What Is The 50 30 20 Budget Rule

What Is The 50 30 20 Budget Rule?

You might of heard about the 50/30/20 budgeting rule. It’s one of many budget suggestions and may work to help you get your spending under control. The basic concept is that you divide your monthly needs, wants and savings or debt up and try to limit each to a specific percentage. It may sound complicated, but it is really very simple.

You would allocate 50% of your monthly income towards your needs, 30% to your wants, and 20% to your savings or debts. Let’s take a look at each category before we get into more budgeting tips.

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Needs (50%)

Needs are the things you need for survival. This includes housing, groceries, utilities, car payments, car insurance, and health insurance. You’ll also want to include prescription medications. Minimum payment on debts and bare minimum for clothing are also needs. Take a look at your spending and identify your needs.

Write each need down along with the monthly payment. There are many examples of a need versus want worksheets available online. Be honest as you go through your needs. You can live without cable and a new cell phone. You can’t live without groceries! If it is not a survival need, move it to the wants category.

Wants (30%)

Wants are things that may make your life easier or more pleasant. These might include dining out, alcohol, cable TV and internet, shopping, vacations, memberships and subscriptions, gifts, entertainment and similar expenses.

Write down all your wants and the monthly amount you’ll need to spend on them.

Savings or Debt (20%)

The final category is savings or debt. This category is money that is set aside for future use or to pay down debt more quickly. This money can go into an emergency fund, retirement investments, or towards your debt.

Most experts suggest saving at least 10% of each paycheck. The 20% suggested here will just help you build up your savings account faster or pay off debt faster.

Budget Percentages

Your next step is to write down your monthly income after taxes (your take home pay). Add back in any deductions for health insurance or retirement plans. Subtract your wants and needs spending and record that number as savings/debt.

Now that you have the totals for your wants, needs, and income, you will figure out the percentages for each.

Take your needs total, divide it by your income, and multiply by 100. This will be your percentage spent on your needs. Write down that percentage on the needs sheet. Do the same with wants and savings or debt. Now compare those percentages to the 50/30/20 rule. Your needs should be 50% or less, wants should be 30% or less. Anything left over is considered savings and should total 20%.

A sample 50/30/20 budget

In order to calculate how much money you can allocate to each category. Let’s say you make $5,000 per month after taxes. You would have $2500 to pay for your needs, $1,500 for your wants, and $1,000 to put towards your savings or debt.

Median Monthly Income: $5,000

Needs (50% of $5,000): $2500

Wants (30% of $5,000): $1500

Savings or Debt (20% of $5,000): $1000

Making a Budget

Did you hit all those numbers? Good job! If you didn’t, look at your needs and wants. Your first step is to eliminate some wants. Remember that this may be just temporary until you get your spending under control. Work out what you can cut to get your wants percentage to 20%.

Check out your needs. Is there anything you can cut? Can you decrease spending on clothes, move to less expensive housing or buy a cheaper car? Your goal is to increase your savings so you can work towards being debt free and having a nice nest egg built for emergencies.

Once you have eliminated any over spending, make yourself a budget. For the next few months, live by the new budget and write down every single penny you spend. Start making your budget a priority and keep checking your percentages to make certain that you are staying on track..

Does the 50 30 20 Rule Work for Everyone?

The 50/30/20 budget has some real benefits. It simplifies your budgeting and makes your expenses and savings crystal clear.

For people living in expensive regions, 50% may not cover the living expenses and the 50 30 20 rule might not work for you. Lastly, if you have a higher income, you may want to adjust the percentages to reflect more savings over wants or needs.

What to Do with the 20% Savings

Once you are putting away 20% of your paycheck each month, decide what you want to do with your savings. Remember that you can have multiple savings accounts at most financial institutions or even in online banks. Set up a harder-to-get-to emergency fund and save up $1000. Your goal will be to have at least 3 months of living expenses saved up, but the $1000 is your first goal. Next, set up a debt repayment account. Start saving to make payments above your minimum payments on all debt. You can pay down each debt or pay off one debt at a time. You can also set up retirement/investment savings and work toward an IRA type retirement plan.

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How to Budget and Manage Your Money

Money is like any other activity – the more time you put into it, the larger the return. Budgeting can be no fun and managing money means you might not be able to splurge on a want. If you invest time into managing your money, you will see a return in either increased savings or decreased debt. There are many budgeting concepts and the 50/30/20 is one very simple one. It may be a perfect solution for you!

But if you find yourself behind on debts payments and unable to afford even the minimum payments, Pacific Debt, Inc can help you.

How Pacific Debt Can Help

Pacific Debt, Inc is one of the leading debt settlement companies in the US. We work directly with your creditors on your behalf in order to reduce your debt, often for substantially less than you owe. Your initial phone call is 100% free, and our debt experts will explain your options so you fully understand them. 

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If you’d like more information on debt settlement or have more than $10,000 in credit card debt that you can’t pay, contact Pacific Debt, Inc. We may be able to help you become debt free in 2 to 4 years. We have settled over $250 million in debt for our customers since 2002.Pacific Debt, Inc is accredited with the American Fair Credit Council and is an A+ member of the Better Business Bureau. We rate very highly in Top Consumer Reviews, Top Ten Reviews, Consumers Advocate, Consumer Affairs, Trust Pilot, and US News and World Report.

How to Manage Debt during the Holiday Season

How to Manage Debt during the Holiday Season

Entering the holiday season with a mountain of debt is a terrible experience. It’s made even worse with the added weight of an abysmal debt-to-equity ratio.

For parents, the weight of responsibility to provide for your children is multiplied during the holidays — one of the few times other than birthdays when the kids expect to receive gifts.

For children, the excitement of past holidays and the expectations of opening presents on Christmas day can create a crushing experience if they feel disappointment. So, what does this mean for parents?

Are you expected to get deeper in debt just to avoid disappointing the children?

Should you buy just a few good gifts or many small gifts?

Is there a way to satisfy your kids’ expectations and avoid more debt?

Believe it or not, there are many ways to avoid getting deeper into debt during the holidays and it all begins with expectations.

The Root of the Holiday Debt Problem

Is it wrong to spend money during the holidays?

No, it isn’t.

But it can do damage in the future if you aren’t careful with how you spend. That’s why you need to cultivate a habit of smart gift giving. Smart gift giving is different from normal gift giving, because you focus on needs over wants and completely cut out holiday overspending habits.

To begin your path to smart gift giving, you’ll need to identify your overspending habits. There are two culprits when it comes to holiday overspending: avarice and love.

Parents/family either love their children so much that they hate to see them disappointed on Christmas — resulting in overspending on Christmas gifts — or they’re so preoccupied with “having nice things” that they willingly fall deeper into debt.

Debt and gift-giving have gone hand-in-hand for far too long — it’s time to break up these two highly unlikely lovers and forge healthier holiday spending habits.

Check out these great ways to avoid going deeper in debt during the holidays.

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The Gift of Giving

Yes, it’s cliche. But constant repetition hasn’t made this any less true — giving will always trump getting. And luckily for all of us, giving doesn’t necessarily mean paying.

There are important, fundamental financial lessons to be learned and developed through giving:

  1. A focus on needs over wants
  2. The true meaning of value
  3. How material things and money affect wellbeing

Through giving, you can actually learn how to save money when buying things for yourself.

Think about it.

If you approach every purchase with a budget in mind, a healthy perception of value, and a focus on your needs, your purchases will become smarter, saving you money in the long run.

Learning to give smart gifts can actually teach you to save money.

Most gift giving involves spending. But you can also give time, knowledge, experience, and care. For example, if you know how to play the piano, you can offer to hold free lessons for the kids in your neighborhood. This is both a gift of time and knowledge.

Whichever type of giving you decide to adopt this Christmas, you’ll likely need to be more outgoing and social than you were before. Opportunities for giving don’t just show up on your doorstep — you have to learn about other people to identify what they need.

I had a friend growing up who celebrated Christmas, but not like the rest of us. He didn’t wake up on Christmas to a mountain of presents under a tree. He wasn’t ever home during the holidays.

Every Christmas, my friend’s family would do charity work in neighboring towns and sometimes different countries. He made new friends and lasting memories of helping those much less fortunate than himself.

Though an expensive excursion may be out of the question for parents struggling with finances, the idea is the same and it doesn’t have to cost money.

Here are some great ways to give without spending too much money (or none at all):

  • Host a dessert swap with neighbors
  • Grow and give away fruits and vegetables
  • Get a charity-focused credit card
  • 12 days of Christmas; acts of kindness
  • Employer gift matching
  • Fundraising for local charities
  • Organize a neighborhood food or gift drive
  • Donate your old clothes, toys, and goods
  • Donate blood
  • Host a cooking day with your friends; make dinner for random families

More than getting gifts, your kids deserve the valuable lessons that come from giving. Yes, random acts of kindness can make a big difference for those on the receiving end. But just imagine the nurturing effect giving will have on your kids.

In time, your children will become givers instead of receivers. You will spend less money on Christmas gifts and more time on learning the meaning of Christmas.

The Gift of a Brighter Financial Future

Sometimes, gift giving is made even more difficult when choosing a gift for those suffering from financial troubles. After all, would you buy an Apple watch for someone who struggles to pay their bills?

There are some great ways to actually improves the lives of those you are giving to, without removing the spirit and festivity of the holidays.

Parents can educate their kids to live or at least desire to live a financially savvy life. Though financial wellness gifts may not make much immediate difference, they will relieve the stress of future holiday debt.

Use the best budgeting apps to manage your expenses during the busy spending season. An good budgeting app can save you some valuable dollars here and there that will make a difference in the end.

By Christmastime, you should at least have a bit of your tax refund set aside for smart gift-giving. When it comes to teaching your kids about taxes, it’s important to lead by example. Plan a family tax prep night, to teach your growing kids about the importance of keeping receipts and records of transactions.

Professional Preparation for the Holidays

In the months leading up to the holidays, offer to work extra hours to impress your superiors. Your hard work leading up to the holidays could lead to a bonus or a promotion.

You can even express your desire to your superiors to earn some extra money to save up for the holidays. You may qualify for a pay increase if you accept extra responsibilities at work.

Besides working extra hard in your chosen career path, you also have the option to make money on the side to save up for the holidays.

Spending the next month as an Uber or Lyft driver will put some extra cash in your pocket for those added holiday expenses.

The Motley Fool reveals that you can make between $371 and $1,853 per month by driving for Uber. Of course, it completely depends on the time you put into it, but you can actually make enough money to pay for Christmas.

Other possible side gigs include:

  • Freelance writing
  • Dog walking
  • Social media manager
  • Caregiver
  • Airbnb
  • Garage sales
  • Donate plasma
  • Party planning
  • Research study participant
  • Become a tutor

No matter how much money you have or how much debt you’ve accumulated over the years, there is always a way back. Yes, the holidays are a time of giving, but they don’t have to be a time of going into debt.

Practice smart gift giving by focusing on needs over wants, saving up money beforehand, making extra efforts at work, sharing good financial practices with your kids, and by focusing on the real reason for the holidays: family.

For more information, talk with one of our debt specialists today.

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Disclaimer: We are not attorneys or accountants and can not give you legal advice. If you have legal or tax questions, you should contact the appropriate expert.

Financially Stable Couples How to Manage Marriage and Finances

Financially Stable Couples: How to Manage Marriage and Finances

Few things are as painful or frightening to a child as parents fighting.

And few things are more destructive to marriages as financial troubles. According to Ramsey Solutions, the only thing that causes divorce more than money is infidelity.

So, how do you resolve the issue between marriage and finance? The obvious answer is to establish financial goals and live frugally. But, sometimes, the obvious answer isn’t the cure-all.

No doubt financial wellness will ease the strain on marriages, but financial wellness doesn’t guarantee happy marriages. And sometimes, the strain on your marriage goes deeper than money itself.

Luckily, there are some great ways to heal relationships damaged by financial strain, as well as ways to avoid financial strain altogether.

Take a look at these tips for handling marriage and finance woes:

How Does Money Affect Relationships

According to Dr. Kathleen Hall from Sharecare, “the first wound in a relationship usually involves finances.” This cause of marital wounds becomes more understandable when you realize that almost two-thirds of all newlyweds start off in debt.

On the other hand, money troubles don’t guarantee a divorce. In fact, couples who have great relationships also discuss money with their spouse. Another finding from the Ramsey Solutions study points out that “Ninety-four percent of respondents who say that have a “great” marriage discuss their money dreams with their spouse.”

Talking about money with your spouse doesn’t always have to be a fight. Dr. Hall adds that “money can be a source of destruction or a source of creativity in a marriage.”

So before you write off your marriage when financial hardship hits, make a promise to yourself and to your spouse that you will use your financial struggles as stepping stone to a stronger relationship.

How to Deal with Financial Stress as a Family

The first rule of surviving financial stress as a family is to know the value of family compared to the value of money.

If you think of finances and family in terms of investment, people generally invest much more time and willpower into money than they do family.

Think about it, at least 8 hours of every day are spent working and 8 hours are spent sleeping. Be honest with yourself, do you invest nearly as much time in your family as you do your money?

Of course, measuring your investment in money and family isn’t really fair — most people are trying to make money in order to support their family. But, we need the perspective that comes from believing we owe something more than money to our families.

This mindset teaches us one important thing that we should always remember: creating a strong family requires an active, daily investment of time and attention.

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Here are some great ideas for dealing with financial stress in marriage:

  • Family Night

    Set apart time to spend with your family. Make it a weekly habit. Family nights help families grow stronger and happier. Family nights are a great time to play games together. In general, playing games as a family is highly beneficial for both children and adults.

    For example, U.S. News revealed that playing helps people learn to be friends, learn difficult subjects, learn to cooperate and play fair, and improves all areas of life. Family night is also a great time to learn how to cope with difficult circumstances, such as financial troubles.

  • Family Dinner

    Eating together has shown to drastically improve the mental and physical health of children.

    Most notably, a report from The Atlantic showed that “children who do eat dinner with their parents five or more days a week have less trouble with drugs and alcohol, eat healthier, show better academic performance, and report being closer with their parents.”

  • Set Family Financial Goals

    Your kids should learn the basic principles of handling their finances while they’re young. You never know, you may pick up a few financial tips yourself while training your kids to be financially independent.

    If your kids ever get the urge to put up a lemonade stand, teach them to save and budget the money they make. Did you know that your kids could actually owe taxes from small entrepreneurial efforts? While this may be annoying, it does provide a great opportunity to learn and grow as a family.

  • Get a Jumpstart on Taxes

    The peak of financial stress for many couples is tax season. To prevent any marital duress due to financial stress, make sure you prepare your taxes well before the tax deadline.

    If you’re putting off your taxes for one reason or another (especially if you owe back taxes), it’s even more important that you get your taxes in order. The added weight of an IRS audit is enough to push any family to the breaking point.

  • Backyard Campouts

    Camping with children is stressful and tedious — like every other activity done with children. Fortunately, backyard camping is all the rage and has actually proven to be a great bonding experience for many families.

    Backyard camping eliminates the hassle of long trips into the mountains and keeps you within arms reach of the comforts of home; it also allows you to sit around a campfire as a family, tell stories, play games, and grow closer than you would by staying indoors.

How to Manage Finances in a Marriage

Most individuals have some sort of personal financial plan before getting married (no matter how poor the plan actually is). Once two people get married, these personal financial plans hardly ever work anymore. There are added expenses, additional debt, and new streams of income.

It’s important that you revise your financial plan once you get married. Luckily, there are many things you can do to handle your joint finances in marriage.

The first step for most couples will be to find a great budgeting app. The best budgeting apps will allow you to track your income, prioritize your spending, and create a budget that fits your unique financial situation.

Another option that many couples find helpful is the combination of debt and finances. If you do decide to combine, take advantage of zero percent interest on balance transfers from select credit card companies.

You may also consider using a debt resolution company to get your combined finances in order.

Other successful couples choose to separate their finances, though this is a much riskier path, in terms of marital success. Combining finances can mean greater financial risk, especially if they file joint tax returns (many people have been held responsible for mistakes/inaccuracies on their spouse’s tax return).

Remember that good marriages lie upon a foundation of teamwork and trust — this is still possible while keeping finances separate, but it is tricky.

Make sure you offer your help and support to your spouse when they are experiencing financial difficulties. You may even consider paying a bit more than your share on the monthly bills every once in a while. It may also be smart to put off a joint bank account until after your individual debts are paid off.

No matter your preferred method a managing finances, make sure you follow the three rules of marital financial success: communication, trust, and self-sacrifice.

Our Debt Specialists can help you explore your alternatives to bankruptcy, including debt consolidation and debt settlement options.

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Disclaimers

We are not lawyers and are not giving legal advice. We strongly recommend speaking to a professional attorney.

How to spot financial scammers

How to Spot Financial Scammers

Perhaps the more difficult part about making money, is actually keeping it. We have expenses, debts, and everyday necessities that need to be fulfilled before putting our money safely into our bank accounts. Sadly, we’re also losing money to sheer gullibility.

Anthony R. Pratkanis points out that “every year, Americans lose over $40 billion in telemarketing, investment, and charity fraud.” Why do we fall so easily to financial fraud? Why are we so gullible? Debt is a burden that most of America is trying to overcome. It is also a burden we would do anything to shake — this means we are willing to fall for financial fraud because we want to believe there is a quick way, an easy way, and a shortcut to breaking free of debt.

According to Comet, 80.9% of baby boomers, 79.9% of generation x, and 81.5% of millennials are in debt today. That’s a huge portion of our economy that is just trying to keep its head above water. Put in this perspective, it’s easy to see that you aren’t alone. Unfortunately, this rising percentage of debtors has awoken a different kind of corruption beyond simple debt — financial scammers are targeting those in need of debt relief.

So how do you spot the scammers? How do you shake the financial sharks?

Grow Confident, Gain Knowledge

We succumb to scammers because we want the easy, quick way out — that is our first financial mistake. We must learn to become confident and independent.

The first step is to improve your own financial decision-making ability. Though you’re currently in debt, that does not mean you can’t grow, learn, and adapt. You should be aggressively attempting to learn everything you can about finances — you must believe that you can dig and claw your way out of this financial predicament.

A key component to gaining confidence is to prepare correctly. As Dante put it, “The arrow seen before cometh less rudely.” So put the time in to prepare for your upcoming challenges. For example, if you have struggled with filing taxes, prepare your documents beforehand and stay organized so that, when the time comes, you will be able to get a bigger tax refund in less time and with less stress.

If you have made financial mistakes in the past (as we all have), it’s time to get over the guilt. What did you do wrong? How do you get past it? What decisions should you make in the future to avoid similar mistakes? It is absolutely vital that you ask yourself these questions before achieving financial freedom.

Though sometimes we must lean on the advice of financial experts, your confidence can only quicken the speed at which you approach financial stability. Whether you are currently employing a debt relief service or are thinking about it in the future, you should be strengthening your personal financial responsibility.

Scamming Scare Tactics

I have received several calls and messages over the past few weeks that start out with phrases like “this is your final notice before we terminate” and then end with something like “lower your credit card rates.” Though not exactly a scam, the company that keeps calling me

Scammers will often use extreme language to evoke feelings of urgency. Words like “terminate,” “final notice,” and “warning” are meant to alert you to a fake-serious situation.

First of all, I do not currently own a credit card, so it was pretty easy to spot the scare tactics. However, even though I did not yet know what the phone call was about, I could not help but feel my heart flutter just a bit. Fear is the most common friend of financial scammers.

Nobody wants to lose thousands of dollars, so scammers will usually promise to instantly end some looming threat of debt. Quick debt relief is a goal that hasn’t quite been achieved yet. Most debt relief companies can square issues away between 24-48 months. Even for financial experts, debt relief is a process. Don’t be fooled by those who promise to wipe away a debt in just a day.

The Most Common Scams

While many scammers use scare tactics, there are many others that will play on all of your emotions to get your money. Don’t fall prey to the most common scams that promise wealth, safety, or security in exchange for personal or financial information.

According to ConsumerFinance.gov, some scammers will pose as members of the “nonexistent ‘Consumer Protection Bureau.” Government officials at the CFPB continue, adamantly stating “This is not us. We are the Consumer Financial Protection Bureau, or CFPB. Some scammers may claim to be with the Federal Trade Commission’s (FTC) Bureau of Consumer Protection. Others may claim to work for the CFPB or FTC, but neither of these agencies calls consumers to alert them of winning a lottery or sweepstakes. ”

The CFPB also warns that scammers will often claim that they are from the IRS and that you owe debt. Such scammers threaten lawsuit or arrest if customers refuse to pay. It is important to note that debt collectors cannot use unfair or abusive collection tactics — such threats would be considered illegal collection tactics. To avoid tax identity theft, try staying ahead of your taxes, carefully inspect your credit reports, and be ready to freeze your credit if you suspect identity theft.

Read Up on Financial Services

Never accept a financial service without first looking at customer reviews. If you are considering working with financial experts to relieve your debt and lift your burdens, be sure that the company has the requisite accreditations (like the AFCC and the IAPDA for debt relief companies).

Customer reviews should act as a supplement to all of your research into each individual company. If you find that the vast majority of customer reviews oppose what the company or service claims, then you should move on. On the other hand, if you find a debt relief service whose customers support the company’s claims, you know when you’ve found a reliable and trustworthy company.

No matter your financial situation, you are always in danger of financial scams. Always be skeptical of those who threaten and ask for personal and financial information. Do not be intimidated by cheap scare tactics or promises of quick wealth. Your confidence and ability to spot a scammer will protect you on your personal path to financial wellness.

Get Budget Help With Budget Apps

What Are The Best Budgeting Apps of 2018?

The Best Budgeting Apps of 2018

Most people believe in the power of budgeting; some people think it’s just an excuse to avoid the real solution. Richard Quinn, a retired VP of Compensation and Benefits with over 50 years of experience in managing pension and 401k plans for a fortune 200 company, offers some profound advice about budgeting. One particular thing he mentioned about budgeting apps will strike a chord with most budgeting experts. According to Quinn, “Nobody needs an app. They don’t even need a budget. They need to do a few simple things: Take their net pay and save 10% or more, throw away all credit cards, buy what you can afford only and spend all you want after fixed expenses. No budget needed.” What Quinn suggests may shock some at first, but it makes sense. Essentially what he is asking is for you to be smart with your money. Stop spending it first and start saving it first.

Yet, there remains a virtue in budgeting apps that might be overlooked in Quinn’s suggestion. What a budgeting app does is it disciplines and trains you to be the type of spender that Quinn envisions. If you have already achieved a high level of self control, you don’t need an app; in that case, as Quinn says, you don’t even need a budget. For the rest of us—those who are still learning to spend wisely and save regularly—we need a bit of help. Here are the best budgeting apps for those who need extra help in 2018.

YNAB (You Need a Budget)

Budgeting apps come in all shapes in sizes. The best one will mostly depend on your personal taste, but for Larry Ludwig, Founder of Investor Junkie, “YNAB is the clear winner.” Ludwig explains that YNAB is his favorite for its simplicity and lack of confusing “bells and whistles” and notes that “for a first time budgeter, it’s important not to intimidate them with a complicated user experience.” The app’s website explains its method in three simple steps: “Get some dollars, prioritize those dollars, and follow the plan.” Those who are in debt are often swamped by numbers and projections of how much they need to spend or save. YNAB is a simple solution to get you back on track or stay on track.

Honeyfi

One of the coolest new budgeting apps is called Honeyfi, made for not only helping one person manage finances, but helps two at the same time. Most married couples have a hard time negotiating spending limits, individual allowances, and other finance rules. In the words of Sam Schultz, Co-Founder of Honeyfi, the free app seeks to solve that problem by helping “couples save more money, pay down more debt, and make better decisions.” Featured in HuffPost, MSN, and Entrepreneur, Schultz explains that the app does “spark a lot of communication IRL” and that it also allows “users to decide how much to share with their partner for each account (balances and/or transactions).” If you’re a couple looking to manage not one, but two different budgets, Honeyfi is a great option.

Mint

According to Brian Bartold, a licensed insurance professional with VFG Associates in Livonia, MI, the best overall budgeting app is Mint. This app lets you link “everything to the app including your credit cards, bank accounts and any brokerage or IRA accounts you have.” Though it might not have the speciality in helping couples like Honeyfi, Mint allows for more in-depth budgeting. Bartold also explains that Mint “also works with TurboTax and QuickBooks, two very popular programs for managing your taxes and bills.”

Even though Mint isn’t quite as cut and dry as other apps, it does simplify more complicated budgeting issues, like losing a job or going through a divorce, in a very helpful way. This simplification is possible because the app puts all financial processes in one place. Bartold explains this, saying “you may work with an insurance agent, stock broker, someone in your 401(k) department, all while doing stuff you are doing on your own. All those things are not being managed in one specific area. Using an app that combines everything you’re doing can make planning and budgeting simpler.” Mint is a great option for those with more money to budget and more financial issues to maneuver.

PocketGuard

The best part of the PocketGuard app is that it lets users link directly to their bank accounts so that all transactions and balances are current. As opposed to many other budgeting apps, PocketGuard is more focused on spending projections than it is past history. Because of this, the app can let you know how much pocket change you have to spend on any given day or even month. The app is a great alternative to Mint or YNAB if those apps aren’t to your liking.

As Richard Quinn pointed out, the best budgeting system available is your own persistence and determination. The purpose of a budgeting app should be to make your savings methods become habitual. Whether it’s Mint, PocketGuard, Honeyfi, YNAB, or some other budgeting app, make sure you are learning self-sufficiency and responsible spending. The most efficient budgeting tool should be your habits.

Top 5 causes of debt

Top 5 Causes of Debt & How To Fix Them

They say it’s smart to have between 3-6 months worth of expenses saved up in case of an emergency. To give you an idea, if your monthly expenses round up to $5,000, there should be $30,000 sitting your saving account right now. But in this age of consumerism, people are likely swimming in debt instead of in a comfortable amount of hundred dollar bills. As of May 2016, 38.1% of all households carry some sort of credit card debt and according to the most recent survey from the U.S. Federal Reserve, the average credit card debt of U.S. households is about $5,700. That’s a lot of money to be sitting on credit cards that likely comes with an interest rate that will boost that debt even higher.

Sometimes, debt is accumulated from massive charges that are typically unexpected such as a medical emergency, a broken car or a divorce, but usually, accrued debt is over a longer period of time by charging common expenses like gas and groceries. These “small” charges here and there look unthreatening at first, but then it spirals out of control where you end up only paying the minimum balance each month, leaving you with more interest to pay in the future.

Here are the top 5 causes of debt and some suggestions for how you can get address the problem.

1. Divorce

The leading cause of arguments among couples revolves around money more than any other causes of typical domestic disputes. It’s likely that one or both parties had accrued debt prior to getting married and “what’s yours is mine” unfortunately applies to the bills too. Although it’s recommended to discuss money and spending habits before tying the knot, if couples don’t create a reasonable plan to paying off debt and spending money, it will lead to marital strife that can turn into divorce. The average percent of divorce in the United States is between 40-50% and the cost of getting divorced is $15,000-$20,000. Also going from a two-income household back to one can take a significant toll on your bank account.

2. Unemployment & Underemployment

No one expects to lose their job and it never comes at a good time. Unless you have the recommended 6 months worth of expenses stored in your savings account, you’re going to have a lot of accrued debt sooner than later just to pay off your current bills and it’s possible that it’ll take longer than 6 months to get another job. There’s also the unfortunate occurrence of taking a pay cut when having to suddenly work part-time either due to having a child, a medical issue, or getting fewer shifts at work. We’re creatures of habit, so although our employment status might have changed, it’s very likely that our spending habits haven’t. People are typically spending more than they earn and recent studies have shown that although income is decreasing, the rate of spending is still climbing up, which leads to the next reason for debt.

3. Poor Money Management

Related to financial illiteracy, not many people have a good grasp of managing the money they earn likely because they were never taught the simple rules of spending and saving growing up. These people rely on credit cards for expenses and the idea of instant gratification is a major factor. It’s so appealing for us to buy something and have it now, but pay for it later. If you don’t pay off your credit card balance in full, you’ll end up paying a good chunk of it in interests. Most credit cards today have an interest rate ranging between 15-20%, making anything you buy cost a whole lot more than what you paid for. This also ties in with impulse spending and making poor financial decisions. Having a monthly game plan to tackle your common expenses will keep you from spending more than you make. It’ll also be a good idea to educate yourself on the rules of the bank, loans and credit cards to see if you can reduce your fees, avoid late charges and have 0% APR for a set period of time.

4. Minimum Payment Trap

So you racked up a credit card and can’t pay the full balance. You know you have to pay something on it so you set up your account to automatically pay the minimum every month and brush it off, feeling assured that payments are being made. Months later, you check your account and wonder why you still owe so much. Well, that’s interest for you! Here’s an example to give you an idea: If you owe $10,000 on a credit card and pay a minimum of $250 per month and your interest is 15%, you’re going to be paying $3,950 in interest in the 56 months it’ll take you to pay it off. That $10,000 easily turns into nearly $14,000 before you know it. If your interest rate is 20%, that payment towards interest becomes $6,617 and it’ll take you 67 months to pay it all off! That’s over 5 years of your life spent paying off this credit card while you’re stuck paying off your typical expenses too, such as food, gas, rent or mortgage and a car. Bottom line is that you should always pay the balance in full, but if you can’t, pay as much as you can as fast as you can.

5. Military Status

A recent study revealed that members of the military accrue debt at a higher rate than civilians and there are a number of reasons why. First of all, military members may be receiving a steady paycheck but it isn’t large enough to support their means, especially if they’re supporting a family, making them resort to credit cards to compensate. Next, frequently moving can add to the debt if an active military personnel is forced to sell their home and they can’t get an immediate buyer. They end up paying two mortgages until they receive an offer on their old home. It may also be difficult for the spouse to find a good-paying job right away during relocation. And finally, when military members find themselves in debt, they end up staying in debt because they don’t want their superiors finding out. They don’t seek out help due to their fear of losing their security clearance, ruining their chances of a career advancement or being discharged. This just makes their debt continually increase.

If you’re currently in one of these situations, there are a number of routes to take to reduce your debt, but the first step should be to come up with a spending plan and stick to it. Review your spending habits and see where you can cut down. Your daily cup of Joe at the local coffee shop can definitely add up in the bills. Pay your balances in full as often as you can and use cash if you’ve got it. People tend to spend less when they only use real money to pay. And most importantly, if you’re married, make sure you keep all lines of communication open and ask for help if you need it. In a perfect world, both parties of the couple will be savers but that’s an unlikely story. If you’re the spender, it might be a good idea to have your spouse manage the money until you’ve got a good grasp on saving more money each month.

If you feel like you’ve tried it all on your own and need professional help, one of our professional and friendly counselors here at Pacific Debt can talk you through your options. Our consultations are free and it’s our goal to get you out of debt for less than you currently owe.

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Debt Crisis Relief:  Changing Bad Spending Habits

Getting into debt is one of the easiest downward spirals any person can get caught up in. Everything in the western world is geared toward getting people to spend money and promotes consumerism. Furthermore, the ease of acquiring credit cards steers individuals toward spending money they do not have. The deck is stacked against consumers who cannot withstand the onslaught of credit cards, financing offers, and sales on expensive merchandise. Simply put, it is amazingly easy to get into an enormous amount of debt.

On another token, one of the hardest things to do in today’s world is to get out of debt. Sure there are classes, books, DVDs, and seminars galore meant to teach people how to climb out of the hole of debt, but in truth all of these are useless if the habits of the individual debtors are not changed. Five of the most common habits that should be changed to help a person get out of debt are listed below, but a look at one’s spending habits could reveal many, many more. Use the list below as a starting point in determining what bad spending habits you have. You might come to realize that you’re able to regain control of your debt situation much more easily than you think.

Eating Out

One of the leading causes of debt in the United States arises from the desire to eat great food. Many people think it is more convenient and less expensive to get great food by going to a restaurant. However, this perception is incorrect. For a family of four, the average bill at a sit-down restaurant such as T.G.I. Friday’s, Olive Garden, or Ruby Tuesday is somewhere between $45-60. This amounts to about a third of the average weekly grocery bill for a family of six!

The money spent on one meal at a restaurant could go toward paying one third of a grocery bill, high interest credit cards, or student loans. Reducing restaurant dining experiences from one or two per week to one or two per month would amount to enormous savings and a quicker climb out of debt.

Downloading Music on Your Phone or iPod

Although song downloads cost $0.99 or $1.29, the ease with how they download leads to overspending and feeds the “click and buy” mentality, increasing your amount of debt. Downloading ten songs may only cost $10 but over time it adds up and trains you into fulfilling your instant satisfaction desires. This leads to little or no concern about how the songs will be paid for in favor of being satisfied.

The actual downloading of music might not affect your budget all that much but the act of downloading anything off the internet or anything utilizing the “click, buy, and pay later” mentality sure does. The key here is to train yourself into not buying things with one click. Break the habit of downloading and paying later and watch your debt slowly decrease. You will be surprised how much more you pay attention to what you are buying when you break this small habit.

Paying With a Credit Card

Perhaps the hardest habit for anyone to break when trying to get out of debt is using their credit card. A lot of people state they are using their card to get bonus points or cash back and they will pay it off at the end of the month. Unfortunately, most people do not actually pay off the card at the end of the month and their bills skyrocket because of it. If you are one of the good folks out there that actually does follow through, either you need to keep doing that or get rid of your cards so you do not charge something you cannot pay off.

A good way to get yourself out of debt is to get rid of your credit cards. That is right, cut them up and get rid of them. Of course when you cut them up your debt remains, but getting rid of the cards will keep you from adding more debt to your total and will get you out of the habit of using them. The best way to pay for things is cash but if you do not like carrying money around, the only card you should have in your wallet or purse is a debit card which automatically withdraws money from your checking or savings account.

You will quickly learn that if you do not have any money in your wallet or in your bank account, you cannot buy something. If it is absolutely necessary that you buy the item you are looking at, then you need to adjust your budget so you can afford it. Not paying with a credit card will not only lower your debt and teach you to only spend the money you have, it will also make you think about those “must have but unnecessary” purchases and get the “need” purchases instead.

Smoking and Drinking

Regardless of what your stance on the issue is, a smoking and/or drinking habit is expensive. The truth is there is no cheap way for a person addicted to alcohol or nicotine to get the drug they crave. The good news is kicking either habit will have major implications for your health and your debt. If you have been trying to find a reason to quit either of these habits, take a look at the receipts from the liquor store or the tobacco shop and you will begin to see where a significant portion of your income is going.

Quitting cold turkey will have the greatest and quickest effect on your budget and your debt issues, but requires the most effort. Alternatively, weaning yourself off of tobacco or alcohol takes more time and causes strain on your budget to continue, but is easier to do from an addiction standpoint. Saving over $100-150 a month because you do not smoke or drink will dramatically change your fiscal standing.

Leasing (Not a House)

Renting an apartment or a home should not be looked at in a negative light unless you are spending above your means. As a matter of fact, many Americans are switching back to renting because owning a home is just too costly in the current economy. Keeping living accommodations out of this, leasing or renting anything is a big, bad, ugly, no-no for people looking to get out and stay out of debt.

If you take a moment to think about it, why do you want to pay $350 a month to lease a car when you can pay $250 for a car that you will own after all your payments are done? On the lease, you will have to turn the car in after three to five years; after you followed all the strict rules that go with a lease, and then you have to start renting all over again! On the other hand, you can buy your car, finance it, and in three to six years you will own it with no payments left to make.

The renting and leasing mentality can be applied to almost everything these days. You do not need to rent a television or a couch for two months from places like Rent-A-Center. Instead, save the money you need to buy one and be done with it. Leases are convenient little scams that cause you to pay out money each week or month for something that you can get yourself. If that television you want costs $50 a week to rent, save the $50 each week until you have enough money to buy the television.

Of course it could take a while to get the television if you only save $50 a week but it will teach you to pick and choose the things you really want to have and will actually make you appreciate the items you buy when you actually get them. Who knows, after two months of saving, one of your neighbors will be getting rid of their flat screen television and the $400 you have saved up will take it off their hands.

Get out of your debt by saving money every month

5 Ways to Save Money Every Month

Most people spend far more than they need to on things that don’t actually make any noticeable difference to their quality of life. Of course, there are obvious ways to start saving, such as eating out less, spending less on your hobbies and going on fewer vacations, but not everyone wants to sacrifice the things that they love most in order to start saving a bit of money for the future. Provided that you are not in a desperate state of debt already, now is a great time to start putting some money aside by cutting your monthly outgoings without having to lower your standard of living. Following are five money-saving considerations that you might be overlooking:

1 – Change Your Utility Providers

Things like heating, electricity, water, city tax and various other bills are things that everyone has to pay, but most people also pay more than they need to for the exact same services. Given that most utility industries are so competitive, it shouldn’t come as any surprise that there are many other options out there, some of which may be much more attractive to you. Thanks to price comparison websites, it only takes a matter of minutes to find out how much you could be saving by switching to a new utility company. However, don’t be attracted only by a short-term deal, and instead think of the longer term saving possibilities when choosing a new utility company.

2 – Change Your Phone Provider or Plan

Many people pay far more than they need to for their mobile phones, and consumers are often fooled by the lure of expensive new phones offered for free in return for an overpriced contract that is difficult to get out of. However, being another competitive industry, the cost of mobile calls, text messages and even mobile Internet, has dropped drastically in recent years, so there’s no need to be paying more than absolutely necessary. Unless you are a heavy mobile user, you will likely find it preferable to go for a prepaid plan so that you are not bound by any contracts or likely to fall victim to any surprise bills.

3 – Stop Paying Interest

Unless they are in the process of being paid off, most debts continue to cost you money in interest to the extent that the monthly payments can put a huge dent in your income. Irresponsible use of credit cards, overdraft, loans and other lines of credit can quickly lead to you spiraling deeper into debt. To avoid paying interest, pay off your debts as soon as possible, but if your income is not great enough to pay them off within a few months, you may want to consider consolidating your debts and transferring them to an interest-free balance transfer credit card or debt consolidation loan. This way, you’ll have to pay a one-time fee (on the balance transfer card), after which you’ll have a certain amount of time (typically six to 36 months) to pay off the debt without paying any more interest.

4 – Buy in Bulk

Buying in bulk, whether shopping for groceries, stationary, cleaning products or anything else that you use on a daily basis, is invariably cheaper than any other option. However, many people are put off spending a large amount of money in one hit, failing to take into account the long-term savings in the process. Instead, consider doing your grocery shopping at a discount supermarket, Costco, or other such venues that primarily cater to businesses seeking wholesale prices. You might need a membership card, but they are usually not difficult to get, and you can often borrow one from a friend without any problem. Saving money by buying in bulk also applies to things like subscriptions, whereby you can purchase things like computer software and prepaid mobile cards that will last you for a year or more.

5 – Change Your Banking Habits

Many people spend more than they need to on their day-to-day banking, either in overdraft interest fees, withdrawal fees, poor exchange rates abroad, money transfer fees or even monthly fees just to keep the account open. Your requirements will vary depending on your lifestyle and your priorities, but there are some tips that apply across the broad. For a start, if you use a credit card, make sure you only use it for emergencies, and be sure to pay the bill off in full every month so that you avoid paying interest. You should also consider opening a savings account if you don’t have one already, since you’ll be able to earn a small amount of interest on what you save, and it’s always wise to set aside some money for a rainy day. As is the case with just about anything else, you can compare bank accounts and other financial services online until you find something that better suits your particular requirements.

Saving money and getting control over your financial affairs is more about making a few changes to your spending habits rather than sacrificing the things you love. By taking time to more closely examine your outgoings, you could be surprised by just how much extra cash you can put aside each month.

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