The Anti-Budget Budget In Your Thirties

Although Jane and I both very recently wrote articles about how we’ve been tracking every dollar we spend lately, (check out Jane’s Budgeting article Saving Money Like You’re In the Depression Era and my budgeting article How Tracking Money is Like Weighing Yourself), I want to write here about a way to possibly not track your money at all.

This is kind of the method I was unofficially using before I started tracking every dollar this past month using the Goodbudget app. The method involves taking a savings percentage off the top of your income before you spend any of your money on anything else. The word “savings” is general and can include any of the below:

Contributions to an Emergency Fund

-Contributions to any savings account

-Contributions to a retirement account – such as a 401K, an IRA, or a Roth IRA.

-Paying down any debt- such as a student loan, a credit card, or accelerating your mortgage payments.

-Contributions to your child’s college fund- such as a 529 Plan.

So here’s how to live the anti-budget life:

  1. The second you get paid, decide on a percentage of your income to contribute towards savings.

2. If you never save anything, you can start with as little as 1% to save. The way to figure this out is to simply knock 2 zeros off the amount. So if you get paid $2000 biweekly, contribute $20 every time you get paid. Make $1000 biweekly, contribute $10 every time you get paid.

3. If you’ve been saving already, for retirement, for a house, to pay down credit card debt, to have a good emergency fund- saving for anything really- then you can easily incorporate this tactic to make saving money even easier. Whenever you make any money, save a certain percentage towards any and all of your goals. I usually do it this way- the second I get paid, I put 10 percent towards my emergency fund, 10 percent towards retirement, and 10 percent towards throwing extra money at my student loans.

With this tactic, you can then try not budgeting the rest but instead spend it comfortably knowing that you’ve already saved what you needed to.

Of course, you’ll need to make sure your bills, like rent and utilities, are paid before you spend the rest freely, but you will still be able to spend without budgeting every  dollar.

Check out another anti-budget budget article by the awesome finance blogger and podcaster Paula Pant of Afford Anything- she lives by this strategy and goes into immense detail about it in The Easiest Budget to Follow- Shockingly Simple.

Give this strategy a try, especially if you hate budgets, and let us know how it works for you! It’s nice and simple!

 

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Saving Money By Living Like You’re in the Depression Era

Growing up, my parents were pretty amazing at saving money. Just to name a few of things they did to save money, they brown-bagged their lunch to work, compared grocery store circulars from several markets before purchasing anything, organized food plans for the week depending on what was on sale, and joined our buildings’ co-op board so that they could be watchdogs on how the building was spending money, which would ultimately affect their maintenance costs and property values.

They instilled a lot of wisdom in me, but more than anything, the idea that has stayed with me the most is: it’s not how much money you make, it’s how much money you save. 

The thirties are a time for building your nest egg, creating a solid financial foundation for yourself and potentially your family. And since I don’t make a lot of money (right now…), I take this adage to heart.

Lately, I’ve been really contemplating every single purchase I make. I try to be mindful about each dollar leaving my wallet. From the smallest items (gum, a bottle of diet coke, etc.) to larger purchases like clothing or new shoes.

This reminds me of a quote my parents used to repeat to me whenever I wanted to buy something new (well, not always, but often enough that I remember it.)

They would say,

“Use it up, wear it out, make it do, or do without.”

Until today, I didn’t realize this was a common household aphorism during the Great Depression. But it works and always. Especially in light of the whole Marie Kondo organizing movement of keeping only items that “spark joy” and also of a surge of people adopting a more minimalist lifestyle. Check out this woman’s blog, Make It Do. She decided to not buy anything for a full year except what she used up or wore out.

For me, I’m not going to be as extreme, but I do want to be mindful about every dollar I spend, in much the same way that I try to be mindful about everything I eat.

Would you adopt a spending diet? What’s your relationship to money?

Should I Play the Lottery In My Thirties?

Last week the Powerball jackpot was 1.5 billion dollars. A bunch of my friends bought tickets and a few of them even won…four whole dollars.

When one of my friends first told me he went and bought a bunch of tickets, I’ll be honest, I was little upset with the idea. He asked me if I was going to buy any myself, and I replied with a haughty, ‘no, I think I’m going to invest my money and save it, thank you very much.’

I kinda felt amazingly proud of myself- the lottery (and gambling in general) are things that I can easily control my response to and I value that about myself. I have insane self-control when it comes to spending money on things that I consider wasteful. I don’t know if I’ve ever purchased a lottery ticket- maybe I bought some for an ex many years ago.

However, something about my own response bugged me- was it really so bad to buy lotto tickets? That same week, I received an email newsletter from a writer I love, Ramit Sethi. He was talking about how silly it is to discourage people from buying lotto tickets, because, in a way, you’re discouraging them from dreaming. Ironically, he was actually writing in response to bloggers who scoffed at people who bought lotto tickets. He said:

Their articles [finance bloggers] reflect a total lack of understanding about WHY people buy lottery tickets. Hint: People who buy lottery tickets don’t really expect to win. People know the odds are astronomically, cosmically against them. So why would they do it?

The answer: They’re buying permission to dream about winning it.

If you think about it, $2 for a dream is well worth it. If you live a life where you’re counting pennies, isn’t it worth paying $2 for the dream of becoming fabulously wealthy — even if just for an hour? Hell, if you live a humdrum life of $60,000/year with 2% annual raises and one 2-day vacation a year, you can see why people would crave an escape.

By the way, there are a LOT of other ways we pay for an escape: Movies, fancy clothes, and so many more things. Isn’t it funny how lottery tickets cost less, but incur more wrath from judgmental people? It’s fun. It makes you feel good, and that’s a great reason to spend $2. OF COURSE lottery tickets are mathematically stupid. So is going to a bar to meet someone…but we do it anyway.

I never really thought about lotto tickets that way, but they’re a tiny price to pay to dream about something way bigger and more exciting in your life. Sure, we can all visualize and meditate and dream for free, but any tool that helps you feel happier and more passionate about life, is harmless, and only costs a couple of dollars, is absolutely, totally worth it. Use the tools that you discover- little indulgences here and there can help you feel better and dream exponentially bigger. Make the ‘silly’ choice sometimes.

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Have You Been Taking Advantage of Compound Interest in Your Thirties?

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“Compound interest is the eighth wonder of the world”

“The greatest invention of mankind is compound interest.”

Albert Einstein is attributed to have said some version of all of these quotes. Whether he did or did not actually say this remains to be determined, but the truth is that compound interest really is a force to be reckoned with.

Compound interest can cause your retirement fund to grow way more than what you could’ve contributed yourself, and you can end up living on what you never could have saved up in your wildest dreams. $5000 invested at the age of 18 in a Roth IRA and left alone can turn into half a million dollars by the age of 72 with an average 9% interest rate.

$5,000 + compound interest magic + time= $500,000 for you

Compound interest can also get you in tons of credit card debt- the kind of debt that you couldn’t imagine wracking up in your wildest dreams. $5000 of credit card debt at a 22% interest rate would become $44,235 in 10 years. 

$5000 + compound interest + time (not much) = $44,235 owed to your bank.

Now that you’re in your thirties, make sure you’re aware of this miraculous compounding power. You can make compound interest work for you, or you can let it wreak havoc on your financial life, but either way, you have to start now because compound interest compounds fast, and waits for no one.

If you learn one financial lesson in your thirties, let it be this one- use compound interest wisely and start now.

Here’s a chart of $5000 invested in an IRA at age 18, untouched until age 72, at various interest rates. If somehow you averaged a 13% interest rate, that $5000, without ever adding another penny, would become over 3.5 million dollars when you retire. Now that’s some powerful magic.

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Budgeting in Your 30’s When You Hate Budgeting

For all the writing I do about finance and money goals, I really hate to budget. I just can’t stand it.

Perhaps this is because I’m already a big saver, so when I want something, I usually REALLY want it, and not much is going to stand in my way. I hate not listening to my own written budget, but I wouldn’t listen if I really wanted something badly, so I feel like I’d probably go over budget lot of the time, and then I’d kick myself. Ok, so this is actually a self-control issue. :/

I walked around forever with budget hatred burning a hole in the pit of my stomach until recently, when I read an article and realized I’d been kind of following an unofficial budget strategy all along. I googled the info in that article and came upon even more articles that outlined alternative budgeting strategies. Turns out, I naturally follow a common budget strategy called the 80/20 budget, though my version is actually a 70/30 budget.

The 80/20 budget is basically the simplest and least detailed way to budget ever. And I love it, because the details of budgeting make me nuts. Here’s how it works: when you get a paycheck, 20 percent goes to savings. The rest is fair game to divide between needs and wants. That’s it.

This is kind of amazing if you’re never sure how much you’re going to spend in any given month- no matter what, you’ll still be saving. I do a 70/30 budget, or actually a 70/10/10/10 budget, which is only slightly different than the 80/20. The way it works is:

  1. I get a paycheck
  2. I put 10 percent in my retirement account immediately
  3. I put 10 percent in my savings account immediately
  4. I put 10 percent towards my student loan immediately (this is always in addition to the minimum monthly fee I pay)
  5. Then the other 70 percent is divided as best I can among EVERYTHING else without making a budget.
  6. Within the 70 percent, my NEEDS include: Rent, utilities, and student loan minimums (definite needs), as well as food, metrocards (transit), laundry money, and toiletries.
  7. Also within the 70 percent are WANTS including: eating out and or/drinking with friends, food and coffee and green juice splurges, new shoes or clothes, tickets to theater, subscriptions to Spotify and Hulu.

Don’t get me wrong- it’s probably best to actually budget everything out little by little with a food budget, a clothing budget, and an eating out with friends budget. But I’ve never done this, and I don’t know if I’d stick to it if I did. So I think it’s better to at least have SOME sort of budget! And with the 80/20 (or 70/30, or even 60/40) budget, you’re at least still saving. If you don’t have students loans, I’d recommend putting at least 10-15 percent of your paycheck immediately into your retirement account, and then 10-15 percent immediately into a savings account.

What’s funny about taking a certain percentage out of your paycheck right away and paying down a debt and/or putting it into savings is how little you notice that the money is gone. It’s a strange phenomenon! Try it if you don’t believe me. Take 10 percent out of your paycheck immediately each month and put it into savings…you probably won’t even miss it! And if you do, you can always take it back. I wouldn’t recommend it…but the whole point is that your savings account belongs to you! 🙂

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Is a 0% Interest Credit Card Just a Blatant Lie In a Pretty Package?

Oh my god!! A zero percent interest credit card?? Does that mean I will have unlimited money and can buy whatever I want forever in my thirties? And then I can simply pay money back super slowly until I die…. interest free?

Short answer: no.

Long answer: no.

I mean, come on.

I was listening to reruns of The Suze Orman show podcast the other day (it has sadly gone off the podcast air this summer) and a few people mentioned using a zero interest credit card and asked Suze for her advice.

I remember the first time I heard about zero interest credit cards. I thought to myself “what the heck is a zero interest credit card? Why would card issuers would give someone money interest free? In what way would credit card companies benefit from this?”

Here’s a simple answer: zero interest offers always expire. And card issuers almost always benefit.

Here’s another simple answer: zero interest credit cards are usually a bad idea for the consumer. And then card issuers benefit.

Here’s why:

Let’s start with the way zero interest credit cards work:

  1. There are two different kinds of zero interest credit cards: deferred interest and waived interest.
  2. For both types of 0% interest cards, the 0% interest rate only occurs for a certain period of time (say, 6 months) and then expires.
  3. For both deferred and waived interest cards, after the 0% interest rate expires, the new interest rate is EXORBITANT- more than almost any other type of credit card. It could be as high as 26%, which is basically highway robbery.
  4. A deferred interest card is VERY bad, and a waived interest card is not much better. Here are the differences between the two:

a) For a DEFERRED INTEREST 0% interest card, interest is actually accruing during the special 0% promotion period (that certain amount of time I mentioned above when the card is still zero percent), but it’s being deferred. So if you buy something on a 0% credit card that’s 0% for 12 months, interest occurs during those 12 months. but you won’t have to pay it until month 13. If you pay off your original purchase by month 12, you never have to pay that interest. But if you haven’t fully paid off your purchase by month 12, you get hit with THE FULL YEAR OF INTEREST CHARGES!!!

So lets say you bought a $1000 bed on a 0% interest credit card that is deferred for 12 months. Let’s say that card has a deferred 23% interest rate. This means that about $20 in interest is adding up on your card every month. You won’t have to pay any of that interest for those first 12 months, but the card company has a record of it. If you pay off that bed within 12 months, you’ll never have to pay the interest. But if you just pay the minimum every month, the SECOND those 12 months are up you’ll be hit with a $240 deferred interest bill PLUS interest will continue accruing on anything you didn’t already pay off!! At a whopping 22% a month interest rate! This is terrible.

b) For a WAIVED 0% interest rate, lets say you bought that same $1000 bed on a 0% interest credit card that is waived for 12 months. Let’s say that card also has a waived 23% interest rate. This means that for 12 months no interest is accruing on your card. If you pay off that bed within 12 months, you’ll never have to pay any interest. But if you don’t finish paying the bed off, the SECOND those 12 months are up you’ll be hit with a 22% a month interest rate! This is pretty bad, though not as bad as the deferred card.

Credit card issuers count on you being dazzled by the zero percent interest rate and simply impulse grabbing one of their credit cards to make a big purchase. Don’t fall for it!! You’ll likely end up paying way more in the long run!

And if this hasn’t yet convinced you not to get a zero percent interest card, here are two more evil tricks 0% interest card issuers may be playing on you:

  1. For some 0% interest cards, if you’re late to pay or miss even one payment, the 0% interest offer is negated, and you’ll end up having to pay interest right away- before the 0% promotional period is even up! And it’ll be higher than other credit cards!
  2. Also, on some 0% interest credit cards, the 0% offer is only good for the first major purchase, and not the purchases thereafter. So if you continue using that 0% card, it won’t be zero interest anymore for anything other than your first purchase!

Read the fine print on 0% cards. And of course, if you can, avoid purchasing things that you couldn’t afford without a credit card anyway. A lot of times when it comes to interest rates, credit card companies are selling you very blatant lies wrapped in very pretty packages.

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How to Save Stupid Crazy Money on Travel in Your Thirties..or.. Oh the Places You’ll Go..While Barely Traveling!

I love travel, but I love New York more. If I had to pick whether to travel and never return to New York, or whether to stay in New York and never travel again…I must admit, I’ve just stumped myself with that one…

Anyway…I’m lucky and grateful that I never have to decide between those two options. And I’m also lucky that I get to travel all the time for work, but during the summer, the work travel slows almost to nothing. And it’s during this time that I travel the most of all! But I don’t have to go anywhere! And I don’t have to spend any money.

I will explain.

I used to have a travel blog where I’d talk about traveling all the time. Ironically, I didn’t actually ever travel for pleasure during this time – only for work- because pleasure trips cost too much money for me. Since I’m still paying off my student loan– which I’m gonna kill dammit…soon..I save a lot of money by not taking vacations.But I found a kind of travel that costs me almost no money, is just as pleasurable as pleasure trips, and never takes up a lot of time. I go on staycations! I travel completely within New York, and see lots of exciting places..even ones I’ve somehow managed to miss during my 30 years living here!

My friend Amy does this best. She’s an expert staycationer who both staycations and travels the globe. No matter whether she’s exploring Greenpoint, Brooklyn, or wandering around Tokyo, she always goes alone. It’s pretty amazing and inspiring. She always finds great places to see and new experiences to have.

Amy recently walked the the George Washington  Bridge and the Brooklyn Bridge in one day!

Amy recently walked the the George Washington Bridge and the Brooklyn Bridge in one day!

So here’s how to save stupid crazy money on travel in your thirties and go on summer staycations instead:

1. Look for free or cheap summer things to do in your hometown

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I happened upon yoga in Bryant Park one day..I’d forgotten that it was a summer thing in New York. Pretty neat.

2. Find somewhere you’ve never gone in your city or hometown and go there.

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My friend Zach and I recently went to Governor’s Island- a little island off the coast of Manhattan- home to a bunch of museums, and gorgeous views and great picnicking areas. It cost me a grand total of $2.00 for the ferry.

3. Go to an area in your hometown/city you’ve been to but find a street or ave you’ve never seen before.

Saw fireworks on the boardwalks of Long Island City, Queens. Somehow I'd never been there before.

Saw fireworks on the boardwalks of Long Island City, Queens. Somehow I’d never been there before.

4. Go somewhere you’ve already been, but never appreciated as a vacation spot..and call it your vacation day!

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I love Fire Island beaches- and with 32 miles of beaches, there’s always more to explore.

5. Go somewhere in your hometown/city that just opened!

I went to the new Whitney museum off the Highline recently ..it's brand new!

I went to the new Whitney museum off the Highline recently ..it’s brand new!

6. Go to a place you’ve been to before but pretend you’re in Europe. Or Canada. Or America if you live in Europe or Canada. You know what I mean.

Ferry off the coast of downtown Toronto

Ferry off the coast of downtown Manhattan.

Ferry off the coast of downtown Manhattan.

7. Go nowhere, stay at home, and say you’re on vacation. Turn off your phone. Disconnect wifi. Call it ‘mental spa week.’

Ahhh, I’m starting to feel better already just thinking about mental spa week.

Doesn’t a summer staycation sound good? Give it a try! It’ll seem even better after you take a look at your bank account and still have all of your hard earned money left 😉

Are You At Your Income Happiness Cap?

I’ve known for awhile that there’ve been scientific studies showing that your income correlates with your level of happiness only up to a certain amount and then caps off.  This is an interesting tidbit to remember in your thirties, as your income possibly grows more than it has when you were younger.

A study in 2010 found the income level happiness cap to be $75,000. So according to this research, you’d get progressively happier up to $75,000 in income and then your happiness level would remain consistent. Let’s adjust this for 2015 inflation and then adjust it once again for a major city like New York, San Francisco, or LA, plus let’s be generous, so we’ll make the number $120,000.

Now, $120,000 a year is a good chunk of money for someone in their thirties, and nothing to scoff about even in New York, especially for one person and not a household. If you made $120,000, do you think you’d be significantly happier making $140,000?

I guess it depends on who you are, and how well you know yourself. I believe happiness  definitely caps at a certain income level… that level might just be different for different people, but it’ll still work the same way.

I believe there’s a Maslow’s pyramid of needs associated with income. If you don’t know about this pyramid, click the link above…Maslow’s pyramid is a very clear way to view how our goals are naturally set up in life.

Ok, here’s a stab what I think the income pyramid of needs is:

1. Providing basic security items such as paying rent and buying food.

This is the basic bottom level of what money needs to provide- food and shelter.

2. Adding personal touches to our basic needs

At this level, you don’t only eat and pay rent, you can also buy a specific soap you like for your home, and buy a nicer can of beans than Goya.

3. Some disposable income

Once you get to this level, you can move beyond simple food and shelter and possibly go see a movie, or have dinner with friends

4. A good amount of disposable income

Here’s where you can purchase bigger items such as higher education, a vehicle, and a big screen tv. Of course, this is where a lot of people get into trouble and get stuck. Debt occurs the most at this level.

4. Money for the future and savings

This is a major jump that some people never get to.  At this level, you’re mostly out of debt or on a good payment plan, and are setting aside money in a savings account and a retirement fund.

5. Money to give away

At this level, you have all the money you need, and your future accounts are funded. Now you can really help others. This is a nice, happy level to be at.

Beyond the last level, I guess you can give even MORE to others, or sock even more money away or buy a ranch and a bunch of ponies or something, but it’s all extra from there.

So maybe it’s actually not a yearly income thing- maybe people simply need to make enough money to climb to the top of the pyramid, and then more money doesn’t really bring more joy.

What do you think?

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How Much Should I Be Contributing to My Retirement Account in My Thirties?

The Suze Orman Show recently went off the air and I’ve been heartbroken ever since.

I never watched Suze on tv, but I listened to her show religiously, podcast-style. After all, Suze’s money commentary was addictive, and she dispensed the good advice to give up cable, which I haven’t had in years to begin with.

There are so many points Suze repeated over and over that made simple what used to feel so complicated in the world of money. She kind of changed my life. In tribute to her, my next few money posts will be as short and simple as possible- her best ideas were short and powerful and repeated time and time again.

So here’s how much you should be contributing to your retirement account(s) in your thirties:

1. First, if you are an employee (and not an independent contractor) make sure you are actually signed up to contribute to your work 401k. Are you SURE? I have so many friends who thought they were signed up for years but actually weren’t. So they contributed ZERO…by accident. Double check.

2. Second, if your workplace offers a 401k match, contribute money into your 401k up to the match. Then stop and contribute to your IRA or Roth IRA. 

3. If your workplace doesn’t offer a 401k match, or you’re self-employed, start out by contributing the maximum to your IRA or Roth IRA. Don’t know how to open an IRA? Read about simple ways to do so here.

4. You can contribute up to $5,500 a year to your Roth IRA OR your IRA. Total. Try to hit that mark. If not, do what you can.

5. Contribute what you can to that IRA or Roth IRA. This is your main retirement vehicle. I try to contribute 10% of my income to my Roth IRA. Many financial advisors recommend 15%…I’m not ready for that yet, but once I finish paying off my student loan I will be.

6. If you max out both your 401k MATCH and ALSO your Roth IRA or IRA, then go back to your 401k and contribute as much as you can. You can contribute up to $18,000 in 2015.

7. If you don’t have a 401k because you’re self-employed like me, and you’ve maxed out your Roth IRA or IRA (good for you!), then you can start contributing to special retirement accounts for the self-employed. Learn about those here.

Hope this helps you learn how to save for retirement! Please ask any questions you have- I’m happy to answer or find you answers! 🙂

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The Most Common Tax Questions in Your Thirties- Part 1

Oh man, it’s getting to be tax time soon. Has anyone already filed their taxes? If so, good for you! Kudos!

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I’m still working in Chicago right now and won’t be able to get all my 1099s together and ready for filing until I get back to New York. I have things moderately organized, and I even have an accountant, but my tax preparation still requires quite a bit of effort- especially since I sometimes end up with over a dozen 1099s per year (!)

In honor of the advent of tax season, and taxes starting to be on the forefront of everyone’s mind, I’ve compiled a list of common tax questions that are relevant to those of us in our thirties. The first few are pretty basic ones which you may have already figured out, and then they get slightly more detailed. Of course, tax answers are rarely simple, so you should make sure to triple check everything for your own personal situation. And I’m splitting this into sections, so you’ll get more tax question and tip articles as April 15th approaches.

1. Should I use tax software this year? Which program?

I used to use H&R Block’s tax software, which I think is pretty good. It’s about $20 for a basic program, and $65 for self-employed software.Turbotax is also quite popular- and it’s base cost is free. Once my self-employment taxes started to get really complex, I hired an accountant.

2. Should I get an accountant?

Only you know whether you need an accountant based on your personal situation. However, I think you can almost definitely make do with simple tax software if you are an employee with only one job and all you need to file is your w2. If you have side income from anything (rental income, side jobs, etc), you may want to consider an accountant- however, I think you still may be able to use tax software successfully. If you’re self-employed, I recommend considering an accountant, if only to protect yourself from accidental audit triggers. You can even find accountants on Yelp now. My goodness, I love Yelp.

3. How much do accountants cost?

CPA’s (Certified Public Accounts) charge anywhere from $150-$400 or more. But you can definitely get a great accountant for less than $400…read those Yelp reviews. A funny bonus of having an accountant is that your tax prep fee is actually tax deductible!

4. Does last year’s tax refund count as income this year?

The answer to this is almost always no if you took the standard deduction. If you itemized your deductions, it may count as income- look into it.

5. What documents do I need to do my taxes?

You need all your w2s (if you work only one job, you’ll have only one w2).

You’ll need all your 1099s if you’re self-employed or have side income.

Also, it’s important to have documentation of any interest you made on any of your savings or investments (you get taxed on this).

Additionally, you’ll need documentation of any interest you paid so you can deduct that from your taxable income (the interest paid on student loans, etc, is tax deductible). Also, if you’re itemizing deductions, you’ll need your receipts, or a spreadsheet of your receipts if you made one. (You won’t actually need to show anyone the actual receipts (except your accountant) unless you’re audited.)

6. If I made very little money this year, do I still have to file taxes?

Officially, for 2014, if you’re under 65 and filing as single and independent, you don’t actually have to file your taxes if you made under $10,500. If you’re married and filing jointly and under 65, the number is $20,300. Here’s a chart with more details. However, you may still want to file taxes for several reasons- one of which is that if you had taxes withheld, you can’t get your tax refund without filing. Here are a few other reasons.

7. What are some deductions I can take to help reduce what I’m paying on my taxes?

Have you deducted the interest you’re paying on your mortgage or student loan debt? Have you deducted your health care costs? Did you spend lots money to move for your job? There are some great deductions you may not be using to your advantage. Mashable goes into fantastic detail on this here.

Hope this has helped you with some of your questions- feel free to comment below with additional ones- I’d love to hear from you! Look out for more tax info here soon, and good luck filing!

Help! I Have No Money In My Thirties And Am Not Able To Follow Any of Your Money Advice

Somewhere around the second month or so of this blog, I’d written a few posts on finances-saving money and putting money into retirement accounts and wasn’t sure what people wanted to hear about next financially. I asked Jane, my co-blogger, what financial advice she might want to hear next.

Jane said to me, “I’m wondering what advice we can give to people who feel like they can’t follow any of the retirement account advice or the savings account advice. What about the people who are barely making ends meet? What about people who are just like ‘I’m broke and can’t do any of this?”

She told me about this teacher of hers who didn’t really want to save money and didn’t want to start a retirement account. He basically wanted to “live in the now” and said he didn’t have enough money to put away for any retirement account or savings account anyway. “All this money advice is BS for people who don’t have enough money,” he said.

At the time I was completely stumped. The topic filled me with fear. I was pretty new at following this financial growth advice myself and I told myself I’d simply get back to the ‘not enough money’ topic.

Then a few days ago I was talking to a coworker about how I put 10 percent of my money into savings, 10 percent into retirement, and 10 percent into additional student loan payoff.

In turn, he told me how he divided his money. He  had a pretty sophisticated system. He put aside 20 percent right off the bat for taxes (he’s self employed like me.) He had a separate account to hold that tax money. He also had multiple accounts reserved for different things- one for investments, one for savings, a special account just for spending money, another for classes (investment in learning.) It was a quite complicated and well laid out system and I felt mildly overwhelmed for a bit. He asked me what I might be investing in, and I was stumped. I wasn’t investing in anything in particular- not in a separate account anyway. I was ‘only’ investing in my Roth IRA…I hadn’t ‘gotten to the investment step yet.’ I’m still killing off my student loan that was originally over $100,000 but is now finally less than half of that.

I started to feel like I might not be as well-prepared financially as I thought I was, and I felt intimidated by how far ahead of me some people seemed to be. There was still so much  investment research I wanted to do- so much more money I still wanted to make and save. But then I started to feel proud of myself once again for all that I financially accomplished so far in just the last two of my thirty years. I was perhaps not as financially ahead of the game as I’d like to be at thirty, but I had made a major dent.

And I flashed back to a time when I felt absolutely overwhelmed by the killer student loan in my life. A time where I cried at the thought of  just getting by monetarily from month to month. Where I would have laughed at the thought of retirement or savings accounts, and could barely pay for a dinner out. Where just paying rent every month put true fear in my heart.

They say that money doesn’t buy happiness, but I’ll say very honestly that it can take away a huge amount of fear.

So if you’re feeling afraid and maybe even embarrassed that you don’t have enough money in your thirties to follow the retirement plan or savings account steps laid out for you by certain financial sites or advisors, let’s start with a simple first step:

1. You’re not alone. And it’s okay.

It’s really okay. The fear is real, but so is the truth. And the truth is that everyone moves at their own pace. Not everyone starts at the same point. Perhaps you have multiple student loans or have gotten yourself into some bad credit card debt. Or you’re making no money or are in school or have just declared bankruptcy. The most important thing is that you will change and want to change and grow your wealth.

2. You recognize that you want to change your finances and are ready to take small steps.

Dave Ramsey says this best with his talk of Baby Steps. Take things little by little. If you’re not making enough money to follow any financial advice, then your focus should be on hustling to make more money. It’s that simple. Dave Ramsey will sometimes tell people to ‘deliver pizzas for extra money’ when they call into his show and tell him they’re broke. That may seem below your sense of dignity, but sometimes you may truly have to hustle.

I’ve worked outside in the snow in the dead of winter, taught SAT prep in my spare time, sold insurance, traveled two hours to Staten Island to work gigs and much more in the past in order to meet the quota for money I needed to make that month. Hustling for money can be hard and grueling, but it can be done.

3. Do what you can. It does get better. Really.

I recently paid off a student loan that I wasn’t supposed to pay off until 2022. It was quite a feat, and I’m very proud of myself. Did I get it paid off early because I’m rich? Not at all- I got it paid off 7 years early because I got angry at the loan and I set my mind to getting it out of my life. My other big loan is still ahead, but you better believe I plan to attack it with all I’ve got. I don’t make a ton of money, but I try my best to take baby steps to get rid of my student loan debt and save as much money as I can. Right now I have a mini retirement account started and a small savings account. It can be done. It’s just little by little.

Times can be hard and finances can be scary. Please know that I understand and I’ve been there. Im still there sometimes. But I believe that I things can get better and they’ve been slowly getting there. And I know you can do it too. I believe in you.

 

2014-07-26 16.28.50

How to Set Goals for Finances- New Years Resolutions Series

The countdown to 2015 continues…though hopefully no one’s standing outside in Times Square yet waiting for the ball to drop. You never know, though. I wouldn’t put it past people.

Anyway, I thought I’d kick off some New Years resolution money talk for thirty-somethings.

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Last year, I made a resolution to put 30 percent of every paycheck I received towards savings, student loan debt and retirement. I actually started doing this slightly before New Years so I cheated a bit.

I split up the 30 percent this way- 10 percent went into my Roth IRA, 10 percent towards my savings, and 10 percent towards my smallest student loan. (My largest student loan already had a crazy amount of money going towards it because its minimum was so high. But I digress.)

And I followed my financial resolutions through thick and thin for the whole year and am continuing with them. There was a moment where I even tried to up my payout percentage to 40%, but that was way too much. Other than that- the 30% resolution was actually quite simple: whenever I received a paycheck I’d log onto Chase.com and make my transfers. There was something extremely satisfying about the whole thing.

If you’re making financial resolutions for the New Year, my advice is much like Jane’s in her last post: break down the goal into easy steps. My financial resolutions last year were simply:

1. Put money into savings

2. Pay down student loan

3. Put money into Roth IRA

A lot less would have gotten done if I’d stopped there instead of making the simple breakdown of 10% from every paycheck towards each category.

So, if you have savings goals, save yourself a headache and break them down into steps that seem so easy as to be almost automatic. In fact, you can even automate the savings process by having your bank automatically put a certain amount of money into your Roth IRA and savings account every month. Just about all banks will do this for you.

Since I’m self-employed and am paid a different amount every month, I kept my process manual. Also, I get a gleeful joy out of manually saving money, but I’m weird like that.

Anyway, this year my financial goals are:

1) Pay extra $$ towards my BIG student loan

-This is broken down into the easy steps of

a) Finish paying down the little student loan the same way I was before. Just about done!

b) Put the 10% (plus the monthly minimum) I was putting into the small loan towards the big loan instead.

Tada!

2) Find a savings account that pays way more interest than my bank. 

– Done! I guess once more I cheated on this one…I did it last week before New Years. But don’t worry if you hate your savings account, I’ll talk about better ones in another post soon and help you set that up too if you like. For now, if you’re interested in how much you should be saving, I wrote about it here.

3) Switch my Retirement Plan from a Vanguard Target Date fund to a different Vanguard account now that I have more money in my Roth IRA. 

– This involves a couple of breakdown steps including investigating Vanguard’s other options and figuring out more about how to manually choose funds. I’ll explain why I’m doing this in another post as well. And if you’re interested in retirement plans in general (or if you don’t know what the heck I’m talking about), I talk all about why retirement accounts are important here and here and here.

Of course, there’s my fourth financial resolution which I haven’t yet broken down, and that’s:

4) Discover additional sources of income. 

I lied about not having this goal last year. I have this goal every year, and I’m always messing with the breakdown. There’s quite a bit of work ahead. Sometimes breaking down resolutions can be as tough as keeping them 😉

What are some of your financial resolutions for the new year?

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