9 Ways Besides Black Friday Deals to Save Cash Over the Holidays

The holidays are rough for those of us on a budget and trying to save money. Many of us let this time of year become an excuse to break all our good habits with food, drink, and money.

patrick eating

Basically me at the holidays

I’m going to let you worry about your waistline, but as far as your wallet goes, I’ve got some tips for keeping it fat and happy this season so we can all start the new year with enough cash to sign up for those pilates classes we’re going to need.

Potluck Everything

One of the things I most enjoyed about moving out of my parents’ house was that my roommates and I could host our own parties. There’s something so cozy and happy about hosting parties, especially around the holidays. It makes you feel very adult and gives you a great excuse to clean.

Parties can be deceptively expensive, however. Food for everyone, plus drinks and decorations, can add up quickly. My friends and I quickly jumped on the potluck train. Almost every gathering we have, everyone brings food and drink to chip in. This month, we did a potluck Friendsgiving! It means no one spends way more than they would normally and the person hosting can relax a little more.

There are several other non-financial perks of the potluck method of party hosting: the host isn’t left with tons of food or pots to wash since everyone takes their own dish back, everyone gets to share favorite recipes or traditions with friends, and everyone knows there’s at least one dish or drink at the party that he or she likes!

Pro tip: If you host these types of gatherings a lot, keep a collection of take-out containers you don’t care about that people can use to take leftovers home with them. If you want a stash, Costco & Amazon sell packs of 50 plastic containers.

Warehouse stores

Speaking of Costco, I think the holidays are when warehouse stores like Costco, BJ’s, and Sam’s Club really come into their own. By stopping by your nearest warehouse giant, you could save a ton on decorations, food, drink, and of course gifts.

I LOVE the book section of Costco, and it always has a selection of cool toys and outfits for little ones. You won’t find the biggest variety ever, but what they do have is usually quality and a reasonable price. Plus, with their amazing return policy, you know you can always get something else should your gift not fit or go over well.

Coupons

When you’re buying something from an online store, don’t just skip over the coupon code box. I always do a quick search for coupon codes before checking out, just in case they’ve got something available.

Keep in mind that some companies, especially the start-up brands like Bombas, Harry’s, Blue Apron, etc. advertise on podcasts and blogs and usually offer a deal of some kind if you sign up for a trial or order using a code from that blog or podcast. If you’re buying someone a subscription or trial as a gift, this could be a great way to save some cash, and you’ll be helping to support media that you like.

If you’re bad at remembering to look for coupon codes, add a browser extension like Honey, which will automatically look for codes and coupons when you buy online.

Coupon apps like Ibotta or Ebates can also help you scrape back a little moolah from online or in-store shopping. I’m a very casual user of the Ibotta app, but I’ve still managed to get $135 back on groceries over past couple years. Buying the fancy brand of cranberry sauce for your very particular Aunt Sharon isn’t so bad when you’re getting a little cash back.

Credit Card Rewards and Deals

A bunch of credit cards have monthly deals with certain stores or brands to get you discounts or cash back. Currently, my American Express Blue Cash Everyday card is offering cash back on car rentals, restaurants, hotels, meal kits, and a TON of retail stores and brands.

The trick is that you often have to sign into your account and manually select which deals you want to add to your card. Otherwise, your purchases won’t count.

Screen Shot 2018-11-23 at 1.46.59 PM

To get these deals, you first have to punch that button on the right!

Check out what rewards or deals your credit cards might be offering. If you’re traveling or brand-shopping this season, you could see a nice bunch of cash coming back to your account.

Of course, since you have to use your credit card to pay for these items in order to get the cash back, make sure you aren’t charging more than you can pay off at the end of the month. Responsibility is the name of the game when credit cards are involved!

Stacking Deals

If you’re really looking to get crafty with the savings, look for ways to stack deals. This can be tricky, especially online, because a lot of coupons and codes are designed to only work alone. However, there are ways you can stack deals to save a few bucks on those things that make the holidays special.

By using a combination of those credit card deals I just mentioned and other available discounts, you can still effectively “stack” deals. The same credit card I mentioned above offers $10 back on $200 of Amex gift cards. If you buy the gift cards and use them yourself to buy discounted gifts, you’re saving at least $10 more than you would have, and more than that if the gifts you buy are on sale. It’s more work, but might be worth it if every dollar matters.

Warehouse stores like Costco (can you tell I love Costco?) often sell gift cards for less than they are worth, too. If you’re the kind of person who loves to gift experiences, these gift cards can be amazing, affordable solutions to gifting (especially for your far-away peeps).

Groupons

Long-distance family and friends are also great candidates for gifting a Groupon to. Groupon is always running deals on experiences like classes, workouts, dinners, tastings, and spa days. There’s nothing like having a Groupon to spur you to try out that class or restaurant you’ve been eyeing.

Check out what’s popular in whatever city your recipient is in and send him/her your gift wrapped in a lovely email. Free delivery!

Have a cash budget

If you’re worried about overspending, try setting up a cash budget. This could be as simple as writing “Holiday $$$” on an envelope and stuffing it with the amount of cash you’d feel comfortable spending over the holidays.

When possible, use that cash to buy your gifts, ingredients, and decorations. If you HAVE to buy something online, take the same amount you spent out of the envelope and put it in a savings envelope. When you run out of cash in your envelope, you know it’s time to halt the holiday spending.

Scout online, buy offline

If you’ve got a good idea of what you’re looking for, see if you can scout out the best deals and prices online first, then pick up your items in person at the store. You might save on shipping costs, and online customer service sometimes just can’t measure up to in-person conversations.

Also, buying items in person gives you the option of paying in cash, which can be safer than entering credit card data online. Handing over cash is also harder than swiping the plastic, so you’re more likely to stick to your budget if you have to pay in cash. (See the above cash envelope budget!)

If you don’t have a credit card, buying in person is DEFINITELY better than using a debit card online. Should your information be compromised, a debit card gives thieves access to your entire checking account, and you may have a fight on your hands to get that money back.

DIY

Making gifts by hand can be a fantastic way to save cash while also making sure everyone on your gift list gets a personalized, thoughtful gift. This can be super helpful if you have a long list of giftees and a limited budget.

Before you say “I’m not crafty, so I just CAN’T make a gift,” I’m not saying you have to cross-stitch, sew, paint, hammer, or anything you don’t feel comfortable doing. If that’s your jam, hop to it! If the idea of DIY makes you sweat a little, why not look at finding something that already exists to dress up or personalize?

One year, a friend of mine gave all her friends flavored oils and vinegars. She had found some decorative bottles, filled them with nice, but plain olive oil or white vinegar, and packed herbs and spices in them to infuse them with flavor. She printed labels to personalize each bottle, and voila! The gift was cute, personal, hand-made, and useful!

olive-oil-greek-oil-olive-53502

Fill a bottle like this one with nice olive oil, and infuse with rosemary, garlic, or other flavors.

Whether it’s painting ornaments, designing personalized mugs, making wreaths, pouring candles, or whatever, DIY gifting is a heart-felt way to make your friends and family feel special without sacrificing your financial stability. Fire up Pinterest and get inspired!

Wrap Up

The holidays are a wonderful time to celebrate your relationships with friends and family. Don’t let the financial side get too out of hand though, or pretty soon that rosy, feel-good feeling of being Santa Claus is going to give way to the sweaty, uncomfortable feeling of being broke.

The holidays mark the end of one year, but remember the beginning of the next year is just around the corner. Set yourself up for success in January by being smart about your holiday spending. Reward yourself with an extra piece of pie or glass of eggnog instead. 😉

Welcome to 2018! What’s Your New Hotness?

Hey there, welcome to the new year!

You feeling that New Year, New You vibe? Me too. I’d just like to throw out a little question to all the money nerdlings out there:

What’s the new hotness in your life?

Is it a present, a person, a pet?

This year, I want you to consider making your wealth the new hotness.

Consider that this time next year, you’ll be another year older and another year forward in your journey to where you want to go.  Imagine looking back on 2018 and saying “This year, I took steps to make sure I’ll never be broke again,” or “Because of what I saved this year, I know I’ll have enough money to retire,” or if you’re competitive, even “I took charge of my money this year and I’m now secretly wealthier than all my friends.” Wouldn’t it feel AMAZING??

Whatever your motivation is, use it to make 2018 the year you build your financial foundations. Learn what you don’t know, Save what you can, and Grow your wealth.

It’s easy to get swept up in the all the possibilities a new year brings. Maybe you’ll finally get those 6-pack abs, or that hot BF or GF, or that promotion, or that round-the-world trip. I hope you get all those things.

But in the meantime, keep Learning, $aving, and Growing. You can do it!

Love,

Elizabeth Signature

What is an IRA?

When I graduated from college, my dad sat me down and explained that he wanted to help me open up a Roth IRA.

A what-now?

This did not sound like fun.

I figured anything that is named by a bunch of letters is usually complicated and when it comes to money, complicated is scary.

scared boy meets world

Basically me when I first heard the words “IRA”

As he explained what it was and how it worked, though, I started getting a little excited. And when I did my own research, I got a lot excited. Turns out, IRAs, particularly Roth IRAs, are pretty darn cool.

If you’re nervous about finances the way I used to be, it may sound crazy-pants to get excited by something that sounds both boring and confusing.

Fear not. I’m going to walk you through the important basics of IRAs and before you know it, you’ll be able to throw the term “IRA” around like you’ve always known what it means. You MIGHT even get a little excited.

Let’s get started.

What does IRA stand for?

IRA stands for “Individual Retirement Arrangement” although many people just say “Individual Retirement Account” because it makes more sense that way.

What is an IRA?

It’s a retirement account. This means it’s designed for you to put money in it, then invest that money in stocks and bonds, then sell those and take your money out gradually when you retire. Money in your retirement accounts is the money you will live off when you aren’t earning an income anymore.

Where can I open one?

You can open an IRA for yourself without going through an employer. Most brokerage firms, like Vanguard, Fidelity, Charles Schwab, and even E*Trade offer IRAs.

Who can open an IRA?

Anyone, including children, can open and put money into an IRA as long as they earn money somehow. It doesn’t matter whether you have a full-time job or if you babysit or shovel snow as a side gig, you can open an IRA as long as you earned some money and are reporting it to the government. No earned money? No IRA.

Parents can contribute to their child’s IRA as long as the contribution isn’t more than the child earned that year.

How many types of IRA exist?

There are four types of IRA, but we’re going to focus on the main two today: Traditional and Roth IRAs.

The Traditional IRA

The OG IRA.

You can put money into a Traditional IRA before you pay income taxes on it, so you avoid paying taxes on that money right now.

Instead, you pay the taxes when you withdraw the money in retirement. Anything you take out once you reach age 59½ will be taxed like income.

Taking anything out of the IRA before that time will cost you a 10% penalty.

The maximum amount you can put into this account per year (your “contribution“) is $5,500.

**UPDATE: Starting in 2019, the new max is $6,000!

Traditional IRAs are great for when you’re making a really nice salary and are getting closer to retirement.

The Roth IRA

Roth IRAs are the best for young or lower-income people.

Roths allow you to put money into them after you’ve already paid the income tax on it, which means you pay taxes now.

However, all the money you pull out after age 59½ is tax-free, INCLUDING any money you make by investing what you put in (money you make with investments is called “gains“). Income that’s tax-free?! Yes, please.

If you need to, you can take out the money you put into a Roth IRA for free at any time. You CANNOT take out your gains before age 59½ without paying the 10% penalty, but at least you have access to some of the money in the account without having to pay extra. Not that you should ever take money from your retirement account before retirement, but it’s nice to know it’s there.

The maximum amount you can put into this account per year is $5,500.

**UPDATE: Starting in 2019, the new max is $6,000!

Roth IRAs are great for when you aren’t making a ton of money because you pay smaller income taxes now and avoid paying taxes later.

PSST…if this is all a lot to take in, here’s a printable that lists these differences:

The ABCs of IRAs Printable

Which is better?

If you start your IRA early, the chances are good that you will make significant gains on that money, so a Roth is the better choice. Paying taxes on your lower income now will allow you to pull out a nice income during retirement without paying a dime of taxes on it.

As you get closer to retirement, Traditional IRAs often become the better option. The more money you make, the higher your taxes are. Most of us will make more as time goes on, and Traditional IRAs let you avoid paying heavy taxes on some of your income when you’re earning the most.

When you retire, as long as you pull less money out of your account than you used to make, you will pay less in tax than you would have using a Roth.

Confusing? Let’s look at some numbers.

Warning- Math Ahead

Let’s say you make $35,000 at the age of 20.

Using a Traditional IRA

In 2017, you would be expected to pay $4,784 in income tax. That’s not a fun number, so what if you contributed $5,000 of your salary to a Traditional IRA? Your income would now be taxed as if it were $30,000 instead.

That lowers your tax bill to $4,034, saving $750! Nice. If that $5,000 grows at about 5% for the next 30 years, even if you never add anything else to the account, you’d have $21,610 when you were 60 years old.

You could then pull out that money, but you’d have to pay $2,775 in tax when you pulled it out (assuming the tax rates are the same in thirty years!). That brings your total tax paid to about $6,809.

Using a Roth IRA

But let’s say you pay that $4,784 of income tax and then put $5,000 into a Roth IRA. You would make that same $21,610, but wouldn’t have to pay any tax on it when you used it at age 60, so you’d end up paying $2,025 less than you would by using a Traditional IRA.

If you contributed regularly to your IRA, you’d see this play out with much bigger, sexier numbers, but the basic idea is the same. As long as you can, you should contribute to a Roth IRA.

What’s the catch?

These IRA things are starting to sound pretty awesome, right? But, of course, there are some rules that limit how much we can take advantage of that awesomeness.

First, you can only contribute $5,500 per year to your IRAs, total. So, if you have both a Traditional and a Roth IRA, you can put part of that amount, say $2,500, into one, and the rest, $3,000, into the other, but you can’t contribute more than $5,500 between the two.

Also, Roth IRAs have income limits. This means if you make more than $118,000 as an individual, you aren’t allowed to contribute the full $5,500 to a Roth IRA until your income drops below that number again. Once you make more that $133,000, you aren’t allowed to contribute to it at all. Similar rules apply if you are married. For a chart that helps clarify what the income limits are for a Roth, check out Fidelity’s chart.

There are no income limits for a Traditional IRA, though, so if you are lucky enough to be making too much to put money in a Roth, contribute to a Traditional IRA instead.

Lastly, the early-withdrawal penalty I mentioned above can be painful if, for some reason, you HAVE to take money out of an IRA. All the more reason to set up an emergency fund.

Wrap-Up

The Benefits of IRAs

An IRA is a great way to stash away extra money for retirement. If you are already contributing to a work retirement account or if you don’t have an account through work, an IRA can help you stay on track to afford retirement.

Also, the fact that anyone earning income can contribute to an IRA means you can get a jump start on saving before you’re even in a full-time job.

The Potential Pitfalls

Like most retirement-specific accounts, IRAs have rules that punish you if you take money out too early. That doesn’t mean you CAN’T get to that money if you absolutely need it, but you may pay a 10% penalty for taking it out early.

There are exceptions to these rules, especially with a Roth, which is yet another point in its favor, but try to think of money in an IRA as off-limits.

And now you know the basics of an IRA! Congrats on making it through. As a reward, here’s a puppy in a cup!

chihuahua-dog-puppy-cute-39317.jpeg

Now, go open yourself a Roth and start stashing those extra dollars!

 

Disclaimer: None of the companies, apps, or websites mentioned in this article paid me to mention them.

How to start getting your finances together

crazy cat nebula

Does the topic of money make you feel like this? You’re not alone.

Probably the most daunting hurdle in your quest to get smart about your money and build wealth is the very first step: getting started.

Dealing with money can seem scary and feels like a huge chore, so it gets treated like the laundry you don’t really want to do — left in a dark corner until it starts to smell a little.

Ew.

The trouble is that time is one of the most important parts of the wealth equation. Given enough time, even a small amount of money can grow into a tidy sum.

So how do you get started building that little nest egg of yours when you are young, inexperienced, and probably not rolling in cash?

The trick is to keep it simple to start. By taking advantage of 4 types of accounts, you can build yourself a great financial foundation.

The Basic Accounts

Checking

Checking accounts are one of the basic bank account everyone needs. They are usually where your paychecks get deposited and where the payments for credit cards, checks, and even PayPal, Venmo, and other online payment systems come from.

Quick Tip: Look for checking accounts that allow you to pull money from any ATM with no fees or will refund your ATM charges. It’s a nice little perk that you’ll appreciate when you don’t have to hunt down the “right” ATM in a hurry.

Most checking accounts don’t pay interest; you may find one that has an interest rate, but it’ll be really low, so don’t count on your checking account to make you any money. It also shouldn’t be the place you stash your cash for the long term. Keep a comfortable amount in it to pay your bills, but your savings belong somewhere else.

Saving

As boring as it sounds, the best place for your emergency fund or savings you might need soon is in a savings account. Savings accounts can do a lot of what checking accounts can, but, with higher interest rates and no checks or debit cards attached to them, they are designed to be better places for money to sit than checking accounts are.

Not every checking or savings account is alike, however, and I would suggest using a tool like Magnify Money to shop around and find accounts with a decent interest rate and no weird hoops to jump through. Remember, there’s no rule that says your checking and savings accounts have to be with the same bank. Mine aren’t.

Many of the savings accounts with the best interest rates are online-only banks, which means you’ll have to have a checking account to connect to the savings account in order to add or remove money.

Personally, I like the idea that I have to wait a couple days for access to my online savings. The delay makes it really hard to spend that money. However, if you want or need access to your money more immediately, you might want to stick to a checking account or a savings account with a big-name bank that has physical locations. Just know you will be sacrificing interest rate for convenience.

As you get further along in your financial journey, you’ll be able to move some of that cash around and maybe make some more advanced decisions on how to save or invest it, but for your initial emergency fund, I think a savings account is the way to go. Hop over to our post on choosing the right savings account for more help with getting yours set up.

Investing Accounts

Investing is where you can really kick up your wealth-building game. Once you’ve gotten the hang of using your checking and savings accounts, investing is the next step. Without investing, anyone with an average salary is just not going to be ready for retirement.

If you’re a little lost when I say “investing” take a look at our What is investing? article, then pop back!

Retirement Accounts

Everyone needs some kind of retirement account. If you’re lucky enough to have a job that offers a 401(k), that should be your primary retirement account while you’re in that job. Other people might have IRAs, 403(b)s, or another type of account. Many have some combination of these.

Why open a retirement-specific account? Unlike standard savings accounts, these accounts are designed to be ideal places for your retirement savings. By investing your money in a retirement account, you’re likely to see much greater returns than in even the highest-yielding savings account.

Also, if you get on board with a retirement account offered by your employer, you’ll probably also have the opportunity to get some free matching money from that employer.

Even better, contributing to your retirement account often comes with immediate tax benefits, so you could be doing yourself a double favor by saving for your future and getting a tax break. Even those accounts that don’t give you a break on the money you put in usually make up for it with a tax break on the money once you begin to pull it out of the account in retirement.

Every type of retirement account allows you to invest the money you put into it. Some accounts offer more limited options than others, but there’s always a way to help your money grow while you’re just going about your everyday life.

Brokerage Accounts

If you’ve got a full, safely stashed emergency fund AND you’re maxing out your retirement accounts, the next easiest way to invest is through a brokerage account.

Brokerage accounts allow you to buy and sell stocks and bonds. These are TAXABLE accounts, so any gains you get when you sell what’s in them will be taxed as income that year, so be careful. For those of you with money nerves, a couple of low-cost funds and maybe a bond or two are the easiest and least dangerous ways to invest a brokerage account’s money.

The advantages of a brokerage account include the fact that the money in them is pretty liquid, which means you can take it out of the account at any time without penalty, unlike a retirement account. You could think of a brokerage account as like a checking account, except you invest the money instead of keeping it in cash. The danger, of course, is that your investments could lose value and you could end up with less money than you started with. A good rule is to not invest any money that you think you will need in the next couple of years.

I strongly encourage you to learn all you can about how stocks and bonds work before jumping into this pool. It can be rewarding, but it can also be dangerous for anyone who thinks they can game the system and make tons of money on trading. The market doesn’t work that way.

Wrap Up

And there you have it: a basic, 4-account map of how to get started with money.

Can be money be way more complicated? Heck, yes.

Does it have to be? Not if you don’t want it to be.

By keeping things simple with your everyday money in checking and savings, you’ll minimize the effort it takes to track your income and expenses. Taking advantage of your retirement and brokerage investing options guarantees that your future self will have money when he or she needs it.

Quick Tip: Using a platform like Mint or Personal Capital can take the effort out of checking on your finances. After linking all your accounts to the program, you just need to open the app to see how much money you have in each account.

How do you keep your money simple? Share your methods!

 

Disclaimer: None of the companies, apps, or websites mentioned in this article paid me to mention them. I just like ’em!

What is an emergency fund?

This one’s pretty easy.

An emergency fund or “rainy day fund” is any money that you have set aside to use ONLY IN CASE OF EMERGENCY.

The purpose of an emergency fund is to be a safety net in case you have an unexpected bill that would wipe out your checking account.

Experts recommend keeping 3 to 6 months of expenses in your emergency fund. That means enough money to pay your rent or mortgage; essential bills like food, water, gas, and heat; and any other recurring costs like debt payments.

What is an emergency

Losing your job

Probably one of the most stressful things that can happen to most people is the loss of a job. For people living paycheck to paycheck, losing that income can spell disaster for their financial life. Having an emergency fund to keep you afloat while you hunt for a new job can take an incredible amount of pressure off you.

Car repair bills

Cars are expensive, man. When one breaks down on you unexpectedly, you might be faced with a bill totaling hundreds of dollars. If you rely on your car to get to work, that bill needs to be paid right away. Your emergency fund can swoop in and save the day, allowing you to pay that bill and get back on the road with minimum life disruption.

Medical or dental bills

If you, a family member, or a pet get ill or need dental surgery, medical bills can come at you fast. Of course, health and dental insurance will cover some of the costs, but you’ll be responsible for the deductible, at least, which can be thousands of dollars.

 

What is not an emergency

A great sale

Seriously. I know the pull of those great sales at Nordstrom Rack, Target, Sephora, etc. But just because something is on sale does not mean you should buy it. If you were already going to purchase that thing anyway, then get it, but with your normal spending money, not your emergency fund!

Upgrading anything

If it ain’t broke, don’t replace it. That’s the saying right?

Raiding your emergency fund to pay for the newest phone, computer, coffee maker, or whatever just because you want an upgrade is not a good idea. If your current whatever-it-is works fine, keep it until you can truly afford to replace it without weakening your savings.

Keeping your emergency fund in a separate account from your spending money is usually a good move. Keeping it just slightly out of reach will help you pretend it’s not there until you need it. Hopefully you’ll never need it, but you’ll be so glad you have it if you ever do.

How one teen started a business by accident

I tutor students during the week, and I always like to ask a little about what their passions are so I can get to know them a little better. This helps me tailor the lessons a bit, but also gets them comfortable in class.

Last week, I was working through a cost/revenue problem with a high school student and he just casually said “Oh, I get it. It’s kinda like the business I started.”

I’m sorry, but you can’t just say that around me and NOT expect to get quizzed about it. Afterwards, I asked him if I could share his story anonymously on here and he agreed. For the purposes of our story, I’m going to call him Evan.

Evan’s story

The business began with a hobby, which we’re going to say was building models. Evan was part of a group who built models together. At some point, Evan was looking to purchase some materials for his models and went looking online to find them. The cheapest decent items he could find were only sold in bulk from China. The price per unit was too good to pass up, though, so he bought a big old box.

Obviously, he had way more than he needed, so he started selling off the others to members of his hobby group. The next time those other people needed something for their models, they turned to him, and he turned to the internet again.

Soon enough, he was the go-to guy for model-building materials. Already, he had a little business.

What really kicked him into gear, though, was when a friend who attends a nearby university started a model-building club there and hit up Evan to provide gear for the club.

Evan suddenly found himself making enough money that he was able to quit the part-time job he had. He’s now saving money for college and planning how he’s going to move the business online so he doesn’t have to lug the boxes around himself.

Lessons to take away

I love this story for a couple of reasons.

First, Evan is a high schooler, but he’s already learned that he can take the idea of supply and demand and turn it to his advantage. He used his own needs to tell him where there was an opportunity and didn’t think “Oh, I’m a kid, I can’t do that.”

Secondly, when people in his club started asking him for other materials, Evan didn’t just tell them where to buy their own boxes, he took the initiative to order them himself. He saw the demand as opportunity and realized he could use his experience to help his friends AND himself. They still got materials for cheaper than they could otherwise, and he made some money.

Lastly, he is thinking of the future. He’s already done more than many people his age would have with his idea, but he keeps thinking about the next step. He said he plans to to continue the business in college, and he’s going to learn so much about entrepreneurship that I’m kind of envious.

Wrap up

Are you secretly yearning to be an entrepreneur? Take a look around at the stuff you take for granted. What activity or passion do you have that you could monetize?

Whether you sell a physical good like Evan is doing or you sell services like mowing lawns or scooping dog poop, there’s something out there you can try. And for those of you who are applying to college soon, I’ll tell you what I told Evan: taking initiative and putting yourself out there looks killer on a college essay. Go stretch your entrepreneurial muscles!

Need a little side hustle inspiration? Check out Side Hustle Nation’s list of potential side hustles to see if one could be for you. or Penny Hoarder for some ideas.

What is a 401(k)?

Welcome back to our What Is? series of posts. Today, we’ll tackle an exciting topic with a snooze-fest name — the 401(k).

The term 401(k) may look like something out of Algebra class, but it’s actually one the most important perks any job can offer.

More important than free food and a foos-ball table?

Oh yeah.

What is this mysterious number-letter combo and why does it matter so much?

401 huh?

Very simply, a 401(k) is a type of retirement account. Retirement accounts are designed to help you save money while you’re working to live off after you retire.

The name “401(k)” comes from the section of the Internal Revenue Service (IRS) rules that defines the rules for this account.

In 2018, you are allowed to contribute any amount up to $18,500 a year to a 401(k). Starting in 2019, that goes up to $19,000!

What’s the big deal?

These accounts are awesome for several reasons.

Reason #1:

If you sign up for your employer’s 401(k), you can assign a percent of every paycheck to be automatically put into that account. This means that money is safely squirreled away where you’ll never miss it. You’ll be saving with basically no effort on your end.

Reason #2:

Your 401(k) contributions are taken from your salary pre-tax, or before your income taxes are taken out. This lowers your income in the eyes of the IRS, which in turn lowers the amount of money used to calculate your taxes. So, by contributing to your retirement, you could also be saving your current self some moolah in taxes. When you retire and start withdrawing that money from your account, you will have to pay income tax on it, but you won’t be working, so ya know, it’s still not a bad deal.

Reason #3:

Probably the best thing about 401(k) accounts is that employers who offer a 401(k) usually “match” a certain percent of your contribution. What does that mean? If your employer matches up to 3% of your 401(k), that means that the first 3% of your salary you assign to be put into your 401(k) will be doubled by your employer, so you are effectively contributing 6%. That money is in addition to your salary and won’t be taxed until you withdraw it.

Let’s look at some numbers.

Say you earn about $35,000, and you contribute 3% of your salary to your 401(k). That works out to be about $1,050 a year. If your employer matches that 3%, you’ll actually be getting $2,100 a year going into your retirement account.

If you contribute more than 3%, good for you, but your employer will only match that first 3%.

How amazing is that? You’re essentially doubling your retirement contribution by taking advantage of your 401(k) — free money!

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What happens to that money?

When you sign up for a 401(k), you will usually be given a list of funds that you can choose to invest your 401(k) money in. Once you’ve done your research and chosen a fund or two, your money will be invested and will start to work for you, growing even beyond what you are contributing.

Once you reach age 59.5, you will be able to start taking that money out of the 401(k). If you take it out before then, however, you will be hit with a 10% fee, so try to imagine that money as off-limits until retirement.

Other types of accounts

Some professions have retirement plans that are different from a 401(k). If you work for a non-profit or for the government, for example, your retirement accounts will have different names.

Teachers and non-profit employees are often offered a 403(b) plan — named, shockingly, after section 403(b) in the tax code — which allows similar contributions to an account. These accounts work differently from a 401(k), however. We won’t delve into them in this post, but the fees and rules around each type of retirement account can vary significantly, so educate yourself on what those are before signing up for any account.

Can I wait to open my 401(k)?

No. Why would you?

It’s a lot to think about when I’m starting a new job.

Better to get the paperwork out of the way when you’re filling out all the other forms for your job than put it off for some mythical future date when you’ll magically have time.

I’m making so little money! Won’t it be better to wait until I make more?

If you start right away, you’ll never miss the money that comes out of your check, and you’ll be taking advantage of your most valuable asset — time. The longer you give that money time to grow in your account, the more money you’ll end up with down the line.

What if I need every penny?

Even if your starting salary is tiny, try to assign at least a percent or two for retirement. That’s about $200 a year from a $20,000 salary, or $17 a month. You can do this.

Future-you will thank you.

Do I really have to invest?

First off, if you don’t know what I mean when I say “investing”, check out What is investing? and then come back.

All good? Okay.

Instead of jumping into why you should invest, maybe we should address some reasons people have for not investing.

1. It seems hard

Many things seem hard or confusing before you try them. Algebra is mysterious and complicated until you learn the basics of math that make it work. Foreign languages are nonsense until you learn the vocabulary and sentence structure. Investing is the same. Also, there’s no rule that says you have to become an investing genius. You just need to know enough to understand where you are putting your money, what it is doing there, and when you plan to take it out.

2. It sounds risky

I like to think of investing like skydiving. It’s a lot of fun, but there are many different levels of risk. Some people like to throw their money into risky situations, chasing the thrill of the big win but always risking the big fall. These are the base jumpers of the investing world. (Seriously, base jumping is crazy.)

Some people like to take some bigger risks, but in a more controlled and planned way. These are the people who skydive, and invest, solo.

Most of us, however, prefer tandem skydiving. This way, we can enjoy the thrill while firmly strapped to someone who knows the ropes and won’t let us get out of control. Investing with the help of a financial planner or at least some guidance from a broker is the best choice for many of us, and that’s okay.

The one thing we can’t do, however, is just sit on the ground and watch others jump out of planes. It sounds super safe, but you end up missing out on a huge opportunity, and will probably regret it later when everyone else is reaping the rewards.
Long analogy short, investing will never be completely without risk, but neither is life, and there are plenty of ways to minimize your risk and still invest.

3. I’m not rich

Investing is so tied to the idea of wealth in our culture that it’s tempting to to think that the ONLY people who can invest are those who already have oodles of money, which is simply not true, especially today. The internet has made it incredibly easy for anyone to invest.

Many brokerages allow you to open investment accounts with small amounts, and there are several apps that are designed to allow people to easily set aside little chunks of money to invest. We won’t get into them in this post, but for now, know that they exist and being wealthy already is absolutely not a requirement to be able to invest.

4. I don’t understand business

If you want to work on Wall Street or in business management, a business or finance degree will definitely help you out. But if you’re just investing for yourself, there’s no degree required.

You should still educate yourself on how to invest and what investments might be best for your situation and values, but modern investment tools and financial planners exist so that you DON’T have to be an expert. It’s important to be aware of what’s going on with your money, but you don’t have to invest alone.

But can’t I just use a savings account?

Having a savings account is important, but it’s not enough on its own. At some point, you’re going to have to invest.

I know it’s hard to think about spending $100 today on something you won’t get to enjoy for years, maybe decades. It’s the ultimate delayed gratification. However, as hard as it can be to set aside that money now, it’s pretty much the only way the average person making an average salary can hope to become a millionaire. Given enough time and a little luck, the $100 could turn into $500 or more down the line.

Still need convincing?

Let’s look at the math!

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Don’t look at me like that, it’ll be fine.

The most recent U.S. Census Bureau data shows that the average household income in the United States in 2014 was $65,751. This includes both one- and two-income households. Let’s imagine you make exactly that amount. A very nice salary for a single person. (I’m going to ignore taxes for the sake of this math problem, FYI.)

According to the U.S Bureau of Economic Analysis, the average person saves about 5.7% of his or her income, which works out to about $3,748 a year for someone making the average household income.

If you socked that much away in a savings account every year for 30 years and got an average of 1.5% interest compounded monthly, you’d have saved about $147,767. Note that this interest rate is higher than you can get now, but may be lower than what you can get in the future.

Pssst. Did your eyes glaze over during that last paragraph? Need a refresher on compound interest? Hop on over to What is Compound Interest?

A six-digit bank account number is awesome, right? Except most people need from $800,000 to $1 million to retire comfortably today, and because of inflation it will probably be more by the time you’re old enough to retire.

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Yeah, sorry to burst that bubble.

Of course, you might be able to save more than $3,748 a year, especially because you probably won’t make the same amount of money every year for 30 years, but where does a lot of the other $700,000 come from?

Yep. Investing.

Say you invested that same amount every year for 30 years and assume a reasonable 5% return. You’d end up with almost $250,000 in that account alone, according to the EdwardJones.com Investment Calculator.

Sounds good, right? A healthy combination of saving and investing will make retired-you very happy.

There are many ways to invest, and everyone’s investing style is a little different, but unless you plan to live as a hermit in the woods, you’re going to have to do it. No excuses.

Ready to start saving up to invest? Find out which of the four kinds of savers you are to help you get started!

Finding a Reason to Save

Saving money is easy. Don’t spend it!

Okay, so maybe it isn’t always as easy as it seems. As a teen or freshly-minted adult, it can be frustrating to be caught between having your parents pay for everything and paying your own way. Most jobs that are available to high school and college students don’t pay very well, so, although it’s nice to have some cash of your own, it’s pretty easy to blow through it with online shopping or dinners out.

If you can sock away some of that money now, however, you’ll be better off than most of your peers in the future.

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Blah blah blah the future blah blah

It’s really hard to imagine that anything you do at 16 could have any real effect on you at 26, 36, or even 46, but with money, it totally can.

Hang on for a minute, we’re going to explore some numbers.

Let’s pretend…

Say you get a part-time job making $9 an hour. If you work ten hours a week, that means you’ll earn $360 a month for the time that you hold that job. Over the nine months of the typical school year, you’d rake in $3,240. Save that up over two school years and you’d have almost $6,500 just from that low-paying, part-time job. If you work over the summer, that could probably double. Note, however, that making over $6,300 as a dependent means you have to file a tax return at the end of the year, and each paycheck will be a little less than than $360. Still, that’s so much better than zero, and you’ll be building some job skills, too.

But what if you actually want or need to spend some of that hard-earned cash? I know many of you work so you can put gas in the car or pay for your cell phone. In that case, figure out how much you NEED to cover those charges, and save as much as you can of the rest. Say you buy $25 of gas per week, that’s $100 on gas per month. Depending on your family’s phone situation, that’s probably another $100. That leaves you $100 for other stuff. Save half of it. Putting $50 a month into savings would still net you $450 in nine months, and you’ll have $50 of fun-money to play with.

Of course, the above scenario is pretty basic, and everyone’s situation will be a little different. The point is, building your savings into your expenses helps train you to see saving as a natural, essential part of life, instead of a chore.

What’s even better is having a specific goal or reason to save. Something that will help motivate you when the temptation to spend every dime gets too much.

Reasons to save

Short-term goals like a new pair of shoes, or a gaming console, or even a car work as motivators because we crave the thrill of coming home with our new thing. These goals, however, lose their power as soon as they’re met, and they usually involve buying things that only lose value once we have them.

Long-term goals like finishing college, traveling to every continent, or starting a business are better because they have the potential to add some kind of lasting value to your life or career.

I would suggest coming up with one or two of each type of goal. Little wins in the form of saving for short-term goals can help keep you moving toward the long-term ones, which can sometimes seem impossible to reach when you’re just starting out.

Whatever your reason, the important thing is that you start a healthy habit of saving money. That maybe-not-so-distant future you will be so happy you did.

Think you’re not a saver? I doubt it. Check out The 4 Types of Savers to see which one you are!

Snow day? Money day!(w/ Printables)

It’s the most wonderful time of the year: Snow Day Season!

In the winter, students all over the country wear their pajamas inside out and flush ice cubes down the toilet, hoping they’ll wake up to several inches of snow and no school.

And every so often, it works! (Not really, but it’s fun to imagine it might.)

Building snowmen and going sledding are both super fun, but after several snow days, you might find yourself looking for other things to do.

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Sure, you could binge the newest Netflix shows, play a video game, finally learn how to knit, or *gasp* finish all of your homework, but I’m going to make a radical suggestion: make a money plan.

Many money experts and companies encourage adults to set aside one weekday per quarter (every three months) to look through their money situation and change or update anything that needs attention.

Teens and college students may not have much money to manage, but it’s always good to know where you stand and have a plan in mind for the future.

So this year, I invite you to set aside at least an hour or two during a snow day (or teacher work day, or whatever) to take note of what you have, what you want, and how you’re going to get there.

To help, I’ve created a few printables that you can use (for free!) to help you get and stay organized with your money, even if all you have is a piggy bank.

Let me know if you use them and if you have any suggestions for edits or for other printables!

 

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A simple sheet with 12 steps to reaching your savings goals.

 

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For a quick round-up of your cash and accounts.

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If you just want to sketch out some of those awesome dreams and goals!

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The classic envelope system of putting aside money.