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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.

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.

What do rich people do everyday that’s different?

American flag with fireworks for the 4th of JulyAJ: We’ve been busy lately, REALLY busy. When I came across this article (Entreprenur.com), it provided a welcome perspective as to why we keep cramming things into our lives even when our cups already runneth over. This post feels like a good post-holiday reset as we all drag our way through life until Labor Day (am I right!?) just praying for a snow day.

I’ve pulled out a few of the stats that resonated loudly with me, and I’d love to know how you all feel about these. Full disclosure – there are a few on the list that don’t resonate with us all of the time: they don’t watch TV (I’m a TV-aholic), They read…but not for fun (I read for fun like a maniac), they’re big into audio book (NO THANK YOU)! So maybe I’m not quite “rich people” material yet, but I like to think we’ve got the fundamentals down.

    Rich people always keep their goals in sight.
    “I focus on my goals every day.”
    Rich people who agree: 62%
    Poor people who agree: 6%

    Not only do wealthy people set annual and monthly goals, but 67% of them put those goals in writing.

OF COURSE wealthy people set goals and they probably accomplish them, too! I think the thing that fascinates me more about this set is that only 6% of poor people claim they make goals. We’ve posted several times about our goals which are a huge priority for both of us as individuals and as a household. We love accomplishing goals together and while sometimes that’s more exhausting than anything else, it’s still a way that we thrive in our relationship together. I would love to know how these statistics change within the community of retired, wealthy people. Even when we’re on vacation I find myself setting goals – sometimes that goal is to get out of bed by 11, but it’s a goal none the less!

KJ: Goals are such an important part of personal (and professional) success and fulfillment. If you’re not setting goals – and keeping them in front of you – then how do you know where you’re headed? Be sure to make your goals specific, measurable, assignable (i.e. who will do it), realistic, and time-related (the S.M.A.R.T.).

    And they know what needs to be done today.
    “I maintain a daily to-do list.”
    Rich people who agree: 81%
    Poor people who agree: 19%

    Not only do the wealthy keep to-do lists, but 67% of them complete 70% or more of those listed tasks each day.

AJ: A to-do list seems like such a simple thing but whether the intention is to accomplish everything on the list in one day or over the course of six months, it’s a living, breathing representation of what it means to be a forward-thinking person. Rarely do people earn money by sitting in the wings waiting for money to come to them. Without a proper to-do list, my meal planning, incidental planning and over and above spending would go haywire. I have to actively plan to manage our expenses and staying on top of that means staying ahead of our retirement goals.

KJ: I am a fanatic for to-do lists. There’s just something about writing down your goals or task list for the day and being able to physically cross them off as you complete items that is quite rewarding. It creates a sense of accomplishment, and it gives you the buy-in that you are working toward something. Sure, not all items are accomplished each day, but the exercise I find is quite valuable!

    They aren’t hoping to win the jackpot.
    “I play the lottery regularly.”
    Rich people who agree: 6%
    Poor people who agree: 77%

    That’s not to say that the wealthy are always playing it safe with their money. “Most of these people were business owners who put their own money on the table and took financial risks,” explains Corley. “People like this aren’t afraid to take risks.”

AJ: I love this one. We know MANY people who play the lottery with the empty hopes of improving their means. Lottery-minded people are not traditionally saving-minded, financial goal-driven people. Why not redirect those hopes and dreams into something you can control – like investing in yourself through a potential promotion, education, or certification? Personally, if I’m going to take a chance on burning money, I’d prefer to do it in a way that results in a bigger reward, one that would help me achieve my goals of course!

    What else do you think differentiates the truly rich from the rest of the general population?
    Why aren’t rich people watching TV and reading for fun?
    What happens when rich people also become the least interesting people in the world? :)

Image courtesy of nirots / FreeDigitalPhotos.net.

What do rich people do everyday that's different? 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.

How often do you look at your net worth?

Growing Dollar Tree Photo
KJ: How often do you look at your net worth? Weekly, monthly, quarterly, yearly, never? Why or why not?

I track our net worth on a monthly basis, and we review it together during our quarterly presentations. Yep, you read that right. For those of you who do not know us, we actually have a presentation that we review each quarter with information on investment performance, net worth changes, and other financial highlights for the quarter. We used to do a comprehensive cash flow each quarter, but since I’ve fallen behind on tracking it in Quicken, the numbers aren’t as reliable. Sure Mint.com has a lot (or mostly all) of the information, but since we stay on top of our net cash flow each month, the quarterly figures aren’t as useful. It’s fun (and shocking) to look at periodically even if you know what you spend each week or month. There’s something about seeing some of the figures on a quarterly or annual basis that makes you wonder, “we spent how much at [insert retailer or restaurant]!?”

AJ: I know we’ve talked about our quarterly presentations before but looking at our net worth on a quarterly basis helps me understand where we are without getting too caught up in the tiny details that occur month to month. Ensuring we’re on track monthly helps keep us from having to catch up later, but I leave the monthly net worth review to Kirby so I don’t go crazy :).

Why track monthly?
So, why do I track our net worth monthly? Short and simple: to see if we’re on trend with our goals. It helps keep front of mind when we have a lot of goals that are very long-term in nature. Otherwise, it’s easy to let them slip by the wayside and lose sight of what the end goals may be.

Tracking it on a daily or weekly basis would probably make you go insane, but tracking it on a monthly basis still gives you the regular updates you need in order to stay on track. Plus, if you start tracking it regularly when you are younger, you’ll begin to learn how much investment performance and the whims of markets can impact an account in the short-term – a valuable lesson to learn sooner rather than later!

What do we track?
Well, everything we can think of to track that represents an asset we own except household valuables and furnishings. We include our house, cars, cash value life insurance, investment and retirement accounts, savings, etc.

What don’t we track?
For administrative simplicity, we don’t track jewelry, silver, furniture, furnishings, etc. in our overall picture. One-off expensive jewelry, art, wine, etc. could be included if you felt it were meaningful, but in most instances, it’s not something you would look to sell to raise cash anyways.

We also don’t track checking accounts or credit cards on our net worth. Since we keep relatively minimal amounts in our checking account from time-to-time other than to meet cash flow obligations, it’s not useful to show in our net worth figures. Same goes for credit cards, since we pay them in full each month, it doesn’t do any good to show the value. Technically, we could show the difference of the checking accounts and credit cards to come up with the net figure each month, but for simplicity, we do not. However, if you do have any type of credit card or loan balance that is carried over from month to month, then you would want to make sure it is properly included (i.e. reducing your net worth).

How do we get values?
Some items are easy to value like your 401(k) or investment accounts that have regular daily values. These most often come from online account summaries or statements that are easy to access. Try to use the same date for valuations, otherwise you might be double-dipping! If you have a deposit or transfer in transit, you could be including it in the value of the receiving account, yet it still hasn’t been deducted from the sending account, so make sure you’re not overstating a value.

Other items like a home and cars are a little less easy to value.

I try not to make any adjustments to the value of the house unless a meaningful event has happened (mostly a significant decline in prices in the neighborhood like 2008 and 2009 showed most of us), but I seldom increase the value of our home. In fact, I even take off 6% of the estimated value to show the true, net estimated costs of selling with all the realtors fees and transaction costs involved if we were to sell it.

For the cars, probably about once or twice per year I’ll head on over to Kelly Blue Book.com to check out the current values of our cars. They don’t change a whole lot, but it’s good to be realistic (and conservative) about the values we’re showing them at, so I usually round down.

If we had business interests, we would include that, but we don’t at this point in time. That part of your net worth may be the most tricky to value, and it is likely to be infrequently valued (probably at most once per year).

Do we use after-tax figures in our net worth?
The short answer is no, but if you really think about it, shouldn’t you show the after-tax value of your retirement accounts? Seeing as how we’ve tried to put as much as we can in Roth accounts, they’re essentially after-tax funds anyways, so we don’t make any adjustments. However, Angela has a 401(k) that is pre-tax that we could consider reducing by our tax rate. Maybe this will be a change we make going forward, but this has just added one more step in complexity to tracking it, so I haven’t taken the plunge to make the adjustment to show our after-tax net worth specifically. It’s really not difficult to do, and I would highly encourage you to make the adjustment particularly if it’s a very significant part of your net worth.

Take the value of your account and multiply it by (1-Tax Rate). So, if you’re in the 25% tax rate, and your account is $10,000, then you would take $10,000 (1 – 0.25) to get a result of $7,500 to show on your balance sheet. A pretty meaningful adjustment though when you think of the impact on a large pre-tax account!

    How often do you look at your net worth?
    Do you exclude the value of anything from your net worth?
    Do you look at the after-tax figures?

Image courtesy of scottchan / FreeDigitalPhotos.net.

How often do you look at your net worth? 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.

Smart 401k planning must knows

Heart monitor on piggy bankKJ: We recently came across a quick 401(k) article talking about 7 ways to avoid a 401(k) disaster. In my opinion, there’s never too much you can read or understand about your retirement plans, so we’ve created our own set of do’s and don’ts when it comes to common 401(k) mistakes to avoid. We’re not forgetting about those of you who have a 403(b), as this list applies the same to you! Read the full MSN Money 401(k) article here.

Take full advantage of your employer’s match
Mistake #1. Don’t leave money on the table. Even if you think you can’t possibly save money because your cash flow is too tight, chances are you actually can come up with a solution. Even if it’s an extra $50 or $100 per month, that can make a huge difference in getting you on track for your goals. You may not be able to make a change in one area to come up with the extra $50-100, but maybe you can adjust a few categories. Cut out that movie channel package, get a cheaper electricity provider, cut out dining out once per week (this alone could save most couples $120 per month), or shop around for some deals and coupons before you make a purchase. Stop making excuses, and do whatever it takes to at least get your full employer match!

Take advantage of the 401(k) Roth feature
Sure, not every firm has this, but more and more companies are offering it nowadays. If you’re young, in a low tax bracket, and have a LONG time until you retire, then not participating in the Roth feature of your account is a big no-no. You pay taxes on the money this year (i.e. you can’t deduct your contributions like you can for a traditional pre-tax 401(k)), but money withdrawn in retirement is tax-free! Huge win for us young savers.

Know your fees
All investing involves not only risk but also fees, so be aware of what you’re getting charged. New regulations enacted in 2012 require your 401(k) plan to provide detailed fee expense information. Not all fees may be paid by you, but it’s important to know what they are. In addition to administrative and record-keeping fees, there are also mutual fund fees (commonly known as an “expense ratio”). Each mutual fund is different, and various strategies have differing amounts of fees. However, just because a fee is higher than another fund, doesn’t mean it is not appropriate. Large company domestic stocks are usually lower in expenses compared to an international stock strategy, so know the differences and make sure you’re comparing apples to apples.

Know your investment options
Pay attention to the options you have to invest in. Much like you probably shop around for the best retailer when making a purchase, do your research to make sure you are picking the right funds for your goals and risk appetite. If you aren’t prepared to analyze all the factors in making an investment decision, then hire out proper counsel!

Diversify your investments
Just because yesterday’s top performer did well, doesn’t mean it will be tomorrow’s best performer. The purpose of diversification is to build a more stable portfolio over time, so some funds will under perform while others outperform in different market conditions. As we’ve seen twice over the last 13 years, stock markets (or real estate) don’t always go up! It’s part of the cyclicality of markets, and knowing that is half the battle.

An important component of this aspect is periodically watching how your investments are positioned. If you own a fund that is considered an “asset allocator” (meaning it could be invested in stocks, bonds, cash, etc.) or target date fund, then it’s important to watch what they do in conjunction with your other investments. Digging into the numbers may help you realize you’re either way LESS or way MORE positioned in one area – too much Europe, too much U.S. small cap?…

Know your retirement needs
Chances are you may not be equipped to know realistically what you need to have for retirement (is it $500,000, $1,000,000, or $5,000,000 – all entirely contingent upon what your expenses are). Work with a knowledgeable advisor to help you navigate not only how to position your portfolio, but also what milestones you’re trying to reach for. If you don’t know where your “financial independence” ship is headed, how can you ever expect to know when you’re there?

Use your account for retirement purposes ONLY
While there are a few IRS tax provisions to allow you to avoid penalties for withdrawals prior to retirement (or at the earliest of age 59 1/2 as set by the IRS), using your retirement funds for non-retirement purposes can be disastrous. Don’t dip into the account before it’s time. You may not even realize the compounding effect of the $1,000 or $5,000 you “need” now and what that could do for your long-term retirement plan!

    Are you maximizing your 401(k) or 403(b) contributions?
    What would motivate you to take advantage of the employer match?
    Is there anything you would add to this list?

Image courtesy of hin255 / FreeDigitalPhotos.net.

Smart 401k planning must knows 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.

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