Why Are Financial Goals So Important?

Where Do You Want to Go?

Would you go on a cross-country RV trip without making a plan, using a GPS, or looking at the road signs? Of course not! 

Being that unprepared would only end in disaster. You would surely get lost or get into an accident. 

Similarly, you shouldn’t expect to reach financial freedom safe and sound without a plan. 

Financial goals are your road map to financial freedom. They help you determine your destination and keep you from going off track. They also help you find the best way to “reroute” when things change or when you encounter a roadblock.

They’ll Help You Set Discretionary Spending

Dining out, movie nights, and new clothes can be a nice reward for your hard work, but they are not necessary. These types of discretionary expenses are often the reason why people find themselves with few to no savings at the end of the month. 

Most of my new clients haven’t set financial goals before. Without financial goals, they have no idea where they want their money to go. So they run the risk of spending more than they should on discretionary expenses. 

Setting financial goals helps you establish a destination and create a roadmap to reach it as quickly and safely as possible. That way you can make sure to save money for your goals before you identify how much you can spend on going out and entertainment.

Steps to Setting Financial Goals

Start With a Brain Dump

Before making financial goals, I always recommend doing a brain dump. Brainstorming and writing your ideas down freely will allow you to consider all your financial wants and needs. You may even come up with ideas you would have never thought about before.

So grab a blank piece of paper or a blank whiteboard and write down anything that comes up when you think about money. 

What are some things you’ve always wanted to do, but don’t have the money for? How much money do you need to have saved for emergencies to feel safe? How much do you want to spend on presents? Do you want to travel? Anything is fair game!

And you don’t have your brain dump to written sentences. I’ve had clients draw pictures of items they would like to purchase. They’ve also depicted their feelings about money. The important thing is to express all your ideas, feelings, needs, and desires when it comes to money.

If you’re married or in a long-term committed relationship, I recommend splitting up at first. Allow all parties to express themselves freely before coming together and sharing your thoughts. Opposites attract in more ways than one. So if your goals are different, it’s important to ensure all voices are heard before setting official financial goals. 

And remember, no goals are off-limits. 

Thinking about your financial dreams can be hard if you’re dealing with debt or you’re behind on bills. But it’s important to write down everything you would like to achieve. Let yourself dream and don’t hold back!

You may not be able to achieve some of your goals yet. But you can use these longer-term goals as motivation to resolve your urgent financial issues and take care of your finances in the future.

Define Financial Freedom

Your definition of financial freedom will be the biggest financial goal you will create. 

Financial freedom is your ultimate long-term goal. You can think of it as the final destination in your financial journey. All other financial goals will revolve around it, helping to guide you to it.

I have an in-depth article that teaches you how to define financial freedom. But all you need to worry about right now is answering the question, “If money wasn’t an issue, what would I do?”

Take money out of the equation for a minute, and instead focus on your dreams. 

Would you move closer to family or spend more time with your children? Maybe you would quit the job that you hate and work at a no-kill animal shelter full-time. Or you may finally take that trip you’ve been dreaming of for years?

Perhaps, you can’t do these things right now because you have debt or your kids are still at home. But that’s what shorter-term goals are for. They’ll help you start down the road towards financial freedom.

You’ll likely go through a few drafts before you arrive at your final definition of financial freedom. 

For example, if your initial definition is “I want to not stress about money and be able to spend without guilt,” that might not be your final answer. 

You can achieve this goal but still feel trapped. A high-paying job may give you enough money to spend freely, but you may hate the job and the long hours you have to spend at the office.   

After each draft, ask yourself, “What would I do next?” If you can come up with more things you want to do, you need to keep editing your definition. 

Defining what financial freedom truly means to you is extremely important because you will be comparing all your other financial goals around it. Every time you add a new goal to your list make sure that it will get you closer to not farther from your definition of financial freedom.

Once you’re satisfied, you need to take your definition of financial freedom along with your brain dump and split them into long-term and short-term financial goals.

Long-Term Financial Goals

Your long-term financial goals typically involve more money, so they will take you at least three years to achieve. They’re broad in scope and can be broken down into smaller, short-term goals. This will make it easier to monitor your progress. Each time you achieve one of those short-term goals, you will get closer to your larger goal. 

Let’s learn how to create good-quality long-term goals!

D.U.M.B. Goals

Setting D.U.M.B. long-term financial goals is the smart thing to do. They will help you see the bigger picture and uncover the path you want to take with your finances.  

1. Dream-driven

Creating goals that are dream-driven will set you on the road toward financial freedom. They may seem impossible in the short term, but you can make them possible in the long term by taking them one day at a time. Get started today, so that instead of regretting not going after your dreams, you’re sure to accomplish something. They do say that you should “Shoot for the moon. And even if you miss, you’ll land among the stars.”

2. Uplifting

Your goals should keep you motivated so that you will continue working towards them. Make them something that makes you feel happy and hopeful for the future. 

3. Method-friendly

Your long-term goals should be able to be broken down into smaller, short-term goals that you can implement into your everyday life. 

4. Behavior-driven

Write down goals that encourage you to change your behavior in a positive way. After all, the only thing you have complete control over is your own actions. You can’t control the price of food at the supermarket. But you can control whether you stick to your shopping list or spend more money on snacks. 

Use your definition of financial freedom to create your first D.U.M.B. goal.

Then you should create several D.U.M.B. goals using the list of ideas you wrote down during your brain dump. Keep in mind that each goal you create here should be easy to break down into smaller, short-term goals.

For example, if your D.U.M.B. goal is “I want to ensure my kids can attend a public university and graduate debt free.” You can break this down into smaller goals, such as, “informing my kids about how much we’re saving for their college funds” and “teaching them what they need to do if they want to go to a private university.”

Check out the “Setting Financial Goals Worksheets” section later in this article for ideas on how to organize your list of goals.

Examples of Long-Term Financial Goals

As mentioned earlier, your long-term financial goals are going to be broad versions of specific goals you might have. On the surface, they sound like they’re going to take forever or are even unattainable. However, you can likely break down your long-term goals into more manageable short-term goals.

Now, let’s take a look at a few examples of long-term financial goals. Please note that these examples are not meant to imply that you need to include them in your list of long-term financial goals. They’re just examples. Your goals will be just that; your goals.

• “I want to work at a no-kill animal shelter full-time while still maintaining my current standard of living.”

• “I want to eliminate all my debt ($25,000 on 8 credit cards) so I can remove the bad stress from my life. It’s affecting my relationships.”

• “Sell our current home and use the equity to buy land and building a smaller, but more efficient home to our specifications. Put in-ground swimming pool on the property.”

• “Save up enough for out two children to attend four years at a public university so they can avoid student loan debt and start off on the right foot financially. Do this while teaching them about personal finance so they don’t find themselves in debt like us.”

As you can see by those examples, they seem very important to the individual. But as they’re currently defined, they can seem quite overwhelming. But you have to write them down. It’s crucial you do. To make them more manageable, you’re going to break them down into more manageable short-term financial goals.

Short-Term Financial Goals

Short-term goals should be achievable in two or fewer years. Some of these will be smaller pieces of your long-term D.U.M.B. goals. 

And many others will be unrelated short-term needs and wants. For example, you may need to pay for your kid’s summer camp in full in a few months. Setting that as a short-term goal will help you determine how much you need to save each month to make that payment by the deadline.

I also encourage you to set non-monetary short-term goals. For example, you may want to learn more about finding a financial advisor. Although it won’t cost you any money, it’s related to your finances. So, it’s important to write it down and work to achieve it ASAP.

S.M.A.R.T. Goals

You can break down most of your D.U.M.B.goals into short-term S.M.A.R.T goals. 

1. Specific

Your short-term should include the specific actions you need to take in order to achieve them. If your long-term D.U.M.B. goal is “to be debt free.” You can set a S.M.A.R.T goal to “pay off your American Express card within 6 months.”

2. Measurable

Create goals that are easily tracked so that you can ensure you’re making progress. Going back to the previous example, you can keep a record of your monthly American Express card payment and the amount of debt left.

3. Achievable

You should be able to afford to put money towards your goals. Take into account your monthly expenses and other saving plans. 

4. Relevant

If your S.M.A.R.T goal is a smaller piece of your D.U.M.B. goals, it should be relevant to it. Paying off your credit card is relevant to being debt free. But setting money aside for a trip is not relevant.

5. Time-bound

Setting a specific deadline to achieve your goal is important. It will help you figure out how much you need to save or spend every month. And you will help you focus on your goal because you have a set amount of time to achieve it. 

Let’s start by taking the long-term goals you created before and decide how you’ll break them down into short-term goals. When you’re done, take a look at your brain dump and identify any leftover goals that can be considered short-term.

Examples of Short-Term Financial Goals

Now, let’s take a look at a few examples of short-term financial goals. Please note that these examples are not meant to imply that you need to include them in your list of short-term financial goals. They’re just examples. Your goals will be just that; your goals. Also, these examples will illustrate how you can break down your long-term goals into more manageable short-term goals.

• “Start volunteering one hour per week at the local animal shelter.”

• “Stop using credit cards that have a revolving balance.”

• “Prioritize paying off my Lowe’s credit card. Start paying extra AFTER I building up my small emergency fund.”

• “Build up my small emergency fund – $2,000 goal, but $1,200 saved so far. This will help me stop accumulating future debt.”

• “Set money aside in our monthly budget to better maintain our home so we can sell it in great condition in the future so we can build our dream home.”

In almost all likelihood, the list of short-term goals would be longer than what’s above. However, you can easily see that these short-term goals are based heavily on the long-term goal examples shown earlier.

Prioritizing Your Financial Goals

Once you’re done creating your long-term and short-term goals, you need to prioritize them. Deciding which goals are more important to you or which goals need to be completed first is an important step in setting financial goals. 

Since you only have a set amount of earnings to fund your goals, you need to make sure you’re prioritizing the things that are the most important to you. 

Incorporate your goals into your spending and saving plan, so that you can determine how much you can afford to spend on them. 

You will have to set aside goals that are not as important or urgent. But that doesn’t mean you will give up on them. You will get to them once you’ve achieved goals that are higher on your priority list.

Setting Financial Goals Worksheet

If you’re looking for an easy way to get your financial goals down on paper, be sure to become a member and gain access to my custom financial goals worksheet.

Here’s a screenshot of the long-term goals section:

Now, here’s a screenshot of the short-term goals section:

For the short-term goals, there’s even a basic calculation built in that will tell you how much you need to save in order to achieve the goal by the month and year you enter.

Here’s how to get a copy of my custom financial goals worksheet:

Financial Goals Worksheet Price: $5 This worksheet is available to members of this site. It's just a fraction of the financial education materials you'll get! Start Today! Monthly membership. Cancel at any time.

Financial Goal Tracking

As you start working toward your financial goals, remind yourself of what you’re trying to achieve. It’s also important to recognize that things will inevitably change. You can’t control every aspect of your finances. So as obstacles and unexpected circumstances arise, you’ll need to make adjustments to stay on the road to successfully reaching your goals.

Here are a few last things to remember:

1. Your goals aren’t set in stone.

Your priorities may change with time. What was once important to you may no longer be significant. Make sure to regularly update your goals. And make sure to reallocate funds from goals that you’re no longer working towards.

2. Your goals are just guesses. 

Goals are just guesses. At first, you should focus on setting goals with a purpose and following them. As you get closer to the goal, what you need to do will become clearer. What’s important is starting towards your goals instead of doing nothing.

3. You won’t fully achieve all your goals.

It’s okay if you don’t achieve a goal. Working towards it is still important. You may learn more about your finances as you work toward something specific. And don’t let mistakes discourage you, learn from them and adjust accordingly.

Now that you’ve made it this far, get started and take action. Start by brain dumping all your ideas and identifying all your financial goals. And most importantly, find the definition of financial freedom in your life. 

Take all the things you’ve learned and set D.U.M.B. long-term goals to determine your financial destination. And break them down into S.M.A.R.T short-term goals to create a roadmap towards success. 

And don’t forget to prioritize what’s most important to you. After all, goals are just the tools to give you the freedom to enjoy your life to the fullest

Now get out there and take care of your money, so it can take care of you later.

Your financial coach,

The post Setting Financial Goals For Your Future appeared first on Adam Hagerman, CFP®.

I’m here to help you make it easier. In this article, I’ll teach you about your debt collection rights, how debt collection works, how to validate the accuracy of debt, and how to negotiate the best deal possible. I want you to be able to protect yourself and fight back against shady debt collectors.

How Does Debt Collection Work?

I know that paying off bills can be difficult. But ignoring them is not a good idea. Regardless of whether you’re unable to pay it, you thought you already paid it, or the bill slipped your mind, an unpaid bill will come back to haunt you.

If you miss a bill payment for a few months, it can be sent to a collection agency. According to the CFPB Annual Report for 2021, medical bills account for 58% of the debt in the collection industry. Collection agencies also deal with telecommunications accounts (like your cell phone or cable bill), credit cards, or student loans, among others.

The collection agency’s job is to get you to pay off your debt. So they won’t stop contacting you until you resolve the matter. To protect yourself, it’s important to know your rights and what type of collection agency you’re dealing with.

Contract Debt Collectors vs. Debt Buyers

If you’re dealing with debt collection agencies, you need to know they operate in two main ways: they either work as contractors for creditors or they buy portfolios of debt.

Collection agencies that are hired by creditors earn a commission on the amount of money they collect from you. So their goal is to get you to pay off as much of the debt as possible.

Meanwhile, collection agencies that buy portfolios of debt buy them for pennies on the dollar. The older the debt, the less collectible it becomes, and the cheaper it will be to buy. The original creditor gets paid a lump sum for the portfolio of debt. And since these agencies buy hundreds of delinquent debts at once, they have many opportunities to turn out a profit.

Debt buying agencies are more likely to agree to a settlement. Even if you only pay a fraction of the debt, they will still make a significant profit.

As you can see, the type of collection agency you’re dealing with is important when negotiating payment. So we’ll come back to them later in this article.

What Are Your Debt Collecting Rights?

Knowing your rights is the first step toward safely dealing with debt collectors. The Federal Trade Commission, which regulates the debt collection industry, created the Fair Debt Collection Practices Act (FDCPA) to protect consumers from illegal and unjust practices.

The FDCPA outlines your rights and the rules that debt collectors must follow. These rules include the following:

• Debt collectors have rules for contacting you. They can only contact you between 8 a.m. and 9 p.m. They can’t contact you at work. Social media contact is allowed, but only through private messages.
• They can’t contact others about your specific debt. They can contact your friends and family to inquire about your location, but they can’t reveal that you owe any debt or that they work for a debt collection agency. And they can’t harass them by contacting them multiple times.
• They can’t lie or shame you. They can’t lie about the amount or status of your debt, nor can they use obscene or profane language. And they can’t shame you by posting about your debt on your social media accounts or publishing your name on a public list of debtors.
• They can’t threaten or harass you. They can’t threaten you with violence, arrest, property liens, or wage garnishment. Property liens and wage garnishment are possible, but they must take you to court first. And if the collector threatens you with arrest, they are likely a scammer. You should report them to the Federal Trade Commission.
• They must stop contact if they receive written notice from you. You may request for them to cease communication or send a written refusal to pay the debt. At that point, they can only contact you if they’re suing you.

If a debt collection agency violates any of these rules, you should report them to the Federal Trade Commission, the Consumer Financial Protection Bureau, or your state attorneys general.

Can Debt Collectors Sue You?

Collection agencies have the right to sue you to collect your debt. If they win they can garnish your wages, get a property lien or gain access to your bank accounts. But they are limited to a statute of limitations based on state law.

Keep in mind that if the statute of limitations has expired, their lawsuit won’t be successful. However, they can still sue you and it will negatively impact your credit.

If you ever receive notification that you’re being sued for a debt, DO NOT IGNORE the summons. Most judgments are awarded to creditors, not because they win the case, but because the debtor never shows up to court. So make sure to gather information and respond within the time limit, usually 20 to 30 days from when you receive the notification.

What To Do If a Debt Collector Contacts You

I’m here to teach you how to best deal with debt collectors. Keeping the following advice in mind will help you make good decisions and protect yourself.

Don’t Ignore Debt Collectors

When you’re contacted by a debt collector, you may want to ignore them and hope they’ll go away. That’s the worst thing you can do!

You don’t need to acknowledge the debt as yours or agree to pay any of it. But you do need to take the call and get as much information as possible from them.

If you need some time to calm down before handling the situation, you can ask them for a callback number. Just don’t ignore them. They’ll keep calling, and the debt will continue to hurt your credit score.

Get As Much Information From Them As Possible

Don’t acknowledge the debt before you have all the facts. Just say that you’re not sure if the debt belongs to you and that you need to check your financial records.

First, ask them to identify themselves and provide their name, the debt collection agency’s name, the company address, and phone number. You can use this information to verify whether you’re dealing with a legitimate collection agency or a scammer.

You should also get the following details about the debt:

• The original amount of the debt and any fees, such as interest or collection costs
• What the debt is for and when was it first incurred
• The name of the original creditor
• Whether the debt collector is acting on behalf of the creditor or has purchased the debt from the original creditor
• Information about whether someone else may owe the debt

Make sure to get this information in writing before you agree to pay or try to negotiate.

Collectors are required by the FDCPA to send you a verification letter with this information within five days after the initial communication. If they refuse to do so, you should report them to the CFPB.

Pull and Check Your Full Credit Report

After talking to the debt collector, compare their information against your financial records. You should pull your full credit score and check them for the debt and any other collection accounts you might be unaware of. I’ve seen many clients who thought they had good credit, only to find unknown collection accounts in their credit report.

That’s why it’s always a good idea to learn how to get your credit report and inspect it for irregularities. You can get it for free every 12 months through the major credit reporting bureaus (Equifax, Experian, and TransUnion).

What to Do If the Debt Doesn’t Belong to You or If You Already Paid It

If you have reasons to believe the debt is inaccurate or doesn’t belong to you, your best option is to send a debt dispute letter. You have 30 days after receiving written notice of the debt to send a dispute letter, demanding that the collection agency provides proof that you owe the debt. You may also need to send a second dispute letter to the credit bureaus to remove the debt from your credit report.

In your dispute letter, you should include your personal information, the amount of the debt owed, the name of the creditor, and a request to not report the debt to the credit reporting agencies. Check out the additional resources section at the end of this article for links to sample dispute letters. If they’re unable to find sufficient information and documents to verify the debt, you can’t be held responsible for it.

Provided that they’re able to validate the debt, they will send a verification letter.

What to Do If You Owe the Debt

Just in case, you should request a debt validation letter. You want the letter to verify why the debt collector thinks you owe the debt; the amount of the debt; how old the debt is; and whether the debt collector has the authority to collect the debt.

If the debt is past its statute of limitations, the collector can’t force you to pay. But you should remember that the debt will still impact your credit score, so you may want to pay it off.

If you owe the debt, you need to brainstorm ways to pay back the debt and clean up your credit as soon as possible.

Don’t rush into paying back the collection agency. You need to assess all of your financial responsibilities to avoid getting behind on other bills and debt payments. Creating a budget can help you understand your finances and determine how much money you can put toward debt payments each month.

If you have enough in savings to partially pay off the debt, you can use it to negotiate a settlement. We’ll discuss settlements in detail in the next section.

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Negotiating With Debt Collectors

What do you do now that you’ve confirmed that you owe the debt?

Try to Negotiate a One-Time Payment

If you have enough funds, you should try to negotiate to settle the debt for less than owed by making a one-time payment.

As we discussed before, many collection agencies buy debt portfolios for pennies on the dollar. So they’re willing to settle for a fraction of the original debt. Even if you only pay half of the original amount, they still make a substantial profit.

It’s always best to start by making a really low offer and see if they accept it or counteroffer with a different amount.

You should make it seem like your first offer is the best you can do, even if you’re able to pay more. And if they come back with a counter amount, tell them that it will be difficult and you need to see if you can scrounge up enough money.

Negotiate a Payment Plan

You’ll be able to get a better deal if you can negotiate a one-time payment. But if you don’t have the funds, you should work out a payment plan that allows you to tackle the debt.

First, you need to determine how much you can afford to pay monthly. You should consult your monthly budget or create one to aid you.

You can still negotiate with the collection agency to lower the total amount you’ll pay to settle the debt. For example, you may owe $2,500, but they may agree to consider the debt settled in full if you pay $50 per month for 24 months. So you’ll only end up paying $1,200.

And if your financial circumstances change in the future, you can try to renegotiate a better payment plan or a one-time payment.

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Try to Get Them to Clean Up Your Credit Report

Once you come to a mutual agreement, try to negotiate the removal of any negative information from your credit report. Credit agencies aren’t obligated to do this, but they may agree in order to make you settle. This will be very beneficial because you’ll see an immense improvement in your credit score.

Get the Final Payment Agreement in Writing

Before you pay anything, make sure you get a written agreement detailing the settlement amount and conditions. In case they don’t hold up their end of the deal, you want to have written evidence. It will also help you fight off future collectors if they try to bring the debt back from the dead as zombie debt.

How to Make Your Payment

When you make your payment, do NOT use a payment method that gives them access to your account information. Don’t pay with personal checks, credit or debit cards, or direct deposits.

You should send a cashier check through certified mail so that you can verify they’ve received it.

Additional Resources For Dealing With Debt Collection

The Consumer Financial Protection Bureau – Check their section on debt collection. They also provide sample letters to correspond with collection agencies, including dispute letters.

The Federal Trade Commission – They also have a robust collection of articles on credit, credit reports, collection accounts, and more.

Your State Attorneys General – They typically have a consumer protection department. And you can learn more about specific debt laws in your state.

* * * * *

The debt collection industry is well-known to use intimidation tactics to get people to pay. If you don’t know your rights, you can end up paying money you don’t owe or sacrificing your regular living expenses in order to make a payment on a collection account.

Understand that you’re in control, you have rights, and you can contact the regulatory agencies if you need help. Don’t let the collection agencies intimidate you.

If you get a call from a collection agency, you can always ask for their name, phone number, and the company they work with. Hang up and gather your thoughts before making any moves. It’s better to be ready before dealing with them rather than being pressured into a bad deal.

Now get out there and take care of your money, so it can take care of you later.

Your financial coach,

The post Dealing With Debt Collection Agencies appeared first on Adam Hagerman, CFP®.

You’ve heard you should invest in a property and build equity instead of throwing your money away on rent. You should buy a house that you can pass down to your family, instead of helping your landlord pay off their mortgage.

But is renting really such a waste of money? Or has the real estate industry been lying to you?

After all, their livelihood depends on selling you houses. Commissions on home sales are what really brings in the money.

But I’m not a real estate agent or a mortgage broker. I don’t make any money whether you buy a house or not.
I’m just here to give you an unbiased answer to the question, “Is renting a waste of money?”

The short answer is “No!” Renting isn’t a waste of money because it gives you a lot of life and career flexibility, it facilitates access to numerous amenities and convenience, and it may save you money and stress.

Now, let’s take a closer look at whether you should buy or rent a house.

Why Renting Isn’t a Waste of Money

Renting Gives You Access to a Range of Amenities

A lot of traditional apartment complexes provide access to on-site amenities, such as a gym or fitness center, a pool, laundry facilities, outdoor entertainment spaces, and 24/7 security monitoring.

Buying a home with or equipping it with luxuries such as a pool, a home gym, or a security system may be out of your budget. These items pose a large upfront expense and require significant ongoing maintenance.

When renting, these amenities may be free or come at an additional cost, but they are definitely more affordable than buying them for your own home.

You Can Get Closer to the Conveniences of the City

Do you want to enjoy the conveniences of living in the city center? You should consider renting instead of buying a home.

If you have an active social life, you will want to be closer to popular restaurants, cultural events, museums, trendy nightclubs, and other sources of entertainment. 

Renting an apartment or a house in the city center is much more affordable than buying a home in the same neighborhood. For example, the monthly rent for an apartment in Downtown District 8, the most popular neighborhood in San Francisco, costs $2,620 on average. Whereas, the average sale price for a home in San Francisco is around $1.2M, resulting in a monthly mortgage payment of $4,370.

Renting Makes You More Flexible

Renting gives you the freedom to change your address to fit your lifestyle and needs.

If you buy a home, you better be 100 percent sure that you like the neighborhood because you’ll be stuck in it for the next few years.

With each passing year, your age might not be the only thing that changes. Being close to the vibrant nightlife scenes or steps away from the beach may be your current priority as a young professional.

But in a couple of years, you may want to go back to a home in a quiet neighborhood, where you can relax after a long day at work.

And if you have kids, or are planning to have kids, you should research the school district thoroughly. Your zip code will determine your access to good schools and high-quality education for your children.

You might find a home that seems like a great deal. But if you’re not careful, you may move into a school district that is underfunded, with schools that can’t provide strong educational support for your children.

So buying a home is not a wise choice if you’re unsure you want to live in it for at least the next few years. Regaining the initial costs of buying a home, moving in, and selling it again will take time.

Renting Is Better for Your Career

Wanting to take a new and exciting job opportunity? You’re more likely to take that opportunity if all you need to do is move out of your apartment and possibly pay a fee for breaking the lease.

But if you own a home, things become more complicated. Since you’ve invested a large sum of money in a house, you’re tied to a specific location for the foreseeable future. 

The hassle of selling a house will most likely deter you from exploring career opportunities that require you to relocate to another region. 

Not only do you have to go through the trouble of finding a good real estate agent, but you may also suffer financial losses.

If you’ve owned the property for a short period of time, you haven’t offset the initial costs of buying a home. You will have to pay a 5-6% real estate commission on the sales price on top of other fees. And the pressure of selling the house as soon as possible may drive you to accept a lower offer. 

Having a mortgage hanging over your head also forces you to maintain a certain income. So you may miss out on career opportunities that cut your pay but have better long-term benefits. You’re also less likely to speak up when you’re unhappy at work or complain when you see something that goes against your values for fear of being fired.

If you don’t have a clear vision of what your future career path looks like or if you’re looking to maximize your income potential, you will benefit from renting.

Owning a Home Comes With a Lot of Hidden Costs

I’d be able to buy a house in cash if I had a dollar for every time I’ve heard, “The mortgage payment will be the same as my rent. But I’ll build equity. So buying is better than renting! Renting is a waste of my money.”

People who think this way are unaware of all the additional expenses that come with homeownership. 

Your fridge broke down? No hot water to take a shower? If you rent, all you have to do is submit a maintenance request. Management will take care of contacting a plumber or a repairman and paying for the repairs. 

But if you own a home, you will be the one fixing it, or making it worse and then paying a professional to fix it.

As a homeowner, you also incur the costs of regular maintenance, like painting, filters for your HVAC, and landscaping. Replacing appliances and household items is another expense that is often overlooked. You can take a look at some of these items in the table below.

Most of these items cost thousands of dollars. And they can break down unexpectedly, putting you under a lot of financial stress. 

And let’s not forget property taxes and homeowner’s insurance. Despite the fact that every homeowner must pay for these, many forget to account for them when considering the cost of buying a home.

All of these additional costs eat away at your home’s equity. So you can spend years paying down your mortgage to see a measly 1% return per year on your investment. Or even worse, you may see $0 in real appreciation by the time you want to sell.

Renting Is Less Stressful

Owning a home comes with large amounts of stress. You’re solely responsible for making sure that your house remains standing up. 

Remember those repairs and upgrades we talked about? Finding the funds to pay for them over the years is not the only thing you need to worry about. 

You will have to find professional tradesmen you can trust to do a good job. It will take time to look through dozens of ads for plumbers or electricians to find the right one. And you will always worry that you may be getting ripped off because you’re unfamiliar with the cost of these services.

Owning a home is also time-consuming. Your weekends will be dedicated to mowing the lawn, cleaning the pool, or power washing the house siding, instead of having lunch with your friends or exploring the city. 

Renting will save you a lot of stress by letting the managing agency worry about all of these necessary repairs and upkeep.

Don’t Buy a House? Like, Ever?

When Does Buying a Home Make Financial Sense?

So if renting instead of buying has so many benefits, when does it make sense to buy a house? 

As mentioned before, buying a home only makes financial sense if you’re planning to live in it for at least a few years. So you must know the area well and be sure you want to live there long term. Otherwise, you risk significant financial losses as you won’t even recoup the initial buying costs before selling.

You can use a rent vs. buy calculator to analyze when your break-even point may come. The longer you plan to stay in a home, the more financial benefits buying will bring you.

And the best way to minimize the overall cost of buying a home is to put down as large of a down payment as possible. 

You should try to aim to put down at least 20%, as this exempts you from paying for private mortgage insurance. 

This might be an unrealistic goal if you’re buying in an expensive area. But the larger your down payment is, the lower your monthly mortgage will be and the less interest you will pay overall.

If you’re tight on funds, I’d suggest 5% as the absolute minimum downpayment.

So if you have a clear vision of what your future looks like and don’t plan to make any significant geographical or career changes, you may be a good candidate for homeownership.

Do You Really Know How Much House You Can Afford?

Let’s go back to all those hidden costs of buying a home we talked about before. 

Remember that you don’t only need to pay for the mortgage. You have to pay for maintenance, property taxes, and replacing broken household items.

But that’s not all. Make sure you don’t neglect your other financial goals!

After accounting for the mortgage payment, will you be able to save enough money for retirement each month? Will you have enough money to save for your children’s college fund or for pursuing your interest? Will you have to give up your hobbies or cancel your annual family vacation to afford this house? 

If answering “no” to any of these questions makes you anxious about whether buying is the right choice for you, you should check out my course, Buying a Home: From Contemplation to Closing. There, I will help you decide if now is the right time for you to buy a home and what you can likely afford based on your financial goals.

Buying a Home: From Contemplation to Closing Price: $20 An in-depth course covering everything you need to know to buy the home of your dreams. Start Today! Monthly membership. Cancel at any time.

Buying a Home Will Lower Your Expenses in the Long Run

You should also consider buying a home if you’re looking to lower your housing expenses in the long run. After all, one of the major benefits of buying a house is that once you pay off the mortgage, you won’t have to worry about it again. 

This is a great option if you’re thinking about staying in the same house during retirement, as you won’t have the burden of rising rent prices on your fixed retirement income.

Just remember that housing expenses do not disappear completely. You will still have to pay for real estate taxes, homeowner’s insurance, general maintenance, and wear-and-tear replacement of household items.

The Non-Monetary Benefits of Home Ownership

Money shouldn’t be the only factor you consider when buying a home.

Switching from renting to owning your own property comes with a lot of non-monetary perks. 

You get to design and remodel your home to suit your specific needs and taste. No more worrying about returning the walls to their original color before you move out of your apartment. You can go crazy and paint each wall a different color (although I don’t recommend it) and no one can stop you!

Or you can reconfigure your house to make entertaining your family and friends easier. 

A family home may also provide you with plenty of space for your children and/or pets to play and run to their heart’s content without worrying about losing your security deposit. 

And maybe the most important non-monetary benefit of all. You get to make lasting memories in a home that will see your family grow for years or even generations.

So even if the math doesn’t show much of a monetary incentive to buy, buying may have many long-lasting positive effects on your well-being.

So, Should I Buy a House?

“Renting is a waste of money” is the greatest myth in the real estate industry!

Many people will try to pressure you into buying. You need to understand that this is YOUR decision. Only you can determine if buying a home is right for you.

I’ve had many conversations with clients that thought they wanted to buy a home because other people told them they’d be stupid if they didn’t. But after going through the differences between renting and buying, they decided that owning a home wasn’t for them, at least not for now.

Now it’s your turn to do the work to determine if you’re ready to buy a house, or if you even want to.

Now get out there and take care of your money, so it can take care of you later.

Your financial coach,

The post Is Renting a Waste of Money? appeared first on Adam Hagerman, CFP®.

For some weird reason, couponing is the first thing that comes to mind when most people think about ways to cut expenses. I blame shows like Extreme Couponing for promoting an unrealistic representation of the benefits and work involved in couponing.

Using coupons shouldn’t be the first thing you do when trying to reduce your expenses. It takes a significant amount of work and will most likely only save you a few bucks. Even if you end up saving a decent amount of money, would you have purchased the items without a coupon?

If you’re looking to reduce your expenses, you first need to focus on the major items in your budget. Items that can save you more than $25/hr by simply making a phone call or shopping around.

Some major expenses you should try to reduce before thinking about couponing include cell phone plans, insurance policies, cable bills, car expenses, and your mortgage.

After you’ve reduced all your major expenses, you can put your time and energy toward saving even more money with coupons.

Coupons = Marketing

Before you learn how to start couponing and get caught up in the excitement of saving, you should be aware that coupons are part of a very clever marketing strategy.

Brands don’t provide you coupons because they care about you. They provide coupons to get you to buy items you wouldn’t normally buy.

You didn’t know you needed that box of granola bars until you got that 50¢ off coupon in the mail. If you use coupons to buy things that aren’t in your budget, you’re still wasting money.

Brands and stores don’t just want to get you to try their products, they want you to keep coming back for more. 

Cheerios sends you a coupon because they want you to create a habit of buying their cereal so that when they stop providing a coupon (and they will!) you’ll still buy it.

And Walmart provides you with a coupon for Campbell’s soup to get you into the store. They know that once you’re there you’re likely to buy other things. You always do, right?

Other stores give you coupons to get you to come back to spend more money later. Kohl’s is especially good at using this strategy.

For example, they may give you a 50% off coupon for your next purchase. But it’ll only be valid for a short period of time and you’ll need to spend a minimum amount. This type of coupon compels you to come back to the store sooner than you would otherwise. In reality, you’re not saving money — you’re spending more. You’re going to be buying something that wasn’t planned for.

Other tactics stores use is to provide you coupons and automatic discounts when you join their loyalty program. Krogers charges less on some of their products to customers with a reward card. And Target tries to get you to sign up for their Redcard with a 5% discount on all your purchases.

Even though loyalty programs can save you money, you should be aware that your reward card will also be used to track your spending patterns. The more information a company has about you, the better they can customize their marketing towards you.

Is Couponing Worth It? Only If…

You Use Them for Budgeted Expenses

When you use coupons, the thrill of saving money may tempt you to buy things you don’t need. It’s why you see people on the Extreme Couponing show with garages full of diapers and zero children.

But you should only use coupons and discount codes for things you already planned to buy and that you’ll use in the next few months. If you use them for things that aren’t in your budget you’re not saving, you’re spending more.

For example, if you use a 50% off coupon on something you hadn’t planned to buy, you’re still paying 50% of the price.

You Don’t Spend All Your Time Looking For Coupons

Time is a valuable asset. You can use it to work, study, build your own business, or relax with your family and friends.

When you obsess about looking for coupons, you may be losing more than you’re saving — in time, work, energy, and money.

Don’t take couponing to the extreme. Think about what’s more important to you and use some of the tips and apps in the next sections to learn how to start couponing more efficiently.

Learn How To Coupon Efficiently

Store vs. Manufacturer Coupons

There are two types of coupons: store coupons and manufacturer coupons. You can usually use both on the same item to save even more.

“One coupon per purchase” only means per item. You can use several of the same coupon on different items. You just can’t use the same type of coupon multiples times on one item.

For example, if you have 10 coupons for the same tuna, you can use one coupon per can of tuna for a total of 10 cans of tuna. You just can’t use all 10 coupons on a single can of tuna.

Read Coupons Carefully

When using coupons, always read the conditions in the fine print.

Don’t focus on the image on the coupon — read the coupon carefully to see what items you can purchase with it. When the coupon is valid for several items, the company usually puts the most expensive item in the image. And coupons are usually only valid for certain sizes of a product.

If you go by the image only, you may end up grabbing the wrong item and paying full price for it.

You should also read the coupon conditions carefully to find out if it qualifies to be doubled, tripled, and/or stacked.

Double and Triple Coupons

Some stores will double or even triple the face value of coupons on certain days and up to a certain amount.

For example, if you have a coupon for $0.50 off on a gallon of milk, the store may double the discount to $1.00 for the first 4 gallons you buy on a Tuesday.

The best way to find if your local grocery stores double or triple coupons is to ask about their coupon policy at the customer service desk.

To save more money, you can plan your grocery trips on the days your local stores double or triple coupons. But make sure to read the coupon terms to see if it qualifies for this discount.

Forgot a Coupon? Ask If You Can Bring It Later

If you forget a coupon at home, you can always ask if you can still get the discount by bringing it back with your receipt the next time you come in, even if it’s expired by then.

I’ve forgotten coupons on a number of occasions. I just bring in my receipt and the coupons the next week, and the store gives me a refund. Just don’t be afraid to ask. The worst thing that can happen is that they say no. And if they agree, you can save money.

Take Advantage of Price Matching

Some grocery stores have a price match policy. If you find an item on sale at a different store and bring prove (like the weekly ads), they’ll match that price.

Find out if any of your local stores have a price match policy and take advantage of it. You’ll save time and gas not driving from store to store to get the best deals for different items.

Stack Deals to Save Even More

Stacking is a term used when “layering” multiple offers on top of each other.

For example, you can buy a bag of rice on sale that has a rebate and use a manufacturer coupon plus a store coupon. You can get all of those savings on a single item.

Just make sure to check the store’s coupon policy and the coupon’s terms and conditions to see if they allow stacking.

Always Check Store Policies

Each store has different policies about using coupons. You’ll want to find the store with the best coupon policy so that you can maximize your savings.

For example, Target only allows you to use four identical coupons per day. If you want to use more, you may want to find a store that doesn’t have a limit.

Where to Find the Best Coupons and Deals

Best Coupons For Food

Apps are a good way to find coupons, cashback offers, and weekly sales. Some of the best ones are:

• Ibotta app
• Checkout51
• Flipp
• Favado
• Grocery Pal

Coupons.com lets you print coupons or load them to your reward card.

Local newspapers often contain coupons from Redplum, SmartSource, and Proctor and Gamble. If you don’t get them, you can ask your family and friends to give you the coupons they don’t need.

Magazines like Red Book and Good Housekeeping also have coupons in them.

Store discount cards are one of the best ways to save money. They’ll track your purchases, but they’re worth it.

Sometimes you’ll also find coupons directly on the product or next to the product in the store.

Best Coupons For Restaurants

The restaurant’s website and social media is the first place where you should look for coupons and discounts. You could also sign up for their email list, because they’ll send you coupons and may even give you free items on your birthday.

Groupon lets you purchase coupons for 50-90% off at local restaurants. But before you purchase a deal, you should check out the restaurant’s menu. Some of my clients have gotten a deal only to find out that each meal was $50 or they had to spend a certain amount of money to use the coupon. They ended up spending way more than they wanted.

Restaurant.com is a good place to buy certificates for restaurants at a discount. You might also want to check out the restaurant’s menu before buying anything.

You can also use apps to get discounts at restaurants. Open Table gives you points that can be redeemed for cash when you use it to make reservations. And Coupon Sherpa finds coupons for chain restaurants in your area.

Best Coupons For Clothing and Household Items

Rakuten gives you cashback when you shop online or link your rewards card.

RetailMeNot provides coupon codes and their app also lets you redeem offers in stores.

Sometimes companies will give you a discount on your first purchase if you sign up for their email list, follow them on social media, or visit their website.

Browser extensions help you find online coupons and promo codes for every website you visit. Some of the best ones are Piggy, CouponCabin’s Sidekick, Honey, InvisibleHand, and The Camelizer.

Combine Couponing with Other Good Habits

Find The Best Price

You can compare prices across stores without driving around and wasting gas by using some of the websites and apps mentioned in the previous section.

When shopping online, you can find the best price by using Google shopping. It compares prices across many websites and allows you to narrow down your search with filters.

If you find a great sale at a chain store, you can make your purchase online and pick it up at a nearby location without having to pay for shipping. This way you can take advantage of sales when you don’t have time to drive to the store or use online promo codes to save more money.

Ask For a Discount

If you’re dealing with a small business, it doesn’t hurt to ask for a discount. You won’t lose anything and the worst that can happen is that they say no.

Small businesses want your money. If you tell them that you’ve found a better price somewhere else, they may be willing to match the price or give you a discount.

They may also be willing to provide a discount if you pay in cash.  You’re technically saving them money because they have to pay processing fees for each card transaction.

Buy With Longevity in Mind

You can buy generic brands of some products to save money. But for other products, you should consider putting quality above price.

For example, you should invest in a good quality mattress. You’ll use it every night. A cheap mattress might hurt your back and cost you more on medical expenses.

Other items you should consider spending more money on include kitchen knives, a good work wardrobe, etc. In the long run, you’ll be saving money because you won’t have to replace them as often.

Combine Coupons With Sales to Save Even More

You won’t always find coupons for the things you need. Sales save you money without having to find and carry dozens of coupons.

You can use sites like Coupon Mom to find deals at your local stores. Apps like Flipp and Favada also help you to compare prices across different stores without driving around.

Don’t Fall For The Tricks Some Brands Use

Brands use tricks to make their products more appealing to consumers. They spend years and millions of dollars building a name for themselves as the to-go brand.

But their products are usually very similar in quality to the generic brand. Don’t let the appeal of a name cost you more money.

Because the quality of food and medicine is regulated by the FDA, you should consider buying the store brand whenever possible. It’ll save you money.

If you’re worried about flavor, you can try different brands and choose the one that you like the most. Some items for which you should always buy the store brand include rice, flour, sugar, and spices.

Brands will also make their packaging deceiving to get you to choose their product. For example, some cereal boxes look huge but have less product than the smaller store brand boxes.

Instead of going by the size of the packaging, look for the “price per ounce” in the tag on the shelf to get a better idea of which one is a better deal.

Stores may use sale signs to get you to buy more than you need. Did you know that when you see 10 for $10 sales you don’t have to buy 10 items to get that price? You can buy only one and still get the sale price (unless the price tag says otherwise).

If you truly want to save money and not be manipulated into buying things you don’t need, you need to be aware of the marketing tricks brands use. Once you know them, you can recognize and avoid them.

Try Not to Get Caught Up In The Thrill of Saving

Saving money is great, but try not to get caught up in the excitement.

Don’t buy things you don’t need just because they’re on sale. You don’t want to end up with hundreds of packs of diapers and no kids like the people on Extreme Couponing.

Coupons and sales make it easier to spend money on things that you don’t need, but you would still be wasting money.

You should only buy things within your budget and stock up on items that you’ll use in the next few months. You don’t want to buy too much food and let it go bad.

Don’t obsess over saving a couple of dollars. Sometimes driving around to find the best deals costs more in time and gas expenses than it’s worth it. You can compare prices online and go to stores that are near your house or on the way to work/school.

*     *     *     *     *

You don’t need to spend all your time couponing to save money.

How to start couponing takes work, time, and energy. Only you can figure out how far you are willing to go to save a few more dollars.

The tips and tools in this article will help you build your own couponing style so that you can save money efficiently.

Now get out there and take care of your money, so it can take care of you later.

Your financial coach,

The post Learn How To Coupon and Avoid The Mistakes appeared first on Adam Hagerman, CFP®.

We’ve all shouted that in our head when those bad spending habits make an appearance.

If you’ve recently created a personal income statement, you’re probably finally getting to see the dollar figures associated with your overspending.

Maybe you always have to have the most up-to-date electronic gadget or you’re a sucker for a good sale.

Maybe you go into the grocery store for that one thing you need to finalize your recipe, but you come out of the store with 10 items.

Whatever the bad spending habits are, you know they’re a problem and you know they’re holding you back from working toward financial freedom.

If your search for “how to stop spending money” is part of your quest to eliminate your debt, be sure to check out my course Destroy Your Debt. It will help you build a debt elimination plan that works for YOU. As a part of that membership level, you also get access to my Budget For Budget Haters course. You’ll get everything you need to succeed!

Destroy Your Debt Course Price: $10 Stop giving your hard-earned money to other people. Keep it for yourself. Start destroying your debt today! Learn More! Monthly membership. Cancel at any time.

Bad Spending Habits? Really?

Just know that what some people might see as overspending, could be right in line with you and your budget. You need to define what a true bad spending habit is for you.

In other words, if you consistently cut back on spending in other categories so that you can dine out four times a week, more power to you.

You’ve identified what’s important to you and made it happen by being frugal in other areas.

If your budget is still functioning properly and you’re meeting all of your goals, what other people view as overspending may not be a problem for you. Don’t let anyone judge you for how you’re spending if you know it works for you. Don’t let them control your spending.

But what if that isn’t the case?

What if you only want to spend $50 a month dining out, but end up spending $250? Do you just stop spending money altogether?

You may be looking at a bad spending habit and it’s time to face the problem and battle it until you get it under control.

As you already know, it’s stopping you from saving money or even worse, causing you to pile on debt. I assume that’s not your goal.

What’s Causing Your Overspending?

Before you start working with some of the tips and tricks outlined below, it’s a good idea to take a step back and evaluate what may have led you to this point. In other words, are there any specific reasons that you’re overspending? Let’s go over a few possibilities.

Spending Triggers

How did you feel the last time you had a budgeting breakdown?

Were you upset over something? Were you bored?

Start tracking how you feel when you splurge on a specific item. For example, if you buy a soda every day at 2:00 PM, write down how you were feeling.

Maybe you were bored or you ran out of things to do.

Maybe every day at 2:00 PM, two of your co-workers gossip about other people in the office and you just need to get out of there.

By identifying the underlying issue, you may be able to stop spending money you don’t have.

Personally, I’ve started taking a short walk to handle my typical “afternoon snack syndrome”. When I have the craving, I just get up and go. It’s helped me refocus my mind and control spending.

Find out what your trigger is, and make adjustments to ensure you deal with it in a more budget-friendly manner.

Peer Pressure

Do you find yourself spending money every time [insert name here] is around?

As you may already know, it’s super easy to spend someone else’s money. So if you have friends that encourage you to spend money, they might be getting a nice rush at your (literal) expense. You need to find a way to tell them to knock it off because it’s making you broke.

You may also have friends that are making more money than you. It’s tempting to try and keep up, but it will only lead to financial stress. Learn to say no. Find ways to hang out with them in ways that don’t cost a lot of money.

If they only want to spend money and can see that you’re not comfortable with that, they should respect your wishes. If they don’t want to help you stop spending money, then they’re not as good of a friend as you thought.

Social Media

Social media can be a wonderful thing. It allows you to keep in touch with friends and family that have moved away, connect with people that have the same interests as you, and so much more.

But, it can also be a curse to your wallet.

By consistently only seeing the best side of everyone else’s life, you feel the urge to put up the same appearance. You want others to know you’re doing great too and that can often lead to overspending on food, clothing, vacations, and more. We want to craft that perfect Instagram picture to show the world we’re living large.

Social media also shows us advertisements for all the things we desire.

Have you ever checked out a pair of shoes on a retailer’s website only to find those same shoes following you everywhere you go on the internet? You start seeing them in your Facebook feed, on Instagram, and even on the apps you use on your phone. Personally, I once shopped for cat litter only to have that cat litter follow me everywhere around the internet. I even had ads popping up on my phone’s weather app. How can I stop spending money when I’m bombarded with all these ads?

You see, almost every website has a tracker on it so they can target you with ads almost immediately after you leave. So, you need to constantly be aware that you’re being advertised to.

To help avoid some of this tracking, you can use a web browser like Brave and you can adjust advertisements on specific sites you visit. For example, here’s how you can eliminate most of the ads you see on Facebook.

Unconscious Spending

In today’s world, it’s extremely easy to spend money. You swipe a piece of plastic, tap a button on your phone, or click the “Buy It Now” button on websites. Sometimes without even knowing which form of payment you’re using.

In many instances, these “conveniences” can make it feel like you’re not even spending money.

In fact, some individuals have reported spending 10-15% more per transaction just because they’re using a credit card.

If that’s the case, it may be best to stop using credit cards and switch to cash or debit for a period of time. The first tip below can really help you address this issue and stop spending money.

How To Stop Spending Money

Control spending habits using these tips.

1. Take Only The Cash You Need

Heading to the grocery store for your weekly shopping? Heading out to the mall to grab lunch with a friend? Only take the cash you need based on what you’ve budgeted.

So, if you’ve budgeted $100 for groceries, hit up the ATM and get $100 cash out. Throw that $100 in your wallet and leave all of your credit and debit cards at home.

Yeah, you read that right. LEAVE YOUR DEBIT AND CREDIT CARDS AT HOME!

Why? Well, think about it this way.

If you take $100 in cash to the grocery store because that’s what you’ve budgeted and that’s all you want to spend, what happens when you get to the checkout and find out that your total is $120?

You’re going to whip out your debit or credit card to pay for the difference, right? You’re not going to put $20 of merchandise back at that point. How embarrassing!

But if you leave your debit and credit card at home, I guarantee that you’re going to grab your calculator and add up everything in your cart as you put it in.

If you find out that you’re over your $100 budget, you’ll prioritize the items in your cart and begin putting things back.

If you ONLY have the cash to work with, you have no other option but to make it work. There isn’t an out. You’re forced to make the right decision. It’s so much easier to stop spending money when you don’t have the option to actually do it!

2. Think About Sales Differently

“I only buy things if they’re on sale!”

Have you said that before? As a financial coach, I hear it all the time.

Let me help you think about sales in a different way.

It doesn’t matter if something is on sale for 75% off. It’s still 25% on if it’s not budgeted for.

Here’s another way to look at it. If you buy ten items that are typically $100, but happen to be 50% off, that’s no different than buying five of those same items at full price.

If you’re “only buying things on sale”, that won’t matter much if the total number of items you’re purchasing increases as well.

This isn’t saying that you can’t buy something in the moment, but you need to be aware that the money is coming from somewhere. Something else is going to be underfunded if you purchase this item that wasn’t budgeted for.

3. Understand The Consequences

If you go through the steps of creating a budget you’ll stick with, you’ll find out that there are consequences to your overspending.

Many of your financial goals will go unmet.

Your definition of financial freedom will never be reached.

Your plan to eliminate debt will never get accomplished.

If you understand the consequences of your bad spending habits, you can stop spending money on the things that don’t matter and start focusing on the things that do.

4. Visualize the Prize

Once you create some financial goals, put them in a prominent place so you have to look at them each and every day.

This will continually remind you of WHY you’re cutting back on expenses and/or sacrificing some things that are difficult.

If the list isn’t enough, add a picture of something you’re striving to achieve.

Looking to buy a house? Print off a picture of something you like in your neighborhood and tape it on the refrigerator.

Want to be able to pay for your kid’s college expenses one day? Photoshop a picture of them with a graduation cap and place it in your wallet in front of your credit cards. That way you’ll always have to look at it before making a purchase.

5. Sleep On It

If you’re looking to make a purchase, force yourself to think about it before pulling the trigger.

Put the item back and only come back to it after you’ve had time to let it sink in.

Some people have suggested 24 hours while others suggest even 30 days if it’s over a certain amount.

What you’ll find is that most purchases are impulses and you don’t really need the item. But if it’s something that you can truly fit in your budget, you’ll still be able to purchase the item, but only after giving yourself some time to think it through and make adjustments.

6. Shop With a List

What happens when you go to the grocery store mid-week because you ran out of milk?

Do you come out with a rotisserie chicken, macaroni and cheese, grapes that were on sale, and several other items? You may have even forgotten the milk!

When you go shopping without a game plan, it’s really easy to go crazy.

If that sounds like your life, you may need to start shopping with a list. The list will help you stop spending money on things you don’t need.

So before entering the store, write down the things you need and stick only to that list when shopping. If you need even more help, revisit tip #1 above.

If you have trouble sticking to a list, find someone who can.

Send your spouse who follows instructions with great detail. Send your teenage daughter whom you’ve trained well.

7. Borrow or Trade

If you need something for a special occasion or will possibly only use it once, consider borrowing that item or trading something you no longer need with someone else that has the thing you want.

For example, if a tree fell down on your property and you want to take care of it yourself, you can rent a chainsaw from The Home Depot. Maybe ask your neighbor if you can borrow theirs.

If you get invited to a fancy gala event, you can borrow clothing, jewelry, handbags, and more online. You might have a good friend that will let you borrow something of theirs.

Why spend extra money on something you’re only going to use/wear once? Why take up extra space in your home to store it? Stop spending money on wasteful items!

8. Know Your Weaknesses and Avoid Them

When you go to the mall, do you always end up spending way more than anticipated?

Maybe you went to meet a friend for a smoothie but ended up buying some shoes, a nice new jacket, a soft pretzel, an ice cream cone and to top it off, you had your eyebrows threaded.

That’s definitely NOT what you went there for.

So if your weakness is the mall, avoid it at all costs. Why put yourself through that?

I’m not saying that your weakness is the mall. Heck, yours could be the cheese deli at the grocery store for all I know.

Just know what makes you weak in the knees and stay away.

9. Unsubscribe

If you have a weakness for marketing, it may be a good idea to unsubscribe from as many email lists and catalogs as you can.

To unsubscribe from promotional emails you get from companies, click on the “Unsubscribe” button you’ll find at the bottom of every email (they’re required to have it).

Catalogs are the tough ones as it can be hard to figure out how to get rid of them. Try a site like this to simplify your task.

10. Tell Your Family and Friends

If you’re trying to avoid your weaknesses, letting your family and friends know is a good idea.

Trust me, trying to avoid the mall and having your friends want to go there all the time makes things tricky.

It’s even more difficult if you’re watching them spend money when you’re trying to figure out how to stop spending money.

Having a quick conversation with them about your issue is no big deal. You can even phrase it to look like you’re being responsible.

Try this:

Hey Jane. Do you mind if we start hanging out at my house instead of the mall? I’m trying to save for my kitchen remodel and you know how I get at the mall! 

Pretty easy right?

If they’re truly your friend, they’ll understand and support your decision.

11. Inventory What You Own

Have you ever gone to the grocery store, bought something and then discovered that you already had it in the pantry at home?

Yeah, it happens.

To control spending at the grocery store, take an inventory of the items you already own to ensure you’re not duplicating purchases.

A good tip is to take a picture of the contents of your refrigerator and pantry with your phone before heading to the store. Not sure if you’re out of ketchup? Check the pictures!

You should also keep a running inventory of the fresh stuff in your refrigerator.

Use a site like Still Tasty or Eat By Date to create a list of the fresh items you have so that you can make sure you eat everything before it goes bad.

So if you’re trying to figure out what to cook for dinner, you can check the list to see if there’s something you need to use ASAP before you can no longer eat it.

If you struggle trying to figure out what to cook based on what you already have, try a website like Supercook. Supercook is a recipe aggregator that searches multiple recipe sites to help you create a recipe based on the items you have in stock. It can also help you piece together ingredients you didn’t think about.

12. Place Reminders In Your Wallet

When you’re learning how to stop spending money, you need to realize that you’re creating new financial habits.

So in the initial stages of making a change, bombard yourself with reminders.

For starters, try taping reminders on your debit/credit cards.

Take a piece of paper, put the phrase “Do I Really NEED This?” on it, and then tape it to your credit and/or debit cards.

I guarantee it will make you second guess the impulse purchase you’re about to make.

It’s also a little embarrassing if you have to hand it to the cashier. They might ask you if you really need it. :-­)

13. Reward Yourself

If you’re working on eliminating some bad spending habits, start rewarding yourself for a job well done.

Every time you find yourself not spending where you would have in the past, take 10% of the money you would have spent and put it in a jar.

After a few weeks, take that money and spend it on whatever you want. It’s something to look forward to!

14. Budget In The “Fun Money”

Fun money is defined as guilt-free spending.

When you create your budget each month, be sure to budget for “fun money” and then spend it on whatever you like.

You could even use the money from the previous tip as your “fun money”!

This process will help because you’ll realize that you can still spend money on things, but you just need to limit your spending so you can meet your other goals.

15. Budget Proactively

This next tip comes with a waiting period. As I’m writing this (January 2021), the following app/program/bank is still in testing. But when it’s available to the masses, I think it’s going to help a tremendous amount of people. Maybe even you.

Before I mention the app, I want to point out my mission. This is to let you know that this company did not pay me to talk about them and I do not make any money if you click on a link to their website.

With that out of the way, let’s talk about Qube Money.

Qube Money is essentially a bank and budgeting program built into one package.

So, what’s the big deal? I’ll let them explain it.

Being FORCED to load your card and look at your budget every time you spend? That’s a game-changer.

Sure, you can try to be proactive while using other budgeting programs, but a requirement to look at your budget before you spend is a tremendous behavioral change that many people need in order to stop spending money they don’t have.

So, if you’re interested in their product be sure to sign up for notifications on when they’re ready to launch.

Your Bad Spending Habits Won’t Change Overnight

Let me start off by saying from personal experience; you’re not going to change your bad spending habits overnight.

Just as it took you several months or even years to create the habits, it’s going to take some time to learn how to stop spending money.

So, if you’re trying to go from spending $800 on groceries per month to $400, don’t be discouraged if you spend $750 in that first month after making changes.

There’s no way you can make that drastic of a change that quickly.

Even a slight change in your habits can have a lasting effect.

As I like to say, inching forward is still moving forward. Take that progress and continue toward success.

Now start taking care of your money, so it can take care of you later.

Your financial coach,

The post How To Stop Spending Money Using These 15 Tips and Tricks appeared first on Adam Hagerman, CFP®.

Since potential lenders use your credit history to decide whether they want to lend you money, they’ll be reluctant to give you credit unless you already have it.

That makes it seem like building your credit is impossible.

But don’t fret. There are options specifically designed to help you build your credit from zero.

In this article, I’ll explain the importance of good credit, share some credit-building options for people with no previous credit history, and try to break the myth that a good credit score automatically means you’re good at managing your finances.

Building Good Credit Is Important, But It’s Not Everything

Building good credit is important because it affects many of the major financial decisions you’ll make in your life.

A good credit score can help you buy a house, rent an apartment, finance a car, get a better rate on auto insurance, avoid paying deposits for utilities, and even get a job.

A good credit score will also help you get lower interest rates on loans and credit cards. A lower interest rate means you’ll pay less on interest over the repayment period which also means that more of your hard-earned money will stay in your bank account.

For example, let’s say you want to get a mortgage to buy your first house. The bank will look at your credit history and salary to determine whether they want to lend you the money. Based on that information, the bank may decide to give you a $200,000 mortgage at an interest rate of 3.5% if your credit is great, but only at 4.5% if your credit is just OK.

In that example, an interest rate that’s lower by only 1% will save you over $40,000 on a 30-year fixed rate mortgage. That’s $40,000 that you can put towards savings, retirement investments, or other monthly expenses.

Lenders are more willing to give you a better deal when you don’t pose a financial risk to them.

If you’re renting, good credit may allow you to pay a lower security deposit because you’re landlord will trust you’ll make payments on time and won’t break your lease.

All that being said, your credit score is NOT a complete representation of your financial health.

Your credit score is simply a three-digit number that tells creditors how you borrow money and how you pay it back.

It doesn’t tell them the whole story about your money management skills. Credit scores don’t take into account how much you earn, what types of savings and/or investment you have, or whether you make and stick to a monthly budget.

Your credit score is important, but it’s only one part of many when it comes to your personal finances. So in other words, don’t make it your primary focus when you have much larger issues to worry about such as paying your bills on time and getting out of debt.

Review Your Credit Report for Inconsistencies

Before starting to build credit, you should review your credit reports for inconsistencies.

Thanks to the Fair Credit Reporting Act (FCRA), you have the right to receive a free credit report from each of the three main credit bureaus (Equifax, Experian and TransUnion) every 12 months.

Only use annualcreditreport.com to get your free credit report. Imposter sites that claim to give you free credit reports will charge you or make you sign you up for monthly services that cost money. If you have to enter your credit card information, you’ll probably be charged at some point.

If you haven’t looked at your credit reports in more than 12 months, you should order reports from all three of the major credit bureaus. Each bureau has different information and you want to make sure there are no inconsistencies under your name.

What Is in Your Credit Report?

When you receive your credit report, you’ll find a lot of information.

Your report contains your social security number, date of birth, employers, various ways you’ve used your name,  and current and past addresses. Make sure your current address is up to date and all other information is correct.

Detailed information about current and past credit accounts are also included in your credit report. You’ll find account balances, credit limits, payment history, important dates, credit inquiries, delinquencies, bankruptcies and much more. Obviously, if you haven’t utilized any credit in the past, no information will show up on your credit report.

Dealing with Identity Theft

If you find any inconsistencies in your credit report, you might be a victim of identity theft.

Identity thieves can use your social security number and name to open new credit accounts. These fraudulent accounts can damage to your credit history and reputation.

Before you try to build your credit, you’ll have to report and deal with your identity theft case. As long as those fraudulent accounts are under your name, they’ll affect your credit and no matter how hard you work, you won’t be able to improve it.

If you suspect your identity has been stolen, you should place a fraud alert and credit freeze on your credit report and contact your current creditors. The link above contains more information about fraud alerts, credit freezes, and dealing with identity theft.

The two most important things you’ll need to do to clean up your record will be filing a police report and creating an Identity Theft Report at identitytheft.gov. You’ll need this paperwork to prove that the debt isn’t yours and prevent creditors from coming after you.

Keep Track of Your Credit Score

There are a few different types of credit score, but the two most popular scores are the VantageScore and the FICO score.

Most creditors (close to 90%) look at your FICO scores to decide whether to lend you money so we’ll focus on that one today.

How to Get Your FICO Score for Free

Many banks and credit card companies give you free credit monitoring when you become a customer. If your bank doesn’t offer it, you can use a free service like Discover’s Credit Scorecard.

Technically, you’ll have a different FICO score at each of the main credit bureaus based on the information that creditors report to them.

You should be aware that these free services may only give you access to one of your FICO scores or to another type of credit score like the VantageScore. For example, Discover’s Credit Scorecard only shows your Experian FICO score.

If you’re making a major purchase (a house or a car) in the next 12 months, you’ll need to get your FICO score to a certain level to ensure you get the best deal available. If you’re striving for a certain credit score, a paid service like myFICO’s Ultimate 3B will give you access to all three of your FICO scores and provide you with tools to help you predict how changes in your credit use may affect your score.

If you’re not making any major purchases, Discover’s free tool will be enough.

How Is Your Credit Score Calculated?

Don’t be frustrated if your credit score isn’t great — you don’t start out with the best credit score and building it up takes time.

To understand how you can improve your credit score, you must first know how it’s calculated.

Credit scores are calculated by looking at the following five criteria:

• Payment History (35%) — whether you make payments on time
• Amounts Owed (30%) — the percentage of total available credit you actually use
• Length of Credit History (15%) — how long you’ve had credit
• Types of Credit (10%) — whether you use different types of credit (mortgage, credit cards, installment loans, etc.)
• New Credit (10%) — credit inquiries and new accounts opened

You can’t change the length of your credit history so don’t worry about it.

Where To Focus Your Efforts

Instead, you should focus on the two major things that affect your credit score — payment history (35%) and the amount you owe (30%).

The longer you make on-time payments, the more your score will improve. Late payments will negatively affect your score. You should set reminders using Google Calendar or your phone’s calendar so you always pay on time.

You also want to decrease your credit use.

I recommend you always keep your credit use under 30%. If you want to improve your score even faster, aim to keep it under 10%.

For example, if you have a credit card with a $1,000 limit, try to keep the balance on that card below $300 or, even better, below $100. This will show creditors that you can be responsible with your money and won’t use all the credit you’re given.

How to Start Building Credit From Nothing

If your credit card application has already been denied and you know your credit isn’t very good (you’ve checked your credit report and credit score as mentioned before), don’t apply for any more credit cards. You’ll continue to be denied and your credit score will take a hit because of multiple credit inquiries.

There are better options specifically designed to help you build your credit from scratch, or to rebuild your credit when it has taken a serious hit.

Apply for Secure Credit Cards

If you have some money saved up, consider using a secure credit card.

With a secure credit card, you’ll make a deposit of cash to the lender and they’ll give you a credit line you’re able to access just like a credit card.

A secure credit card is NOT a prepaid card. The deposit works as an insurance for the lender in case you don’t pay your credit card.

Since it’s just like a regular credit card, you’ll want to only use a small percentage of your available credit and make all your payments on time. Once you’ve built your credit, you can negotiate with the same company to get a regular credit card and get your deposit back.

Ask Someone to Add You to Their Credit Card

Another option is to have someone add you as an authorized user on their credit card. Your parents may be willing to add you to their card.

You don’t need to personally use the card in order for it to build your credit. But make sure that their credit card is clean with a lengthy on-time payment history. If they end up maxing out the card or making late payments, it’ll negatively affect your credit as well. You won’t be responsible for their debt, but the information will be added to your credit history.

NOTE: If you can get a secured credit card or a credit-builder loan, I recommend you go with those options. Things get riskier and more complicated once you link your credit with another person’s credit.

How to Build Credit Without a Credit Card

Use a Credit-Builder Loan

If you don’t have money saved up, you can use a credit-builder loan.

With a credit-builder loan, instead of giving a cash deposit to the lender, the lender will approve you for a small loan but won’t give you the money.

They’ll place the money in an interest-bearing savings account in your name, which will be accessible to you after you repay the loan. This acts as a safety net for the lender since they don’t know if they can trust you yet.

Credit-builder loans are only meant to help you build credit so you won’t be able to buy anything with the loan money (until you pay it back). But the lender will still send information about your payment habits to the credit bureaus. So you should make all your payments on time because negative information will also be reported to the credit bureaus.

You can check your local bank or credit union to see if they offer credit-builder loans. But if they don’t, you can go with online lending services like Self Lender. Self Lender offers loan amounts of $500, $1,100 or $2,200, with repayment terms of one year.

Have Someone Cosign for You

If someone with great credit is willing to allow you to piggyback off their good name, you can take them up on their offer. Get a small installment loan of around $1,000 from the bank and pay it back over a short period of time.

But do NOT spend the loan money. Instead, put the money in a savings account and take money out of the account each month to pay back the loan on time. Remember, your goal is to build your credit, not to get instant spending money.

You should also keep in mind that late payments will affect your cosigner’s credit. If this person agreed to cosign for you, you probably have a good relationship with them. You don’t want to damage their credit and put a strain on your relationship.

*     *     *     *     *

You don’t need to do anything crazy to build your credit.

Building credit will take time. You should focus on developing good spending habits, using only a small part of the credit available to you, and making payments on time.

Credit is an important part of your personal finances and will affect a lot of your financial decisions. You should take good care of it, but don’t focus all your attention on it. You should also learn how to keep a budget, save money, and invest for retirement.

Now get out there and take care of your money, so it can take care of you later.

Your financial coach,

The post How to Start Building Credit From Nothing appeared first on Adam Hagerman, CFP®.

Late payment fees, interest, overdraft fees, and insufficient funds fees drain your checking account and add to your already increasing credit card balance.

Late fees vary from $25 to $35 and since they usually carry over to the next billing cycle, you might not even know you have them until you get your next statement. In the meantime, you’ll continue to accumulate interest on your balance and on the extra fees.

Overdraft and insufficient funds fees can cost you on average, $35 per transaction. So, if you pay for a purchase with your debit card or withdraw money from an ATM without having enough money in your account, you’ll be hit with that fee. So in essence, you could purchase a $5 meal at McDonald’s and be charged a $35 fee for the convenience of allowing the transaction to go through. If you look at that in terms of an annual interest rate, that’s over 200%! I highly doubt that value meal was worth it.

When you get behind on one of your bills, you may try to get caught up by delaying the payment of other bills or by bringing your account below zero thinking that everything will be fine once you get paid again. But by delaying your other bills, more late fees are charged and it gets harder and harder to pay all your bills on time.

It can become a vicious cycle!

But don’t despair. Keep reading this article for tips on how to start untangling your finances so that you can get back on track.

Also, if you want to avoid this financial stress for good, consider investing in my course Budgeting For Budget Haters. Not only will you get access to the 4+ hours of instructional videos, but you’ll also get access to my full library of custom financial worksheets, my monthly financial newspaper, and MUCH more.

Budgeting For Budget Haters Course Price: $10 Learn the exact steps you need to take to create a budget you'll actually stick with. Get the support you need to follow through. Learn More! Monthly membership. Cancel at any time.

How To Get Caught Up When You’re Behind On Bills

Step One: List Out All Your Bills

First, you need to figure out how much you have to pay on bills each month.

To get started, make a list of all your bills:

• Mortgage/rent
• Utilities (electricity, water, garbage, cable, cellphone, etc.)
• Credit card payments
• Other loan payments
• Insurance payments (auto, life, health, etc.)
• Subscriptions (Netflix, Hulu, newspaper, gym, etc.)
• Any other recurring expenses

Include payment due dates, frequency (monthly, every three months, etc.), and minimum payments. Listing them by their due date will give you an idea of how they are distributed throughout the month. The link above contains a spreadsheet where you can create your list and include all of the information I mentioned.

My Bills Worksheet Price: Free Due to the COVID-19 pandemic, you can currently get access to this financial worksheet for FREE. You'll need to register as a free member. Get Access

After you account for all your monthly bills, review your non-essential expenses to see if you can eliminate any of them – even if it’s only temporary.

Maybe you can cancel your Netflix account for a few months or exercise at home using workout videos until you get back on track.

Your first priority is to catch up with your payments and avoid paying any more penalty fees. You might need to make some small sacrifices now, but they’ll pay off in the long run.

And after you’re all caught up, you can go back to watching Netflix.

Step Two: Plan Out Your Daily Spending

Your next step is to project your income and expenses on a day-to-day basis to make sure you don’t have a negative cash flow.

Use a daily budget to make sure you’ll have enough in your account to pay your bills on time and determine how much you can spend on discretionary expenses each day.

Include your bills and discretionary spending (groceries, gas, entertainment, etc.) into your daily budget. Discretionary spending is usually where people go off budget, causing them to get behind on other payments.

Daily Budget Worksheet Price: Free Due to the COVID-19 pandemic, you can currently get access to this financial worksheet for FREE. You'll need to register as a free member. Get Access

But because these expenses are not fixed, this is also where you can save a few extra dollars that you can use to pay your bills. For example, by planning your meals and writing a grocery list, you can save money at the supermarket, avoid impulse purchases, and spend less money eating out at restaurants.

For the time being, you can plan date nights or family time that doesn’t involve spending too much money.

If you’re having trouble controlling your discretionary spending, consider using cash for them. By implementing this strategy, you’ll only be using your checking account for your bills and you’ll be withdrawing the amount planned for discretionary spending in cash from an ATM.

You then need to take the cash strategy a step further and only take the cash you budgeted with you. In other words, leave your debit and credit cards at home. Otherwise, you’ll be tempted to use them when you inevitably go over your allotted cash. It’ll make it easier to stay on budget and more painful to let go of an extra few dollars for an impulse purchase.

Stop using credit cards

In order to get your finances back on track, you need to stop accumulating more debt. So lock your credit cards away where they can’t tempt you anymore. You’re going to use the daily budget to make sure you have enough cash in your account to pay for your discretionary expenses without the use of a credit card.

You might think you have the self-control to use your credit card wisely, but chances are that if you’re reading this article, you’re already in trouble because of your credit card.

Spending money on a credit card is easier and less painful than using cash. You don’t see the dollar bills disappear from your wallet, so you may not even realize how much you’re spending until you get your monthly bill. And by then it’ll be too late.

Credit card companies will try and tempt you with cash back rewards and airline miles. However, you need to concentrate on fixing your finances before you even consider using your credit card to gain rewards. Credit card rewards are only worth it if you stick to your budget and pay off your balance every month. Otherwise, you’ll end up paying more in interest and late fees than what the rewards are worth.

Make minimum payments

Making minimum payments on your credit cards and loans will still decrease your balance (assuming you stop using them – see above), keep your credit healthy, and stop you from paying late fees. It’ll also allow you to redirect your money to other bills and expenses so you can get caught up.

Avoiding late and overdraft fees are more valuable than paying a few more dollars towards your credit card each month. In other words, avoiding a $25 late fee on a bill is much better than saving $0.15 in interest because you paid an extra $20 above the minimum on your credit card.

Step Three: Look for Flexibility

After you set up your daily budget, you can look for a little flexibility in your bill payment schedule. You especially need to do this if you project that your account will go negative any time in the next few weeks.

Some of your creditors might be willing to accept payments a few days late without charging you a penalty. For example, your landlord may allow you to pay rent up to 5 days late – giving you enough time until you get your next paycheck.

If you have trouble paying bills on time because they’re all due around the same time, credit card and utility companies may be willing to change your due date. Spreading out your bills over the month may allow you to have enough money to pay all your bills and discretionary expenses without using a credit card.

But before you contact your creditors and explain your situation, you need to visualize when and how much you can pay each month. Your daily budget will help you do that. Then, you can use an electronic calendar like Google Calendar can help you organize the due dates and set up reminders so you always pay on time.

With this information, you may be able to change your due dates online or by making a quick call to customer service. If you’re behind, companies might require you to catch up before changing your due date. Also, it might take a few billing cycles for the due date change to go through, so you should keep a close eye on your billing statements.

If your request is denied, you can check your calendar and daily budget to see if you can make full or partial payments earlier in your billing cycle. You don’t need to wait until the due date to make a payment. You just need to make sure you can actually make the payment at that time.

Step Four: Negotiate Your Bills

If you’re behind on your payments, you’re not the only one that wants to get back on track. You’re creditors also want you to pay on time because it’s in their best interest.

Don’t be afraid to call your creditors to work on a plan to help you pay on time. They might be willing to lower your monthly payments, reduce interest rates, temporarily postpone your due date, and/or waive fees that are keeping you from getting ahead on your payments.

You should also be prepared to answer questions about your income and expenses. If you still have enough money left over after covering all your basic necessities, you might not be eligible. That’s where the daily budget comes in handy.

Hardship payment plans are temporary – around 3 months and up to 12 months. And they might only waive or eliminate any fees and penalties after you make several payments on time.

Before you try to negotiate a payment plan, you should check your daily budget to make sure how much you can afford to pay your creditors. You need to tell them what you’re able to do, not the other way around.

Step Five: Focus on the Future

As you start getting back on track, begin to plan for future expenses.

It isn’t unusual for people to use their credit cards to pay for periodic expenses when they forget to budget for them. That’s how they end up with more debt than they can pay. It’s also a big contributing factor to getting behind on bills.

Saving for car insurance premiums, kids summer camp, and gifts around the holidays will help you avoid going into debt and eliminate future issues with your cash flow.

Use an annual budget to plan for irregular expenses and save a little bit every month.

Build Up an Emergency fund

You should also start an emergency fund so that you won’t go into debt when unexpected expenses inevitably occur.

If you’re working on paying off debt, I recommend you save one month of your expenses or at least $2,000.

If you’re out of debt, I recommend you save at least three months of your expenses. Anything above that depends on your susceptibility to true financial emergencies and what helps you sleep at night. For example, if your family only has one income or if your career field is unstable, you should save more money.

And don’t dip into your emergency fund unless it’s truly an emergency. True emergencies include an unexpected job loss, unexpected home repairs, unexpected car repairs, unexpected medical expenses, and unexpected travel to see a dying or deceased family member.

That pretty much sums up all of the true financial emergencies. All other expenses could be classified as expected and something you should have budgeted for. So, start budgeting!

Planning ahead for future expenses and emergencies will help you get control over your financial life and avoid ever having to pay your bills late again.

Step Six: Increase Your Income and Reduce Your Spending

If you’re behind on bills and spending more than you earn, you have three options.

Option #1 – Increase Your Income

Your first option is to increase your income. Are you afraid to earn more money because of taxes? Don’t be.

Here are some ideas:

• Sell some of the crap lying around the house.
• Get a roommate.
• Start looking for odd jobs and part-time work.
• If you get a large tax refund every year, consider adjusting your withholding to get more per paycheck.

Just do something!

Option #2 – Reduce Your Spending

Your second option is to reduce your spending.

Just remember that when focusing on reducing your spending, focus on reducing your major expenses first. Don’t focus on couponing as your fix. That’s not a good use of your time.

If you purchase items on impulse, check out these tips on how to control your spending.

If your credit is decent, you can always look at consolidating your debt.

Option #3 – Do a Combination of Both

Please see options #1 and #2 above.

*     *     *     *     *

By following the step-by-step plan above, I’m confident you’ll get back to paying your bills on time.

Now get out there and take care of your money, so it can take care of you later.

Your financial coach,

The post 6 Steps to Take When You’re Behind On Bills appeared first on Adam Hagerman, CFP®.

But this is not the only or the biggest data breach in recent history.

In the last 10 years, reputable companies, such as eBay and Target, have had their customer data compromised, exposing the personal information of billions of people.

The Equifax incident is only the most recent. It also won’t be the last.

On July 29, 2017, Equifax, one of the biggest credit bureau in the U.S, discovered a breach in their system. The breach is believed to have been going on since mid-May and exposed the personal information of 143 145.5 million consumers, including Social Security numbers, dates of birth, addresses, and driver’s license numbers. Additionally, the credit card data of 209,000 consumers were affected.

With all these breaches, you should be concerned about your information getting into the wrong hands.

Once you’ve trusted a company with your information, its security is out of your hands.

In order to fend off identity theft, you should be careful with whom and how you share your personal information.

Identity theft is so concerning because it gives an unknown individual the power to use your name to commit fraud and destroy your credit.

And it’s much more common than you might think. Between 2006 and 2008, 11.7 millions of people in the U.S. reported identity theft. That’s 5% of the U.S. population. 1 in 20 people.

You need to start protecting your information right now!

How Does Identity Theft Happen?

Identity thieves can get their hands on your information the old-fashion way, by snatching your purse or going through your trash. But many of them resort to more tech-savvy tactics like email “phishing” or spyware.

They pretend to be family members, friends or reputable institutions to trick you into willingly giving them your information. They might even say that you or your family will be in danger if you don’t give it to them. Take a deep breath and take a moment to confirm who you’re talking to before you give them any information.

Also, be very careful before downloading an attachment or clicking a link, even if it’s from someone you know. Their account might have been hacked and the file might be infected with spyware.

Antivirus software and online security have improved in the last 10 years, but so have identity thieves.

Your personal information will never be 100% safe online, but that doesn’t mean you shouldn’t take measures to protect it.

Did the Equifax Breach Affect You?

I’m sure you’re dying to know if the Equifax breach affected you, but at this moment there is no sure way to tell.

Equifax launched a website (equifaxsecurity2017.com) where you can find the newest developments in the case. But the names of the affected customers haven’t been released at this time. Quite honestly, I doubt they even know for sure who was affected.

The company said it will be contacting the affected customers via USPS with additional details once the investigation is over. So keep an eye out for any mail from Equifax.

For the moment, instead of adding more of your information into the system, just assume you have been compromised or that you’ll be in the near future. Even if that’s not the case, it’ll benefit you to take measures to protect your information from now on.

Keep reading to learn how to prevent and how to deal with identity theft if it happens to you.

How to Check Your Credit Report for Identity Theft

If you didn’t know it, you should be keeping a close eye on your credit report.

Credit reports contain information on how you use credit and include personal information, such as your name and previous and current addresses.

Reading and understanding your report can help you spot discrepancies in it. Look for incorrect information and unknown credit lines. Those are major indicators of identity theft.

And thanks to the Fair Credit Reporting Act (FCRA), you have the right to one free credit report from each of the main bureaus (Equifax, Experian, and TransUnion) once every 12 months. You can request your free credit report at annualcreditreport.com.

Avoid “imposter sites” like freecreditreport.com which are actually operated by the main bureaus and could end up charging you money. If you have to enter in credit card information, that’s a good indication that you’ll probably be charged at some point.

Lesser know credit reporting agencies such as Innovis and ChexSystems also provide you with one free report a year, but you need to contact them directly.

Additionally, if you live in one of 7 states (Colorado, Georgia, Maine, Maryland, Massachusetts, New Jersey, or Vermont) you are entitled to an additional free copy a year by state law. But you must contact each credit bureau directly to request it.

You should also keep an eye on your credit score throughout the year. If your score suddenly decreases without any reason, your identity might have been stolen and it would be wise to check your credit report at that time.

Bank of America, Chase, Citibank and Capital One provide you with free credit score monitoring. Check with your bank or credit card company to know if you have access to this resource.

You can also use websites such as Credit Sesame and Credit Karma, which offer free credit report and credit score monitoring. While free is nice, you should know that the scores they provide are not typically used by lenders. If you’d like to know the scores that are used by lenders, you’d need to use a paid service called MyFICO.

How to Prevent Identity Theft

Although your personal information can never be 100% safe, you should make sure to protect your identity to the best of your ability.

In order to make it harder for your identity to be stolen, you should avoid spreading your information as much as possible and keep an eye out for signs of identity theft.

Now let’s learn some actionable steps you can take to minimize the risk!

Use ID Monitoring to Your Advantage

In almost every situation, when a company is hacked and your information is part of the breach, they typically offer you free credit monitoring.

While it’s pertinent that you monitor your credit and keep an eye out for identity theft, by consistently signing up for all the free ID monitoring services offered by companies, you’ll be spreading your information even more.

Isn’t that what you’re trying to avoid?

Here’s something else you need to know. ID monitoring doesn’t stop identity theft, it just alerts you to changes in your credit so you can react quicker.

If you really want to prevent identity theft from occurring, see the upcoming section on freezing your credit.

If you’ve never been part of a security breach where free ID monitoring was offered, there are a few free credit monitoring options available. Just know that they don’t cover all the credit bureaus. For example, Credit Karma only covers TransUnion and Equifax. Credit Sesame only covers TransUnion.

Therefore, if someone opens up an account in your name and the information is only reported to Experian, neither of those two options will alert you to the issue.

In my opinion, paying for ID monitoring may be a better solution since you can keep your information limited to only one company. Personally, I recommend and use myFICO’s Ultimate 3B monitoring. Not only do you get credit monitoring, you also get to see the actual credit scores that the majority of lenders use when you apply for credit.

I know free sounds good, but what’s the value of your identity?

Place a Fraud Alert on Your Credit Report

Fraud alerts can make it more difficult for identity thieves to open up new credit accounts in your name.

A fraud alert requires companies to take additional steps to confirm your identity before offering credit. This is usually a phone call where the bureau will ask information that only you should know regarding your credit file. Therefore, if you decide to place a fraud alert on your credit report, make sure your contact information is up-to-date with the credit bureaus.

You can place a fraud alert on your credit report by calling one of the credit bureaus. They are required by federal law to alert the other two major bureaus., but I would still call the other two to make sure the alert goes through.

The initial 90-day alert is free, after which you can extend it for up to 7 years. The extended fraud alerts are available for true victims of identity theft. If you’re not a victim of identity theft (i.e. you’re just being overly cautious), you can renew the alert every 90 days.

Place a Freeze on Your Credit File

A credit freeze blocks all creditors from accessing your credit report until you remove or temporarily lift it. So no new credit lines can be opened, by you or by other people.

Under a credit freeze only existing creditors, state/local agencies (law enforcement and child support agencies), credit monitoring services, and you can review your credit report.

Due to this high level of protection, it’s what I recommend to all of my clients that are concerned about identity theft. It’s the ultimate level of protection.

Here are the links to the security freeze pages of the three major credit bureaus.

• Equifax
• Experian
• TransUnion

In addition to the three major credit bureaus, you may also freeze the alternative agencies I mentioned earlier, Innovis and ChexSystems.

If you want to open a new credit line, you can lift the freeze for a specific creditor or period of time by contacting the credit bureau. This is commonly referred to as temporarily thawing your credit. Once you’re done, the freeze will resume automatically.

Due to federal law, freezing your credit is free. So, you have no excuse not to do it.

Other Tips to Prevent Identity Theft

Buy a shredder. Destroy personal information from all documents and mail before throwing them out. Many identity thieves are dumpster divers. Personally, I recommend using a micro-cut shredder. They will turn the documents into very fine pieces of paper that would be extremely difficult, if not impossible, to put back together.

Remove as much personal information as possible from your wallet. Take out unnecessary credit cards, debit cards, and other identifying documents. And NEVER carry your Social Security card and/or birth certificate around. Keep those in a fireproof safe. 

Change passwords frequently. Services like LastPass allow you to store all your passwords in one place. You can create unique, secure passwords for each one of your accounts without the fear of forgetting them. You will only need to remember your master password and the passwords are locally stored on your computer, not the cloud.

Safeguard personal information. Don’t give out personal information unless you initiated the contact. Identity thieves use email “phishing” and spyware to get their hands on your information. Also, make sure to activate two-factor authentication whenever possible. It’ll protect your account even if your password is compromised by asking for the answer to a security question or by sending a unique code to your phone.

Safeguard your mail. Take your outgoing mail directly to the post office or a USPS mailbox. I also recommend getting a secure mailbox for incoming mail.

Review your statements for suspicious transactions. I know you probably don’t check your bank statements or balance your checkbook anymore, but in today’s world, it should be a part of your life. Review all of your transactions. If you don’t remember making it, someone else might have your account information. Report it to the fraud department of your bank or credit card company. Don’t trust them to always spot fraudulent activity.

Dealing with Identity Theft

What if your identity has been stolen?

All the preventive tips in the world won’t help you, but you should still protect your information to avoid future thefts.

But before you do that, you need to work fast to minimize the damage and take back your identity. Here’s what you need to do.

Contact your current creditors. Call their fraud department and let them know your identity has been stolen.

Change all your passwords. Get new account numbers and cards and change your PINs and security questions.

Place a fraud alert and credit freeze on your credit report. This will stop new credit lines from being opened in your name. Go back up for more information on how to do this.

Get your credit report.  Look for other issues beyond the initial things you noticed. You want to record all fraudulent activity before filing an Identity Theft Report.

Report identity theft to the Federal Trade Commission (FTC). They collect statistics and provide resources for victims. Their website (identitytheft.gov) will walk you through creating an Identity Theft Report. You will need it to prove that someone stole your identity and to place an extended fraud alert, remove fraudulent information from your credit report, and stop creditors from reporting fraudulent accounts.

File a police report. Don’t expect the police to do anything about it, but you want the paperwork to prove this debt isn’t yours. Many people don’t report identity theft to the police because the culprits are often family members or friends. You might want to protect them, but you also need to act in your own self-interest. It’s your credit history at stake and you’ll end up repaying that debt if you don’t report it.

*     *     *     *     *

In today’s world, your personal information is more vulnerable than ever. Your name, address, phone number, and even Social Security number are scattered across the internet.

You can’t just trust the safety of your information to some website or app. You need to be diligent and prevent identity theft. It’s always better to be safe than sorry.

With your information, identity thieves can:

• Withdraw/transfer money from your accounts
• Open new credit lines under your name
• Use up your health plan benefits
• Add health conditions to your medical records, denying you access to coverage
• File and receive your tax returns
• And even give your name to the police

You need to protect your identity.

Now get out there and take care of your money, so it can take care of you later.

Your financial coach,

The post How to Prevent Identity Theft appeared first on Adam Hagerman, CFP®.

OK. Forget couponing. That doesn’t always save you money.

So after potentially using coupons to reduce your expenses, I bet the second thing that comes to mind is your cable bill.

For some reason, it’s always right there at the top of the list when I ask people about reducing their expenses and I think I know why.

Reducing your cable bill or cutting it out altogether isn’t just about the money.

It’s also about your quality of life.

Today, the average American (and quite possibly you too) watches about 5 hours of television PER DAY. If you spread that out, you could quite possibly be spending 76 ENTIRE DAYS watching television each and every year.

No wonder the average person complains about not having enough time.

So while you say it’s about the money, deep down I bet it’s about finding more time to do more enjoyable things.

By reducing your television watching, you could spend more time with family, make updates to your house, or start that business you’ve always wanted to.

So by taking the time to lower the cost of your cable, you can also start being more deliberate with your viewing. A double win!

Personally, we wanted to cut our cable so we could have more time to devote to our businesses. By doing so, we also saved some money. Let’s go over how you can do the same.

If reducing your cable bill is a part of your larger quest to attain financial freedom, be sure to check out my course Budgeting for Budget Haters. It’s designed to give you step-by-step guidance on building a budget you’ll actually stick with.

Budgeting For Budget Haters Course Price: $10 Learn the exact steps you need to take to create a budget you'll actually stick with. Get the support you need to follow through. Learn More! Monthly membership. Cancel at any time.

Alternatives to Cable TV

How To Lower Your Bill and Increase Your Happiness

Internet, Phone and TV Package

For this first part, I’m going to talk about my current cable bundle with Verizon.

While I’m going to talk about how I altered my cable bundle, I want you to think about how you can emulate what I did, with your bill.

In order to make this work, you’re inevitably going to need to call your cable company and negotiate a new plan. These next few paragraphs can give you a starting point in your conversation.

Let’s take a look at my current plan with Verizon:

With taxes and fees, this plan comes in at about $128/month.

Prior to negotiating this bundle, we had a slower internet speed (75/75 Mbps), more channels, a DVR, and the unlimited telephone plan. We were paying about $153/month.

Now you might be asking yourself, “I thought he said he cut his cable? I see TV in that bundle!”. Great observation!

When I called to negotiate a new bundle, I requested only internet and telephone. But as I started reviewing their different offers, I saw that Verizon had a new “Custom TV” option.

With the Custom TV option, I would receive 30 base channels (whatever those are), my local stations, plus two custom channel packs of my choice.

After I found out the price of just the internet and phone, I asked what the price would be if I added in the Custom TV option.

They said I would SAVE $5!

You can’t make this stuff up.

Now remember, we didn’t want to be able to aimlessly channel surf. So I thought to myself, “Why can’t I add the TV, save the $5 a month, and just not watch it?” Eureka!

In fact, adding the TV saved me even MORE money which I’ll explain a little later.

So anyway, I told the agent from Verizon to add the TV, but NOT send me any cable boxes.

He said he HAD to send me a box, so I just made sure it was a standard box that cost $0 per month to have.

They shipped it to me and it’s literally still in the original packaging. I never hooked it up.

Now looking at my new bundle vs. my old one, you can see that I also upped my internet speed from 75/75 Mbps to 150/150 Mbps. I did this because many of the alternatives to cable TV I’m going to mention, still require you to have high-speed internet. Therefore, you need to make sure you have a decent speed too.

Digital Antenna

Since you’ll no longer be able to watch live TV via cable, you may want to have something available in case you want to watch some local news, live sports, etc. An old-fashioned antenna will do the trick.

Personally, I picked up this one:

RCA Amplified Antenna Buy Now This is NOT an affiliate link. Read about my mission.

With this antenna, I’m able to get dozens of local, HD channels over the air for free. Use this website to see what’s available in your area.

Streaming Media Player

The most important item you’ll purchase in your quest to cut the cable cord will be your streaming media player. Think of it as your TV’s computer. You’ll need it to access everything we’ll discuss.

Personally, I use the Amazon Fire TV and highly recommend it.

Amazon Fire TV Buy Now This is NOT an affiliate link. Read about my mission.

If you have an ethernet cord close by, I recommend getting the ethernet adapter as well so you can improve your streaming. Otherwise, you’ll need to use your Wi-Fi.

Amazon Fire TV is even better if you pair it with Amazon Prime which allows you to stream TV shows, movies, etc. That’s in addition to the two-day shipping!

Amazon Prime Price: Free Trial Start Your Free Trial This is NOT an affiliate link. Read about my mission.

If you’re not a heavy user of Amazon like I am, you could also go with a Roku box, Google Chromecast, or even Apple TV if you’re a heavy user of iTunes. I’ve heard good things about all three from my clients.

You could also purchase a Smart TV which will have the ability to install many of the Apps you need to cut the cable cord.

Once you have your streaming media player up and running, you can start to enjoy the many alternatives to cable TV that are out there.

Let’s go over a few.

How to Watch New Release Movies

Without cable, you’ll no longer be able to access the “On Demand” feature to watch new release movies. But all is not lost.

There are still plenty of ways to continue to rent new releases.

Amazon

If you end up getting Amazon Fire TV, you can easily rent and purchase movies directly from Amazon. They’ll then be saved in your digital library which is easily accessible through the main app on Fire TV.

Other places to rent/buy videos for streaming include FandangoNOW, Apple iTunes, and YouTube.

Redbox

If you’re looking to save a little money, you could always use Redbox to rent movies.

We do this occasionally if we know we’ll be out and about near a Redbox location.

You can rent movies from Redbox for less than $2 each if you return them within a day of renting.

However, if you hold onto it for longer than a day, you’ll continue to pay around $2 per day. That can add up significantly if you forget to return it. I’ve seen large charges on some of my client’s statements, so be careful.

How to Watch Current TV Programs

One of the big fears that may be coming up in your quest to cut the cable, is your ability to continue watching the current programs you enjoy.

It’s hard to quit a program after you’ve already committed to 5 seasons, amirite Lost fans?

Well, don’t fret. You still have some options.

Using Your Cable TV Login

As I mentioned earlier, I still technically have, and pay for cable TV. I just choose not to watch it live where I’d be tortured with commercials and aimless channel surfing.

However, paying for it has advantages.

It allows me to log into the channel’s website and stream their programs on my computer, which I can then hook up directly to my TV for viewing.

So, since I technically subscribe to AMC through Verizon, I can use my login credentials to watch The Walking Dead at no additional cost. If we didn’t have that option, we’d be paying $1.99 per episode on Amazon.

With your cable TV login, you may also be able to watch live sports.

Since the package I pay for includes ESPN and NBCSN, I’m able to install their Apps on my Fire TV and watch live sports. Pretty great for when one of my teams are playing on one of those stations!

Hulu

Another option to watch current TV programs is Hulu.

Hulu has many of the most recent episodes of popular TV programs. For example, I like to catch the most recent episodes of Shark Tank and can easily find them on Hulu.

Hulu also has movies, original programming, and many older TV shows like Frasier and Golden Girls.

You can get Hulu for $7.99/month with limited commercials or you could splurge and pay $11.99/month to get no commercials.

CBS All-Access

One channel that Hulu does not have is CBS. So if you like programs such as The Big Bang Theory and NCIS, you’ll need to do something different.

You can watch some of the most recent episodes of CBS programs on their website, but you’ll have a full set of commercials.

If you’d like limited commercials or even no commercials, you can use their streaming service, CBS All-Access. You can then install their app on your Fire TV and stream programs directly through it.

YouTube

Many programs on TV today have a YouTube channel where you can view clips and sometimes full segments.

For example, I like to watch The Late Show With Stephen Colbert, but since I’m in bed by 10 pm every night, I’m not awake to watch it live. Therefore, I watch most of the program on YouTube after they upload the content.

Buy Full Seasons on Amazon

Another option is to just purchase the season pass for a program directly on Amazon. I just recently did this to save a little money.

As I mentioned earlier, I like to watch Shark Tank and The Big Bang Theory. If I wanted to watch both of those programs, I would need to subscribe to Hulu AND CBS All-Access at a cost of $13.98 per month ($167.76 per year) at a minimum. That’s pretty costly for just two shows!

So to save money, I actually just purchased the season passes for both programs on Amazon. For Shark Tank, I purchased the entire season for $14.99 (the standard definition (SD) version). For The Big Bang Theory, I purchased the entire season for $34.99 (SD version). That’s a total of $49.98 for the season. That saves me almost $118 per year!

How to Watch Older Movies and TV Programs

If you’re looking to view some older movies or catch-up on some of your favorite, classic TV programs, you have quite a few options.

Amazon Prime

I’ve already mentioned Amazon Prime in a previous section, but it needs to be mentioned again.

By purchasing a $119 annual membership (you actually have a free, 30-day trial to start), you get access to a large library of movies and TV programs you can stream directly through your Fire TV. I’ve found the selection to be very similar to Netflix which we’ll get into next.

Amazon Prime also has an abundance of original programming. I’ve also heard that their children’s programming is quite good.

In addition to all of that, your membership to Amazon Prime gets you MUCH more.

You also get free two-day shipping, unlimited photo storage, Prime music, and MUCH more.

Amazon Prime Price: Free Trial Start Your Free Trial This is NOT an affiliate link. Read about my mission.

Netflix

Netflix started out as a service where you could order DVDs through the mail and has morphed into a mega media company.

With Netflix, you can view thousands of movies and TV programs. Plus, their original programming like Stranger Things, Orange Is The New Black, and The Crown is absolutely amazing.

Netflix starts at $7.99/month with other plans to fit your specific needs.

They have a free, 30-day trial so I highly suggest at least checking it out to see if you need it in addition to Amazon Prime.

Like most of the other options I’ve mentioned, you can install their App on your Fire TV set-top box and stream it directly through it.

Additional Alternatives to Cable TV

Sling TV

If you’re looking to reduce the number of cable channels, but still want to have a few of them, you could go with a service like Sling TV.

With Sling TV, you can watch 30+ Live TV channels such as ESPN, HGTV, TBS, CNN and more.

Plans start at $20/month and you can also add premium channels like HBO.

Just be aware that if you go with something like Sling TV, you’re not getting rid of the commercials and you still have the ability to channel surf.

If your main goal is to increase your productivity and happiness, this may not be the best alternative for you.

DIRECTV Now

Just like Sling TV, DIRECTV Now allows you to stream many channels live.

Plans start at $35/month and go up from there.

*     *     *     *     *

If you implement many of the alternatives to cable TV I mentioned above, you’re inevitably going to have additional time available for more meaningful things.

Now get out there and take care of your money, so it can take care of you later.

Your financial coach,

The post 17+ Cable TV Alternatives – How to Save Money and Enjoy Life appeared first on Adam Hagerman, CFP®.

Now be honest. What’s going through your mind?

“How the heck did he rack up that big of a cell phone bill in one month?”

“Does he have 5 teenagers that text constantly?”

“Was he roaming in Buffalo while letting someone listen to a Bon Jovi concert?”

“Did AT&T/Verizon/Sprint/T-Mobile put the decimal point in the wrong place?”

Actually, it’s none of these.

Well, the Bon Jovi story happened, but that was over ten years ago, and the bill was only $300.

The $2,173.44 figure represents the amount my cell phone company used to charge me on an annual basis for three lines.

Why would you care what my cell phone costs?

Well, I imagine it’s pretty close to what you pay too.

According to J.D. Power & Associates, the average family’s monthly wireless bill was $157 in 2017, up 40% from 2010.

If you compare that to the most recent U.S. median household income levels ($64,000), you can reasonably estimate that close to 3% of the average American family’s income goes toward their cell phone plan.

That’s a sizable chunk of a household budget for something that wasn’t really around 20 years ago!

Reducing Your Current Cell Phone Bill

Reducing your cell phone bill can be tricky. Usually, the biggest obstacle is your contract.

You see, when you bought that shiny new iPhone 27 or Samsung Galaxy S whatever at a reduced price, the cell phone company wasn’t doing you a favor. They were just conveniently committing you to a new two-year contract.

They wanted to make sure they’d be able to suck another $4,000+ from you over that time period. No wonder they were eager to give you the phone for free.

Now if you’re under contract, it’s easy to break it. But unfortunately, it’ll cost you. How much? Sometimes it can be in excess of $300 per line.

But if you’re still under contract, all is not lost.

It doesn’t hurt to call your provider to ask for a lower rate. They don’t have to give you one, but maybe there’s a new plan that wasn’t around when you signed up.

Or, maybe you’re not using as much data as you were when you originally signed up. You could have them reduce your data plan which may save you money.

Even if you’re out of contract, you may still be stuck in a tough spot.

How? Well, recently the major cell phone companies lowered the prices for their plans and did away with contracts.

Sounds great, right? Wrong.

In order to lower their plan prices and remove contracts, they shifted the full cost of the cell phone to the consumer.

So if you want a new iPhone, you have to pay the full price of $769.

Now, they’ll conveniently allow you to pay for that phone over time, but after they add that to your bill, it will be right back up to where it was when there were contracts.

It was all a shell game.

If you wanted to leave that carrier, you’d have to pay the remaining balance due on the cell phone. In my opinion, that’s just like a cancellation fee.

If you’re lucky enough to be out of contract, you should highly consider shopping around.

Even if you’re still under contract or owe money on a cell phone, you should still compare the cost of getting away from that carrier and getting on a lower cost plan.

Have you noticed an abundance of commercials for cell phone providers lately?

They’re shoveling out the marketing dollars because there’s a lot of competition. That’s good for you.

Many small providers are creeping in on the market share and it’s making the big companies nervous.

How to Lower Your Cell Phone Bill

As I just mentioned, many smaller cell phone carriers are starting to compete with the big guns.

Over the past few years, I’ve been testing out two of them and have had a wonderful experience. I’ve also saved a TON of money!

Let me introduce you to them.

Republic Wireless

Republic Wireless offers no-contract, unlimited talk-and-text cell phones plans starting at $15/month.

Yep. You read that right. Starting at $15 a month.

Want data too? Well, it’s only $5 per GB.

So, let’s say you’re looking for a plan unlimited talk and text plan with 4 GB of data. With Republic Wireless, that plan will be $35 per month plus taxes and fees. That’s crazy!

They’re able to offer such low prices because they focus on using WiFi at home and other places you frequent before cell towers.

That saves a ton of money because you’re not pinging the towers. Republic Wireless then passes those savings to you.

So you might be asking, “What if I go outside? Won’t I drop my call?”

Well, if you’re on a call and step outside your house, you seamlessly switch from your WiFi to the T-Mobile network of towers.

Even if you’re traveling in an area that doesn’t have either of those options, you can roam on other carriers. You wouldn’t be able to use data if roaming, but you’d be able to use the phone in case of emergency.

Personally, if I focus on using free WiFi when available, I’ve found the 1GB plan ($20/mo) to be more than enough.

When we were all still on Republic Wireless, we reduced our annual cell phone bill from $2,173 to under $800. That’s a huge saving and we still had three lines!

So what’s the catch?

The only catch is that you need to buy your phone outright, and the iPhone isn’t one of them.

Now that the shock has worn off, let’s move on.

They have over 10 top of the line phones available ranging in price from $79 to over $599. As your financial coach, I certainly recommend purchasing it with cash.

If you think that’s a steep price for a phone, consider this: if you still have your old phone from your previous carrier, you can just sell it. Pop it on Craigslist or eBay and use the money to offset the cost of the new phone purchase.

Again, if you’re looking to lower your cell phone bill, I highly recommend Republic Wireless.

Google Project Fi

A few months ago, my wife and I left Republic Wireless to give Google Project Fi a try.

In all honesty, there wasn’t anything wrong with our service at Republic Wireless. I just wanted to try Project Fi so I could provide an honest review.

So far, we’ve been impressed.

Project Fi is pretty simple to understand.

You pay $20 for unlimited talk and text. You then pay for 1GB of data at $10. If you go over the 1GB of data, Google will automatically add more data for you at $10 per GB.

If you want to add lines, you can do it for $15 plus the data.

So if you had two lines, you’d pay $55 plus taxes and fees. Not too shabby!

But here’s the cool part.

If you don’t use all of your data, Google will credit your account for the cost of the data you didn’t use!

Since we try really hard to only use Wi-Fi when using our phones, we’ve gotten some big credits to date.

So again, what’s the catch?

Well, just like Republic Wireless you need to purchase your phone outright and Project Fi only has three phones available.

The phones are great quality and receive updates from Google much faster than if you were on a separate carrier.

Personally, we bought the Nexus 5X at $249 (which is no longer available) and have been very happy. They even offer 0% financing for 24 months with good credit.

Google’s Project Fi is a great option if you’re looking for something that’s low cost with great service. I highly recommend it!

Other Carriers

There are many other low-cost carriers available, but I can’t speak for them as I haven’t used anything outside of what I’ve already mentioned.

If you’d like to see other options, I recommend looking at the phones and carriers available through Amazon.

Keep Reducing Those Major Expenses!

I’ve previously explained why it’s a good idea to focus on reducing your major expenses before moving on to strategies like cutting coupons.

Your cell phone bill fits into the “major expense” category.

How long will it take you to switch providers? You’ll probably invest a couple of hours, but it will be well worth it financially.

Before reading this article, you may have thought of your cell phone as “just another bill.” However, I challenge you to look at all of your expenses over a 12-month period to give yourself a little shock therapy.

Expenses that you may have thought were ordinary may end up looking expensive.

Start reducing them today!

The post How to Lower Your Cell Phone Bill By At Least Half appeared first on Adam Hagerman, CFP®.