking account. This can create a false sense of security because it looks like they have more money available than they do. For instance, if they have $2,050 in their checking, but of that, $2,000 is saved for an emergency fund, they really only have $50 currently available to spend. However, because they looking at the checking account balance and see $2,050, they feel comfortable spending more than they should.

Limited Access to Savings

Why You Should Have Both a Checking and Savings Account — Photo by Verygoodlord on Unsplash

An ATM card can make it so easy to access your cash, even if you don’t make it to the bank during normal banking hours. However, you may not have access to your savings account with an ATM card, which means you have to show a bit more restraint. Not having immediate access to the money during off hours or when you’re not nearby the bank can curb impulse buys, improving your financial situation. Plus, most savings accounts only give you a limited number of transactions, so you can’t as freely withdraw your money as you can with a checking account.

Automatically Put Money in Savings

Most people have their paycheck automatically deposited to their checking account. However, if you’re saving for some goal, you can go to your business’ payroll office and fill out a form for part of your paycheck to be deposited in your savings account.

Let’s say you’re slowly saving for a new car and want to put $150 a month for that goal in your savings account. If you depend on yourself to move the money from checking to savings, you might not. After all, there are always other things vying for that money. However, if you went to payroll and filled out the necessary forms, $150 will automatically go into your savings every paycheck. By having two accounts and setting up automatic deposit to savings, you take yourself and self-discipline out of the equation, making it easier to save.

Protect Your Money in the Event of Theft

Enhanced Due Diligence (EDD) in banking plays a crucial role in safeguarding consumers by detecting suspicious activities, thereby ensuring secure financial transactions and demonstrating banks’ adherence to international regulatory standards. This not only protects individual consumers but also fortifies the integrity of the broader financial system.

Despite the protection EDD offers, the risks of not diversifying one’s funds become clear when thinking about potential theft. If you put all of your money in your checking account, you could open yourself up to serious financial difficulties if a thief accesses your account electronically through your debit card. The thief would be able to empty your checking account, and while you’ll usually get the money back, it can take several days, unlike credit card companies which usually return your money immediately.

While you’re waiting for your hard-earned money to be returned, you may inadvertently bounce checks if you have outstanding payments that haven’t cleared your account before the thief stole your money.

In addition, how will you pay your bills and daily living expenses in the interim? If you still had a savings account, you could use that money to pay your regular expenses, but if all the money is in one checking account, you would have access to none of your money until the bank refunds what was stolen.”

Caveat: Try to Find a Savings Account That Does Pay Interest

While you may want to chuck the savings account because you’re earning very little in interest, maybe it is just time to go savings account shopping and find a bank that pays more interest. A family friend, Jackie, has her savings at a local credit union, and she earns nearly 2% interest. Depending on how much you have stashed in your savings, that can add up. Jackie earns nearly $100 in interest every month, and she earmarks the interest payment to save for a new car. Every year, she is putting $1,200 away for a new car, and it costs her nothing because it’s all interest. In addition, as she keeps the interest in the account, it makes her account balance grow, and she earns even more interest.

If you’re thinking of ditching your savings account in favor of a checking account only, take a moment to reconsider. You’re financially more secure with both accounts. Maybe instead you should shop around for a savings account that pays more interest.

What is your preference? Do you prefer to keep money for your medium and long-term goals in a savings account, or do you prefer to keep it all together in your checking account? What other reasons would you give to encourage people to maintain both accounts, or would you instead argue that people just need a checking account?

MelissaB

www.momsplans.com/

Why It’s Okay to Make Financial Mistakes

February 24, 2020 By MelissaB 1 Comment

What’s the worst financial mistake you’ve made? Ask any adult, and you’ll likely hear about thousand dollar or even hundreds of thousands of dollar mistakes. Ouch. We’d all love to go through life with a great handle on our money, only making smart decisions and watching our money grow in investment accounts. But life isn’t that way. Sometimes we’re just stupid with money, and other times, we think we’re making a smart decision only to find out later that we were wrong. But that’s okay. In fact, there are many reasons why it’s okay to make financial mistakes.

Why It’s Okay to Make Financial Mistakes

Chances are you’re more financially savvy because of the mistakes you’ve made!

You Learn

The most important reason why it’s okay to make financial mistakes is that you learn from those mistakes.

When I was in my early 20s and just out of college, I was working at a job and was told that I would be getting a raise in the next few weeks. I increased my meager standard of living because I knew the raise was in the works. But week after week went by, and I didn’t get the raise. In fact, a few months later, the company went out of business. Not only was I out of a job, but I had accrued some debt by raising my lifestyle prematurely.

A few years ago, my husband was guaranteed a raise. It was supposed to come in August, but it didn’t actually come until December. Thanks to the lesson I learned in my 20s, we were very careful to avoid lifestyle creep.

You Can Help Others

When you’ve learned from your financial mistakes, you can help others avoid the same mistakes that you made.

Why It's Okay to Make Financial Mistakes — Photo by Irina Murza on Unsplash

When I went to graduate school, I did my best to avoid student loans. I chose a college that paid my tuition and gave me a small stipend for teaching two classes a semester. But after I graduated, I wanted to teach at a community college. Those full-time jobs are inaccessible if you don’t have experience. The only way to get experience is to teach as a part-timer, and part-time community college jobs pay next to nothing (about $1,000 for a 16 week class).

I went into credit card debt trying to maintain my college lifestyle (which was already frugal) while earning poverty level income. The next year, I did get a full-time community college job, but I entered that job with over ten thousand dollars in credit card debt thanks to trying to subsist on such a low income.

When it comes to encouraging my kids to save and plan for college, I urge them to try to get scholarships that will also help them pay their living expenses. We’re sending my son to SAT prep classes so he can score high enough to be in the running for a lucrative scholarship from our local college.

Final Thoughts

Making money mistakes is part of your history. Hopefully, you’ve grown and made smarter decisions because of your financial mistakes, which is an excellent reason why it’s okay to make financial mistakes.

However, if you find yourself making the same mistakes over and over again, i.e. running up your credit cards, paying them down, and then running them up again, you may need to explore more deeply why you keep following the same negative behavior patterns.

MelissaB