Archive for Wise Bread

7 Habits of Highly Frugal People

By Dr Penny Pincher…

Frugal people who pay off their debt and achieve financial independence don’t succeed by accident. They establish habits that allow them to consistently reach their goals over the long haul.
During the past few years as a personal finance blogger and author, I have noticed that the most successful frugal people tend to follow a common set of habits. These same habits remind me of the traits that Stephen Covey detailed in his popular 1989 book, The 7 Habits of Highly Effective People. For this article, I kept the original seven habits, but updated them for achieving financial independence today.
What are the seven habits that allow some people to excel at being frugal?
1. Be Proactive
Frugal people are proactive about their money, taking action to monitor and control spending and maximize income. They find ways to spend less and reduce expenses – even if it requires effort and creative thinking. They direct most of the money they save from reduced expenses into savings and investments for long term goals.
Although the first thing that comes to mind with frugality is saving money, many frugal people maximize income through side hustles or by generating passive income in addition to controlling their spending. An extra dollar saved or an extra dollar earned both contribute favorably to the bottom line.
Frugal people know how much money they have coming in and how much is going out, often with great precision. This is accomplished by creating and following a budget and proactively monitoring spending. They focus on what they can control within their budget to achieve financial success.
2. Begin With the End in Mind
Why do frugal people work so hard to control spending and keep track of their money? Are they simply not interested in buying things? On the contrary, most frugal people are striving to reach financial independence so that they can travel or launch a second career or to have plenty of money to buy the things that matter to them. Frugal people are willing to worry about money now so they don’t need to worry about it later.
Surprisingly, many frugal people care more about their time than their money. Saving money buys financial independence, which buys time to do whatever you want. Frugal people want freedom to use their time as they wish and not be locked into working at a job until they reach old age.
Frugal people begin with the end in mind. The end they want to achieve is financial independence. With that end in mind, they make a plan to reach the goal and follow it every day. The sacrifices along the way are worth reaching the goal.
3. Put First Things First
What is the first thing you pay every month? Do you pay your mortgage first? Perhaps you pay your utility bill or car payment first. Frugal people pay something else first – themselves.
Paying yourself first means that you invest in your retirement fund or other savings accounts first, then you …read more

Read more here: 7 Habits of Highly Frugal People

Category: budgeting, frugal, money, personal finance, saving

5 Places to Travel While the Dollar Is Strong

By Nick Wharton…

Travel isn’t cheap, but when the dollar is 15%-55% stronger against other currencies than it has been in over a decade, now is the time to travel! Not everywhere is a good value at this time. Some other currencies are flourishing just like the USD, so if you want to find strong-dollar discounts, you have to know where to look. Here are five amazing places to visit that are far less expensive than they have been in a recent five-year history thanks to a strong U.S. dollar.

Note: All currency conversions are based on XE.com’s historical data. The current exchange rates may have changed since this article was published. Daily budgets and average hotel costs were calculated using numbeo.com’s travel index tool.

1. South Africa ($1 USD = 15 ZAR)

Five years ago, you would have only gotten 6.73 Rand for your dollar, but now you’ll feel more than twice as rich in South Africa. There has never been a better time to go on an African safari. In 2010, entrance to South Africa’s biggest park (Kruger National Park) would have cost $23.77 (160 ZAR), but now, you can watch lions, zebras and elephants roam free for just $17.50 (264 ZAR)!

A four-day luxury lodge safari trip in Kruger National park is around 15,000 ZAR. In 2010, that would have been $2,225 USD, but today it’s only around $965 USD!

A budget room in a guest house (known as a “backpacker” in South Africa) will cost you about 385 ZAR. In 2010, that equated to $57 a night, but today you’ll pay just over $25 for the same room.

The Math

  • Midrange Daily Budget: 500 ZAR / Day
  • This daily budget based on 2010 conversion: $74 / Day
  • This daily budget thanks to today’s dollar: $33 / Day
  • Savings of: 55%
  • Current Exchange: 1 USD = 15 ZAR
  • 5 Year High: 16.00
  • 5 Year Low: 6.56

2. Russia ($1 USD = 70 RUB)

The beautiful city of Moscow, the churches of St.Petersburg, and the world’s greatest train journey have never been so affordable. The Russian ruble fell drastically at the end of 2014, and while this isn’t great for Russians, it is excellent for those of us who have always wanted to visit this vast and beautiful country.

The average price of a midrange hotel in Moscow is around 3,500 RUB. In 2010, that would have been $116, but today that is less than $50.

One of the most legendary train journeys on the planet, the Trans-Siberian, is now a better value than it has been in the past few decades. The trip from Moscow to Ulan Bator will run you around 35,000 Rubles for a first class ticket. At Christmas time in 2010, that would have been $1,160, but with today’s exchange it’s just $498! You can buy two tickets today, for the same price as one ticket would have cost you at the end of 2014. Incredible.

The Math

How Credit Inquiries Affect Your Credit Score

By Wise Bread

Have you noticed inquiries on your credit report? Not sure what they mean? Soft and hard inquiries are the result of potential creditors assessing your credit report after you’ve applied for things such as a credit card, mortgage, or car loan. Hard and soft inquiries each affect your credit differently. Read on to learn more:

What Are Soft Inquiries?

Soft inquiries typically occur when your credit report is pulled for a background check. This can occur when you are applying for a new job, getting pre-approved for lending offers, and even when you check your own credit score.

While they will usually show up on your credit report, this isn’t always the case. Plus, they won’t affect your credit score, so you don’t need to be concerned about them.

What Are Hard Inquiries?

Hard inquiries occur when a lender pulls your credit report to make a lending decision. This takes place most commonly when you apply for a loan, credit card, or mortgage. However, there are other reasons that your credit may reflect a hard inquiry, such as when you request a credit limit increase. They can, in some cases, lower your FICO score by one to five points and can remain on your credit report for up to two years. Typically, the more hard inquiries on your credit report, the likelier it is to affect your score.

Multiple hard inquiries in a short period of time can cause significant damage to your credit. When multiple hard inquiries come through at once, the credit bureaus assume you are desperate for credit or can’t qualify for the credit you need. Any future creditors may also take this information and assume that you are a high risk borrower, which will reduce your chances of getting the credit you need. In fact, according to myFICO, people with six hard inquiries or more on their credit are up to eight times as likely to file for bankruptcy, compared to people with no inquiries – meaning that more inquiries usually means greater risk.

Exceptions to the Rule

There are certain instances that are gray areas, which may result in a soft or hard inquiry depending on the situation (such as when you rent a car or sign up for new cable or Internet service). If you aren’t sure about whether your actions will result in a soft or hard inquiry, you can simply ask the financial institution you are requesting financing from.

Another exception is when you are rate shopping. Generally, your FICO score will only record one single inquiry within a 14-45 day period if you are shopping for the best mortgage, auto loan, or student loan rates. By doing all of your shopping for the same type of loan within a two-week span, you can reduce the effect on your credit.

Disputing an Unauthorized Inquiry

If a hard inquiry occurred without your permission, you may be able to dispute it. This can be done by calling or writing the creditor and asking them to remove the unauthorized hard inquiry from your credit …read more

Read more here: How Credit Inquiries Affect Your Credit Score

Category: credit score, economy, hard inquiry, soft inquiry

10 Household Tools Every Frugal Homeowner Should Own

If you have a home, you need a tool kit. It’s an essential for any household. But what to put in it?
Well, the good news is you can get by with just essential 10 items. You will of course need more tools as time goes by, but this list is a great starting point. (Oh, and you will need a sturdy toolbox to store them all. You can find used ones for cheap, or even free, on Craigslist. Or try your local thrift store.)

1. Multi-Bit Screwdriver

There are many variations of the multi-bit screwdriver. On the cheaper end, the bits come in a separate holder or case. You can also find ones called “auto-loaders” that contain at least six different varieties of bit. You want one that fits both Phillips head and slot head screws. With this one tool, you have a starter set of screwdrivers that will work for most jobs around the home. (See also: 10 Easy Plumbing Repairs That Don’t Require a Plumber)

2. Power Drill (Go Cordless)

There are so many different jobs around the home that require a power drill, so your frugal tool kit should include one. If you want to save the most money and have something much more handy, go with a cordless drill. They don’t have as much power as an equivalently-priced corded drill, but for everyday needs, they’re just fine. Ideally, get a good, refurbished brand rather than a cheap new one. DeWalt or Makita are reliable, and will last you many years. This will definitely be the most expensive tool you buy in this kit, but it’s worth it. You will also need a variety of drill bits. Luckily, many drills come with a starter selection.

3. Claw Hammer

There are several types of hammer available to the DIY enthusiast. A ball peen hammer, a tack hammer, a club hammer, and even a sledgehammer. But for the basic, frugal tool kit, your best bet is a claw hammer. Its two uses, driving in and removing nails, are ideal. When you get into more specific tasks, other hammers for specific jobs are much better, but for a starter kit, the basic claw hammer is just fine.

4. Adjustable Wrench

The key word here is adjustable. As you’re building a frugal tool kit, you want your tools to have as many uses as possible, whenever possible. The adjustable wrench can fit a wide variety of nuts and bolts, and is therefore perfect for your kit. Buy a wrench that is big enough to cover a large array of sizes, without being so big that it will be cumbersome on smaller nuts and bolts. Anywhere from eight to 12 inches is good.

5. Retractable Tape Measure

You probably know this as the Stanley Measuring Tape, but they are available from many different manufacturers. However, Stanley has been …read more

Read more here: 10 Household Tools Every Frugal Homeowner Should Own

Category: budgeting, economy, money, personal finance, spending

25 Purchases You’ll Never Regret

By Marla Walters…

Over the years, I have made many a purchase. Some were big-ticket; some were under $15. Of course, there were occasions when buyer’s remorse soon followed my shopping trips, but there were several purchases that I still stand by.

Here are 25 purchases that I think you would never regret.

1. Houses

Home ownership is still a sound financial idea. You can build up equity, claim mortgage tax deductions, and build a good credit history. I was a renter before I was a homeowner, and would never go back, but that’s me. I like being able to put holes in walls where I want them, own pets, or dig up part of the yard for a garden. When you own a home, you are able to create the living environment you want – not your landlord’s.

2. Four-Wheel Drive Pickup Truck

Not too long after my husband and I became homeowners, we bought a truck. It is now 18 years old and still runs well. Need green waste hauled? Buying large stuff? Going somewhere adventurous, where you need four-wheel drive? A truck enables you to do a lot of things that are especially handy if you are a homeowner. Ours isn’t going to break any land-speed records, but we don’t care. It’s as handy as heck.

3. A Safe

There are paper records, and then there are really important records like birth certificates, marriage certificates, title to cars, valuables, etc. If it is important, it needs to be put somewhere secure. Sure, you could get a safe-deposit box, but it’s handier to have things around – where you can get them when needed – and not subject to a bank’s hours.

4. Fruit Trees

There is no instant gratification in planting fruit trees, but they are well worth the effort. Every time we pick avocados, oranges, bananas, or lemons, we are grateful we took the time to plant those trees. We cannot begin to eat all of what they produce, but part of the fun is to share the bounty.

5. Leather Furniture

When we began buying furniture, I thought leather would be bad to have, with kids and pets, but I was so wrong. It is extremely durable, and with leather cleaner and a little elbow grease, it cleans right up. Ours has survived beautifully, and we’ll never go back to upholstered furniture. It is also easy to re-decorate with different throws or pillows.

6. Gas Stove

If you are interested in energy efficiency, gas is the way to go. It takes nearly three times as much energy to deliver electricity to your stove, according to the California Energy Commission. Savings aside, if you like to cook, it is so much easier to regulate stove temperatures with gas instead of electric. Plus, if the power goes out, you can still cook.

7. Outdoor Fire Pit

An outdoor fire pit was a bit of an impulse buy, but we have gotten so much use out of it. If you like to entertain, break out the marshmallows. Even …read more

Read more here: 25 Purchases You’ll Never Regret

Category: budgeting, money, personal finance, spending

10 Surprising Ways Spring Is Gonna Cost You

By Tim Lemke…

If you live in a colder part of the country, you probably can’t wait for this winter to end. The New York City area, for example, has experienced its second-coldest February in history. But before the warmer months hit, it’s important to understand how the change in seasons will impact your finances. While winter brings its own financial burdens, spring and summer can empty your pocketbook, as well.

Here’s how to stay within your budget as the temperatures warm up.

1. Go Green With Transportation

You’ll probably drive more when it gets warmer, and may even take long road trips. You can expect gas prices to rise as demand increases and fuel companies switch from winter to summer fuel blends. Gas prices will remain low by recent standards, but it might help to consider walking or biking to work, or using public transit.

2. Register Early for Summer Camp

Summer can be a challenge for working parents, as the kids are out of school and need someone to look after them during the day.This means that many families explore summer camps and other activities. A week of summer camp will set you back an average of $304, according to the American Camp Association, with some for-profit camps costing more than $500 weekly. It helps to register in the winter to take advantage of early bird registration deals, and you may get a discount by signing up for multiple weeks at the same location. There may also be discounts for families with multiple children at the same camp.

3. Start Saving for New Family Additions

If you or your partner are not pregnant already, you can probably disregard this one. But statistics show that more children are born during the spring and summer months than other times of the year. The Centers for Disease Control and Prevention report that August is the top month for new babies. New arrivals aren’t cheap, and you can definitely expect to spend some money in the months leading up to the delivery. Now is the time to start banking as much cash as you can.

4. Travel Within Your Means

With an improving economy, the American Automobile Association expects more people to take trips this summer. According to American Express, an average vacation will set you back $1,145 per person, or $4,580 for a family of four. The good news is that gas prices are lower than in years past, and a strong dollar means that it’s cheaper to travel overseas.

5. Budget Home Expenses

When it’s cold and snowy outside, there’s no lawn to mow (and you’re probably postponing the construction of that backyard patio until the thaw). Warmer weather is when you whip out the lawnmower and make the call to that contractor. It’s also when you might make any repairs necessitated by the snow, ice, and wind of winter. Various sources suggest that a homeowner will spend about 1% of their home’s value on maintenance each year. Much of this …read more

Read more here: 10 Surprising Ways Spring Is Gonna Cost You

Category: budgeting, money, personal finance, spending

Don’t Skip These 8 Tax Breaks for Students

By Damian Davila ..

Dear students, I’m sure that you have heard the news: Every single year the average student loan debt per borrower is increasing. For example, the average class of 2015 graduate with student loan debt will owe a little more than $35,000.

Still, there is a silver lining: College students and grads often qualify for significant tax breaks and deductions. To minimize your tax bill and increase your chances of a refund, here are eight tax deductions and breaks worth knowing about.

1. 529 Plans

If your parents or other donor started a 529 plan for you, you’re in luck. Also known as qualified tuition programs, 529 plans allow individuals to save for education expenses on a tax-deferred basis and allow a designated beneficiary (ideally, that’s you) to use those funds, including interest gains, for qualified expenses free of taxes or penalties.

But few people know that you can also start a 529 plan for yourself. Yes, if you anticipate returning to school for any reason, you can save for related expenses in your own 529 plan – at any age. The list of qualified education expenses goes beyond tuition and academic fees, including expenses for room and board, transportation, equipment, and accommodations for individuals with special needs, so adults can benefit, too. (See also: The 9 Best State 529 College Savings Plans)

2. Qualified IRA Distributions

Qualified distributions taken from a traditional IRA for use in qualified higher education expenses create no tax burden or penalty for you, assuming you only withdraw contributions, and not any earnings on the contributions. (Note: If your spouse, parent, or grandparent takes distributions from their own plans to fund your educational expenses, they would have to pay applicable income taxes on those funds, but don’t have to pay the early distribution penalty which applies if under age 59 1/2.)

3. American Opportunity Credit

Replacing the Hope Scholarship credit, the American Opportunity Credit allows you to cover up to $2,500 of undergraduate college costs, including:

  • 100% of your first $2,000 qualified education expenses; and
  • 25% of next $2,000 qualified education expenses.

Keep in mind that you can claim the American Opportunity tax credit on your own academic expenses or on those of your spouse and kids. This means that you can claim up to $2,500 per student living in your household. However, to be eligible for the full credit, your modified adjusted gross income must be $80,000 or less (those making more receive a reduced amount of the credit).

Another advantage of this tax credit is that 40% of it is refundable, meaning that the IRS will issue a refund for that amount even if you don’t owe any federal income tax.

4. Lifetime Learning Credit

The Lifetime Learning Credit allows you to deduct up to 20% of your first $10,000 in qualified education expenses, up to $2,000 per taxpayer.

Unlike the American Opportunity Credit, the Lifetime Learning Credit isn’t refundable. You can use it …read more

Read more here: Don’t Skip These 8 Tax Breaks for Students

Category: college, millennials, students, tax, tax breaks, taxes

10 Money Moves to Make After a Promotion

By Damian Davila …

Congratulations on your promotion! You’ve just made another step toward a successful future.

Still, this isn’t the time to become complacent. A promotion comes along with new challenges and tasks. To help you make the very best out of your new job, here are the 10 money moves to make after a promotion.

1. Revisit Your Tax Withholding

Most promotions don’t come with just a title upgrade, they come with a well-deserved raise. If that’s your case, calculate whether or not you need to adjust your W-4 form and submit it to your HR department.

Let’s assume that you file a joint return with your spouse and your combined taxable income was $90,000. Your tax due would be $18,293.75 ($5,156.25 + 25% of the amount over $37,450). After your promotion, your new combined taxable income is now $100,000. Your new tax bill is $21,071.25 ($18,481.25 + 28% of the amount over $90,750). Assuming no offsets to your salary bump and no changes to your W-4, you would be $2,777.50 short of your tax bill! (See also: Top Three Tax Facts to Know for 2016)

Use the IRS Withholding Calculator and determine if you need to update your W-4.

2. Calculate Vesting of Company Shares

Vested company shares are another way that your employer could reward you. Very often, these restricted stock units vest over time, meaning that you gain ownership of those shares the longer you stay. The idea is that your employer wants you to perform well and remain with the company. Contact your HR department to find out the vesting schedule of your company shares so that you know how much you would actually take with you if you were to part ways with your employer.

3. Time Profit Sharing and Bonus Checks

When your promotion includes a large bonus or profit sharing check, pay attention to the date that the
payment will be issued on. An elective deferral contribution to your retirement accounts must be deposited by the tax filing due date (April 19, 2016 for Maine and Massachusetts residents and April 18, 2016 for everybody else). For 2015 and 2016, the contribution limit to 401K, 403B, and most 457 plans is $18,000, and to regular and Roth IRA plans it’s $5,500. If you’re age 50 or over, you can make an additional $6,000 in catch-up contributions. When you haven’t met the applicable contribution limit, take advantage of that windfall to fatten up your retirement accounts.

4. Identify Additional Costs

With great power comes great responsibility, Peter Parker! Take stock of the responsibilities of your new position and determine how much additional time you may need to perform those tasks successfully. Having to stay a bit longer at work may increase several costs, including paying higher fees for babysitters or preschools, and dining out more often than before the promotion. Your first weeks in your new position will provide you an idea of how much your budget will need to adjust.

5. Determine …read more

Read more here: 10 Money Moves to Make After a Promotion

Category: income, money, new job, personal finance, promotion, salary

7 Investment Accounts All 30-Somethings Should Have

By Tim Lemke …

You’re in your 30s now. If you’re finally looking to get settled in your financial life, you may want to consider ways to build wealth over the long term. But that checking account alone isn’t gonna cut it. It’s time to examine the options out there for someone in their 30s who finally has a little bit of money to invest.

Here are seven essential investment accounts all 30-somethings should have.

1. 401K, If Available to You

If you’re employed full-time, your company may offer a retirement plan that gives you access to a number of mutual funds and other investments, plus the great tax advantages that come with it. Under a 401K, 403B, or similar plan, contributions are deducted from your pre-tax income, and most employers will match a certain percentage of what you put in. Now that fewer employers are offering pensions, the 401K has become the primary vehicle for saving for retirement. Pumping cash into this account while you’re still relatively young gives your investments plenty of time to rise in value and give you a sizable nest egg. Even better, your investment is tax-deferred until you begin making withdrawals.

2. Traditional IRA

You don’t necessarily need a traditional Individual Retirement Account if you have a 401K with an employer match. But if you have 401K from an old employer, it might make sense to roll it into an IRA, because you have a much broader choice of investments to choose from – many with lower fees. With an IRA, you can invest in practically anything, including individual stocks, mutual funds, bonds, and even commodities. Traditional IRAs are also great for people who are self-employed or otherwise don’t have access to a 401K. Like a 401K, your contributions are deducted from your taxable income. You can open an IRA at most discount brokers such as Fidelity, TD Ameritrade, and E*TRADE.

3. Roth IRA

This account is a little bit like a 401K in reverse. The tax advantage is on the back end, when you can withdraw money upon retirement without paying tax on the earnings. That’s because contributions to a Roth IRA come from earnings after tax, unlike 401Ks, which draw on pre-tax income. Under a Roth IRA, you can contribute up to $5,500 annually, and you can withdraw contributions (but not your gains) before retirement age without paying a penalty.

4. Taxable Brokerage Account

While your main focus should be investing in tax-advantaged accounts that are designed for retirement, it’s good to have some investments available in this type of account due to the flexibility. You don’t need to wait until retirement age to access funds in this account, for one thing. That means you can use it to boost your income now, through the sale of stock or the gain of dividends. If you hold on to investments in a taxable account for a long time (generally over a year), you’ll pay only the long-term capital gains tax (mostly likely 15%) …read more

Read more here: 7 Investment Accounts All 30-Somethings Should Have

Category: 30s, 401ks, budgeting, economy, investments, IRAs, personal finance, savings

4 Common Money Misconceptions About Women

By Qiana Chavaia…

In a decade-long Prudential survey that studied the financial experiences of women, research data showed that since the 2008 financial crisis, women have made significant improvements in their financial behavior. Still, many continue to admit a lack of knowledge and understanding of sophisticated financial products.

That lack of knowledge causes more than 50% of women to rely on someone else to make financial decisions regarding their future. On the other hand, the study dispels several myths about female financial behavior, casting a more positive light on women’s money habits.

Here are four common money misconceptions about women.

1. Women Are Impulse Shoppers

One of the most common misconceptions is that women are impulse shoppers. Data from the survey showed that often, the last-minute purchases referred to as impulse buys are made using funds already set aside within a budget. And the majority of respondents (70%) claimed to spend based on need, not wants.

2. Women Don’t Know How to Manage Money

Most people don’t fully understand money management – but that’s a problem for both sexes, and not unique to women. However, a majority of women distrust the process of turning planning over to a financial professional – six in 10 prefer the help of family and friends. This differs from men, who often prefer outside sources of help.

3. Women Don’t Understand Retirement Planning

Women’s understanding of workplace retirement plans and IRAs showed considerable improvement since the 2008 crisis, up from 47% to 72% of respondents. While many women have more to learn about other retirement products such as annuities, a majority of female respondents have seen progress in their understanding of retirement planning.

As women increasingly become primary earners or amass significant net worth of their own, their financial behaviors and understanding of money management will undoubtedly continue evolving.

4. Women Don’t Make Financial Decisions in Their Households

The belief that women don’t make household financial decisions is an entirely outdated and erroneous one, according to the data. The survey showed that 95% of women consider themselves financial decision makers, and 85% of married women say they manage the household’s financial decisions themselves, or jointly with their spouse. That means today’s women are developing (or in many cases already have) a much more thorough understanding of personal finances and investing than earlier generations.

Do you cling to any of these money myths about women?

Permalink | Email this | Linking Blogs | Comments

…read more

Read more here: 4 Common Money Misconceptions About Women

Category: budget, economy, personal finance, women

%d bloggers like this: