Is it more stressful to not have an emergency fund or to spend one you already have?

Locked Piggy BankKJ: If you don’t have an emergency fund, the answer to you may seem simple, but once you’ve built up that emergency fund, then when it comes time to actually dipping into it for an emergency – yes, that’s right, an emergency – you may find that your answer to the question isn’t so simple!

Before we go any further, if you don’t have an emergency fund (or don’t have an adequate one yet), then read our prior post on why you need an emergency fund, so you can get on track sooner rather than later. That’s priority numero uno.

If you do have an emergency fund – go ahead and pat yourself on the back whether you’ve made it all the way to build it up or you’re still working on it! – then the chances are you have been faced with this question before. A tree falls on your house, your car breaks down on the side of the road, or you have a sudden medical complication that has your head running in a tailspin as you try and calculate all the numbers and expenses that are coming your way.

Spending your hard-earned savings can be stressful
It can be quite difficult to psychologically part with any of the money you’ve built up. You spent your hard earned time building it up, so when it comes time to deal with the actual emergency itself, you may find yourself cutting your expenses further for the month rather than wanting to dip into your savings. I mean, if you can still make it work and not really cause your budget to be completely turned upside down, then why not? The sense of accomplishment of making it work within your month is quite rewarding to know that you were able to take the challenge head-on.

Once you spend it, you have to work to build it back up
An obvious issue, but part of the reason why it can be so difficult to spend that hard-earned cash. Hopefully if you’ve been good about your emergency fund, once it’s built up, you just redirect the savings to additional retirement savings or to other longer-term investment savings. So, if you have to build back up the emergency fund again, then you may just need to revisit your priorities on whether other savings amounts will need to be adjusted.

It’s always a moving target
Hopefully over your career you are increasing your income as you build up your skill-set in making yourself marketable to employers. If you simultaneously increase your expenses while your income soars, then you’ll find that your emergency fund needs will soar to new heights as well! All the more reason to just keep your expenses low and to ratchet up your savings, not your lifestyle.

You get accustomed to your new normal
You get used to watching your emergency fund as a nice little addition to your net worth. Whether that’s $5k, $10k, or $20k+, parting with any portion of it means your net worth takes a hit. And who likes to see their net worth decline? You get used to seeing it build over time that you hate to have a period of time where it dips some. Sometimes though it can be the push you need to try and find creative ways to make money the weird way like we did this last month. I mean, everyone needs a little inspiration here and there to innovate, don’t we?

    Have you had to dip into your emergency fund before?
    Did you have to fully-fund the expense from the account or did you cover some of it from your budget?
    Was it difficult to build up the emergency fund again?

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Is it more stressful to not have an emergency fund or to spend one you already have? is copyrighted by TheSimpleMoneyBlog.com without consent to republish.

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10 signs that your budget needs a makeover

Hand Holding Dollar
AJ & KJ: Here are our 10 signs that your budget needs a makeover:

1) The words “I’ve never made a budget” come out of your mouth
WHAT!? Okay, so forgive my shock and awe, but this is a no brainer. Never made a budget = never been aware of your true expenses. Get to cracking and check out a lot of the simple and free options out there for starters to see how to create a budget.

2) You say things like “I don’t know what I spend per month on [xyz]…”
If you don’t have a clue what you spend in a given month in any particular area, that’s typically an indication that your budget is a leaky faucet. Time to get out Quicken or Mint.com and run the numbers to see what you’re spending. It can be a good chance to find an area to trim where you didn’t realize you were over spending!

3) Your budget contains more categories than you can count
Simplify categories to show your primary fixed items (or relatively fixed items when it comes to insurance, utilities, etc.) and create as few categories as you can on the discretionary items so you can more easily see the total dollars you’re working with on a month-by-month basis.

4) You don’t “close out” the month
This is a must for us and should be on the list for all budgeters. Make sure you true-up your expenses for the month, so you can identify what (if anything) can hopefully be swept into your savings accounts! Don’t fall into the trap of spending right at the end of the month thinking you’ve earned it only to come apart at the last minute.

5) Your budgets are too idealistic
Yeah, that’s right. Sometimes you can create a goal that is too aggressive for even you. Create budget amounts that are both realistic and attainable.

6) You don’t pay yourself first
Priority numero uno is to pay yourself first! Have some of your savings come off the top through programs like payroll deduct or automatic monthly transfers, so you don’t have it to spend regularly.

7) You don’t have any room to save
Blasphemous! No matter how good of a budgeter you are, there are always ways to trim a little to make sure you are saving to meet your goals. If that’s not one of the highest priorities in your budget, then think again, and get back to the drawing board!

8) Roth IRAs are non-existent
Especially for you young savers out there, if your budget doesn’t include some savings to Roth accounts (via Roth IRA or Roth 401(k)), then you should reconsider and reevaluate your options. Roths can be a great tool for those young savers at heart!

9) You don’t plan for upcoming expenses
Make a list before each month and update it as irregular expenses come up. Maybe this month you need to buy dog food or pay for an insurance policy or have a lot of gifts to give. Keep track of it and plan ahead, so it doesn’t surprise you at the last minute!

10) And lastly, you don’t budget with financial goals
No. no. no. Why save if you don’t know why you are saving or what target you’re saving for? Get a plan in place so you can stick to it and know what you are aiming for!

Just starting out? Check out our budget quick start guide to learn what you can do to get on track!

Image courtesy of ponsuwan / FreeDigitalPhotos.net.

10 signs that your budget needs a makeover is copyrighted by TheSimpleMoneyBlog.com without consent to republish.

Some of the links in the post above may be affiliate links. This means if you click on the link and purchase the item, we will receive an affiliate commission. We feel strongly about only recommending products or services we use personally and/or believe will add value to you, our readers. Read more about our commitment to providing quality product recommendations.

New Year’s Resolutions: eight month check up

Success On Dartboard Showing Accomplished ProgressKJ: We’ve written about our goals a lot this year, and part of what we wanted to do was build accountability around the goals we set. With a focus on one of the main things that rich people do differently – which is not only setting goals but keeping them at the forefront of their daily lives – we wanted to do a six month gut-check (which actually turned into an eight month gut-check) to see how we’re doing with our 2014 goals (read more about our intro post on our 2014 goals here).

    What goals did you set?
    Have you forgotten what they were, or have you accomplished what you set out for?

Here’s how we have fared for the first half of the year:

AJ’s 2014 goals:
Full disclosure, I forgot it was August, so remembering I started this year with goals seems impossible.
- Read 5 specific books. I have read two of the five books I intended to read along with 31 pages of a book I thought would be good for us to read as a couple (Kirby read it in one weekend about 2 months ago, and now I’m a slacker). And I’ve read probably 65 mindless books given my Nook app downloads. I bought the two other books I’m supposed to read in February, so I should probably just get on that.
- Learn to knit. I am resolved to stop making this a resolution. This is never going to happen for me.
-Learn how to bake. I’ve pretty much mastered baking, and I’ve semi-mastered gluten free baking. So long as we pretend those gluten free buttermilk biscuits never happened, this is an overall win.
-Make money money, shake money money. I’m not yet to THE goal, but I’ve made good headway. This might not happen in this calendar year but forest for the trees and all that.
- Just say no to alcohol one week per month. I THINK I’ve done pretty well about this but I’m not going to lie to you, I forgot this was a goal.
- Bring in $100 more per month. Yeah, I’m a money making machine. Check out our other post on how we made money the weird way this last month. Some months have been quite successful for this!
-Maintain my ideal weight. Kirby had a major health scare 8 days into our cleanse, so we never finished that round BUT we’re in our second month of an awesome boot camp so weight has become less of a focus in exchange for strength and overall health, so this one is for sure an A+.
-Create and maintain a garden. I think this is one of my biggest accomplishments this year. I’ve grown an incredible variety of produce that we have loved and shared. I’ve learned a lot – if your brother-in-law accidentally steps on your squash, they never come back from the dead, you can’t physically plant enough green beans to make Kirby happy, potatoes are like rabbits, sometimes you think you’re growing broccoli only to find out it’s been carrots all along, grub worms are sick and snails are suckers for snail poison.

I’m in love with gardening even though I had some failures – my strawberry plants are BEAUTIFUL, but they never produced fruit. I’m still not entirely sure where my jalapeños, sweet peppers, broccoli or tomatoes went, but whatever!

All-in, I think I’m 4 3/4 for 8, which is a-okay by this full-time-job-having, volunteer-focused girl.

KJ’s 2014 goals:
- Read 5 books. I completed reading two books so far: American Gridlock: Why the Right and Left Are Both Wrong – Commonsense 101 Solutions to the Economic Crises and The Five Love Languages. This second book is pretty fascinating. The best takeaway from this is simply a much better understanding of how different people perceive and receive love. We all have different languages, and so long as we understand that, it will go leaps and bounds to keeping open communication lines within your household.
- Professional development. This goal relates to continuing to invest in my own “human capital” (i.e. unique earning potential from the ability and skills used to generate an income). I have completed all of my required Continuing Education this year. I have three more months to go, so not too shabby. Also, I’ve continued to emphasize business development and prospecting within the community as well as finding ways to be the “guinea pig” and learn new technologies at work.
- Maintain my ideal weight. Surprise, surprise, this one has fallen by the wayside other than this last month. With the boot camp we signed up for (going on our second month now), I hope to have this in the bag by the end of the year!
- Double blog readership. Although the year started off strong with a shout-out from a fellow blogger, we had a few months of very slow posting (only two in June!) with too many things on our plate, but we’ve since refocused and we’re back to more regular posts. Just so much to always focus on, am I right!?

OUR combined 2014 goals:
- Work out twice per week. Kirby says: No comment. This one hasn’t quite worked out like we hoped with how busy we’ve been this year, but we have picked this back up in recent weeks, and we’re off to finish 2014 strong! Angela says: I’ve done way better than Kirby. I’ve made it to some Pilates classes, I’ve done the 7 minute workout and I’ve run. But yeah, two times a week is generous on the whole.
- Increase our net worth by 35%. We’re a little over halfway through the year, so that should mean we’re about halfway to this goal – theoretically. Well, we’re still generally on track, but not quite at the halfway mark that we would like to be. Hopefully the last half of the year we’ll be able to hunker down and focus now that we have some significant expenses behind us (read new fence, medical costs, and home finish-out costs to get as close as we can to finishing out our home renovation projects).

    What’s the most challenging resolution you’ve taken on?
    How do you motivate yourself to stick to it?
    Share with us your success (or failure) to stay on track of your goals.

Image courtesy of Stuart Miles / FreeDigitalPhotos.net.

New Year's resolutions: eight month check up is copyrighted by TheSimpleMoneyBlog.com without consent to republish.

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The month we made money the weird way

Save Jar Means Saving and ReservingAJ: I love “found” money.

My pen and notebook budgeting system is really hardcore. It comes down to the last day of the month every time to see where things will net out. We have all kinds of factors that come into and out of play:

    - Did either of us travel this month and therefore do we have an expense report or two that needs to be reconciled?
    - Were our monthly bills lower than expected? (Ours are almost always lower than we expect and instead of lowering that budget I use this as “found” money which certainly isn’t the best system but it’s a system none-the-less!).
    - Did we go over our fuel budget? (We almost always do)
    - Did we over/under spend our food budget?
    - Did we over/under spend our everything else budget?
    - Did we over spend last month and need to recoup extra dollars to put towards savings in this month?

Then comes the fun stuff. What do we get to ADD back into our numbers? This past month has been especially fun:

1. I got a gift card from work for doing my annual health screen.
2. I did a really weird video survey in exchange for $100 through our insurance company.
3. We got reimbursement from a doctor for an appointment that was 8 months ago (Kirby says this isn’t “found” money since we paid them initially but I disagree. We accounted for the expense last November and now we’re getting credit back, so that counts as “found” to me and I’m running this ship :))
4. I got money for my birthday. This is the best kind of money – appreciation, celebration money.
5. We cashed in on a reward from a survey site that resulted in a free tank of gas. I’m a little bit obsessed with the concept of using my in-between-other-projects time to make money and this is SO easy to do it’s ridiculous. If I had more time lying around I’d probably be able to earn a tank of gas a month, but I’m on an every-other-month system right now which equates to an extra $300 in savings a year. Nothing to sneeze at!

    How do you track you “found” money and how do you spend it?
    Where do you find money in your budget?
    What is your philosophy on new found money?

Image courtesy of Stuart Miles / FreeDigitalPhotos.net.

The month we made money the weird way is copyrighted by TheSimpleMoneyBlog.com without consent to republish.

Some of the links in the post above may be affiliate links. This means if you click on the link and purchase the item, we will receive an affiliate commission. We feel strongly about only recommending products or services we use personally and/or believe will add value to you, our readers. Read more about our commitment to providing quality product recommendations.

The misconception of UTMA and UGMA accounts: what you need to know

KJ: A bit shocking of a headline I imagine for anyone who has setup an UTMA or UGMA account for their son, daughter, niece, nephew, grandchild, cousin, whomever. In theory, I like the concept of an UTMA and UGMA account, but in reality, I think they are highly over utilized for what their intended purpose is.

Short for Uniform Transfer to Minors Act (UTMA) or Uniform Gift to Minors (UGMA), it even says it in the name that it’s a gift or transfer TO the minor.

So, what is the misconception? With an UTMA or UGMA account, any money you gift to the account is considered an irrevocable gift to the beneficiary. That’s right, it is a gift of money (or investments) that you have given to a minor, and it’s up to a designated ‘custodian’ (i.e. generally the parent) who oversees the account on behalf of the minor until they are of age.

Sure, it’s a great way to potentially help set aside some designated funds for a minor, but once the minor reaches the age of majority (depends on the state, but it is either 18 or 21), then they legally have full control of the account to do whatever they may want to do with the account. Woah. Anything? Yep!

One nice feature is that you can use the funds for the benefit of the minor at any age (can be junior high, high school, college, etc.) for living expenses unlike a 529 plan that must be used for qualified higher education expenses. See also our post on into to funding education where we also talk about other higher education funding accounts and their pros/cons.

Figure Sitting And Reading Book With Idea Bulb Stock Image

An UTMA/UGMA becomes the child’s account
While traditionally common to help set aside some funds for education for a child, many parents don’t often realize that the account is legally the child’s to use however they would want once they reach a certain age. Plus, if the parent wants to recapture some of the funds (say it wasn’t all used for education or other support for the child), then it is up to the minor to actually gift the money back to the parents! Sure, a saving grace is often that the child probably has no idea how to access the funds unless the parent discusses it with them, but still. They might begin to wonder why they have a 1099 for an account in their name!

Taxation implications
There really aren’t too many positive income tax implications for an UTMA/UGMA. The first $1,000 of gains/income each year (for 2014) is tax-free, and the second $1,000 is taxed at the child’s tax rates (typically very, very low), but any gains above that are taxed at the parent’s income tax rates. It prevents parents from being able to shift a lot of assets to their child to avoid a higher income tax bracket.

Know the restrictions
While I’m not 100% anti-UTMA and UGMA accounts – in fact, we have one setup for my nieces – the person setting them up often doesn’t quite realize the implications for how the account can be used. For us, Angela and I wanted it to be used for whatever K&G may want when they get to a certain age – be it school, help with a car down payment, help with a house down payment, etc. We knew the implications of setting up the account and how it may ultimately be used beforehand.

Consider other options
Sure, these account types CAN be appropriate from time-to-time to help fund education for a child, and they can be appropriate for a parent truly wanting to gift some funds to their child to use however they want.

However, for those parents hoping to exclusively use it for higher education costs and to potentially “recapture” whatever may be left, there are much better uses of the funds. Maybe a 529 plan would be more suitable (where the donor continues to control the account after the beneficiary is of the age of majority), and if you wanted to gift the account back to yourself at the end of the time period, you generally can find a way to do so much easier (noting there could be some gift tax and income tax implications for earnings in the 529 plan account not used for higher education).

With a 529 plan, you can also reassign the beneficiary to another child, relative, etc. if the first child either doesn’t go to college or attends a less expensive college than you planned (woohoo for your budget!). Something you don’t have the ability to do with an UTMA/UGMA.

UTMA/UGMA accounts may impact financial aid options
One factor impacting your out-of-pocket education costs is eligibility for financial aid. A downside to the UTMA/UGMA accounts is that the value of an UTMA/UGMA account may reduce the child’s ability to receive financial assistance in college. In fact, it isn’t uncommon to see financial aid reduced by 20%+ of the value that is owned in an UTMA/UGMA.

    Do you have an UTMA or UGMA setup for anyone?
    What made you decide to open that account type?
    If you chose a 529 plan, why?

Image courtesy of Master isolated images / FreeDigitalPhotos.net.

The misconception of UTMA and UGMA accounts: what you need to know is copyrighted by TheSimpleMoneyBlog.com without consent to republish.

Some of the links in the post above may be affiliate links. This means if you click on the link and purchase the item, we will receive an affiliate commission. We feel strongly about only recommending products or services we use personally and/or believe will add value to you, our readers. Read more about our commitment to providing quality product recommendations.