Why Liquid Net Worth Matters

Why Liquid Net Worth Matters

“Liquidity is a good proxy for relative net worth. You can’t lie about cash, stocks, and bond values.

Mark Cuban

Understanding your net worth and how to calculate it is hugely important for measuring your financial health at a particular point in time. It is simply the difference between assets and liabilities. However, it doesn’t consider the liquid nature of your assets.

For example, stocks and bonds tend to be more liquid than other assets as they can be quickly and easily converted into cash. Other assets like your house or car take time and negotiation to sell if you need money. Net worth remains a helpful benchmark but depending on the type of assets you have it may be a less accurate picture.

Liquid Net Worth Is A Realistic Snapshot Of Your Financial Condition

Liquid net worth is what really matters. It is a far more realistic reflection of your financial condition should you face an immediate need for money such as a medical crisis or a business opportunity. While liabilities remain the same for both calculations, your liquid assets have more significance when unforeseen events occur.

Those assets for readily available as cash with little or no loss of value to be counted in liquid net worth. Having liquid money provides a sense of financial security for disasters and opportunities alike.

Asset Rich Cash Poor Can Be Uncomfortable

To a great degree, when you need to take money out to pay for an unforeseen event, would it be easier to take $15,000 out of your savings account or sell your land? Depends if you have $15,000 in the bank. The expression “asset rich cash poor” comes to mind. Often, people have economic assets like land or other economic interests but are not able to easily liquidate them for money.

Land and antiques are assets we have owned and enjoyed. However, you can’t count on those assets to pay for a costly emergency in your life. When I think about mistakes I have made, those purchases stand as major regrets. You sleep easier with access to liquid assets.

What Is Net Worth?

Your net worth is your personal balance sheet that provides a snapshot of your financial position at that time. Net worth is all that you own less than all that you owe. For an expanded explanation, see 10 Reasons Why You Need To Know Net Worth.

The  Formula: Net Worth =  Total Assets less Total Liabilities

Using an excel spreadsheet with different assets/liabilities is an excellent tool for you to put all of your categories in one place that can be periodically updated. You should do it on at least a quarterly basis. However, if you are true to your monthly budgeting, reviewing your monthly net worth is better.

Try putting it on a spreadsheet first. You can use Personal Capital’s net worth app for tracking your investments. Frankly, any way you can keep on top of your net worth with an eye towards building the amount will work.

Knowing Your Net Worth:

  • is a crucial benchmark and report card at a particular time.
  • will allow you to set near-term and long-term goals.
  • track its changes for better money management.
  • highlight your liquid asset balances.
  • helps you to get a loan for a house, car, college tuition, or new business.
  • pay down high-cost debt.
  • refinance your mortgage loans.
  • encourage you to save and invest more.
  • buy your own home, rather than pay high rent.
  • is a great road map to building your wealth.

 

What Is Liquid Net Worth?

Although net worth provides a view of your current financial condition, it doesn’t differentiate the assets that can provide you with liquidity quickly and easily. When facing a medical crisis or an opportunity to buy a business, getting access to your money matters. Sure, you can sell your car quickly but likely for less than the estimated value. Understanding what assets are more liquid means they can be readily converted into cash with little or no loss in value.

The Formula = Liquid Assets Less Total Liabilities

You can either remove non-liquid assets from your total assets or discount their values from their appraisals. Additionally, you need to recognize that tapping certain assets too early such as retirement accounts could result in paying penalties and taxes. More than that, you lose momentum when you withdraw assets that were benefiting from compounding growth.

 

Your Liquid Net Worth:

  1. Understand the differences between your net worth and liquid net worth. Liquid net worth is what you need to count on for immediate funds.
  2. Liquidity varies among our assets which have different growth rates. Money market accounts are liquid but typically have lower returns than stock investments long term.
  3. Consider costs involved in the transactions such as penalties, taxes, fees, and such

 

How To Calculate Your Liquid Net Worth?

Liquid Assets:

  • Cash
  • Cash-Equivalent Securities
  • Brokerage/Investment Accounts

The most liquid assets are cash, cash-equivalent (or money market) securities, and investment or brokerage accounts. These are either already in cash or are those financial or monetary assets that can easily turn into cash with little or no loss in value.

Cash is the best form of liquidity but of course, doesn’t grow unless it is invested.  This category broadly consists of cash on hand, prepaid cards, savings accounts, checking accounts, money market accounts, certificates of deposit (CD), savings bonds, and emergency funds. If your CDs are in a fixed term like 6 months or a year, you may need to pay a small prepayment penalty but this is fairly accessible money. Separately, you need to have an emergency fund earmarked for unforeseen expenses.

Brokerage/Investment Accounts

All types of financial securities can be bought or sold in your brokerage account. Typically, they are stocks, bonds, REITs, mutual funds, and ETFs that are in these taxable investment accounts. While these accounts are liquid in a matter of three business days, you do pay taxes on price appreciation based on the time you held the security. Holding the securities for over one year is taxed at a lower 15% capital gains rate. Otherwise, you pay taxes at the same rate as ordinary income.

Less Liquid Assets

The cash value of your life insurance policy is fairly liquid but you may have to absorb small fees. Depending on the company, it can take more time (eg. 10-20 days) than access to financial securities. On the other hand, access to pensions and investments in real estate such as multifamily homes are less liquid.

Retirement Accounts

When withdrawing money from your retirement accounts before you turn  59.5 years,  you will likely be hit with a 10% penalty and immediate payment of taxes, losing the deferred benefit on that amount. Generally, if you withdraw early from a 401K plan or IRA account you will pay taxes at your marginal tax rate. The marginal tax rate is the tax rate paid on the dollar of earnings (eg 22%-24%).  On the other hand, Roth IRAs are treated differently. For those accounts, so long as you have had this account five years or more, you may withdraw contributions you made to your Roth IRA anytime tax-free and without penalty.

While you may have access to your retirement savings, these are not considered to be liquid. You should not dip into your retirement accounts unless needed as a last resort. By withdrawing these funds, you lose the compound benefit on this money for your future when you are less likely to earn money at your job.

A Temporary Exception

The federal government had waived the 10% penalty if you made a withdrawal between January 1 and December 31, 2020, for those impacted by COVID. Qualified individuals that put back this withdrawn money within a three-year time frame will be excused from paying taxes on the money.

If you are including retirement accounts in your liquid net worth, you should discount your retirement balances by 25% to be conservative.

529 College Savings Accounts

Like retirement accounts, withdrawal of money saved in a 529 college savings plan may be subject to a 10% penalty and you will have to pay taxes. The exception to this rule for 529 savings is withdrawals made for qualified education expenses such as tuition, fees, books, computer, and related costs.

If you are including 529 accounts into the liquid net worth, I would use a similar discount of 25% off the account balance.

Other  Assets

The cash value of your life insurance policy is fairly liquid but you may have to absorb small fees. Depending on the company, it can take more time (eg. 10-20 days) than access to financial securities. On the other hand, access to pensions and investments in real estate such as multifamily homes is less liquid.

Tangible assets

These assets are real and personal property that reflects your lifestyle and is harder to liquidate for funds.

Your Primary Home

If you own the primary home you live in, this may be your largest asset. While the home is an investment, it is not a liquid asset like financial securities you invest in. You cannot count on liquidating real property for quick conversion to cash. You need to figure out how the real estate market is faring in your area using Zillow Zestimate and other sources.

Selling your home is a complex process that can take several months or more to accomplish. An appraisal value is not necessarily your sales price which is often lower. Also, to complete your sale, you are responsible for fees and costs including broker fees of 5%-6% on the sales price, closing costs of 1%-2%, and attorney costs.

Most likely you are carrying a mortgage that is picked up in total liabilities. Upon the sale of your home, you will pay off your mortgage in full from the proceeds of the sale of your home, reducing your liabilities.

Your primary home as an asset should be discounted about 25%-30% off its estimated value for purposes of liquid net worth.

Other Real Estate

Besides your primary home, you may own other types of real estate, including vacation or second home, timeshares, land, and rental property. Having just sold a plot of land, I can tell you that we took a 30%-35% hit from our cost basis in an ugly market after putting it on the market over a year ago.

Use current conservative market values for real estate. Appraised values may not reflect actual sales or liquidated values. You should not be inflating your liquid or net worth unrealistically.

You would need to approximate the value of your home, cooperative, condominium, cars, boats, and any other large items. To approximate real estate values, you can look at Zillow Zestimate, Redfin, Chase Home Estimator, or real estate websites for your zip code.

Your Business(es)

If you own businesses outside of your primary income, it is tricky to calculate a value let alone consider it to be a liquid asset. While you may want to include in your net worth statement a discounted multiple of annual revenues, it doesn’t make sense to include for purposes of liquid net worth unless you had the business appraised and a ready buyer.

Personal Property Is Tricky To Value

Unless you have a meaningful fleet of cars and boats, you should not add these to your assets for your net worth or liquid net worth.  These assets depreciate too fast and sell too slowly to add fairly to your liquid net worth. If you do have that fleet, for cars, you can look at Kelly Blue Book, Edmunds, or AutoTrader. Similarly, for boats, you can consult Boat Trader.

What Else Goes Into Total Assets?

Art, rare books, rugs, and antiques may be a large part of the net worth of wealthy households handed down to the next generation. Unless they are highly desirable or rare, these assets tend to be wildly low liquidated values to count on if you needed money in a pinch. Musical instruments have their value, but again, they are very difficult to peg and their sales are less predictable to raise capital.

This category has a lot of sentimentalities but its value may be very difficult to ascertain. In my opinion, these assets should not be counted on unless you work with an estate professional steeped in knowledge and who has a terrific network to help you sell the items.

My Own Personal Experience Provides A Valuable Lesson

When I worked on Wall Street, I was restricted from making investments in financial securities. If on that rare occasion I was able to buy certain securities, I was often not allowed to sell that security when I wanted to. So, on either side of the trade, I was burned and finally abandoned investing until I left my career as an equity analyst.

So what did I invest in?

A large part of our assets was in art, rugs, rare books, and antiques. What was I thinking?

These assets are on our walls (art), in our bookcases (rare books such as the first edition of the Federalist Papers), on the floors (ancient rugs), and antique furniture (signed in the mid-1760s by the cabinetmaker).

Ever try to sell an 18th-century Tiger Maplewood card table? We have! And we are still waiting for that sale.

Beautiful stuff, but they can’t pay the bills! So I don’t include these personal assets. The few pieces we have sold were at prices 70% below what we paid for them.

I digress but a worthwhile lesson for those who are collectors.

List all your Liabilities By Current Balances

 

Mortgages

  • Your mortgage loan balance is probably your largest liability.
  • The home equity loan balance.
  • Separate mortgage loan balances for the other real estate property (listed above in assets)

Other Loans

  • Student loans at the current balance.
  • Loans associated with the business(es) even though you aren’t including the value of the businesses.
  • Personal loans
  • Credit card account balances (you should break these out individually).

Related Post: Pros And Cons of Credit Cards

Total Liabilities

As mentioned earlier, the formula is fairly easy:

Total  Liquid Assets minus Total Liabilities = Your Liquid Net Worth

Depending on the composition of your assets, it is possible that your liquid net worth may be negative, especially when you are conservatively discounting large assets like your home but including the full mortgage balance. It is important for you to consider whether you need to adjust your investment strategies, spend less, save more, and make sure you have money for emergency purposes.

 

How Can You Build Up Your Liquid Net Worth: Make Good Trade-Offs

Track changes in your liquid net worth statement as early as possible to make sure you are making progress towards your goals.

Track your spending, review for areas you can reduce and produce savings

Have an ample emergency fund of 6-12 months for unexpected events like a lost job. Invest this fund in a liquid account like money markets.

Put more of your money into investment assets like stocks that can expand wealth rather than in personal possessions.

Add to your retirement accounts to the contribution limit. Avoid withdrawing money from these accounts which trigger penalties and taxes. The same goes for 529 plans.

Making more money at your job or a side gig to boost income.

Consider buying recently used cars than luxury fast-depreciating vehicles.

Choose to invest based on your appetite for risk and where you are in your life cycle.

Related Post: How To Make Better Trade-Offs

Where Should I Invest My Money To Maximize My Liquid Net Worth

Stocks are riskier but generate higher returns than keeping your savings in bank accounts at low returns.

According to Bankrate, the best annual percentage yield (APY) which is your effective annual return as of August 28, 2020 ranges from  0.60%- 0.91% for the top ten banks. Those paltry rates which do not provide much in the way of income. Typically, banks may require a minimum balance from $1 to $25,000 and have monthly fees up to $15.

The younger you are, the more able you are to ride out the greater risk found in stock investing, with the benefits of compounding effects.

Homeownership remains a worthwhile investment with currently low mortgage rates. But your home is less liquid than financial securities.

Decreasing your loans or debt liabilities will increase your liquid net worth.

Your Mortgage Loan Deserves Your Careful Attention

Look into refinancing your mortgage if you carrying a mortgage with more than 5% loan rates. You may realize savings.

Target carefully what you borrow, for how long, and at what rate. Look at taking out a 15-year mortgage loan versus a 30-year mortgage loan. While your monthly payments will be higher for the 15-year loan, total borrowing costs will be lower.

Taking on a mortgage loan is a big cost but home prices have generally kept pace with inflation until 2008-2009 when subprime mortgages played a huge factor in declining home values.

Lower Your Debt Where Possible

Pay off your credit card debt in full. It’s likely your highest cost debt so use extra savings, bonus, or tax refund to lower this amount. Otherwise, slow your spending.

Pay off your student debt as soon as you are able.

Final Thoughts

While net worth is a more common benchmark, refining your assets for liquidation purposes gives you a more realistic picture. Tracking liquid net worth helps you to understand your ability to deal with a crisis or an unexpected opportunity. When facing an immediate need for cash, you don’t want to withdraw funds that are earmarked for retirement.

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Credit Card Alternatives Have Benefits

Credit Card Alternatives Have Benefits

Do you really need a credit card? Most people believe so. I have had a love-hate relationship with credit cards, admittedly using cash and alternatives more often than most people I know. Credit cards can be a valuable tool, allowing you to make purchases with credit from the bank or retailer, as issuers. You must pay these debts back.

For disciplined cardholders, who pay their monthly bills in full, credit cards are a convenient tool. However, Americans carry an average balance of $6,354 at the average 16.28% interest rate. These folks are borrowing to spend money, growing their balances at fast rates while incurring exorbitant interest costs. It is a toxic formula.

Many people believe a credit card is essential. Roughly 83% have at least one credit card in their wallets, and 52% are carrying a balance.

The Benefits of Credit Cards – Can They Be Found Elsewhere?

 

Convenience

Credit cards are more convenient than paying with cash or checking accounts. Many retailers do not accept cash, and it is tough to carry a wad of bills in your purse or pocket. With credit cards, you can make fast payments, transfer between accounts, have more shopping options, and track your spending. Some alternatives like debit cards, share this convenience factor.

Building Credit History 

More than most alternatives, credit cards can help you establish your credit history and boost your credit score. When you make purchases with a debit card, the funds are deducted from your checking. You can improve your creditworthiness by paying your bills on time with checks like rent, utilities, car loans, or even a loan through the Lending Club. You can set up an Experian Boost for free, linking certain payments like your cell phone and streaming service to lift your credit score a few points.

Perks

Credit cards offer many perks to their cardholders, such as cashback, points, discounts, and other rewards. Keep in mind that higher fees may accompany better perks. Charge cards and even debit cards may offer some of these benefits. If you link PayPal to your credit cards, you can still get whatever points, miles, and rewards associated with your specific card.

Savings and checking accounts do not offer these awards, but you can earn some interest income, admittedly at low yields these days.

Borrowing Capacity

Credit cardholders may be able to get cash advances by borrowing money using the available credit limit to take out a short-term loan. This double-edged benefit is a more comfortable and quick way to borrow money than getting a personal loan, but it is also more expensive.

Its costs have two components: first, there is a $5-10 flat charge or a percentage of your borrowing, and secondly, your interest rate on the advance will likely be higher than your regular purchase APR.

If you borrow for immediate needs, advances may be faster. However, it is ideal if you have an emergency fund when you need funds in a hurry. You may tap into other alternatives to get various loans reasonably quickly from Peer-to-Peer (P2P) lenders like the Lending Club. Otherwise, you can go to a traditional bank for a personal loan but it may be a slower route.

Fraud Protection

Credit card protections for holders come from the Fair Credit Billing Act (FCBA).  Your card has protections if lost, stolen, used without your permission, and potentially fraudulent transactions. Holder liability for unauthorized use is limited to $50, which may get waived at some banks.

The Electronic Fund Transfer Act (EFTA) covers fraud associated with an ATM or debit card. Liability limits are a bit more complicated for debit cards. If you report your card lost or stolen, your liability is:

  • Zero before any unauthorized transactions, 
  • or $50 within two days; $500 within 60 days; and no protection after 60 days.
  • However, there is zero liability if there is evidence of fraud transactions without a stolen or lost card.

For online purchases, PayPal may be an attractive alternative to credit cards as it has an added layer of encryption technology to avoid fraud.

11 Alternatives To Credit Cards

 

1. Debit Cards

Debit cards provide the convenience of making purchases with a plastic card emboldened with a Visa or MasterCard logo. They are widely accepted at retailers and can give cashback and rewards.

You can withdraw money or transfer funds and make purchases via point of sale (POS) with a PIN. Some people do not like entering the PIN for security purposes, and especially during the COVID pandemic. They can bypass the terminal to complete the transaction by signing for their purchases.

Your debit card purchase amounts are deducted electronically from your checking account in days. Make sure you keep some balance in the checking account to avoid overdraft fees from overdrawing.

Debit cards don’t provide the user with the same temptation or danger of overspending as credit cards. As such, debit cards are useful for those who overspend, aren’t creditworthy, or have little experience using cards like teens. You can get a debit card without a credit history. The first card I carried was a debit card because I didn’t want to have cash.

It Won’t Help Your Credit History

However, debit cards do not appear on your credit history or positively affect your credit score, as you are making payments from your funds. Unlike credit cards, the credit bureaus (Equifax, Experian, and TransUnion) do not receive reports of your debit card activity. Therefore, debit cards won’t help you build up your credit history. There are other ways you can improve your credit history outside of using a debit card.

2. Prepaid Debit Cards

To avoid overdraft fees that may mount up from debit cards, some people prefer prepaid debit cards. It has all of the benefits (and drawbacks) the debit card has, but it has an increased limitation. You can only spend up to the amount on a  card. Like debit cards, it is safer and more convenient than cash or checks. Prepaid debit cards are a good option for parents who have children in high school or college-age. These cards can help students learn how to use a card with spending limits.

3. Charge Cards

A charge card (e.g., American Express, gas companies) requires you to pay your balance in full each billing cycle. Typically, to be eligible for a charge card, you need to have a good to excellent credit score of roughly 700 or higher. Unlike credit cards, you have uncapped spending abilities and do not pay interest.

High annual fees range from $100 to $550, and these costs go up quickly. The higher the fee, the more significant and tailored are the features.

The  American Express Platinum card is top of the line, is metal instead of plastic, and a status symbol for many. I have this card for years which I originally used for my traveling work schedule. It has tremendous benefits and flexibility, some of which I don’t fully use, and I think a change is in order.

Plastic or metal aside, it is your responsibility to manage this significant charging power well. You will incur a steep late fee if you missed the payment date, and it will be reported to the credit bureaus, impacting your score. You can easily overspend, so it is up to the user to recognize that you have to pay your balance down to zero during the cycle.

4. PayPal

Paypal is a payment app, has the convenience of a credit card when shopping in stores, online, or as a mobile application. You can use this Instant Transfer service to send money to anyone, make fast payments, and refund faulty goods options. While PayPal may not be yet as widely accepted as credit cards, that gap will likely narrow over the next few years.

Essentially, PayPal connects to your bank checking account, debiting each amount instantly. You can link PayPal to credit cards and continue to get points, miles, and any rewards available from your card. You can get cash from PayPal if you participate in surveys.

5. Secured Credit Cards

A secured credit card is usually the best card for those who have already had financial challenges such as bankruptcy or managing a traditional credit card. It can also help those with limited or no credit history. Unlike debit cards, secured cards can help you build or rebuild your credit history.

They are easier cards to qualify for than credit cards, but they will look at your credit background and employment situation. Also known as a collateralized credit card, it requires you to deposit money in a bank account equal to its credit limit. The security deposit is your collateral.

You are usually setting the credit limit by your deposit amount. Start with a small deposit, say $300, manage your spending, and pay your bills on time so that you can build up a positive history. Typically, the issuer reports your purchases to the credit bureaus. There may be fees to pay to apply for the card and its processing.

6. Become An Authorized User

If you don’t have a card for various reasons–too young, limited, or poor credit history–, you can become an authorized user of another credit cardholder such as a parent, a sibling, or a close friend. If you go this route, make sure that you become an authorized user of someone with a good-to-excellent credit score and manages their bills well.

You are piggybacking on their credit profile (for which you should be immensely appreciative), but, as an authorized user of someone with poor credit, your score will reflect that person’s score on your credit. In other words, you will not be doing yourself any favors in that situation.

Authorizing your child as a user on your card is a good option for creditworthy parents. They can teach their children how to handle credit cards responsibly, set limits, keep track of spending, and take away authorization if the cards are misused. It may be a more challenging situation to set boundaries for an older adult as an authorized user.

7. Store Credit Cards

I am not a fan of retail (or store) credit cards, nor have I ever been. It’s the sales pitch at the point of sale where you are most vulnerable to getting a credit card you don’t need. It’s the retailer, not the clerk at the checkout, who I fault for the technique that turns many people (myself included) into silly putty.

Typically, the sales clerk will often talk to their customers at the point of sale, asking if you have their branded store card. Your arms may be holding a significant load of purchases and a credit card, but before you answer their question, they are offering a 10% discount on your purchases. Oh, and it will only take ten minutes more. It takes longer than that as the clerk tells you to look around since you are getting money back into your pocket.

The discount and future discounts in a store you tend to visit us often can be worthwhile. However, I don’t recall receiving any deals that were greater than 15%.

The negatives of having a store credit card far outweigh any positives, at least in my experience. Store cards carry higher interest rates than traditional credit cards, which are high enough. Applying for the card will impact your score slightly.

My personal experience years ago (the late 1990s) with a store credit card, which I used probably twice, lingers with me still. I signed up for the card. After getting the 10% discount on a warm coat, raincoat, and a few other garments, I did get their card. It was a higher bill than usual as I was shopping in a hurry, leaving my office to get these items for an overseas work trip. As is my practice, I paid the bill before its due date so I wouldn’t forget.

Months later, we applied for a mortgage refinancing but, I found an error on my credit report. It indicated that I had an outstanding bill from the retailer, where I had my one and only store credit card. Without identifying the retailer (it’s a Fifth Avenue behemoth), I called and wrote letters, receiving no answer. I visited their credit department, but no one would reverse the notation.

Ultimately, as we ran out of time for our refinancing application, I paid the bill twice! The second mistake I made regarding the store card, I closed the card. Later on, I realized you never close any credit card, just put it in a drawer.

8. Gift Cards

A gift card is a stored-value card containing a specific dollar amount for future discretionary spending. There is usually an expiration date that can be short term. Once the card’s sum is spent down or has expired, the card no longer has any value. Gift cards represent a retailer and potentially its affiliated businesses.

You can buy the gift card with cash or a credit card. Gift cards are on display on checkout lines, sold physically or online as an eGift such as an Amazon card. It is an easy way to give someone a present, especially during holiday times. We gave and received many gift cards through the years, especially for countless children’s parties, ours and their friends.

Besides the impersonal nature of gift cards, they are easy to lose, forget, and expire, so that it may be a waste of money ultimately. When these cards expire, the money you spent on the card is gone for the person you were gifting. On the other hand, the retailers do well from the gift cards as the unused dollar amount goes straight to their bottom line.

People spend roughly $100 billion on gift cards, with about $3 billion going to waste. National Retail Federation reported more than 59% of people surveyed in 2019 preferred a gift card for their holiday present. Another survey said that 80% of the gift card funds are spent within a year, leaving 20% on cards. Looking back, I regret giving cards, preferring more memorable gifts.

9. Apple Pay

There has been a significant rise in mobile commerce, ushered with new technology in recent years.  Electronic mobile wallets like Apple Pay and Google Pay are widely accepted digital cards linked to your credit and debit cards. They are a mobile payment service that works off your smartphone device, allowing you to make contactless, secure services in retail stores, in apps, and online.

It is convenient having a card on your phone, limiting the need to carry a lot of cards or cash in your physical wallet. You can track your spending like traditional credit cards.

If you lost your physical wallet or someone stole it, you would lose cash and need to contact each of your credit and debit card issuers. Your stored information is with a third-party provider. Each transaction must be approved by the user using a PIN or a fingerprint as a security measure. It may offer rewards or discounts but in exchange for fees.

Among its disadvantages, there are spending limits, and it may be even easier to pay, and your phone is readily available. At least with credit cards, you can leave them behind and window shop. Your phone needs charging, which may temper some of its convenience. As far as security goes, it may depend on how you manage your phone security.

10 Cash And Checking Accounts

They say cash is king, and for many, it remains an essential alternative to credit cards. It doesn’t provide points, miles, or rewards and may not be accepted everywhere. Cash is not convenient to carry and is easily lost and stolen. When cash is gone, it is gone like a home run over a  New York Yankees’ fence or wall.

Its significant benefit is in serving as a limit to spending and as an emergency fund. Cash has a tangible feel, and you can put it into your savings and checking accounts, which will not generate much interest in this low-interest-rate environment, but you may pay fees if you don’t maintain the bank’s minimum.

You can invest your money from assets you can convert to cash in your retirement investment accounts to watch your cash grow through compounding. You can use your checking account to pay your bills, at some retailers, and to everyone who will accept a check as payment.

I use cash and checking accounts for discretionary spending where possible.

Overdrafts

Overdraft protection is a personal line of credit you can get from the bank to cover your checking account. This credit works when you spend more than you have on deposit in your checking account. By arranging this, your check will not fail for insufficient funds. A bounced check is embarrassing and a red flag. You can’t withdraw money from an empty checking account depending on overdrafts.

You should not rely on this protection except in an emergency. If you are prone to a miscalculation of what is in your account, you need to remedy it by handling money with care.

The bank will either charge an annual fee or $25-$30 for each overdraft. That can add up. How much coverage you have from your bank depends on you and your creditworthiness. You should not rely on overdrafts except as an emergency, such as when your car broke down, and you only had a check with you but not much in that account.

 Final Thoughts

Credit cards are a valuable tool if you pay your balance in full, avoiding debt accumulation. Used the wrong way, credit cards can be toxic. For those who need more discipline, there are alternatives that can limit your spending but still provide the convenience you don’t get from carrying cash around. There is a range of credit card alternatives that provide benefits and serve various purposes that can reduce your reliance on credit cards.

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5 Budgeting Methods To Boost Financial Discipline

5 Budgeting Methods To Boost Financial Discipline

I have to admit that  I am hostile to the term, “Budget.” The word signifies limitations as if I will have to change my lifestyle. Before I prepared a budget, I felt anxious about doing one. Only one out of three (32%) people prepare a monthly budget, and those making at least $75,000 a year are likely to do so. Why do people not want to do a detailed budget?

Common Reasons For Not Having A Budget

  • It is too much work, and I don’t know where to start.
  • I don’t know if I need one.
  • Fear of finding out about mistakes I was making.
  • “Don’t want to rock the boat,” as it may involve confrontation and change.

 

The Mistake Of Not Finding Out

I had a vague idea about preparing a budget but was reluctant to do one. Craig, my husband, paid the bills, went grocery shopping, and we dined out most of the time. Financially, we were in good shape, living more modestly than others we knew earning less.

Changes like these often require a financial review. We never really sat down to discuss our finances through the years though we met several times with a financial advisor to draw up a financial plan. We were enjoying financial flexibility, but we wanted kids and more space. At some point, virtually overnight, we had two babies and needed a bigger apartment.

These changes meant thinking through our finances since I had left my lucrative career, and Craig was building his law practice.

As I was in law school, I relied on Craig to work through some of the numbers as to what we could afford in terms of more space. That was a big mistake on my part and unfair to Craig. I was the numbers person, yet unaware of our finances. Many of our assets–land, arts & antiques–were less liquid than I realized.  Later on, I found many late notices from delayed payments on bills. And it was the beginning of the financial crisis, and it impacted Craig’s practice.

My Epiphany

We had two kids, a dog, a spacious apartment in less than three years, generating lower-income and still spending as when it was just the two of us. I felt lost, realizing Craig’s income was down, and I did not have a good handle on our monthly costs.

Where was our money going? I soon realized that I needed to create a budget to review and analyze our finances better. It sounds like a cliche, but it was an epiphany for us. Yes, I found mistakes I didn’t want to admit to making, and yes, Craig and I had arguments. We worked to resolve them together by making changes, some more drastic than I wanted. We still handle money differently, and I am more firmly in the frugal camp.

Start Budgeting Early

Don’t wait to budget as I did, using excuses of not needing one or not knowing how to start.  It can be easier to create a budget when you are young because you have less money and few assets. Sure, budgeting is tricky when you are just starting in your life. You may be carrying student debt and renting an apartment while your salary is at the beginner’s level. On the other hand, you have fewer costs to monitor, making it an excellent lifelong habit. Use it as a motivational tool to save more and spend less. Be diligent in improving your money management skills. 

Yet, preparing a budget is the cornerstone of a successful financial plan. Budgeting is a lot like dieting. It is hard to start one when there are many choices. Each works differently for each person. Both diets and budgets, may provide lasting benefits and bring you closer to achieving goals.

There are many benefits to having a budget at any income bracket. Even if you were to inherit $100,000 tomorrow, you need to understand how to deploy this money best. A budget can help you.  You just need to find the best budget method that works for you. We discuss five different budget methods below.

Reasons For Having A Budget

  • Having awareness provides essential financial discipline.
  • Make changes to patterns you want to avoid.
  • It helps you to achieve your financial goals.
  • Be more conscious of how you handle money, so you rein in overspending.
  • Improves your ability to pay off credit card debt by allocating saving better.
  • When you have better control, you can allocate more savings to investments.

 

 

5 Budgeting Methods To Boost Financial Discipline

 

1. The 50-20-30 Budget Rule

This budget rule is straightforward. It prioritizes your needs over wants to build your financial future.

Essentially, you are dividing your after-tax income into three buckets:  

50% For Basic Needs

Paying for your basic needs is your priority. About 50% of your earnings go toward your basic living needs. Housing is the proportionally most considerable amount of your basic needs and includes utilities, groceries, car, loan payments, minimum debt payments, and other monthly fixed expenses. 

20% To Savings And Debt Prepayment

This income bucket devotes 20% to savings. This amount is building your financial future. If you have significant debt levels, then a higher percentage should go into this bucket and be reduced from the wants category. Your savings can pay down debt, build an emergency fund, retirement savings, and investing.  When paying off your debt, you are likely saving money by eliminating the interest costs you carry on your balance, especially credit cards. 

30% For Wants 

After the above priorities, allocate 30% for wants or desires. This allocation is for discretionary or flexible spending for entertainment, vacations, and shopping. After your preferences, the remaining amount is for your desires. Overspending here means you will have a debt to pay above. 

The Pros of the 50/20/30 Budget Rule

This method is simple as you are only tracking three categories, needs, wants, and savings. You have the flexibility of allocating the savings into other areas, like debt pay-offs.

The Cons of the 50/20/30 Budget Rule

It is not as structured as other methods, and some people just need that discipline. You may have little to no savings but have more debt in that bucket. Then proportion the buckets to fit your needs. Paying off debt may be more of a priority than spending as much as 30% on your discretionary wants.   

 2. “Pay Yourself First” or Reverse Budget

This budget strategy to pay yourself first aligns well with a lifelong principle of personal finance. It is a reverse budget because, unlike other methods, you are saving before paying your bills. It emphasizes savings as the golden rule to learn early in life.

For some, saving money is hard, let alone putting 5%-10% away, which may be virtually impossible. Instead, set aside even small amounts like $50-$100 for your retirement, emergency fund, and savings accounts first. Automate a savings plan for these accounts. When you can, earmark more money, so you will grow your financial future.

That does not mean you don’t have to pay your monthly bills (you do!) but make savings your mantra. You may need to be more frugal at times to restrain some of your spendings so that you can put some away out of your reach.

The Pros of the “Pay It Yourself” Budget

By prioritizing your savings to a retirement account, you can earn compound interest on interest or pay off your debt if your levels are high.

The Cons of the “Pay It Yourself” Budget

As a standalone budget plan, “pay yourself first” may be too simple. You should understand the trade-offs between paying off high credit card balances, which will grow faster than savings as the card issuers charge far higher interest rates than you will get on savings.  However, saving money is an essential personal finance concept that will lead you to invest more at higher returns.

3. The Envelope (or Cash Diet) System

The envelope system may be a more comfortable budget method to adapt to if you are more cash-oriented. If you are paying for everything via credit card, this could be a rigid way to budget. This system entails placing exact amounts of cash into envelopes for each monthly expenditure you make, including your fixed costs. Putting money in jars or socks can substitute for envelopes, but I don’t think you want to walk with that.

Here’s how it works. You need to go to the bank to get a large amount of cash and allocate amounts into your spending categories. You would label each envelope and its amount for each of the following typical costs:

Groceries $500

Rent/Mortgage $1,000

Utilities $300

Dog Grooming $75

Gas $100

Gifts $100

When an envelope is empty, funds are exhausted for that category, and you can’t take out money from another envelope. This method involves a good understanding of how much you typically spend on each classification. The envelope system provides strict budgetary control and may reduce overspending. You run out of money for dining out, and you may have to change plans.

 This budget is essentially a cash diet, and some categories, such as rent or your mortgage payments, don’t translate that well into cash. You can still pay most things with checks. Studies show that people tend to spend less when they use cash payments.

You can use white envelopes for this system if you are frugal like I am. I have seen beautiful Celine envelope wallets ($700+), binders, and there are envelope apps to use like Mvelopes and GoodBudget.

Pros of The Envelope System

You are using cash, which can teach you to be more financially disciplined. It will require you to know your budget and the key categories well. You will likely spend less when you know you are running low on cash.

Cons of The Envelope System

This method is time-consuming, especially at first. It is inconvenient to have to withdraw money and carry cash around. Carrying cash conjures up that scene from The Wolf of Wall Street when Donnie Azoff (Jonah Hill’s character) was lugging around a suitcase filled with bills to deposit in a Swiss bank.

Paying cash is not always welcome. A cash diet may be challenging for particularly fixed costs, like paying your mortgage. Instead, you can try the envelope method for discretionary spending and then see if you can pay fixed costs by check. Using checks may mean more work or creativity on your part.

4. Zero-Based Budget or Every Dollar Budget

The Zero-Based budget originates from a business concept where every expense needs justification by a project’s need. This method is number-crunching heaven for those who need more structure in their budget. Essentially income minus costs need to be zero.

Households can implement this budget, similar to a traditional budget. The primary difference here is the budgeter proactively allocates remaining money, if not spent, to a financial goal.

Expenses are costs, outlays for savings, debt payoffs, investing, and charity. You assign a role for each dollar of your earnings to your expenses, savings, debt payments. Savings is a line item on your budget.

For a family, you would total the household earnings from multiple sources minus costs and allocate the rest of the money to where best it should go. When you have minimal debt, you can add the remaining cash where you need it. It could go to your emergency fund, retirement, or investment accounts. On the other hand, if you have high debt balances, use your savings to reduce those levels.

Preparing the Zero-based budget is a lot of work, combing through many details by itemizing your bills and overall spending. At the same time, you need to consider your financial goals, matching where the leftover budget money may best go. This budget method requires a good understanding of your household’s needs, wants, and financial future.

Pros of the Zero-Based Budget

It is structured to pay your costs and use the remaining money where it best should go. This method is goal-oriented, relying on a detailed account. If your expenses are high, variable expenses fluctuate; and are the best area to cut spending.

Cons of the Zero-Based Budget

It is detailed, time-consuming, and can change monthly. You need a good handle on all your expense items and your goals, understanding trade-offs between saving or paying off debt.

5. Traditional or Line-Item Budget

This budget is a personal income statement for an individual or household. It is similar to the zero-based budget but a bit simpler.  It totals net income from multiple sources minus total estimated expenses equal plus or minus amount. I use this budget on an excel spreadsheet, making changes over the years. For years, I did not use a budget for many reasons. There were only two of us; we were financially comfortable; it seems like a lot of work, and we kept postponing the task.

Monthly income sources include wages, tips, commissions, dividend income, and passive income.

Total monthly expenses are fixed and variable costs. Fixed costs are housing, food, transportation, utilities, and loan payments. Variable costs are less predictable and are associated with entertainment, medical, clothing, personal, and discretion expenses.

 

Total  Monthly Income                     $___________

Total Fixed & Variable Costs          $___________

Minus- Total monthly expenses      $___________

Total Savings/Deficit   $___________

Pros of The Traditional Budget

The traditional budget is a good starting point for understanding your household finances. It pulls a lot of detail together about income sources and expenses. Unlike a zero-based budget, it doesn’t have to a goal per se. Instead, if there are funds left, you can allocate it as you please. That is easy enough to figure out.

Cons of The Traditional Budget

Like the zero-based budget, it is detailed and time-consuming. It is a tool rather than a mechanism to help you identify areas to reduce your spending.

When Our Budget Became A School Project

Whenever I think of the line-item budget, I remember this story. I set up the template that had primarily been a back-of-the-envelope work of art. A few years ago, my son, Tyler, showed an interest, and we worked on it together. At the time, I didn’t realize he had a PowerPoint project due for his computer class.

After a few days, I was comfortable with doing a simple budget table jointly with Tyler. About a week went by, and Tyler came home, telling me that he used the budget we worked on for his project. I remember gulping, tensing up, and asking Tyler, “With numbers?#!” And he said, “Yeah, Mom, they didn’t care about the numbers, but they liked the colors.”

Hybrid Budgets

All of these budget methods have advantages and disadvantages. They can be used together, breaking envelopes into three bucks of needs, savings, and wants, and dividing into more categories with our needs, and so forth. In any budget you do, consider paying yourself first, that is, saving before overspending on discretionary categories such as entertainment. Be conscious of your spending, so you have money to save and invest.

Irregular Income

About a third of Americans generate irregular or less predictable income. Uneven income can be a problem for many, including us. Craig and I had budgeting challenges for many years, as most of our earnings were irregular and unpredictable. I had a salary with an annual bonus that varied significantly from year-to-year. Craig is a self-employed attorney and receives payment dependent on deal closings or other legal areas. Each area varies.

How do you budget in that case? Depending on your income sources, where there is variability, it is best to look back to the last three years and divide by 36 months to develop a meaningful income figure. The more conservative your estimate is, the better.

Final Thoughts

 The reasons for preparing a budget far outweigh any reasons not to do so. There are at least five different budgeting methods to choose from ranging from simple to more detail-oriented ways to review your finances. Creating and reviewing your budget is the cornerstone of a successful financial plan. It helps you identify your household’s strengths and weaknesses and help you devise a plan to make corrections. Find the best budgeting method for you.

Thank you for reading! If you find value in this article, please visit us at The Cents of Money for more articles of interest. Please consider subscribing to get our weekly newsletter.

 

 

 

 

How To Control Spending With A Simple Budget

How To Control Spending With A Simple Budget

Have you wanted to manage your money better but didn’t know how to start?

I know that I can do better for us, especially our kids, so they learn good habits.

I know I am not alone.

Ultimately, our goal should be to reduce costs, spend smarter, save more for investing in what we value. Or to keep for an emergency fund in the event you work for the federal government and there is a government shutdown.

Understanding your monthly costs by creating a simple budget to keep track of your spending needs is prudent and may help you eliminate or reduce some areas.  A budget is the most basic of financial planning tools and gives us a start to saving money in the future.

Despite improved GDP growth in 3Q2020, economic conditions remain uncertain. Unemployment is still high as we social distance to combat the pandemic. The financial crisis of 2008-2009 lingered for years afterward.

Financial Statistics

Yet, 63% of Americans live paycheck-to-paycheck since the COVID outbreak, according to an October 2020 survey.

One in five (18%) workers making $100,000 or more are living paycheck to paycheck in a February 2020 study.

The Federal Reserve found that 37% of adults could not cover a $400 emergency expense in 2019.

Statistics like these are hard to absorb and not easily reversible.

American Psychological Association 2017 study reported 62% of Americans are financially stressed. Anxiety and stress can lead to serious health issues and workplace absenteeism, furthering financial insecurities.

We Spend and Borrow Too Much

We are a consumption-oriented society, relying on too much borrowing. Consumer spending accounts for more than two-thirds of our gross domestic growth. Household debt climbed to $14.3 trillion in the first three months of 2020. Only credit card debt is lower, but that may be because of the pandemic and not getting out regularly. 

However, most of us spend too much. I try to reign in our spending and teach our children good financial habits. 

True Story To Share

When my daughter, Alex, was in a toddler program, I had bought her inexpensive suede boots, knowing that it was just a matter of time before her feet would grow and she would need a new pair. Soon after she had her new boots, Alex came home with my husband, crying about how she had the “wrong” boots and threw them in a corner.  I was a bit startled, but I ran to get a Sharpie and wrote“U-G-G” on the back of each boot, and I showed it to Alex. She hugged me and called me a genius! I rocked!

As our kids have grown, so have their needs and wants, and they often can’t tell the difference between the two. I grew up in a modest home, and a budget was a must for us.

Early in our marriage, blessed with my successful career on Wall Street accompanied by a 24 by 7 work schedule, financial planning attempts often took a backseat. We never had a budget.

As our family grew, so did our spending and our need for a budget.  I have kept better track of our costs so we can cut down spending.  For the record, my husband, Craig, is a more impulsive shopper, which often causes some tension.

Why Aren’t Americans Budgeting More?

According to US Bank, 41% of Americans in 2016 say they use a budget, up from 32% in 2013. There are terrific budget resources: apps, available worksheets to use.  Personal finance legends like Dave Ramsey, J. Money at  Budgets Are Sexy (cool name, smart guy!), and  Suze Orman urging people for years to work on a budget, why aren’t more people engaged in budgeting?

There are many reasons people like us have not prepared a budget: fear, family arguments, too much work, and it won’t work. The list can go on. I know these excuses well. By creating a budget, you may have more control over how to reduce spending, and put more money towards saving.

 Begin A Budget To Accomplish Your Financial Goals

The list of reasons for preparing a simple budget outweighs the plan for not starting one. You need a place to understand what you are spending and saving to accomplish your financial goals. 

In its simplest form:

Total household aftertax monthly income plus other income sources less total expenses=  +/-

Before we build a simple worksheet, try to understand your significant categories as a percentage of monthly aftertax income or take-home pay plus other income rather than monthly gross income which is not the real place to start.

There are great guidelines from Dave Ramsey, Every Dollar, Credit Counseling Society, and others. You can also take a look at actual percentages from  US Bureau of Labor Statistics Consumer Expenditures Survey in 2017 shows major expense categories as a percentage of the pretax income of $73,573 for median households in the US so you can compare your household expenditures.

Keep in mind that the percentages on the BLS table are lower than ours.  I recommend you use aftertax income, not pretax income. It should be noted that net incomes and expenses may vary in different cities than yours.  

Monthly After-tax Income or Net Income

What you earn is the money you take home every month after taxes.

Besides your salary or wages, other types of income may include:

sales commissions and bonuses, rental income from property you may own;

income from a second job or passive income;

dividend or interest income from investments or loans made to others;

pension, retirement,  and profit-sharing income; social security,

public assistance from the  state or federal  you may be collecting;

alimony or child support; and

tax refunds, royalties, and capital gains; some professionals and college students may receive grants and scholarships.

Your monthly net income should only include that income that is steady and predictable streams rather than one-time events.

Monthly Costs

Deduct monthly expenses from your monthly net income.

Except for savings, the following categories are mostly expenses deducted from your net income—separate expenses into two groups: fixed and variable costs.

Household fixed costs

Fixed costs are usually periodic, predictable, and often contractual. They are primarily inflexible payments like rent, mortgage, car loans, insurance. You can reduce these amounts through refinancing or negotiating rent. You may have to change apartments as your rent is usually set at monthly payments.

Household variable costs

Variable costs are more flexible and often associated with personal and discretionary spending such as furniture and furnishings, entertainment, vacations, medical, education, and personal care.

Savings

Pay yourself first with any savings by putting some dollars into a 401K plan. Better yet, automate amounts via direct deposit from your paycheck. You can also have some flexibility if you can reduce monthly expenses. Saving is an important part of your lives and it is recommended that 5%-10% of net income goes to savings. The St. Louis Federal Reserve Bank reports our savings rate at 3.8%. Target a 10% savings goal.  

Housing

Shelter or housing is the largest cost factor for the average person. These costs are mortgage costs or rent, insurance, property taxes, furniture. Your goal for housing as a percentage should be between 25%-35% of your after-tax income.

Do you own your home or rent? If you have your own home, your monthly mortgage payments could be a sizable part of this category. Look for mortgage refinancing opportunities when interest rates decline. Rates are relatively low but have come up from the lowest historical rate levels. We were able to reduce our monthly mortgage costs by taking advantage of lower rates.

Food

Like shelter, food is our most basic living needs and should account for 10% of our after-tax income. This category has groceries, baked goods, and personal care items.  We all shop for groceries differently, but there are a lot of opportunities to shop wisely.  More than ever, there is competition from Amazon and Walmart. I have been buying in bulk, outside of New York City, and eating out far less frequently.

Transportation

Transportation should be about 10%-15% of your after-tax income, depending on your mode of getting around to work. This category includes bus, train, taxi, UBER, parking, car insurance, the bridge passes, and maintenance. These costs can vary on where you live, work, and the availability of good public transportation.

Utilities

Utilities amount to 5%-10% of net income and include electric, water,  gas, phone, cellphone, cable, and internet. There will be more competition with alternative energy. This category should hopefully result in reduced costs for at least some of these items.

Clothing

Clothing for your family members should amount to 3%-5% of net income. It varies based on the size and age of your family. For us, it was more comfortable when I could mark my daughter’s cheap boots with a Sharpie.

Medical and Healthcare

Medical should be about 3% of net income and includes healthcare premiums, specialists, and over the counter prescriptions. This is can be an expensive area for many families.

What We Owe

Debt Payments outside of mortgage payments can be a tremendous stress factor and needs to be controlled to the lower end of 5%-15% of net income. Here, we include credit card payments, car payments (unless you put the latter into Transportation), student loans, and installment loans. Credit card debt especially can be toxic with double-digit interest costs and are discussed in our article: Pros and Cons of Credit Card Debt

The higher the percentage of net income these costs command, the lower the potential savings.

Discretionary Spending

Personal and Discretionary are costs that should be 5%-10% of net income.

It includes entertainment, recreation, education, gym dues, eating out, gaming, haircuts, hobbies, education, tobacco/alcohol, and travel, which could be an annual family trip. The latter should be on your monthly table. This category could include gifts to family and friends and charity.

Personal and Discretionary items are diverse, but we need to be fair to ourselves,  trying to stay healthy, active, and happy.

Total  Monthly Expense Categories Above.

Your total monthly net income $___________

Minus Total monthly expenses $___________

Total Savings/Deficit               $___________

 

Just Do It and Share With Your Family

Your budget needs to suit you and your family. You may want to separate spending into different groups or combine them. Being specific may better help you identify areas where you can reduce costs. Eliminate Weight Watchers monthly membership or streaming subscriptions you forgot about or magazines you no longer have an interest or time for.

There are a number of apps and free worksheets available online or you can create a family budget that works for you.

mint monthly budget template

make budget worksheet consumer.gov

In Career Builder’s study, those surveyed, when asked what they “would absolutely not give up” cited the following:

54% Internet connections

53% mobile devices

48% driving

37% pets

21% cable

19% going out to eat

Set up An Emergency Fund For Liquidity’s Sake

Having a good idea of your most important monthly expenses should lead you to establish your emergency fund.

An emergency fund is what it says, cash funds for emergencies put aside in an account separate from your savings account. While you can’t predict why you may need such a fund—that is why it is called an emergency fund—many of us have experienced the loss of jobs, family illness not covered fully by healthcare.

It is prudent to do this when you are facing a critical time. Having enough liquidity is vital. By liquidity, I mean having cash on hand without selling assets at a material loss in value.

Build An Cushion

If you don’t have an emergency fund yet, I recommend you start to put this money aside to cover the essential costs you will have to pay no matter what your circumstances are. Expenses such as food, mortgage, rent, utilities, medical, car, and pets require such a fund.  You need to save at least six months of payments, but if you can manage saving eight months, that’s great. Remember, this fund should be liquid and readily accessible, but that doesn’t mean it couldn’t be in cash-equivalent money market securities.

Final Thoughts

Preparing a  budget is a means to an end. It can provide discipline to help achieve financial goals. We only need to be reminded that many people remain out of work now or the more than 10% unemployment rate at the peak of the 2008-2009 financial crisis.  While you will get unemployment benefits from the government, it won’t be nearly enough money to pay the required outlays for your basic needs. Getting your finances in good shape by understanding where you spend and save reduces stress.

Thank you for reading!

Do you have a monthly budget and has it helped you? Can you share your experiences in managing your costs in your budget?

We’d like to hear from you!

 

9 Ways To Avoid Financial Infidelity

9 Ways To Avoid Financial Infidelity

“From hidden debt to secret expenditures, lying about finances can cause a marriage to go into default.”

Kimberly Foss, CFP

 

The US divorce rate among young people under 30 years has been dropping to below 50% since the early 1990s. However, that may be deceiving. Millennial couples are marrying later and arming themselves with prenuptial agreements.

Total divorce rates may be higher, closer to 53%, according to a study by sociology professor Philip Cohen. Older couples are quitting their marriages more than previously.

Money is the number one trouble spot among couples according to 35% of people surveyed in the SunTrust Bank study. Most conflicts about finances are the driving force in most divorces. Couples talking to each other in making smart financial decisions may reduce some of the strain these topics may cause.

In its Love and Money survey, TD Bank found that 90% of respondents who say they are in happy relationships discuss money at least once a month. It is always better to address these problems head-on rather than procrastinating over financial decisions. Bad financial habits may be costly by not confronting the piling up of higher-cost debt or overspending.

Related Post: 11 Ways To Avoid Costly Procrastination

Financial Attitudes May Be Visible Early On

When couples start dating, they may gain some visibility into each other’s attitudes about saving and spending habits. Once couples become more seriously involved, they should have more in-depth conversations about money to gauge each others’  financial goals. They should communicate their perspectives on financial planning with honesty and respect.

It is awkward to talk with your partner about money if you never have. If you are moving to the serious couple stage, you need a way to get started. Ramit Sethi, a legendary personal finance expert (in all areas), developed “The Definitive Script…” He provides helpful word-for-word phrases for you to use. Frankly, it works for us, after 30+ years of marriage!

First Money Fight May Illuminate Your Differences

Learning how to talk to each other is essential as you contemplate tying the knot. You may get an early view of your financial differences once you decide to get married.  You may have different opinions about what kind of wedding you want to have. Should you marry at City Hall (about 3-4% of couples do) or have a lavish wedding.

The Wedding: City Hall or Grand Affair

If you choose the latter, hopefully, you are on the same page. Make sure you do your research and are ready for the high costs.  The average amount spent on a traditional American wedding is $35,439.  However, geographic locations differ.  Expensive weddings could go higher; they cost $75,000 or more in New York and San Francisco.

How the engaged couple handles this monumental event may tell volumes about how close their relationship with money may be. If they agree on the venue together, that is a significant first step. An expensive wedding may put a big dent in savings for couples if they pick up the tab, or perhaps they can get help.

Their weak money management skills challenge highly educated professionals like doctors and lawyers. My husband, Craig, an attorney, has often had difficulty with finances. He frequently laughs, saying that he went to law school instead of business school like I did.

My Experience

Finances have been a difficult topic for our household. Once my husband embarked on his legal practice several years ago, I never had a good handle on what he earned regularly. It was understandable in the early years as his practice was going through typical growing pains and his income was minimal. Also, clients don’t pay as regularly as they probably should.

The problem was that Craig never made me fully aware of how tough things were. Truthfully, I was wantonly oblivious and focused on my own career which demanded long hours of 6-7 days and heavy traveling. We probably missed some bills as Craig was the bill payer.

Fortunately, I was doing quite well on Wall Street. Ultimately,  we were able to pay bills. However, as time went on, my husband still didn’t share his income or was relatively vague. He is not alone in hiding information from me. Eventually, I always find out about the financial damage. It causes enormous stress in our lives.

A Financial Planner Helped Us

Among the biggest mistakes, I have made is not being persistent about knowing what he earned. Like others, he has a less predictable income, so he had some valid reasons. We benefited when we worked with a financial planner, and Craig was far more open.

Circumstances change, and you and your significant other always need to update each other. As those of you who have children know, our financial lives get more complicated when your family expands. So, folks, be open and honest with each other.

Financial Infidelity Seems To Be Growing

Many people who succeed in their careers have had trouble handling their finances and may cover up some of their actions. They may hide large purchases they have made, have credit cards or a loan they didn’t tell their partner. This is known as financial infidelity, which occurs when couples are secretive about money stashed away or having debt accounts hidden away. They lie to each other about financial transactions. It leads to stress, anger, broken relationships, potentially bankruptcies, and/or divorce.

Financial infidelity has been on the rise, according to a survey by CreditCards.com. Millennials are nearly twice as likely to hide money or accounts from their partners than previous generations.

Prenuptial agreements, up 62%, have been popular with Millennials, especially women. These agreements are legal documents two people negotiate and sign before they marry. The signed documents cover financial issues and the potential division of assets in the event of divorce.

A Harris Poll done on behalf of the National Endowment For Financial Education (NEFE) reported these findings:

  • in 2 out of 5 couples (or 41%), one spouse admitted to financial deception.
  • 75% of those surveyed said financial infidelity adversely affected their relationships.
  • 36% surveyed believed some aspects of their finances should be private.
  • 25% discussed finances with spouse and knew partner would disagree.
  • 18% say they lied or hid financial information because they were embarrassed or fearful and didn’t want their spouse to find out.

Other Surveys

  • 31% of people in another survey by CreditCards.com kept credit cards and other accounts from their partner. Hiding debt is a particularly dangerous deception.  The unsuspecting partner may think their household is financially secure when it is not.
  • Almost 30% of couples do not know each other’s salaries by a study by PolicyGenius.

 

8 Ways Couples Should Talk About Money

There are few topics that are more uncomfortable to talk about than money. Sex conversations are comparatively easy. Yet, avoiding the conversation about finances because it is challenging is foolhardy.  If you are entering what is hopefully going to be a life long relationship, now is the best time to get started.

1. Have Honest Communications

Early on, you should express your general views early on a range of financial topics without specifics on saving, spending, giving, reducing debt, investing, and retirement. Discussing how your family handled finances may be an excellent place to start. What kind of lifestyle do you want to have?

Remember, if you and your significant other are going to have a long term relationship, there will be plenty of time to get very specific.

Each of you needs a framework to understand your respective money mindsets better. You might consider writing each other a letter as to what is essential to you. Share it and ask questions. It is a meaningful time to say what your significant priorities and learn of your partner’s.

Meeting of the Minds

There must be a meeting of the minds when it comes to values and expectations. You should talk about where you want to live, whether you would prefer buying your own home rather than rent, saving for retirement through work, setting up additional Roth IRA accounts, and setting up a vacation fund.

Most importantly, don’t lie or hide crucial financial information from your spouse because you are embarrassed or fear a potential fight. Face the music by admitting your mistake and ask your spouse for help in understanding the matter.

2. Set Up A Time To Talk About Money

It is a good habit to find a standard time to discuss a range of money issues together. You want to make sure you are on the same page regarding short term financial goals. Those goals may impact your long term plans if you breach your ability to save to buy a home. Also, couples should set aside money for an emergency fund for unexpected costs.

Initially, try to meet weekly to establish this as a regular event. You can call it a “money date” and talk over coffee or dinner. It should be informative and not stressful. You should use this time to get comfortable talking about money issues. One person may be a spendthrift, buying only the highest quality, and the other one is thrifty, often purchasing low quality.

Having a discussion is an excellent way to clear up misunderstandings over one spouse’s purchases while the other person wasn’t happy about the amount spent. We have all been there at one time or another when we couldn’t resist a salesperson’s pitch to us.

Have Monthly Meetings

After the first few weeks, consider a regular monthly meeting convenient to your schedule. Gather financial documents, bank statements, budgets to review together. Both spouses are entitled to know their financial situation clearly and correct any divergence from their goals on a timely basis.

3.Tell Your Spouse What You Earn

Generally, it is a good idea to share your salaries as a combined baseline income. However, one person may have a predictable salary while the other person may depend on annual bonuses, commission, or self-employed, receiving less predictable lump sum payments. You will need to figure out how much you both earn annually.

Whether you are not sharing with your spouse what you earn or hiding debt from your partner, you impair their right to know about these financial issues. Surprisingly, CreditCards.com reported that only 52% of individuals believe their significant other is honest.

For budgeting purposes, you will need to know your household’s combined income. It will be essential to create a monthly household budget to track savings and expenses. You should be working together towards your financial goals. Iron out any fundamental differences.  You should also know your net worth, tracking your assets and liabilities.

4. If/When Finances Merge

Among the most challenging decisions for any new couple is whether to combine finances and divide up money responsibilities. There are many tasks to take care of, such as managing money day-to-date and dealing with long-term issues.

Own or Joint Bank Accounts

Traditionally, married couples open joint bank savings and checking accounts. Often, one spouse may earn more than the other.

Increasingly, both spouses earn their income. Both spouses should be responsible for saving and spending in line with their goals. If they were married later in life, they might have accumulated assets and debt, notably a student loan and credit card debt. They may want to protect their individual owners.

Have At Least One Account That Is Yours

For many couples, it makes sense for each person to have their accounts. Each of you may have automatic paycheck deposits and employer-sponsored retirement accounts. It is likely you have respective bills for entertainment, clothing, jewelry that you are paying on your credit card.

You can each allocate a pre-determined percentage for savings to the joint account based on your respective incomes. Joint accounts can be for distributing your income for household savings, investing, routine or monthly fixed expenses.

Some of these savings can be put into the household’s emergency fund for surprise expenses.

5. Divide Financial Responsibilities

You should decide how to share responsibilities for financial tasks. Among the jobs are paying monthly bills, monitoring credit card accounts, establish an emergency fund, paying taxes, charitable giving, reviewing credit reports periodically, and your budget. Determine which one of you is financially more capable for various respective tasks.

Your monthly budget and net worth statements are essential tools. Track your income from all sources, less all fixed and variable costs.  Review your discretionary spending and consider limits if you are overspending.

Net worth statements will give you a snapshot of your assets divided into cash, and other financial assets. You want to track your debt amounts from your monthly credit card balances, student loans, mortgage, and car loans. Consider reducing debt to manageable levels, especially any high-cost debt usually from your card balances. Pay these monthly balances in full and zero out that debt.

Related Posts:

10 Reasons Why You Should Know Your Net Worth

How To Pay Down Your Debt For Better Financial Health

How To Control Spending With A Simple Budget

Why You Need An Emergency Fund

6. Spend Less Than Your Combined Income

To spend less than you earn is easier said than done. If you are paying more, then you are relying on your credit cards or loans.

Put yourself and your spouse on a limit that you both agree to, which coincides with your targeted budget goals. For example, if your savings target is 10% of combined income, but you are finding it tough, rein in your spending.

Ultimately you want to maximize your saving and investing for greater financial security for your current household and your retirement years.

Related Post: 10 Ways To Better Manage Spending

7. Long Term Financial Planning

You and your significant other need to be on the same page whether you are dealing with day-to-day financial management or long term planning. Any shortfalls in the near term, such as reluctantly high debt, need to be worked to realize your long term goals.

Consider going to a financial advisor or planner to help you develop your plan more aptly and become more successful financially and in your relationship. You and your partner will need to make many complex decisions over the decades that you will be together. A planner can take some of the angst away.

Related Post: How To Choose A Financial Advisor

8. Strengthen Your Financial Skills

Most of us did not have a course in financial literacy in high school. Having necessary financial skills is essential for everyone for day-to-day transactions as well as long-term planning. Take a workshop, read personal finance blogs, listen to podcasts, YouTube videos and TED Talks.

9. Be Happy With Your Partner Or Go For Help

No one enjoys confrontation, particularly about money. However, when we have financial issues we often do. The truth is that our lives revolve around money. Making, spending, saving, borrowing and investing money. We do it together and often apart.

Let’s make a pact to talk about money more freely and discuss financial goals together. You will be happier with your partner if you can plan together. Sometimes you need to go for help financially. If you can’t communicate honestly, consider a marriage counselor.

Subscribe to our free Personal Finance email course delivered to you. We can help on a range of topics that can get you started!

 

How do you talk about money with your spouse or partner? It is difficult for all of us. We can all gain from each other’s insights. Please share your experiences as to what works for you. We would love to hear from you!

 

 

 

 

 

 

 

 

 

How To Save Money When Grocery Shopping

How To Save Money When Grocery Shopping

The pandemic has reshaped our lives in many ways. We are home more due to social distance, remote work, distance learning, traveling, and dining out less. We have spent more on grocery shopping to accommodate this “new normal” lifestyle. 

We were surprised to see a panic buying cause of shortages on store shelves for food and toilet paper. We recognized that as we spent more time at home, we had more significant needs. With vaccines becoming more available, we can start to see the light at the end of this very long tunnel to our regular lives. Hopefully, we will sport some new and improved financial habits. Americans are saving more time money, becoming more frugal.

We can save money by using grocery shopping tips to consciously change our ways. First, let’s take a look at some grocery statistics.

 Grocery Statistics

The average household spent $8,169 annually or 9.9% on food in pre-pandemic 2019. There are 2.53 people in the average household. Roughly 57% of the amount spent was for food at home and 43% for dining out. This year, many of us remained home rather than dining out. 

According to a Lending Tree study released in October 2020, the average consumer weekly grocery spending increased 17% due to the pandemic to $190 from $163.

C+R Research reported that most Americans (85%) found grocery prices have been higher during the pandemic. 

Before the pandemic, the 2019 American Time Use Survey showed the average shopper spent 41 minutes in the grocery store. That time may decline as we make more purchases online.

Ways To Save Money When Grocery Shopping

 

1. Have A Reasonable Shopping List

The better your shopping list is, the more productive your experience. Make your grocery shopping list as specific as possible. Peruse your pantry, frig, and freezer for what you have. I leave a pad on the counter for things we run out of to form our next list.

My kids aren’t that reliable in writing their preferences down, which are frankly more junk food-oriented. When I come home from shopping, and their stuff is missing, I feel it is their responsibility. They have gotten remarkably better at adding to the list ahead of time.

It saves time and stops us from meandering down all the aisles. I often give myself just enough time to buy what I need. When shopping for groceries without a list, I find surprises in my cart. It feels like somebody possessed me. I bought things we didn’t need but forgot the items I needed to cook with that evening.

2. Use Unit Pricing As A Great Tool

Unit pricing is a valuable tool to use to help you find the best prices. The price label on grocery shelves usually includes the unit price for the product. Sometimes in small writing, the unit price tells you the cost of the product in ounces or pounds, allowing you to compare the price of different sized packages better. Larger sized products and store brand items often have a lower unit price but not always.

Take the case of buying carrots:

  • One pound of baby carrots,  $0.99 ($0.99 per pound)
  • Two pounds of baby carrots, $1.89 ($0.94 per pound
  • One pound full-size carrots   $0.68 ($0.68 per pound)

If you have time to peel and cut the carrots, the full-size carrots are the better deal. All you need is basic math to make better buying decisions.

A Teachable Moment With My Son

Tyler had bought one ounce of cashews at a small grocery store with about 18 cashews for $4.99. He was “starving” on the way home from school, about a 15-minute walk home. We had just bought a large container (40 ounces) of cashews from Costco a day earlier. He had asked for them.

I asked him to do the math. He then realized he had paid 10x more for his little plastic cup. Incidentally, Costco sells that large-sized Kirkland cashews for $26.99. Just saying!

3. Cut Your Fresh Produce and Grate Your Cheese

In a pinch, I will buy fruit, cheese,  and veggies, cut up already. However, I find cutting fresh produce very therapeutic. They stay fresher longer, tastier, and are less expensive. I have all the tools–shredders, graters, dicers–and I use them as needed. However, I enjoy the feeling of cutting a cucumber or carrots. It may not look as pretty (so I have been told), but it is a relaxing activity.

Making our salads and experimenting with dressings has been fun and rewarding. Alex always asks for the recipes, but they are different each time. We have also bought bagged greens or salad packages to save time but feel better about our own. Saving money is a collateral benefit when you are enjoying your salads more.

Grating your cheese from a block is better compared to pre-shredded packages, which can spoil faster.

There is still way more processed food such as Kraft Mac and Cheese than we should have in our home. On American shelves since 1937, I’m sure I am not alone in hoping that one day these boxes disappear.

4. Leftovers Provide Benefits

Leftovers are the bane of so many people’s existence. Not to me. Growing up, we had leftovers though we never called it as such. My mom, a Holocaust survivor, believed in plentiful portions, eating at home, never in restaurants, and having a refrigerator filled to the gills. We didn’t discard food in our home.

Sometimes, leftovers, specially marinated recipes, taste better the next day. I view leftovers as extra portions after purposefully making more to freeze or have the next day or so. Having leftovers save time and money at the grocery store, in the kitchen, and searching for a new recipe. Certain foods are better (lean proteins, vegetables) the next day than other foods. 

I repurpose leftovers for snacks, breakfast, add-ons to other meals. Leftover chicken or salmon is excellent as a salad. As such, these portions provide me with some flexibility and feedback if I know my family liked the meal in the first place. I’m not a great or even a good cook, but I enjoy feeding my family.

 5. Bring Your Phone

There are good reasons to have your phone available. The calculator comes in handy for crunching unit prices, comparison shopping, or playing upbeat music to pick up your pace. It’s a good alternative to overcome piped-in Musak used to slow down your shopping.

6. Use Cash To Avoid Overspending

Credit cards are more convenient when I have significant grocery shopping to do. You can track your spending better. Plus, getting some money back is satisfying if you are using a cashback rewards credit card. However, I often use cash to pay for groceries as a way of limiting my purchases. You can still use some money and get rewards if you are in a store loyalty program.

When using limited cash to pay for groceries, you are increasing your pain which curbs overspending. As such, it is easier to budget.

7. Bulk Buys Don’t Work For Everything

When it comes to bulk buying, my husband, Craig, and I are different shoppers. When Craig goes shopping and sees sales on produce, he is liable to overbuy some things that aren’t bargains at the end of the day. He bulks up on perishables or non-perishables alike.

Buying in bulk does make sense for certain products that don’t have “Best by dates.”  Many household products fit that bill, such as paper goods, cleaning, or items you use frequently. If we buy too much of something like shampoo, my kids often overuse it. A lot of these items take up a lot of space. Family and friends envied us for having so much toilet paper during the early days of shortages. We mailed some rolls to friends. I am not kidding!

Perishables Are Not Good Candidates For Bulking

My daughter, Alex, was going through a veggie stage, asking for red peppers. Craig saw a pepper sale and came home with huge packages, amounting to 24 red peppers! After two peppers, Alex was bored with them. I used them for many recipes over the next week or so, then froze some, but we had some spoilage.

The next day, Alex wanted Brussel sprouts, cauliflower, and cucumbers. Of course, Craig found a sale and bulked up again. I am appreciative that Craig was doing a lot of the shopping those days. However, I finally pointed out the amount we were throwing out was outweighing the cost savings. There are better cost savings when buying large quantities of non-perishable items. That is not true when perishable food spoils.

 8. Buy Generic Brands

Buying generic brands for food, drug, and household products at supermarkets and wholesale stores are a terrific way to save money.  A generic brand for a consumer product is typically sold without a widely recognized name and is usually not promoted by expensive brand advertising.

Brand marketing for products is higher for often the same quality when you buy name brands. The private brands (also known as private label or generic brand)  and the name brands are often sitting next to each other, so it is easy to compare the ingredients’ labels. They are usually identical except for the price, with the generic brand costing one third-to-two thirds less. These savings are very worthwhile.

Kirkland Signature, a store brand, accounts for 25% of Costco Wholesale revenues.  Several notable brands—Starbucks, Duracell, Huggies, and Grey Goose—are manufactured under a private label by name brands with varied savings of up to 50% on some items. https://hip2save.com/tips/brands-behind-costco-kirkland-signature/

9. Buy In Season

“For everything, there is a season.” These lyrics are from “Turn! Turn! Turn!” written by Pete Seeger and originated in the Book of Ecclesiastes. The words are a reminder that we should value our seasons. And so too, our seasonal foods. Sure, it is always fun and convenient to get a pomegranate when we want to have one.

Transporting produce is easier done these days, but if they are sourcing overseas, that country’s pesticide regulations may differ from ours. Convenience is not a good enough reason to eat out of season.

On the other hand, the cost of seasonal food is cheaper because farmers are harvesting in abundance. Fresher food is tastier and retains more nutrition than food consumed out of season.

10. Go To The Farmer’s Market

As a result of the pandemic, we have shopped less from farmers this year. I missed doing that this year as that is a fun experience to do.  Farmers are typically proud of their offerings,  appreciative of your purchases, happy to share information about their crop. We buy food from the farmer’s market for its freshness, organic, and uniqueness but not necessarily because it is cheaper.

However, buying eggs, cheese, and produce from the farmer’s market is usually better and cheaper. You are also supporting the farmers who have had a tough year.

11. Certain Stores Have Different Purposes

There are many different types of stores that sell groceries. Supermarkets have significantly more choices, such as Publix, Wegman’s, Safeway, and Aldi’s. We have shopped at Aldi’s, which has great prices. Wegman’s recently opened nearby, and we have found reasonable prices, especially for their private brands and excellent service. Their meat counter is accommodating and will cut to the size we need at the same price.

Superstores like Walmart, sell food and household items at affordable prices. Also, they sell clothing, gardening, games, and much more.

We have been members of warehouse clubs, favoring Costco’s, especially for Kirkland Signature, and to a lesser extent BJ’s. Membership pricing has gone up, but they offer value.  In recent months during the pandemic, we have avoided these larger stores. These stores are great when bulking up properly. Trader Joe’s and Costco are exceptionally terrific when you return food without question that has spoiled or doesn’t taste right. We have done it infrequently, but everyone I talk to says the same thing about these retailers.

Aldi’s and Walmart are perfect for grocery staples. Amazon and Walmart are great for buying nonperishables online. I buy a variety of things at Ocean State Job Lot, from spices to hand sanitizer, when no one else had it.

On the other hand, our local grocery store is typically more specialized, smaller, often more pricey. That said, we favor them for their neighborhood feel and want them to do well.

Convenience stores are for grab and go stops to pick up eggs, coffee, bread, and milk at a gas station. Drug stores can serve a similar purpose with like prices for specific food items.

12. Know Store Policies, Sales Cycles

All stores have their own sales cycles, which vary every six-to-eight weeks. The key is to know your store’s predictable cycle to make your purchases at their lowest price points. This information can be found in-store ads, on websites, or ask in the store. You can also find more discounts on certain items during the quieter morning hours.

Certain stores have coupon policies that allow “coupon stacking” meaning you can use both the store coupon and the manufacturer coupon. Retailers may give you twice the discount on whatever coupon you use or double couponing. Some stores will take competitor coupons.

 13. Use APPs, Coupons, Rebates, And Other Tools

Technology has evolved for the grocery shopper to save more money. The first coupon was created by the Coca-Cola company in 1887, providing a free sample of the one-year-old drink. The rebate coupon became popular though there have been skeptics. Craig has been an avid user of coupons for years and is a loyal shopper at certain outlets.

There are useful apps for saving money on groceries, notably using Ibotta, Checkout 51, Rakuten, among others. We can’t do full justice in this article for all the apps that can be used efficiently for savings and will do a standalone post soon.

14. Grocery Owners Use Marketing Psychology

All retailers use behavioral psychology to form biases that cause us to spend more money than we should. We discuss cognitive and behavioral biases here.

Grocery store owners use their trickery to encourage us to meander and linger longer in the stores. That way, we will spend more money on higher-margin items, be attracted to colors like red sale signs, and use larger shopping carts than we need.

Here are just a few schemes they use:

Piping in easy listening Muzak to slow on our pace in the store and stay a little while longer.

Grocery store layouts encourage you to enter their stores by walking to the right, counterclockwise where revenues are slightly higher ($2 per trip on average). Most people, notably right-handed people, steer with their left hand and grab with their right hand. That is where the goods are. I am left-handed but conditioned to go in that same direction, right into the baked goods and produce area. Typical supermarkets want you to walk to the right pleasant smells, freshness, and beautiful colors.

The aisles are especially desirable places for retailers to want customers to go. There are displays in your way at the ends of the lane, which will be another way for customers to stay longer. Grocery owners fill their shelves with their higher-margin products on the shelves at eye-level. Manufacturer fight for this space and pay slot fees for desirable space.

15. Bigger Shopping Carts

The average family size in the US has not increased, and oddly the proportion of our spending on food has decreased to below 10% of income from far higher decades ago. So why has our shopping cart tripled since 1975?

Marketing consultant Martin Lindstrom has said that retailers tried doubling the size of the shopping cart as an experiment, resulting in shoppers spending 40% more on merchandise. Ever carry one of those little baskets? They can hurt and cause black and blue marks at least on my arms.

The giant carts are subliminally causing us to shop and spend more.

16. Order Online And Pickup Your Packages

New research reported that more than two-thirds of shoppers are buying online pick up in-store (BOPIS) for the first time, and more than half are spending more when doing so. The numbers were highest for April 2020. Even as grocery stores opened in May and June, they were at limited capacity.   

Still, online grocery shopping has some lasting benefits. You are less likely to purchase impulsively, more comfortable to compare prices, contactless payments, and more time-efficient.

https://app.convertkit.com/forms/designers/921706/edit

 

Final Thoughts

There are many ways to save money when grocery shopping. Our lifestyle has changed due to the pandemic, causing us to reconsider how we make purchases. We may realize lasting benefits as we improve our financial habits and time management. Buying groceries is a prime example of how we can save time, money, and become more healthy.

Thank you for reading! If you enjoyed this article, share it with others and come visit us at The Cents of Money and subscribe to get our weekly newsletter and more.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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