Top 10 Money Tips from Around the Web – May 2016
Each month we gather the top 10 money tips from bloggers, newspapers, and other online sources. We figured that since we spend so much time reading other people’s articles all month, why not share our favorites with our readers! Besides, utilizing all of our resources always results in a better experience for others. And what better resource than the minds of hundreds if not thousands of others! Okay, maybe 10. Our money tips include saving money, financial concepts, life lessons, and more.
Money TipsTip #1 – Create an Emergency Savings Account
Mel, at BrokeGirlRich.com recently wrote in her article, The #1 Best Financial Thing I’ve Done, that having an emergency savings account has helped her as a freelancer and as a generally anxious person. Not to mention that it actually comes in handy.
Emergency funds not only lower stress, but they can open additional doors of opportunities.
That’s what we keep saying! Well, we say that “Debt takes away choices,” but the opposite is also true. Cash creates opportunities – or at least allows you take advantage of some new ones.
Tip #2 – Spend no more than 10% of your income on a car
Sam, in the article The 1/10th Rule For Car Buying Everyone Must Follow posted on Financial Samurai, explains why so many people are overspending on their cars and why it is such a bad idea. When you add in maintenance, taxes, insurance, stress, and even buyer’s remorse from spending too much, it just doesn’t make sense to use so much of your hard-earned income on a car. He even includes a chart to indicate the type of car people should own at every income level!
According to him:
Tip #3 – Your home is a purchase, not an investment
A median income earner buying the median priced car that now costs $32,000 in 2016 is financially absurd. Who spends ~72% of their gross salary on the purchase price of a car? Worse yet, after you pay a 20% effective tax rate on your median $42,000 gross income, you’re now spending around 95% of your net income on a car! That’s crazy and a sure path to financial mediocrity.
Sam, Financial Samurai
Kristin Wong, in the article Why the Rent vs. Buy Debate Is Completely Pointless posted on Lifehacker, that there is so much more to deciding between renting and buying than just the numbers. In her words,
Still, a calculator can only do so much. It might tell you the better long-term decision on paper, but that still doesn’t mean it’s the best decision for you.
Kristin Wong, Lifehacker.com
This is so true! The numbers are there, sure. But there are so many factors that you are really estimating anyway. The real key is to decide – are you at a point in your life and career where you will not need to move for the next opportunity or promotion soon? Are you ready for the time and responsibility and the financial risk associated with home ownership? When you are ready and the money is there, then buy. But not before.Tip #4 – Pay annually for insurance premiums
Hayley, in the article 5 Ways to Save More Money When You’ve Already Cut Back posted on Disease Called Debt, points out that most insurance premiums charge interest if you don’t pay it all up front. While may of us pay monthly because that is how we get paid, it is a good idea to start a system to set some money aside until it builds up enough to make a lump sum payment. Insurance is expensive enough without paying extra interest – so see if there is a discount for paying one year at a time.
As she puts it:
Car insurance, life insurance, pet insurance, home insurance (basically, most insurances) come with interest attached if you decide to do the usual thing and pay monthly. If you pay upfront for the year, you can save quite a bit of money that way.
Hayley, Disease Called Debt
Tip #5 – Get educated about finances
James, in the article Advice for Building Your Financial Wellness Toolkit posted on Thousandaire.com, emphasizes the importance of financial education. He says it is important to know where you stand – and that could mean using free online resources or even consulting a financial advisor. Whatever you decide, it is important to have a firm understanding of personal finance so you can take a solid assessment of where you are and understand the path to where you want to go – once you make that determination.
As he put it:
Tip #6 – Start an emergency fund before paying down debt
Regardless, it’s up to you to take control of your situation by using all means necessary!
Jefferson, in the article It All Starts With Emergency Funds posted on See Debt Run, points out the importance of having an emergency fund as the foundation to a debt elimination strategy. Since your goal is to avoid adding debt, you have to have a mechanism in place to prevent that from happening. Otherwise, you can get frustrated and give up.
In his words:
But the truth is that even if you make some minor gains in paying down debt, you will eventually have another “emergency” that will force you to pile that money right back on the top.
Jefferson, See Debt Run
See how emergency funds came up twice this month? Must be something in the water – or the financial environment 🙂Tip #7 – Don’t inflate your lifestyle as your income rises
Katie Little, in the article How I Retired at 33 and So Can You posted on USA Today a story about a few individuals who were able to retire in their thirties by simply prioritizing or reducing their spending while their income rose to a bit over $130,000 per year. That seems like a lot of money, but use it to retire before age 40 is quite impressive!
Even if your income is not this high, the principle is the same. If you buy a new car and bigger house when you get a pay increase, then you still have nothing left at the end of the month. The common pattern is live as though you are still making the same as when you started out and invest the “extra.”
In her words:
Tip #8 – Budgeting is about spending mindfully
(Speaking about a person featured in her article) He and his family keep expenses relatively low by finding happiness in things that don’t cost as much money, like hanging out with friends over home-cooked meals.
Katie Little, USA Today
Carrie Schwab, writing on LinkedIn account, recently started a financial cleanse series. Her week 2 article, Financial Cleanse Week 2: Budgeting Isn’t Always About Doing Without. It’s About Spending Mindfully is a great explanation about what budgeting really is all about. It’s not sacrifice, but rather prioritizing and making informed spending decisions.
This is the first time I ventured into LinkedIn for a tip source, but it was really good, so I went with it. In her words:
Tip #9 – Protect your number one asset – your income
[I]t’s much better to consciously cut back than to unconsciously put extras on a credit card. But remember, too, it’s not so much about doing without, but rather about spending mindfully.
Carrie Schwab, LinkedIn
Richard Barrington, in the article Depending on stock returns to fund your retirement? Think again posted on Five Cent Nickel, Explains that while the stock market is something we have no control over, we can control our own destiny – by protecting our income and minding our spending. He also mentions that the one asset that will generate the most amount of income for us is likely our job. He says the rest of us should not worry about whether the stock market is up or down today, but keep investing regularly and focus on our jobs.
He points out:
Tip #10 – Get a Plan for Your Debt
Keeping that stream of income coming [from your job] — and growing it through career advancement if possible — can help pick up the slack when investments are doing little to build your wealth.
Richard Barrington, FiveCentNickel.com
Bill Pratt (yes, that’s me), in the article We Earn Millions But Lose it to Debt posted on our site, The Money Professors, points out that when you add up the amount of money most of us will earn throughout our lifetimes, it adds up to over $2 million! But sadly, very few of us manage to keep much of it. How did I chose this one over the extensive awesomeness on our site this month? (Modesty is not my strength at the moment). In all seriousness, it is an important point to understand that the money is there. We just have to find a way to keep it.
I couldn’t have said it better than this:
Don’t get your advice about money from friends who are broke… Be careful when you get your advice from banks… be aware of how those who are helping you are being compensated… you have to carefully consider whether their financial advice is about your wealth or theirs.
Bill Pratt, The Money Professors
Since we have so much coming in over a lifetime we have to make a real plan on what we want to do with that money, otherwise it will just slip away.
So there you have it. Top 10 money tips from various sources from around the web. Don’t forget to share this post and/or leave a comment with some of your favorite money tips. For more money tips see last month’s Top 10 Money Tips!
If you are a writer and would like to have your tips considered for our monthly top 10 money tips, please email the link to your article and if we find a tip we like, we will include it. Email us: info [at] themoneyprofessors [dotcom].
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