Budget

20 Easy Ways to Save Money Every Day

people-meeting at table-easy ways to save money

We all know it is easier to spend money than to save them. Spending money often gives us emotional comfort and became a habit. But changing your spending habits and finding new ways to save money can be a great thing for your financial life.

Learning how to save money can help you to reach your financial goals:

to buy a house
to pay off debt
to save for a vacation
put more money in your emergency fund
to save for retirement
to save for kid’s education

No matter what your financial goals are, this post has money-saving ideas for everyone. Start with a few of these suggestions and see if they work for you.

Here are 20 of my favorite ways to save money every day:

How to Save Money Through Money Management:

1). Pay your bills online.

There are many benefits of paying your bills online. I personally do not remember the last time I mailed off a check to pay our bills. By going online, you will not be using envelopes, stamps, and checks as much as it was popular in the past. Automation helps to save money and time and reduce the stress of money management.

We pay all our bills automatically. Our online payment is set up with a local bank and bills are paid out of our checking account. I just have to make sure I added money to that account before the bills are due. Even though I keep an eye on all our transactions, but I never have to worry about being late on bill payments.

2). Consolidate your credit cards debt.

Debt can be a very terrifying issue. When you face thousands of dollars in credit cards debt you do not have enough money to save for retirement or to pay off your mortgage more quickly.

You can save a lot of money and reduce your monthly payments by consolidating your credit cards debt. If you own several credit cards try to consolidate your debt into a single credit card with a lower percentage rate. It will help to reduce interest costs and make your monthly payments more manageable.

One of the best ways to consolidate your debt:

Refinance with a balance transfer credit card
Consolidate it with a personal loan

3). Get cash back when you shop online.

For many of us, it has become so convenient to shop online regularly. That is why we need to turn it to our advantage and learn how to get paid while shopping online. You can sign up for websites like Ebates, Ibotta, Rakuten, and Swagbucks to take advantage of cash-back rewards. All these websites are free to join and easy to use.

If you want to learn how to earn cash back, save money on groceries and travel, I recommend reading the article by Michelle from Making Sense of Cents:

Best Rewards Credit Cards for 2021 – What You Need to Know

4). Negotiate credit card rates.

If you are losing money by paying a lot of interest on your credit cards you should negotiate your current interest rate with your credit card company. It is important to remember that you have some power to negotiate your current interest rate as long as you have been making payments regularly. Call your credit card company and ask for an interest rate reduction.

5). Transfer your credit card balance.

If you cannot reduce your credit card interest rate, try to transfer your credit card balances to 0 percent APR card. Transferring your balances will help you save hundreds of dollars in interest over time.

The Best Zero Percent Interest Credit Cards

6). Move your money into a high-yield savings account.

Most people have their savings stashed in a local bank with a very low-interest rate. The primary reason for that is because it is convenient and close to their homes. Unfortunately, your money will not grow fast over time with low-interest rates.

You can do a lot better by moving your money into a high-yield savings account. Find online banks that are paying interest rates higher than your bank and keep your savings there.

Check out the Best High-Yield Savings Accounts and start earning higher interest right now.

7). Refinance your mortgage

You can save a lot of money by refinancing your mortgage to a lower interest rate. With a lower interest rate, you can get lower monthly payments. And once you reach 20 percent equity you can eliminate PMI – private mortgage insurance.

Refinance rates from Wells Fargo

How to Save Money Shopping:

The next time you are going shopping make sure to apply these money-saving ideas:

8). Stick to your shopping list.

One of the easiest ways to save money is to stick to your shopping list. Do not go shopping if you do not have a shopping list. Creating a list is a great way to make sure you will purchase only what you need. Otherwise, you might go on impulse shopping and spend more money than you have planned.

Stay away from email marketing and do not subscribe to emails from your favorite retail stores. Avoid the chances of spending more money on things you do not need.

9). Stop going to the Mall.

Retail marketing is all around us and it is hard to fight the temptation to shop for new clothes. That is why if you want to save money you should stop going clothes shopping so often. As I said before you should have a plan and shop only for what you need. And stick to your shopping list!

10). Do holiday shopping right after the holidays.

One of the best ways to save money on shopping is to do your holiday shopping after the holidays. After the holidays, the prices go down drastically, sometimes up to 75 percent lower. I often buy party supplies, decorations, wrapping paper, and even gifts a few days after the holiday passes.

11). Clean your closets.

If you have an urge to buy new clothes often, I recommend going through all your closets and see what you might find. Make an inventory of your clothes. Have a yard sale or use craigslist to sell clothes buried in your closet for years.

Another useful trick is to take the clothes from the back of your closet and bring them to the front. After cleaning your closets, you might find your wardrobe looks completely different and you do not need to spend money on clothes right now.

How to Save Money on Food:

Learning how to save money on food and groceries does not have to be complicated.

12). You can save money on food by:

Prepare some meals at home
Cook from scratch
Get a crockpot
Brown bag your lunch
Invite friends over instead of going out
Share meals when eating out

13). You can save more money on groceries if you choose to:

Skip the bottled water and soda
Buy in-season groceries
Plan your meals around your grocery store’s sale
Start a vegetable garden

How to Save Money on Entertainment and Vacations:

If you are planning a road trip or vacation, there are lots of money-saving ideas. Here are a few of my favorite ones:

14). Check out free events in town.

Our town has several wonderful parks, lakes, trails, free tennis courts, and more. Everyone can have fun playing outdoors, hiking on trails, walking around the lakes, or trying any sports activities. And it is all there for free.

Most towns schedule many free events. You can save a lot of money if you want to get free entertainment and free food. What you need to do is just look at your community calendar. Stop by the local town hall or library and ask how to get a list of upcoming community events. I always check out our town’s website to keep in touch with what is going on around us.

15). Pack food for road trips.

If you want to get out of town, take some time to pack meals and snacks for your road trip. Thus, instead of stopping in the middle of the trip and driving around looking for a place to eat, you can just eat on a road. Even better if you can stop at a nice park and have a picnic there. This way you will have fun and save money. Travel service plazas and fast-food chains are conveniently located right off the highways and always expensive, so you better off avoiding them if possible.

16). Use Airbnb when traveling.

For the past decade, Airbnb became hugely popular among travelers as a cheaper alternative to hotels. Vacations are always expensive. The next time you plan on taking a trip, check out to see and compare prices for Airbnb vs hotels. You can save a lot of money by renting an entire house to yourself for a fraction of the hotel cost.

Stay at Airbnb

17). Use Booking.com for travel deals.

Booking.com is one of the best websites in the online booking world.

city of Rome - save money on travel expenses

We like to travel and use this website all the time for booking our hotels because you can find some incredible deals. If we stay at the hotel, we always try to find one with breakfast included in the price. I love hotel breakfast especially when they offer regional specialties. With breakfast included we do not need to start our day trying to find a place to eat and we can take a bagel or pastry and some fruit for our lunch later.

Use Booking.com for last-minute deals

18). Use your AAA discount.

If you are an AAA member you can save a lot of money by using your AAA discounts. AAA travel agency has money-saving offers from cruise vacation packages and hotel discounts to car rental deals. To save more money use your membership card to get a discount anywhere you can.

Use AAA for your travels

How to Save Money at Home and on Services:

There are many ways to save money at home and on services. These tips will help you minimize your household expenses significantly.

19). You can save money at home if you want to:

Try to fix things yourself. You can learn anything you want from YouTube.
Turn off the lights every time you leave the house or the room.
Install energy-efficient light bulbs. Swapping just your 4 or 5 most used light bulbs for LEDs can save you $50 or more a year.
Rent out unused space in your home.
Cut your lawn.
Look for a cheaper place to live.

20) You can save money on services if you choose to:

Get rid of some of your subscription services (meal deliveries, streaming services, etc.)
Cancel unused gym memberships.
Cancel the cable or satellite channels you do not watch. Switch to low-cost cable alternatives such as Netflix, Amazon Prime Video, or Hulu.
Get rid of your home phone and switch to cell phone plans.

Final Words

We all know that trying to find easy ways to save money can be tough. We have been there before. There are times you feel that you are not making much progress even you have tried everything. However, if you are prepared to sacrifice now and learn about the best ways to save money every day you can reach your financial goals a lot faster.

What are your favorite ways to save money? Share your thoughts and ideas with us in the comments below.

Remember to share this post if it helped you!

9 Ways to Organize and Simplify Your Finances

by Maggie 4 Comments

woman's hands - dollar bill - organize-simplify-your-finances

The modern lifestyle can be very chaotic and stressful. It is no wonder we are overwhelmed by our busy schedules, family responsibilities, and finances.

Money management can be complicated on all levels. Everything from budgeting, retirement planning, savings, investing, debt, and even types of insurance needed to be organized and managed.

I do not know about you, but I have found that often enough finances are in control of my life. I get overwhelmed with so many parts needed to be managed to keep my money goals on target.

Fortunately, there are many ways to manage money without getting overwhelmed. Learning how to organize and simplify finances eventually will help you stress less about money and focus on what is important in your life.

If you feel that your financial life is out of control, I encourage you to try one or two ways to organize and simplify your finances.

1. Organize financial paperwork.

It is hard to simplify your finances when you do not know where to find your financial papers at the last minute. And in case something happens to you does your family know where to find your important documents?

That is why the key to keeping your finances simple is to keep them organized in one place.

Collect all your bank statements, bills, legal documents, mail and set up a filing system in a way it suits you. The filing system should be simple and yet effective to keep track of your financial papers. I keep all my papers in simple manila folders and hanging file folders inside a 3-drawer file cabinet. All papers are divided into categories:

Expenses
Credit cards
Banking
Medical
Insurance
Investments
Tax returns
Miscellaneous

Once a year I go through all folders and get rid of everything I do not need anymore.

2. Track all financial accounts in one place.

It is hard to keep a track of everything you own if you do not have a system. If you want to simplify your finances, you should create a list of everything you own. Seeing all your financial information in one place will help you get a big picture.

Start the process by gathering your financial information in one place. This way you will see all your expenses, assets, debts, and liabilities at glance. Whether you want to list them down in a traditional ‘pen and paper style’ or create an Excel spreadsheet, call it “an inventory of your accounts”.

You can also do it with a personal finance app like Mint. This popular free online financial tool allows you to link all your accounts to get a real-time view of your financial life in one place. Also, this app helps you pay bills in one place, gives you updates on your payments, gets reminders on your due dates.

I personally use a combination of Mint and Excel spreadsheet and it works well for us.

MINT

3. Consolidate your accounts.

One of the easiest ways to simplify your finances is to consolidate your accounts. Many people still like to have multiple savings and checking accounts and keep money in several different banks. In addition to that, you may also have a mortgage, retirement and investment accounts, and insurance products. It is a lot to juggle.

I believe it makes your financial life is complicated. If you want to simplify your finances, you should keep your accounts to a minimum.

I even recommend closing your old accounts including your old retirement accounts. If you changed your jobs a few times, you might still have your 401(k) money with previous employers. And if you forget to roll over this money to your IRA or Roth IRA, you may even forget to track thousands of dollars invested in old retirement accounts.

Save yourself the headache of dealing with multiple savings and checking accounts by closing those that are not useful and consolidate them in one bank account. If you have fewer accounts to track, it means you have less hassle remembering logins, websites, and tracking your money.

4. Pay your bills automatically.

If you hate keeping old receipts and bank statements, you should take advantage of automation and go paperless. I personally do not remember the last time I mailed off a check to pay our bills.

table-globus-smartphone-organize your finances

There are many benefits of paying your bills online including convenience and security. By going online, you will not be using envelopes, stamps, and checks as much as it was popular in the past. Moreover, it will be easier to track your payments using a lot of tools like reports and alerts when you sign up with an online service. The best part of automation is to reduce the stress of money management and make it less complicated.

All our family bills are set up to be paid automatically out of our checking account. I just have to make sure I added money to that account before the bills are due. Even though I keep an eye on all our transactions, but I never have to worry about being late on bill payments.

5. Automate your savings.

Another great way to simplify your finances is to automate your savings. Learning how to automate your savings will help you stress less and save more. Every time we receive our paychecks, a lump of it automatically is going into our retirement accounts. Another portion of our income is deposited into our savings account and then the rest is going into our checking account.

We use our savings account for keeping our emergency fund money, and funds for future travels. The checking account is where we keep the money for our monthly bills and living expenses. I like to know that our income gets distributed in a few simple accounts. By automating it, I always know I am going to be saving a certain portion of our income each month.

Another great thing I like about automating our savings is that even a small amount of money will grow up over time. I started with a $50 automatic transfer from checking to savings account once a month, then increased it to twice a month. The automation really helped to raise our travel fund from $1,000 to $8,000.

6. Simplify your investments.

The simplest way to invest your money is through index funds. Index funds are low-cost and low-risk investments because they follow the market indexes. But you still have to deal with asset allocation and portfolio rebalancing.

If you are a new investor who likes hands-off investing experience, try using Robo-advisors.

I recommend checking out Betterment as a Robo-advisor.

Robo-advisors are known as online advisors or automated investing services. Robo-advisors are much cheaper than a human financial advisor. These online services make it easier for you to start working on your financial goals. You will get help with your investments at a low cost and with low account minimums.

If you want to learn more about Robo-advisors, I recommend reading What is Robo-Advisor and How Do They Work from Balance.

7. Pay down debt.

Carrying debt on a few credit cards makes your financial life stressful. When you face thousands of dollars in credit card debt you do not have enough money to save for retirement or to pay off your mortgage more quickly.

Set your financial goal to get rid of high-interest debt as quickly as possible. You can use recommended debt snowball or debt avalanche strategies to pay down your debt.

8. Package all services in one place.

Consolidating your expenses in one or two places is another way to simplify your finances and save some money.

Many companies produce and supply multiple products and services. They sell these products or services separately or in packages or bundles, at a “bundle price”. As a result, you can buy them together as a package at a lower price than what you would pay for them individually.

You can bundle together services like your internet, cable TV, and cell phone. You can also package together with all your insurance needs with one company such as homeowner and car insurance.

The best part is that you can save money by getting a discount from your provider for combining two or more services on one bill. And you can reduce the number of bills to pay each month from several to just one.

9. Reduce the number of your credit cards.

Another way to simplify your finances is to get rid of numerous credit cards.

Once, we used to have nine credit cards and it was way too complicated to keep track of our spending. We used credit cards for promotional money transfers, to earn cash back, and other rewards. At some point, it became a nightmare to pay off those balances.

Eventually, we trimmed down the number of our credit cards to just a few. We prefer to use credit cards with no annual fee and cashback rewards. And we do not worry about high interest rates because we always pay the balance off in full each month.

Best Credit Cards Comparison by Forbes

Final Words

If you want to simplify your finances, it does not have to be complicated. Just making small changes as I have described in this post can make a huge difference in your relationship with money.

Do you feel frustrated dealing with your finances? How do you simplify your finances?

Remember to share this post if it helped you!

Financial New Years Resolutions for Baby Boomers

by Maggie Leave a Comment

a piece of paper _new year resolutions for baby boomers

Happy 2021! In the spirit of the New Year, I have put together a list of financial New Year’s resolutions for baby boomers.

These financial goals are especially important for people who are planning to retire within the next 10 years. I personally think that the beginning of the year is a great time to start something new and work towards a goal.

Here is the list of financial New Year’s resolutions for baby boomers:

1. Determine how much of the nest egg you will need.

When you are near retirement, it is important to know how much of the nest egg you will need to live comfortably for the rest of your life. How do you figure it out? You have options.

The typical advice is you should aim to replace 70 to 80 percent of your annual pre-retirement income. For example, if you earn $70,000 per year before retirement, you should expect to live off $49,000 to $56,000 per year.

Also, you can use an online retirement calculator. Take a few minutes to enter initial information and then see the numbers, and where you stand today.

Vanguard – Retirement Nest Egg Calculator

Or you can use your current expenses and determine how it will change when you retire.

The best advice is to create an estimated retirement budget based on your current and future expenses. You might have a general idea of what you spend now. But you will be better prepared financially for retirement if you have a clear picture of your expenses now and how that might change in the future.

Related Articles:

2. Get a clear picture of your retirement income.

When you are working, you probably have a single employer and a single source of income – your salary. In retirement, everyone has different sources of income.

As a retiree, you receive income from multiple sources: Social Security, pension, part-time job, or rentals (if you have any).

Another source of income will come from your nest egg – investments and retirement savings:

Tax-deferred accounts – 401(k), IRA
Tax-free – Roth IRA, Roth 401(k)
Taxable investment accounts
Taxable bank checking and savings accounts

Getting a clear picture of your retirement income will help to make sure you have enough money to cover all your living expenses.

To make your assets last through the next 20 or 30 years, use the rule of thumb to withdraw 4 percent of your portfolio annually.

For example, if you have $500,000 in retirement funds, you can spend roughly $20,000 ($500,000 x 0.04) per year when you retire. Add this number to your Social Security, pension, and other savings, and calculate if it is enough to support the retirement of your dreams.

Related Articles:

3. Set a target retirement date.

woman and man walking on the beach - financial new year goals for baby boomers

Another important financial goal for baby boomers who are near retirement is to set a target retirement date. We all need to plan for the day when we are ready to retire or can no longer work.

Based on your target retirement date, retirement income, and what you want to spend in retirement, you can determine if you have enough money saved for your golden years. If it is not enough for a comfortable retirement, move the date, and save more into your retirement funds.

Related Article:

7 Financial Mistakes to Avoid in Retirement

4. Update your budget.

What is your budget? How much you want to save and how much to spend in 2021?

Sticking to your budget can help to know where your money is going. If you want to save more money for your upcoming retirement, begin eliminating some expenses that may not be important to you anymore.

When you retire, you do not need a lot of things that you did when you were working. The costs of commute, take-out lunches, and business clothes will go down. But you will start spending more money on travel, hobbies, and activities.

Balancing income with your spending plan will help you to save more money for retirement.

Related Articles:

5. Maximize your retirement savings.

Whenever possible, increase your retirement contributions up to the maximum allowed in retirement plans such as 401(k), IRA, and Roth IRA.

When you are a few years away from retirement, being short on retirement savings can be problematic. The best option is to start reducing expenses in your budget, so you can put more money into your retirement savings.

The 2021 contribution limits are:

$19,500 for 401(k) retirement plans. And if you are age 50 or older, the catch-up contribution is an additional $6,500. So, you can save a total of $26,000.
$6,000 combined contribution for traditional IRA and Roth IRA. And the catch-up contribution for people age 50 or older is $1,000. So, you can save up to $7,000 with your pre-tax money (IRA) and after-tax money (Roth IRA).

Related Article:

Why Do You Need to Max Out Your 401(k)?

6. Get out of debt before retirement.

Paying off debt, no matter how much you owe, is a key to a stress-free retirement. Getting into retirement with any kind of debt will put a burden on your lifestyle.

The best advice for baby boomers is to pay off all your debts before you retire including a mortgage.

When you are working, you have years of earned income to pay a mortgage, credit cards, student, or any other kind of loan. But once you retire, you will be living on a fixed income.

And when you start living on a fixed income, it is hard to pay off debt if you need to pull big chunks of money from your savings. Although, big withdrawals from retirement funds could push you into a higher tax bracket.

Being debt-free gives you more freedom and money left in your pocket to enjoy your golden years than struggling to pay the mortgage or other debts.

To pay off all debt including a mortgage might not be realistic for everyone. However, the less debt you have, the better you are prepared financially for retirement.

Related Article:

How to Pay Off Debt Before You Retire

7. Rebalance your portfolio.

list of 2021 goals - financial goals for baby boomers

The 2020 year has been a volatile year for financial markets. It can be tempting to stay away from stocks to reduce the risk of losing money in your retirement funds.

But stocks provide growth, and investing for growth is important at this stage of your life. If you retire at 65 and spend 20 years in retirement, you need to have enough growth to make your money last that long.

Take the opportunity to review your asset allocation and make sure your portfolio is diversified and invested for growth. You should have a mix of stocks, bonds, mutual funds, and other assets that fits your retirement goals.

You need to remember that a well-balanced portfolio will help you to weather market downturns. Also, it will potentially generate a retirement income to cover your living expenses.

Related Articles:

8. Think about the future medical cost.

Health care is expensive. Unfortunately, many baby boomers forget to include it in their financial plan. Medicare will cover most of your routine health-care costs if you retire at age 65 or older. Unfortunately, it does not pay for all medical bills, and it does not pay for long-term care at all.

Underestimating health care expenses or how to pay for long-term care can be a big financial mistake. Think about your future medical cost and find ways to protect your retirement savings.

Consider buying long-term care insurance which can help to pay for home health aides in your late years. If you buy long-term care insurance now, your premiums will be lower than if you wait several years.

It is recommended by many financial gurus to open a health savings account (HSA).

The money you can contribute to HSA is tax-deductible or pre-tax. And any increase in the value of your account is free from federal taxes. But it has to be used for qualified medical expenses otherwise you will be paying income tax and penalties on your contributions.

The 2021 HSA contribution limits are:

$3,600 for individual coverage
$7,200 for family coverage

You can put money into HSA every year until you enroll in Medicare benefits. After that, you are no longer allowed to contribute. However, money that you do not spend will be accumulating in this tax-free account until you need it in retirement.

Related Article:

5 Ways HSAs can Fortify Your Retirement

9. Plan where you will live.

Where you will live in retirement could have a big impact on your living expenses. Consider this option – sell your big house in an expensive location and move to a smaller house or condo in a low-tax state. In this case, your living expenses will be reduced, and you might have some extra income to pay for things you love to do in retirement.

You may also consider staying in your town but moving to a smaller home or condo. That will be more financially manageable while living on a fixed income.

But if you are planning to move to a big city you should be financially prepared to spend more money because retiring in a booming metropolis can be pricey.

Related Articles:

Final Thoughts

I know many people do not bother with New Year’s resolutions. But I find them to be very motivating. New Year’s financial resolutions are a great way to take steps to move towards your new goals.

What is your New Year’s resolution? Do you have any financial goals?

Like this post? Share it.

Holiday Spending and How to Control It

by Maggie 4 Comments

Christmas houses-how to control holiday spending

The holiday season is here. There are so many fun things to spend money on like gifts, decorations, parties, travel, etc.

The stores are decorated with Christmas trees and twinkling lights. TV commercials tell us about the “great deals”. Families and friends are making plans for holiday parties and activities.

With all the pre-holiday noise around us, it gets hard to remember how to control our holiday spending.

Follow these simple steps to avoid overspending, stick to your holiday budget, and keep more money in your bank account:

Create a holiday budget and stick to it.

No one wants to hear the word “budget” when it comes to preparing for the holiday season. But if you do not want to drain your bank account, this is exactly what you need to do.

Before you make a list of all the things you want to buy for the holidays, you need to create a realistic budget. A holiday budget will be helpful to know your limits, so you would not be dreading a moment when the piles of credit card bills will come due in January.

Decide how much you can afford to spend on things like:

Gifts
Holiday cards
Decorations
Holiday meals
Entertainment
Activities
Travel
Donations

And do not forget to budget for additional costs of holidays such as gift wraps, wrapping supplies, stamps, packing materials, and shipping. It all adds to the price of your gifts.

Make a shopping list.

holiday gifts - ho to control holiday spending

Do not go to the store without a shopping list because it is so easy to get caught up in the moment and overspend.

Before going to the store, make a list of your family members, friends, and neighbors and assign a gift budget to each name. Also, you can add to your shopping list a few gift ideas for each person.

I like to use a small notebook for my shopping list with names, gift ideas, and the total amount of money I can spend. With all details listed in my notebook, I enjoy my shopping without worries of getting into new debt during the holidays.

It is a smart idea to start shopping early because you will have more time to shop around and very often get the best price. Moreover, you will have time to compare prices at different websites and retail stores. That gives you more options on what to buy and helps to save money.

Last-minute holiday shopping is stressful and often comes with the risk of paying much higher prices.

Limit your gift list.

Do you have a list of all people you give presents to every year? Do you buy gifts for family members, friends, co-workers, neighbors? Be honest and ask yourself if you really need to exchange gifts with all of them?

If you have a big family, it will be hard to limit your gift list. But if you still buying gifts for relatives you ever hardly see, consider dropping them off your list and just send the holiday cards instead of presents.

Consider a DIY alternative and buy fewer gifts.

glass mugs with chocolate-homemade gifts for holidays

Another way to control your holiday spending is to buy fewer gifts. Change your shopping habits to fit your holiday budget.

With fewer store-bought gifts, you can get creative and make one DIY gift for everyone on your list. It can be homemade cookies or holiday sweets in a glass jar, a framed family photo, or a special ornament.

Here is the list of free or affordable holiday gifts for family and friends:

Homemade treats – put a dozen of home baked cookies in a cute tin or mason jar with a ribbon.
Homemade bath gift set – fill a box with bath salts, soap, candles, matches, and chocolate.
Christmas tea box – fill a box or a canvas bag with your loved one’s favorite tea bags and a cute ornament or card.
Holiday plant box – fill a box with the cute succulents.
Hot cocoa party gift – fill the Christmas-themed mugs with hot chocolate and marshmallow bags.
Christmas potpourri – fill a small glass jar with candy canes, greenery, cinnamon (it will smell like Christmas), and decorate with a festive ribbon.
Ready-to-bake cookies gift – prepare a cute sack filled with a dry mixture of ready-to-bake cookies.
Make a colorful printout of the 10-minute meditation or relaxation guide and wrap it with a ribbon or ornament.
Frame a memorable family photo.
Offer to put actual photographs in a photo album and catalog them.

After all, homemade gifts are a great alternative to store-bought gifts. Most people understand the current state of the country and economy and would be grateful for whatever gift you get them.

Other alternatives to holiday spending – Sacred Santa gift exchange, holiday e-cards, holiday potluck party, etc.

Shop online.

laptop - shopping online during the holidays

Shopping online became so convenient in recent years. The number of people shopping online instead of going to retail stores is growing every year.

Most of us prefer to shop online in the comfort of our homes and avoid the stress of fighting traffic on the roads, and then circle the lot looking for a parking space.

Also, the online shopping brings a lot of advantages if you want to control your holiday spending. The biggest advantage is how easy it makes for you to compare prices.

Check out these deal-oriented websites:

Retail Me Not

e Deal Info

Deal Hunting

You can automatically check prices all over the Web by using the browser extension Honey. Also, this browser will help you find and apply coupon codes to save money.

Honey

Moreover, you can earn cash back on your online shopping by signing up for a website like Rakuten.

Rakuten

Pay with cash and leave the credit card at home.

It is so easy to get caught up in the moment during holiday shopping. You are in a store, you put everything you like in a shopping cart, and it is overflowing.

It will be so convenient to pay with your credit card. But do not use your credit card unless you are sure you can afford to pay your bill off at the end of the month.

Once you figure out your holiday budget, take that money out of the bank account and stop shopping when the money is gone. Paying with cash can help to limit your spending.

It is smart to pay with cash and leave your credit card at home. Which means you will pay only for what you can afford. Ask yourself if you really need everything you put in that shopping cart?

Be selective on holiday gift deals.

Do not fall for all those holiday gift deals. Many of these big deals you find during big sales on Black Friday and Cyber Monday are not actually deals at all. I personally do not like to get into this holiday deal bonanza and prefer to start shopping early.

Recently, I have read that ‘Black Friday is a better time to buy newer, big-ticket items. And Cyber Monday is a better day to shop for tech deals and smaller gifts’

Even we see thousands of deals during the holiday season, it does not mean they are all worth shopping for. Be selective. Create a list of things you are hoping to purchase and make sure to do your research on what you will be buying.

To save money, check and compare prices online before setting foot in a store. The goal should be to buy the best product at the best price.

Resist temptation and know when to stop.

It is so easy to go overboard with holiday shopping. While visiting a mall it is hard to resist temptation and do not buy something “extra”. It could be a little present for yourself, new towels for the bathroom, new luggage set for future travels or nice lunch with your daughter.

If you buy too many “extras” you can blow your holiday budget fast without having any idea where your money went. I found it easier to set a budget for my holiday “extras” so I can enjoy spending the money within that limit.

Once you have bought everything on your shopping list, it is time to go home. I know it is not that easy to resist the temptation to stop at other places and see “what they have on sale”.

But no matter how good the discounts are, you should not be buying things that are not on your list.

Enjoy your holidays.

You do not need to spend a lot of money to be happy. The joy of hosting fancy Christmas dinners, giving expensive gifts, and throwing big parties will soon be replaced with the stress that comes later when you have to pay for it all.

Planning, dealing with a budget, and controlling holiday spending can be frustrating for many people. But what makes holidays memorable is not the money you spend but the time you spend with your family and friends.

Time is often harder to give than anything else. Spending time with your loved ones can be as simple as baking holiday cookies, decorating a Christmas tree, lighting candles, or just watching a movie together.

How do you control your holiday spending? Do you make a holiday budget? Do you prefer to shop online instead of driving to the mall?

How to Prepare a Retirement Budget in 5 Simple Steps

by Maggie 4 Comments

two women with laptop at the table-retirement budget

There is a fear of running out of money in retirement among many baby boomers. As boomer women, we live longer than men, but our savings are not always enough to last long in retirement.

The main goal of retirement planning is to see how to cover your retirement expenses while living on a fixed income. Part of creating a solid retirement plan is to understand your retirement income and expenses. That means you need a retirement budget.

The best advice is to start planning when you are still working and can adjust the numbers. Preparing retirement budget will help to see if you have enough money to retire. If you are still working you have time to add to your savings, pay off debt and change your spending habits.

How do you prepare a retirement budget? I will take you through 5 simple steps.

Step 1. Calculate your retirement income

bees flying over lavender-preparing retirement budget

The more sources of retirement income you have the better off you will be in your golden years. The income in retirement will come from different sources. For many retirees, a Social Security paycheck will be the ONLY income. Other retirees will have an additional income coming from 401(k), IRA, Roth IRA, savings, annuities, dividends, and/or rental properties.

Start with Social Security and find out how much you will get paid once you retire at 62, at full retirement age which 66 or 67 for most of us or delay it until you turn 70.

Social Security website will help you to open an account if you do not have one and find out the size of your guaranteed paycheck.

Social Security website

The next source to consider is pension income. Most Americans do not have pensions anymore. But if you are lucky and have a pension add the estimated paycheck to your Social Security.

Then, look at your retirement accounts including 401(k), IRA and Roth IRA and calculate the balance on all of them.

After you calculated your retirement savings balance, find out how much it will grow in the next 5 or 10 years. For example, you have saved $200,000 on your retirement accounts. If this money grows at 6 percent per year, it will be worth $267,645 in 5 years or $358,170 in 10 years. I like to use an online calculator for estimating my investment portfolio growth:

Smart Asset investment calculator

Using a 4 percent safe withdrawal rule will help to see how much income you can generate from retirement accounts. It would generate around $10,405 or $14,326 a year of income.

Finally, calculate the total of your combined retirement income:

SSB + pension + retirement accounts + bank savings balance + rental income + business income = combined retirement income.

Step 2. Estimate your retirement expenses.

man using notepad and laptop-preparing retirement budget

Step 2 will help to find out how much money you need in retirement by accurately projecting your retirement expenses. It is easier to control your spending than retirement income. And we all know that if we spend less than our monthly income, our retirement funds will last longer.

A simple way to estimate your retirement expenses is to know where and how you spend your money today while still working.

Divide your expenses into 3 main categories:

Essential – need to have
Non-essential – want to have
Unexpected and/or one-time expenses

Label your expenses as either essential or non-essential. It will help to see where your money is going.

Essential expenses – need to have:

Your essential expenses are expenses you cannot live without in retirement:

Mortgage or rent
Utilities
Transportation
Food
Medical

When you retire, you will still have to spend money on these expenses each month. But how it will change in the future when you stop working?

Here are the same budget categories but the cost of it might change when you retire.

Housing – Are you planning to downsize, pay off your mortgage, rent, or relocate to a more affordable place? You have to include the property taxes and maintenance costs if you’re an owner.
Utilities – Cost of utilities might go up or down. If you relocate to a warmer state, include the additional cost of air conditioning.
Internet/ cable/ phone – Are you planning to spend a lot of time at home reading and gardening or some of your hobbies include using the internet? You should include the approximate cost of the internet and cable in your retirement budget. Many people cut costs by switching from cable TV to a streaming service.
Transportation – How your transportation needs will change in retirement? How many cars do you have? Are you planning to downsize your vehicles? Will you buy a new car or a boat? Calculate how much you pay each month for gas, car insurance, and parking and decide how it will change when you stop working.
Food – How much you will spend on food depends on your eating habits. Most retirees start eating out less and prefer to have homemade meals. This budget category expense can be significantly reduced.
Medical – It is hard to calculate medical out-of-pocket expenses, along with premiums for Medicare. Yes, Medicare provides health insurance, but it does not pay for all medical bills and it does not pay for long-term care at all. There is no way to know how much it will cost. But according to Fidelity Investments, a healthy couple can expect to spend on average, a total of $275,000 out of pocket on healthcare expenses in retirement. And a long-term care cost is not included in this number.

Non-essential expenses – want to have:

These expenses are your extras. Make sure to leave room for fun when calculating your future cost of living. You worked hard most of your life while saving and planning for retirement. Traveling, camping, attending a concert, or eating dinner with friends will be part of your fun years. You need to plan for that and include the cost of it into your retirement expenses.

Traveling/ vacations
Hobbies
Entertainment
Gift/ charity

Many of my friends who already retire admitted that every month of their retirement look different than the month before. Some months they spend a lot of time at home. Other months, they are on the road visiting friends and family or traveling abroad.

Unexpected and/or one-time expenses:

Urgent medical expenses
Unexpected car or home repairs
Home improvement
Wedding
Grandkid’s college tuition
Funeral

By including these expenses into your retirement budget, you will minimize the chance to be surprised by these events. You wanted to be sure that you have enough money to cover these expenses. One way to deal with unexpected is to have an emergency fund. Instead of panicking at every unexpected bill, you will have a small pot of money at hand and ready for use.

For our retirement expenses I like to use a worksheet from Vanguard:

Vanguard retirement expenses worksheet.

Step 3. Compare your retirement income and expenses.

architecture - retirement income and expenses

After calculating retirement expenses compare it with your retirement income and see how much you have left over.

Retirement income – retirement expenses = cash flow

Once you stop working you can rely only on the income generated from your savings and Social Security. And if you do not have enough retirement savings, you will have to rely only on one source of income – Social Security. Even Social Security is considered a guaranteed income, but it might be not enough to cover all your expenses.

It is important to have enough income to pay for your monthly essentials. Thus, first look at your Social Security benefits and see how much it will cover. Next, calculate how much money you have to withdraw from retirement savings to cover other expenses.

You can boost your retirement income by downsizing your home or delay retirement for a few years. But those may be not the options for everybody. Most baby boomers will need to reduce their expenses and change spending habits so they can live on their available income.

I calculated that Roman and I will need to have $60,000 a year ($5,000 a month) to cover our expenses for the first 5 years of our retirement. We plan to downsize, sell our house and rent an apartment before we decide if we want to buy a condo. We like to travel and have a long bucket list of places we want to visit. If we do not delay our benefits until age 70, our estimated Social Security paycheck will be $42,000 a year ($3,500 a month).

Thus, we will need to withdraw an additional $18,000 a year ($1,500 a month) from our savings. Many advisors recommend withdrawing 4 percent from savings so your retirement funds last longer. We can withdraw up to $20,000 a year from our savings to follow this rule and feel safe.

If I want to bump that number to 5 percent and withdraw $25,000 a year from our savings, we will spend our retirement funds faster. I would rather adjust our lifestyle and reduce our expenses to fit a safe rule of 4 percent withdrawal than to deplete our funds fast. The goal is to adjust our lifestyle to fit our available income.

Even the whole process looks like a lot of work, remember that calculating these numbers now will make life in retirement much easier.

Step 4. Add inflation and taxes to your retirement budget.

Inflation is real and it will erode the value of today’s dollars over time. Many advisors suggest including 2 or 3 percent inflation to retirement budget. But if you are like me and have no intention of moving your retirement portfolio out of the market, you should expect that keeping money in the market will help to fight inflation.

When you start preparing a retirement budget first thing you want to know is how much income you have available to pay the bills each month. But whatever number you calculated in Step 1 may not be yours to keep in full. Your withdrawals from retirement accounts like 401(k) and IRA will be taxed year after year. And depending on your retirement income so might be a portion of your Social Security paycheck.

Hence, instead of being surprised by taxes, budget for them. Look at your current tax brackets and try to figure out yours in retirement based on estimated income. Then add that money to your retirement budget. You will pay lower taxes in retirement because you will have less income. But you still need to have money to pay taxes every year.

Step 5. Keep updating your retirement budget.

a woman on a suitcase-retirement expenses

I know that my retirement budget is not perfect and needs to be updated. But it is a starting point that allows me to learn how much income Roman and I need to replace when we stop working.

Budgeting for retirement is not a do-it-once-and-forget exercise. Retirement budgets are living things that need periodic checkups. Once you retire you need to keep updating your spending, income, and withdrawal numbers, because spending in retirement could go easy out of hands.

Also, you need to keep an eye on your retirement portfolio growth and make sure that all is going according to your plan. Otherwise, you need to adjust and fit your lifestyle to available income.

Final Thoughts

None of us wants to spend our fun years worrying about money. Everyone wants to enjoy retirement. Follow these 5 simple steps and start preparing your retirement budget. It should help you to stay on track financially so you can enjoy your fun years and avoid stress.

Do you have a retirement budget? Have you thought about preparing a retirement budget? Share your ideas with us in the comments below.

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Disclosure: This information is only educational. The intent if this post is to provide a simple guideline for an extremely complicated matter. I am not providing any specific financial advice or recommendations to any of my readers.