Budgeting Tips for the Sandwich Generation: How to Care for Kids and Parents

Everyone knows that raising kids can put a serious squeeze on your budget. Beyond covering day-to-day living expenses, there are all of those extras to consider—sports, after-school activities, braces, a first car. Oh, and don’t forget about college.

Add caring for elderly parents to the mix, and balancing your financial and family obligations could become even more difficult.

“It can be an emotional and financial roller coaster, being pushed and pulled in multiple directions at the same time,” says financial life planner and author Michael F. Kay.

The “sandwich generation”—which describes people that are raising children and taking care of aging parents—is growing as Baby Boomers continue to age.

According to the Center for Retirement Research at Boston College, 17 percent of adult children serve as caregivers for their parents at some point in their lives. Aside from a time commitment, you may also be committing part of your budget to caregiving expenses like food, medications and doctor’s appointments.

Budgeting tips for the sandwich generation include communicating with parents.

When you’re caught in the caregiving crunch, you might be wondering: How do I take care of my parents and kids without going broke?

The answer lies in how you approach budgeting and saving. These money strategies for the sandwich generation and budgeting tips for the sandwich generation can help you balance your financial and family priorities:

Communicate with parents

Quentara Costa, a certified financial planner and founder of investment advisory service POWWOW, LLC, served as caregiver for her father, who was diagnosed with Alzheimer’s disease, while also managing a career and starting a family. That experience taught her two very important budgeting tips for the sandwich generation.

First, communication is key, and a money strategy for the sandwich generation is to talk with your parents about what they need in terms of care. “It should all start with a frank discussion and plan, preferably prior to any significant health crisis,” Costa says.

Second, run the numbers so you have a realistic understanding of caregiving costs, including how much parents will cover financially and what you can afford to contribute.

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17 percent of adult children serve as caregivers for their parents at some point in their lives.

– The Center for Retirement Research at Boston College

Involve kids in financial discussions

While you’re talking over expectations with your parents, take time to do the same with your kids. Caregiving for your parents may be part of the discussion, but these talks can also be an opportunity for you and your children to talk about your family’s bigger financial picture.

With younger kids, for example, that might involve talking about how an allowance can be earned and used. You could teach kids about money using a savings account and discuss the difference between needs and wants. These lessons can help lay a solid money foundation as they as move into their tween and teen years when discussions might become more complex.

When figuring out how to budget for the sandwich generation, try including your kids in financial decisions.

If your teen is on the verge of getting their driver’s license, for example, their expectation might be that you’ll help them buy a car or help with insurance and registration costs. Communicating about who will be contributing to these types of large expenses is a good money strategy for the sandwich generation.

The same goes for college, which can easily be one of the biggest expenses for parents and important when learning how to budget for the sandwich generation. If your budget as a caregiver can’t also accommodate full college tuition, your kids need to know that early on to help with their educational choices.

Talking over expectations—yours and theirs—can help you determine which schools are within reach financially, what scholarship or grant options may be available and whether your student is able to contribute to their education costs through work-study or a part-time job.

Consider the impact of caregiving on your income

When thinking about how to budget for the sandwich generation, consider that caring for aging parents can directly affect your earning potential if you have to cut back on the number of hours you work. The impact to your income will be more significant if you are the primary caregiver and not leveraging other care options, such as an in-home nurse, senior care facility or help from another adult child.

Costa says taking time away from work can be difficult if you’re the primary breadwinner or if your family is dual-income dependent. Losing some or all of your income, even temporarily, could make it challenging to meet your everyday expenses.

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“Very rarely do I recommend putting caregiving ahead of the client’s own cash reserve and retirement.”

– Quentara Costa, certified financial planner

When you’re facing a reduced income, how to budget for the sandwich generation is really about getting clear on needs versus wants. Start with a thorough spending review.

Are there expenses you might be able to reduce or eliminate while you’re providing care? How much do you need to earn each month to maintain your family’s standard of living? Keeping your family’s needs in focus and shaping your budget around them is a money strategy for the sandwich generation that can keep you from overextending yourself financially.

“Protect your capital from poor decisions made from emotions,” financial life planner Kay says. “It’s too easy when you’re stretched beyond reason to make in-the-heat-of-the-moment decisions that ultimately are not in anyone’s best interest.”

Keep saving in sight

One of the most important money strategies for the sandwich generation is continuing to save for short- and long-term financial goals.

“Very rarely do I recommend putting caregiving ahead of the client’s own cash reserve and retirement,” financial planner Costa says. “While the intention to put others before ourselves is noble, you may actually be pulling the next generation backwards due to your lack of self-planning.”

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Making regular contributions to your 401(k), an individual retirement account or an IRA CD should still be a priority. Adding to your emergency savings each month—even if you have to reduce the amount you normally save to fit new caregiving expenses into your budget—can help prepare you for unexpected expenses or the occasional cash flow shortfall. Contributing to a 529 college savings plan or a Coverdell ESA is a budgeting tip for the sandwich generation that can help you build a cushion for your children once they’re ready for college life.

When you are learning how to budget for the sandwich generation, don’t forget about your children’s savings goals. If there’s something specific they want to save for, help them figure out how much they need to save and a timeline for reaching their goal.

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Ask for help if you need it

A big part of learning how to budget for the sandwich generation is finding resources you can leverage to help balance your family commitments. In the case of aging parents, there may be state or federal programs that can help with the cost of care.

Remember to also loop in your siblings or other family members when researching budgeting tips for the sandwich generation. If you have siblings or relatives, engage them in an open discussion about what they can contribute, financially or in terms of caregiving assistance, to your parents. Getting them involved and asking them to share some of the load can help you balance caregiving for parents while still making sure that you and your family’s financial outlook remains bright.

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How Much Should You Spend on an Engagement Ring?

How Much Should You Spend on an Engagement Ring?

There’s nothing like falling in love and finding the person you want to spend the rest of your life with. But when it’s time to shop for rings, it’s easy to get discouraged by the price tags. Just how much should you spend on an engagement ring? We’ll dive into the topic and discuss ways to save on the big purchase.

Find out not: How much do I need to save for retirement?

What the Average Engagement Ring Costs

Maybe you can’t buy love. But if you’re in the market for an engagement ring, you’ll quickly realize that it won’t be cheap. According to the Knot’s 2016 Real Weddings Study, Americans spent an average of $6,163 on engagement rings, up from $5,871 in 2015. Wedding bands for the bride and engagement rings combined cost between $5,968 and $6,258.

If you want your wedding to happen sooner rather than later, keep in mind that on average, couples spend more than $30,000 to tie the knot. That’s roughly how much you can expect to pay for everything from your wedding reception and DJ to your cake and your photographer. Location matters when it comes to weddings, however, so you might be able to save some money by choosing a more affordable place to host your ceremony.

How Much Should I Spend?

How Much Should You Spend on an Engagement Ring?

Conventional wisdom says that anyone planning to propose to their partner should prepare to spend at least two or three months of their salary on an engagement ring. But spending too much isn’t a good idea for various reasons.

A recent study conducted by Emory University connected pricey rings to divorce rates. Men who spent more money on rings for their fiancees were more likely to end their marriages. That’s a possible long-term consequence of overspending on an engagement ring. In the short term, using a large percentage of your money to buy a ring might prevent you from using those funds to pay bills or stay on top of your debt, which can hurt your credit score.

If the marriage doesn’t work out and your ex-spouse decides to sell their diamond engagement ring, its value won’t be nearly as high as it was when it was first purchased. That’s why diamond rings can be such bad investments.

So exactly how much should you spend on an engagement ring? It’s a good idea to make sure that the price you pay doesn’t prevent you or your partner from accomplishing whatever you’re planning to achieve in the future, whether that’s buying a house or having a child. Rather than following an old-school societal notion that says you should spend x amount of money on a ring, it’s best to spend an amount that won’t compromise your financial goals or jeopardize the status of your relationship.

How to Save on the Ring

If you don’t want the engagement ring you’re buying to break the bank, it’s a good idea to learn as much as you can about the rings and what makes some more expensive than others. Diamonds are the gems most commonly used in engagement rings, and if you’re buying one for your significant other, it’s important to familiarize yourself with what jewelers refer to as the four C’s: clarity, cut, color and carat weight.

In terms of clarity, the best diamonds are flawless, meaning that they don’t have any blemishes when viewed under a microscope with 10 power magnification. Since no one’s eyesight is that powerful, you can get away with choosing a diamond with a lower clarity grade that costs less. Getting a diamond that has fewer carats (meaning that it weighs less) or getting one that isn’t completely colorless can also lower its overall price.

Or don’t get a diamond at all. Your partner might be just as happy with a simple band, a white sapphire or an emerald ring and it probably won’t cost as much as a diamond engagement ring. Shopping for your ring at a vintage store, looking for one online rather than in-person and getting a ring with a series of smaller stones surrounding the center stone (also known as a halo ring) are a few additional ways to save when buying a ring.

Final Word

How Much Should You Spend on an Engagement Ring?

There’s no need to spend a fortune on an engagement ring. And you don’t have to feel guilty about cutting corners in order to find one that you can afford to buy.

Like any other major purchase, it’s a good idea to take time to save up for a ring. If you have to take on more credit card debt or a personal loan in order to buy an engagement ring, it’s a good idea to find out how long it’ll take to pay off your debt. It isn’t wise to begin a marriage by digging yourself (and your partner) into a deep financial hole.

Tips for Getting Financially Ready for Marriage

  • If you haven’t already, start talking about money. It’s important to establish an open dialogue and make sure you understand and respect each other’s money values.
  • You might also consider sit down with a financial advisor before the big day. A financial advisor can help you identify your financial goals and come up with a financial plan for your life as a married couple. A matching tool (like ours) can help you find a person to work with to meet your needs. First you’ll answer a series of questions about your situation and goals. Then the program will narrow down your options from thousands of advisors to three fiduciaries who suit your needs. You can then read their profiles to learn more about them, interview them on the phone or in person and choose who to work with in the future. This allows you to find a good fit while the program does much of the hard work for you.

Photo credit: ©iStock.com/sergey_b_a, ©iStock.com/svetikd, ©iStock.com/adamkaz

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10 Things to Know About Working in New York

10 Things to Know About Working in New York
Thinking about working in New York? There are some features of work life in the Big Apple that set it apart from the work culture in other cities. Is it true that if you can make it there you can make it anywhere? We’re not making any promises, but we can give you some tips about what working in New York is really like. 

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1. Salaries are high – but so is the cost of living.

For many fields, particularly those that require highly skilled workers, salaries in New York are higher than those in other cities. But before you get too excited about the fact that salaries in New York tend to be higher, keep in mind that the cost of living in New York is higher, too.

Luckily, there are plenty of financial experts around to help you figure out how to keep your finances in check. These are the top 10 New York financial advisor firms.

2. New Yorkers put in long hours.

New Yorkers tend to work longer hours than folks in other cities. In part, that’s because the workday itself is longer, but it’s also because New Yorkers tend to have long commutes. If you want to have plenty of free time to pursue side hustles or hobbies, working in New York might not be the best fit for you.

3. Commuting by public transit is the norm.

According to recent Census Bureau figures, 55.6% of New Yorkers take public transportation to work, 0.8% bike to work, 10.3% walk and 3.9% work at home. Hate crowds? Commuting by public transit could take some getting used to.

4. Office happy hour options are plentiful.

Working in New York means having a multitude of options for weekday lunches and office happy hours at your fingertips. Socializing with your coworkers after the end of a workday is easy with so many places to go and easy public transportation options to take you home at the end of the evening.

5. Being a working parent is expensive in New York.

10 Things to Know About Working in New York

New York has some of the highest childcare costs of any city in the nation. Being a working parent in New York is expensive – and it’s not easy, given the long hours New Yorkers put in. New York has a lower rate of working mothers than many other major U.S. cities, in part because the high price of childcare makes it hard for many New Yorkers to earn more than they would have to pay for childcare.

6. New York work culture takes some of its cues from Silicon Valley.

Some New York workplaces are taking their cues from the start-ups of Silicon Valley, implementing casual attire, flexible workdays and other features. In an effort to compete with companies in other cities, some New York companies are expanding the perks they offer their workers, so if you’re lucky enough to get a job in one of those companies, you’ll find that working in New York has its compensations.

7. Lots of New Yorkers have more than one job.

Whether they’re care workers who work double shifts or actors who tend bar on the side, many New Yorkers have more than one job. For some, having a second (or third) job is a matter of necessity, while for others it’s a way of advancing their career or expressing their artistic side. Plus, getting a second job (or a roommate) makes it easier to live the New York dream without going into debt.

8. There are professional support opportunities here.

Because it’s a huge, densely populated city, New York has professional support opportunities for those up and down the career ladder. You can get help finding a job or finishing your GED. You can also attend high-powered networking events and conferences. The important thing is to know what resources are out there and how to take advantage of them.

9. You can outsource a lot of tasks – if you have the money.

If it’s in your budget, you can outsource a lot of tasks that you don’t want to have to tackle during your non-working hours. That includes mailing packages, getting food, dropping off dry cleaning, completing home repairs and more. Of course, these services aren’t within reach of all New Yorkers, and many people like to do these basic “life admin” tasks themselves. But if you’re planning on diving into the workaholic lifestyle in New York and you think you’ll have some money to spare, there are lots of companies looking to make outsourcing chores easier for you.

10. It helps to know someone.

It helps to know someone when you’re looking for work in New York, if only to stand out from the pile of applications that so many New York jobs attract. That’s why it’s a good idea to build and maintain your network and put it to work for you when you’re looking for a new (or just better) job.

Bottom Line

10 Things to Know About Working in New York

Working in New York isn’t for everyone, but many find it to be an exciting challenge unlike what they would face elsewhere. For others, working in New York is more of a means to an end – living in New York. Wherever you stand, working in New York is made easier when you have a strong network and plenty of determination.

Tips for Maximizing Your Money

  • Come up with a budget – and stick to it. Instead of spending $5 a day on a latte, put that money in one of the best savings accounts where you can earn interest.
  • Work with a financial advisor. In addition to helping you craft a financial plan and identify your financial goals, a financial advisor can help you determine the right investments for your financial situation, time horizon and level of risk tolerance. A matching tool like SmartAsset’s SmartAdvisor can help you find a person to work with to meet your needs. First you’ll answer a series of questions about your situation and goals. Then the program will narrow down your options from thousands of advisors to three fiduciaries who suit your needs. You can then read their profiles to learn more about them, interview them on the phone or in person and choose who to work with in the future. This allows you to find a good fit while the program does much of the hard work for you.

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A Guide to Qualified Retirement Plans

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Saving for retirement is an important financial goal and there are different options when it comes to where to invest. A qualified retirement plan can make it easier to build wealth for the long term, while enjoying some significant tax benefits.

Qualified retirement plans must meet Internal Revenue Code standards for form and operation under Section 401(a). If you have a retirement plan at work, it’s most likely qualified. But not every retirement account falls under this umbrella and those that don’t are deemed “non-qualified.”

So just what is a qualified retirement plan and how is it different from a non-qualified retirement plan?
Understanding the nuances of these terms can help you better shape your retirement plan for growing wealth.

What Is a Qualified Retirement Plan?

Qualified retirement plans allow you to save money for retirement from your income on a tax-deferred basis. These plans are managed according to Employment Retirement Income Security Act (ERISA) standards.

The IRS has specific rules for what constitutes a qualified retirement plan and what doesn’t. Public employers can set up a qualified retirement plan as long as these conditions are met:

•  Employer contributions are deferred from income tax until they’re distributed and are exempt from social security and Medicare tax
•  Employer contributions are subject to FICA tax
•  Employee contributions are subject to both income and FICA tax

Following those guidelines, qualified retirement plans can include:

•  Defined benefit plans (such as traditional pension plans)
•  Defined contribution plans (such as 401(k) plans)
•  Employee stock ownership plans (ESOP)
•  Keogh plans

Section 403(b) plans, which you might have access to if you’re a public school or tax-exempt organization employee, mimic some of the characteristics of qualified retirement plans. But because of the way employer contributions to these plans are taxed the IRS doesn’t count them as qualified plans. The same is true for section 457(b) plans, which are available to public employees.

Defined Benefit vs. Defined Contribution Plans

When talking about qualified retirement plans and how to use them to invest for the future, it’s important to understand the distinction between defined benefit and defined contribution plans.

ERISA recognizes both types of plans, though they work very differently. A defined benefit plan pays out a specific benefit at retirement. This can either be a set dollar amount or payments based on a percentage of what you earned during your working career.

This type of defined benefit plan is most commonly known as a pension. If you have a pension from a current (or former) employer, you may be able to receive monthly payments from it once you retire, or withdraw the benefits you’ve accumulated in one lump sum. Pension plans can be protected by federal insurance coverage through the Pension Benefit Guaranty Corporation (PBGC).

Defined contribution plans, on the other hand, pay out benefits based on how much you (and your employer, if you’re eligible for a company match) contribute to the plan during your working years. The amount of money you can defer from your salary depends on the plan itself, as does the percentage of those contributions your employer will match.

Defined contribution plans include 401(k) plans, 403(b) plans, ESOPs and profit-sharing plans. With 401(k)s, that includes options like SIMPLE and solo 401(k) plans. But it’s important to note that while these are all defined contribution plans, they’re not all qualified retirement plans. Of those examples, 403(b) plans wouldn’t enjoy qualified retirement plan tax benefits.

What Is a Non-Qualified Retirement Plan?

Non-qualified retirement plans are retirement plans that aren’t governed by ERISA rules or IRC Section 401(a) standards. These are plans that you can use to invest for retirement outside of your workplace.

Examples of non-qualified retirement plans include:

•  Traditional IRAs
•  Roth IRAs
•  403(b) plans
•  457 plans
•  Deferred compensation plans
•  Self-directed IRAs
•  Executive bonus plans

While these plans can still offer tax benefits, they don’t meet the guidelines to be considered qualified. But they can be useful in saving for retirement, in addition to a qualified plan.

Traditional and Roth Individual Retirement Accounts

Traditional and Roth IRAs allow you to invest for retirement, with annual contribution limits. For 2020 and 2021, the maximum amount you can contribute to either IRA is $6,000, or $7,000 if you’re over 50.

Traditional IRAs allow for tax-deductible contributions. These accounts are funded using pre-tax dollars. When you make qualified withdrawals in retirement, they’re taxed at your ordinary income tax rate. IRAs do have required minimum distributions (RMD) starting at age 72.

Roth IRAs don’t offer the benefit of a tax deduction on contributions. But they do allow you to withdraw money tax-free in retirement. Unlike traditional IRAs, Roth IRAs do not have RMDs, meaning you don’t have to withdraw money until you want to.

A self-directed IRA is another type of IRA you might consider if you want to invest in stock or mutual fund alternatives, such as real estate. These IRAs require you to follow specific rules for how the money is used to invest, and engaging in any prohibited transactions could result in the loss of IRA tax benefits.

Advantages of Qualified Retirement Plans

Qualified retirement plans can benefit both employers and employees who are interested in saving for retirement.
On the employer side, the benefits include:

•  Being able to claim a tax deduction for matching contributions made on behalf of employees
•  Tax credits and other tax incentives for starting and maintaining a qualified retirement plan
•  Tax-free growth of assets in the plan

Additionally, offering a qualified retirement plan, such as a 401(k), can also be a useful tool for attracting and retaining talent. Employees may be more motivated to accept a position and stay with the company if their benefits package includes a generous 401(k) match.

Employees also enjoy some important benefits by saving money in a qualified plan. Specifically, those benefits include:

•  Tax-deferred growth of contributions
•  Ability to build a diversified portfolio
•  Automatic contributions through payroll deductions
•  Contributions made from taxable income each year
•  Matching contributions from your employer (aka “free money”)
•  ERISA protections against creditor lawsuits

Qualified retirement plans can also feature higher contribution limits than non-qualified plans, such as an IRA. If you have a 401(k), for example, you can contribute up to $19,500 for the 2020 and 2021 tax years, with an additional catch-up contribution of $6,500 for individuals 50 and older.

If you’re able to max out your annual contribution each year, that could allow you to save a substantial amount of money on a tax-deferred basis for retirement. Depending on your income and filing status, you may also be able to make additional contributions to a traditional or Roth IRA.

Making Other Investments Besides a Qualified or Non-Qualified Retirement Plan

Saving money in a qualified retirement plan or a non-qualified retirement plan doesn’t prevent you from investing money in a taxable account. With a brokerage account, you can continue to build your portfolio with no annual contribution limits. The trade-off is that selling assets in your brokerage account could trigger capital gains tax at the time of the sale, whereas qualified accounts allow you to defer paying income tax until retirement.

But an online brokerage account could help with increasing diversification in your portfolio. Qualified plans offered through an employer may limit you to mutual funds, index funds, or target-date funds as investment options. With a brokerage account, on the other hand, you may be able to trade individual stocks or fractional shares, exchange-traded funds, futures, options, or even cryptocurrency. Increasing diversification can help you better manage investment risk during periods of market volatility.

The Takeaway

While a qualified retirement plan allows investors to put away pre-tax money for retirement, a non-qualified plan doesn’t offer tax-deferred benefits. But both can be important parts of a retirement saving strategy.

Regardless of whether you use a qualified retirement plan or a non-qualified plan to grow wealth, the most important thing is getting started. Your workplace plan might be an obvious choice, but if your employer doesn’t offer a qualified plan, you do have other options.

Opening a traditional or Roth IRA online with SoFi Invest®, for example, can help you get a jump on retirement saving. Members can choose from a wide range of investment options or take advantage of a custom-build portfolio to invest.

Find out how an online IRA with SoFi might fit in to your financial plan.


SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC Registered Investment Advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).
2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.
3) Digital Assets—The Digital Assets platform is owned by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.
For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, http://www.sofi.com/legal.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
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Budgeting For Beginners: A FREE Five Day Quick Start Course

The post Budgeting For Beginners: A FREE Five Day Quick Start Course appeared first on Penny Pinchin' Mom.

Learn How to Budget

 

If you feel stress about money, worry about paying your bills or are just tired of trying to find a way to rob Peter to pay Paul, you aren’t alone.  In fact, I get it.

I really get it.

I tried to figure it all out on my own and failed miserably. That lead me to declare bankruptcy.  While it wasn’t my finest moment, it had to happen to lead me to the place I am today.

Sometimes, our biggest mistakes force us to learn the most.  For me, thinking that I could just try to wash my hands of my financial problems was mine.  I did not take the time to figure out the right way to get control over my money and stay out of debt. Bankruptcy was the easy solution – but the wrong one.

Before filing, I had tried it all.  I organized my bills to pay them on time. I worked with debt consolidation companies to try to lower my payments. I put spending freezes in place, just to blow that a few days later.

Nothing I had done was working.

So, I did what I thought was right. I contacted an attorney and filed.

As I said, that wasn’t the answer for me.  I never took the time to get to the root of why I was looking at money the way I did.  I did not want to face my own demons head-on.  And that lead me to build up more debt…..even after bankruptcy.

Once my bankruptcy was behind me, I married my husband.  We both knew that I wanted to stay home and raise our children.  We thought that we would be OK when I quit my job, after all, my husband had a good income.

Boy.  Were we wrong.

After our daughter was born, reality set in.  The truth is, we did not really know where we were spending our money and continued to live the same lifestyle, even though our income had dropped.

Our finances were a mess.

Then, one night, after a rare dinner out with friends, the light bulb came on.  Both of us realized that we could make some changes.

From that moment on, things were different.  We both had revelations:

  • We figured out we had to have a budget.
  • We learned why we were spending.
  • We worked together to create an actionable plan.
  • We were on the same team and found new ways to save more money than ever before.
  • We had a financial plan in place.

For us, it was our REBOOT moment.  When we took control of our finances, it was like we started living again.  When we stopped trying to hard to fight it and allowed ourselves to be vulnerable to change, it happened.

This is true for anyone who wants to learn how to budget.  You have to allow yourself to be open to the change.  You need to be willing to try something new.  After all, what you are currently doing isn’t working, is it?  What more have you got to lose?

That’s where the Free Five Day Money Management Course can help. This is a simple course that anyone can take – no matter your financial situation.

You will learn:

  • How to understand your own attitude towards money
  • Really see where you spend every penny you make
  • Create a workable budget
  • Develop a plan to dig yourself out from debt
  • Finally feel in control of your finances

Like I said above, this is free.  I will not charge you a dime to take the course. Your first lesson will arrive in your inbox tomorrow morning, so you can wake up and be ready to jump in and learn.

Best of all, I’m here with you.

You aren’t alone.

Sign up now and take control of your finances. What have you got to lose?

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Source: pennypinchinmom.com

What Is Cash Back?

What Is Cash Back?

Cash back is a rewards benefit that many credit cards offer to cardholders. By taking advantage of it, you’ll receive back a prespecified percentage of certain purchases you make. Many credit card companies will provide higher cash back rates on certain types of purchases, such as airfare, gas, food and more. Cash back is just one way that credit cards offer rewards, as mileage and points are some alternatives.

Before you spend too much money with your credit cards, make sure you have a financial plan in place. Speak with a financial advisor today.

What Is Cash Back?

The most commonly recognized style of cash back is what you have likely seen advertised as cash back credit cards. This specifically refers to earning a certain percentage of your credit card purchases back as cash rewards. However, cash back rates vary widely, as do the categories that they apply to.

You usually won’t see credit card cash back rates higher than 5%, while 1% is the typically minimum you will earn. Cash back categorization is significantly more complex though, with a merchant category code (MCC) system being the main organizing force.

MCCs run the entire cash back industry, as they ultimately decide how each purchase you make is classified. These designations coincide with cash back rates set by the issuer of your card. For example, you could use your card for a $50 dinner at a steakhouse, which has a “restaurant” code. If your card offers a 2% cash back rate on all spending at restaurants, you’d earn $1 cash back.

Familiar alternatives to cash back include point- and mile-based programs, though many cardholders are partial to cash back. Cash back affords cardholders an independence that is ideal, since you can redeem it for nearly anything.

Popular Cash Back Credit Cards

What Is Cash Back?

Discover, American Express, Mastercard and Visa all have cash back rewards credit cards available for prospective cardholders. Each abide by their own set of regulations, though card issuers decide on cash back rates, promotions and bonuses. Chase, Wells Fargo, Citi and Capital One represent some of the most active card issuers on the market today.

Below are a few examples of what you can expect to earn when looking for a cash back credit card:

Cash Back Credit Cards Card Name Cash Back Rates Cash Back Bonus Costco Anywhere Visa Card by Citi 4% cash back on eligible gas up to $7,000 per year, 3% cash back on eligible travel and restaurants, 2% cash back in-store and online with Costco and 1% cash back elsewhere None Bank of America® Cash Rewards credit card 3% cash back in a category of your choosing, 2% cash back at grocery stores and wholesale clubs and 1% cash back on all other purchases (up to a quarterly cap of $2,500 in combined grocery/wholesale club/choice category purchases) $200 bonus cash back for spending at least $1,000 over your first 90 days Capital One® Quicksilver® Cash Rewards Credit Card Unlimited 1.5% cash back everywhere $150 cash back bonus when you spend $500 during your first three months Citi Double Cash Card 1% cash back on your purchases and another 1% cash back when you pay your bill None Capital One® Savor® Cash Rewards Credit Card Unlimited 4% cash back on dining and entertainment, 2% cash back on groceries and 1% cash back elsewhere $300 cash back bonus for $3,000 spent over your first three months TD Cash Visa® Credit Card 3% cash back on dining, 2% cash back at supermarkets and 1% cash back on everything else Earn $150 cash back when spending $500 within the first 90 days (See Terms) USAA Preferred Cash Rewards Visa Signature Unlimited 1.5% cash back on everything None Blue Cash Everyday Card from American Express 3% cash back on up to $6,000/year at U.S. supermarkets (then 1%), 2% cash back at U.S. gas stations and select U.S. department stores and 1% cash back on other purchases $150 bonus cash back for spending $1,000 over your first six months Getting Cash Back at Retailers

What Is Cash Back?

Picture this: you’re buying some groceries on a Sunday morning, but know you’ll need $40 cash to fill up your car with some gas later. You could swipe your debit card at the supermarket and then head over to the ATM. Or you could ask for cash back right from the cashier, eliminating the extra errand.

The above situation represents the alternative definition of cash back. It’s ultimately the use of a cash register as if you were swiping your debit card at the ATM. When you request cash back from a cashier, your bank account will be charged the amount you asked for. This enables the funds to be pulled from your account so the cash can be placed in your hand.

Although this generally only applies to debit cards, there are a few exceptions for credit cards. Discover® allows cardholders to ask for cash back at more than 50 large retail stores without a transaction fee.

Bottom Line

There are many benefits to utilizing credit card rewards programs. But spending money that technically isn’t yours will always involve some level of risk. If you’re in good financial shape, though, cash back and other types of credit card rewards can help you take more vacations, save money on purchases and more.

Credit Card Tips

  • Managing your credit cards and any debt you accumulate using them is a major part of your long-term financial outlook. Consider working with a financial advisor to make sure you’re managing your money with your goals for the future in mind. SmartAsset’s free matching tool can connect you with up to three advisors in your area. Get started now.
  • If you’re someone who wants freedom when spending credit card rewards, you may prefer cash back to a points- or mileage-based reward system. However, keep in mind that cash back rates are sometimes less than those in point-centric programs.

Editorial Note: This content is not provided by the credit card issuer. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by the issuer.

Advertiser Disclosure: The card offers that appear on this site are from companies from which SmartAsset.com receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). SmartAsset.com does not include all card companies or all card offers available in the marketplace.

Photo credit: ©iStock.com/SIphotography, ©iStock.com/MJ_Prototype, Â©iStock.com/Juanmonino

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Source: smartasset.com

Everything You Need to Know About Budgeting As a Freelancer

Could logging in to your computer from a deluxe treehouse off the coast of Belize be the future of work? Maybe. For many, the word freelance means flexibility, meaningful tasks and better work-life balance. Who doesn’t want to create their own hours, love what they do and work from wherever they want? Freelancing can provide all of that—but that freedom can vanish quickly if you don’t handle your expenses correctly.

“A lot of the time, you don’t know about these expenses until you are in the trenches,” says freelance copywriter Alyssa Goulet, “and that can wreak havoc on your financial situation.”

Nearly 57 million people in the U.S. freelanced, or were self-employed, in 2019, according to Upwork, a global freelancing platform. Freelancing is also increasingly becoming a long-term career choice, with the percentage of freelancers who freelance full-time increasing from 17 percent in 2014 to 28 percent in 2019, according to Upwork. But for all its virtues, the cost of being freelance can carry some serious sticker shock.

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“There are many hats you have to wear and expenses you have to take on, but for that you’re gaining a lot of opportunity and flexibility in your life.”

– Alyssa Goulet, freelance copywriter

Most people who freelance for the first time don’t realize that everything—from taxes to office supplies to setting up retirement plans—is on them. So, before you can sustain yourself through self-employment, you need to answer a very important question: “Are you financially ready to freelance?”

What you’ll find is that budgeting as a freelancer can be entirely manageable if you plan for the following key costs. Let’s start with one of the most perplexing—taxes:

1. Taxes: New rules when working on your own

First things first: Don’t try to be a hero. When determining how to budget as a freelancer and how to manage your taxes as a freelancer, you’ll want to consult with a financial adviser or tax professional for guidance. A tax expert can help you figure out what makes sense for your personal and business situation.

For instance, just like a regular employee, you will owe federal income taxes, as well as Social Security and Medicare taxes. When you’re employed at a regular job, you and your employer each pay half of these taxes from your income, according to the IRS. But when you’re self-employed (earning more than $400 a year in net income), you’re expected to file and pay these expenses yourself, the IRS says. And if you think you will owe more than $1,000 in taxes for a given year, you may need to file estimated quarterly taxes, the IRS also says.

That can feel like a heavy hit when you’re not used to planning for these costs. “If you’ve been on a salary, you don’t think about taxes really. You think about the take-home pay. With freelance, everything is take-home pay,” says Susan Lee, CFP®, tax preparer and founder of FreelanceTaxation.com.

When learning how to budget as a freelancer it’s necessary to estimate your income and expenses before setting aside savings for tax payments.

When you’re starting to budget as a freelancer and determining how often you will need to file, Lee recommends doing a “dummy return,” which is an estimation of your self-employment income and expenses for the year. You can come up with this number by looking at past assignments, industry standards and future projections for your work, which freelancer Goulet finds valuable.

“Since I don’t have a salary or a fixed number of hours worked per month, I determine the tax bracket I’m most likely to fall into by taking my projected monthly income and multiplying it by 12,” Goulet says. “If I experience a big income jump because of a new contract, I redo that calculation.”

After you estimate your income, learning how to budget as a freelancer means working to determine how much to set aside for your tax payments. Lee, for example, recommends saving about 25 percent of your income for paying your income tax and self-employment tax (which funds your Medicare and Social Security). But once you subtract your business expenses from your freelance income, you may not have to pay that entire amount, according to Lee. Deductible expenses can include the mileage you use to get from one appointment to another, office supplies and maintenance and fees for a coworking space, according to Lee. The income left over will be your taxable income.

Pro Tip:

To set aside the taxes you will need to pay, adjust your estimates often and always round up. “Let’s say in one month a freelancer determines she would owe $1,400 in tax. I’d put away $1,500,” Goulet says.

2. Business expenses: Get a handle on two big areas

The truth is, the cost of being freelance varies from person to person. Some freelancers are happy to work from their kitchen tables, while others need a dedicated workspace. Your freelance costs also change as you add new tools to your business arsenal. Here are two categories you’ll always need to account for when budgeting as a freelancer:

Your workspace

Joining a coworking space gets you out of the house and allows you to establish the camaraderie you may miss when you work alone. When you’re calculating the cost of being freelance, note that coworking spaces may charge membership dues ranging from $20 for a day pass to hundreds of dollars a month for a dedicated desk or private office. While coworking spaces are all the rage, you can still rent a traditional office for several hundred dollars a month or more, but this fee usually doesn’t include community aspects or other membership perks.

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If you want to avoid office rent or dues as costs of being freelance but don’t want the kitchen table to pull double-duty as your workspace, you might convert another room in your home into an office. But you’ll still need to outfit the space with all of your work essentials. Freelance copywriter and content strategist Amy Hardison retrofitted part of her house into a simple office. “I got a standing desk, a keyboard, one of those adjustable stands for my computer and a squishy mat to stand on so my feet don’t hurt,” Hardison says.

Pro Tip:

Start with the absolute necessities. When Hardison first launched her freelance career, she purchased a laptop for $299. She worked out of a coworking space and used its office supplies before creating her own workspace at home.

Digital tools

There are a range of digital tools, including business and accounting software, that can help with the majority of your business functions. A big benefit is the time they can save you that is better spent marketing to clients or producing great work.

The software can also help you avoid financial lapses as you’re managing the costs of being freelance. Hardison’s freelance business had ramped up to a point where a manual process was costing her money, so using an invoicing software became a no-brainer. “I was sending people attached document invoices for a while and keeping track of them in a spreadsheet,” Hardison says. “And then I lost a few of them and I just thought, ‘Oh, my God, I can’t be losing things. This is my income!’”

As you manage the cost of being freelance, consider digital tools and accounting services to keep track of invoices, payments and income.

Digital business and software tools can help manage scheduling, web hosting, accounting, audio/video conference and other functions. When you’re determining how to budget as a freelancer, note that the costs for these services depend largely on your needs. For instance, several invoicing platforms offer options for as low as $9 per month, though the cost increases the more clients you add to your account. Accounting services also scale up based on the features you want and how many clients you’re tracking, but you can find reputable platforms for as little as $5 a month.

Pro Tip:

When you sign up for a service, start with the “freemium” version, in which the first tier of service is always free, Hardison says. Once you have enough clients to warrant the expense, upgrade to the paid level with the lowest cost. Gradually adding services will keep your expenses proportionate to your income.

3. Health insurance: Harnessing an inevitable cost

Budgeting for healthcare costs can be one of the biggest hurdles to self-employment and successfully learning how to budget as a freelancer. In the first half of the 2020 open enrollment period, the average monthly premium under the Affordable Care Act (ACA) for those who do not receive federal subsidies—or a reduced premium based on income—was $456 for individuals and $1,134 for families, according to eHealth, a private online marketplace for health insurance.

“Buying insurance is really protecting against that catastrophic event that is not likely to happen. But if it does, it could throw everything else in your plan into a complete tailspin,” says Stephen Gunter, CFP®, at Bridgeworth Financial.

Budgeting as a freelancer allows you to select a healthcare plan that best suits your employment status, income and relationship status.

A good place to start when budgeting as a freelancer is knowing what healthcare costs you should budget for. Your premium—which is how much you pay each month to have your insurance—is a key cost. Note that the plans with the lowest premiums aren’t always the most affordable. For instance, if you choose a high-deductible policy you may pay less in premiums, but if you have a claim, you may pay more at the time you or your covered family member’s health situation arises.

When you are budgeting as a freelancer, the ACA healthcare marketplace is one place to look for a plan. Here are a few other options:

  • Spouse or domestic partner’s plan: If your spouse or domestic partner has health insurance through his/her employer, you may be able to get coverage under their plan.
  • COBRA: If you recently left your full-time job for self-employment, you may be able to convert your employer’s group plan into an individual COBRA plan. Note that this type of plan comes with a high expense and coverage limit of 18 months.
  • Organizations for freelancers: Search online for organizations that promote the interests of independent workers. Depending on your specific situation, you may find options for health insurance plans that fit your needs.

Pro Tip:

Speak with an insurance adviser who can help you figure out which plans are best for your health needs and your budget. An adviser may be willing to do a free consultation, allowing you to gather important information before making a financial commitment.

4. Retirement savings: Learn to “set it and forget it”

Part of learning how to budget as a freelancer is thinking long term, which includes saving for retirement. That may seem daunting when you’re wrangling new business expenses, but Gunter says saving for the future is a big part of budgeting as a freelancer.

“It’s kind of the miracle of compound interest. The sooner we can get it invested, the sooner we can get it saving,” Gunter says.

He suggests going into autopilot and setting aside whatever you would have contributed to an employer’s 401(k) plan. One way to do this might be setting up an automatic transfer to your savings or retirement account. “So, if you would have put in 3 percent [of your income] each month, commit to saving that 3 percent on your own,” Gunter says. The Discover IRA Certificate of Deposit (IRA CD) could be a good fit for helping you enjoy guaranteed returns in retirement by contributing after-tax (Roth IRA CD) or pre-tax (traditional IRA CD) dollars from your income now.

Pro Tip:

Prioritize retirement savings every month, not just when you feel flush. “Saying, ‘I’ll save whatever is left over’ isn’t a savings plan, because whatever is left over at the end of the month is usually zero,” Gunter says.

5. Continually update your rates

One of the best things you can do for yourself in learning how to budget as a freelancer is build your costs into what you charge. “As I’ve discovered more business expenses, I definitely take those into account as I’m determining what my rates are,” Goulet says. She notes that freelancers sometimes feel guilty for building business costs into their rates, especially when they’re worried about the fees they charge to begin with. But working the costs of being freelance into your rates is essential to building a thriving freelance career. You should annually evaluate the rates you charge.

Because your expenses will change over time, it’s wise to do quarterly and yearly check-ins to assess your income and costs and see if there are processes you can automate to save time and money.

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“A lot of the time, you don’t know about these expenses until you are in the trenches, and that can wreak havoc on your financial situation.”

– Alyssa Goulet, freelance copywriter

Have confidence in your freelance career

Accounting for the various costs of being freelance makes for a more successful and sustainable freelance career. It also helps ensure that those who are self-employed achieve financial stability in their personal lives and their businesses.

“There are many hats you have to wear and expenses you have to take on,” Goulet says. “But for that, you’re gaining a lot of opportunity and flexibility in your life.”

The post Everything You Need to Know About Budgeting As a Freelancer appeared first on Discover Bank – Banking Topics Blog.

Source: discover.com