January budget challenge: mid-month update

Stack of billsAJ: Two weeks ago we introduced the “H” family and their month of Guest: Hi folks, this is Mr. H. Mrs. H wanted me to chime in with my perspective at the midpoint of this financial fast. I would say things are going very well… but the garage door broke during the first week of this commitment. My immediate reaction was to cut off a week or so of groceries to make up for the loss… but that was a nonstarter as soon as we ran out of goldfish crackers.

One budgeted item for me was $10 a work day ($200 a month) to eat at the office. At first I was a little nervous because it covers both breakfast and lunch. After two weeks, I am happy to say I have come in under the $10 by about 35%. I was able to do this by increasing my consumption of oatmeal, sandwiches and hamburgers from the cafeteria.

For months I have been planning to “cut the cord” (cut off cable TV service) and this seemed like a good opportunity to finally make that happen. After exploring our options I discovered that most competition has been pushed out of our neck of the woods and our choices were limited to two companies. Neither of the companies endorse cutting the cord. In fact, they both charge a higher premium for internet-only services and one even imposed a limit on data usage to discourage the “cut the cord” movement. Instead of cutting the cord we were able to downgrade our TV package and supplement with NetFlix. This is going to save about $30 a month.

Another commitment was to eat out much less. Of course, as soon as we did, some good friends asked if we could go out to dinner with them one night. These friends do not have kids (yet), so a night out for them is always a little extravagant. I could see dollar signs jumping out the window at the thought of going out. BUT my beautiful and intelligent wife asked them to eat at our house instead of going out. They agreed and ended up having a great time chasing the kids and playing Candy Land. This was so much fun we want to do it more often even after the financial fast is over.

Overall, I am really glad we are doing this. Through the process of digging through the fridge and pantry we have found that it can be fun thinking of new ways to eat old food. You know, like carving the moldy part out of cheese and bread. ;-) Just kidding, I only did that once, but don’t tell Mrs. H!

Signed,
Mr. H

AJ: “H” family, we feel your pain! I also shared my meal plan for the month and for the first month in almost two years my plan has been ridiculously off-plan. I forgot to thaw stuff, I didn’t even have some of the necessary menu items, things didn’t sound good, all I’ve wanted to eat was sugar, yadda yadda yadda. On top of that, we celebrated my parents’ anniversary and dinner turned into after dinner drinks, that turned into more drinks, that turned into dancing and live music – dang it! That didn’t align with our budget or our New Years resolutions! So, we reset and refocus and tip our hat to January for breaking our wills temporarily.

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How to save for retirement if you don’t have a 401(k)

It should be called retIRAment (IRA and retirement)KJ: How DO you plan for retirement and save when there aren’t any options with your employer? What happens if the 401(k) (or 403(b) for those public workers) everyone pines for isn’t even an option for you? Surely there have to be ways around this, so you too can save for and enjoy a comfortable retirement, right? Well, the good news is that there still are tax-advantaged ways of saving for retirement despite not having an employer retirement plan at work. Check out our post on IRAs for some additional reading.

I think the key thing to recognize about whether you do or do not have a tax-efficient way of saving for retirement is that you are saving for retirement, period. It may be a long ways off, but with the compounding effect of interest, you’re a sucker to not let time be on your side and invest early. Start early…like REALLY early!

SEP IRA
If you are a contract worker, there is something called a SEP IRA (Simplified Employee Pension). You can take your happy little 1099 earnings for the year and contribute (typically) up to 25% (nice little caveat there since it is slightly less for those who are self-employed) of your income up to a maximum savings of $51,000 for 2013 (or $52,000 for 2014)…and that’s a LOT of retirement contributions. Do your best to contribute the full 25%, and work with your accountant to make sure you’re maximizing this as an option.

As an aside, you have until your tax filing deadline (including extensions – i.e. up until October of the following year) to make a contribution for the prior tax year.

Traditional IRA
For 2013 and 2014, you can contribute up to $5,500 per person into a Traditional IRA. However, depending on your income (or family’s income), you may not be able to deduct all of your contribution from your tax-return. Just because you can’t deduct it from your taxes, doesn’t mean you shouldn’t contribute! However, if you can’t deduct it, but you can participate in a Roth IRA, then a Roth IRA would likely be a better fit for you.

Roth IRA
Again, you can contribute up to $5,500 per person into a Roth IRA for 2013 and $5,500 per person for 2014. Do note that this limit of $5,500 applies to the TOTAL of your contributions between Traditional IRAs and Roth IRAs, and it’s not for EACH account, so you can split up the contributions however your heart desires (or you know, what the tax man says you can).

Good old savings account
Like I said earlier, just because you don’t have a tax-advantaged way of saving for retirement (or are no longer eligible due to income limits), doesn’t mean you should stop or not contribute. In fact, quite the opposite. Without a tax-advantaged way of saving for retirement, you should be saving more to account for the fact that you can’t benefit from those advantages. Yeah, more savings! :)

Your savings account dedicated for retirement should likely not just be sitting in a little old bank account, so you should look for options to invest the money and get some more long-term growth. Your comfort, experience, and tolerance for investing will help guide the ship for where to go and what to do (find an advisor, manage yourself, stocks, bonds, fluffy bunnies – wait, what?).

Another important feature about a good old savings (or investment) account is that what it lacks in tax advantages, it gains in flexibility for you to use the funds for other goals, retirement, education, new pool, and more!

Now it’s your turn! Join in the discussion and let us know if you have a retirement plan at work (and whether it’s the greatest thing since sliced bread – or not, ya know) or if you have had to explore other options. We’d love to hear what your experiences are!

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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 does it mean to “roll over” your 401(k)?

401(k) Roll over

 

KJ: Have you ever had a job that you left forgetting you had a retirement plan that you had at the prior company? Chances are this may have happened to you at some point in your career. When you leave your employer (whether voluntarily or involuntarily), there are so many things going through your mind that it’s easy to forget your retirement account you had been saving to especially since saving to your 401(k) (or 403(b)) is such an automatic process coming out of each paycheck that it’s usually out of sight, out of mind.

However, options abound when you leave your employer on what you can do with that “old” 401(k). Here are four things that can be done:

Roll it over to an IRA
The nice thing about a 401(k) is that your contributions are YOURS, so you’re able to take the funds and roll them over to another retirement account called an IRA (Individual Retirement Account). The tax nature of your contributions (i.e. if you made “pre-tax” contributions or “post-tax” contributions) will dictate what type of IRA you are able to roll your accounts to. If you have pre-tax 401(k) contributions, then you can roll those funds over to a Traditional IRA. On the other hand, if you have a portion of your account that is Roth contributions, then you can roll it into a Roth IRA.

For employer contributions, the answer isn’t quite so easy. Some types of employer contributions to your 401(k) can be rolled over, but some contributions may be forefeited (unfortunately!). For most of us who receive a regular employer match each paycheck, those funds are considered “portable” (i.e. you can take it with you) and can be rolled over with the rest of your account. However, if there is what is called a “profit sharing” component of the employer’s contribution or any kind of discretionary contribution, then the funds the employer has put into your account are likely subject to something called “vesting.” What this means is there is typically a schedule the employer has on when you “vest” (i.e. when the contributions become YOURS), and it typically takes anywhere from 1-7 years of working at an employer to receive all of the employer contributions in your account. For our household, Angela has regular matching contributions from her employer (i.e. the first 5% of her salary, her employer automatically contributes 4%) whereas contributions made to my 401(k) at work fall into the “profit sharing” bucket and thus employer contributions are subject to a schedule of vesting. If you have any uncertainty about your 401(k) and what is “yours,” then check your most recent statement (and don’t forget to ask your HR department if you have any questions!). You should be getting statements quarterly, and the portion that is “vested” should be clearly identified as well as whatever contributions you and/or the employer are making regularly to the account.

Roll it over to your new 401(k)
Just like rolling it over to an IRA, you can typically roll it over to your 401(k) with your new employer. Again, same types of rules apply as outlined above. This can sometimes be preferred if you have small accounts and don’t want both an IRA and 401(k) to keep up with or if you don’t know what to do about managing an IRA (i.e. if you aren’t willing to manage it yourself or aren’t currently working with an advisor to help you with this process).

Keep it as-is
Many companies let you keep your 401(k) with the former employer. However, some require that you withdraw the funds (noting you should really ONLY consider options of transferring to an IRA or another 401(k) as mentioned above) within the year. Each 401(k) is setup differently, so it’s important to work with your former HR department to understand your options as well as the timing of when it needs to happen.

Cash it out
NOT RECOMMENDED! While this is an option that is technically available to you, I struggle to even list this as an option. Cashing out your 401(k) involves paying taxes (Federal and/or State), significant IRS penalties if you are under the age of 59 1/2, as well as losing future retirement deferrals by not letting it grow for its intended purpose – retirement!

So, how do you work through which solution is best for you?
The answer to this question could probably warrant an ENTIRE post, but we’ll focus on just six key aspects to think through in the process:

1) Are you able to begin accessing the 401(k) with your new employer right away to roll funds into? Some companies require you wait a year before becoming eligible for a 401(k). For others, you actually have to elect NOT to participate in a 401(k) and are automatically enrolled.
2) Are you willing/able to manage your investments yourself? If so, an IRA can give you some extra flexibility.
3) Do you have an advisor that would help you manage the retirement account? Most advisors can’t work directly with a 401(k), but they can manage an IRA.
4) What are the fees associated with the 401(k) options? Look at outlining what the existing fees are with your current 401(k) (now clearly outlined on your quarterly statements thanks to a new law that went into effect in the last couple years) as well as what the fees may be with the new 401(k). Some costs are covered entirely by the employer, some may be fixed expenses, and others may be based on a percentage of your account value. Only one way to find out: run the numbers! There may be a clear winner, and it can also help you tell if an IRA may be a better target to send the funds to since most custodians allow you to open an IRA with very little money and with no annual/monthly fees.
5) Are you looking for simplicity of options? 401(k) plans usually have 5-20 options of funds to invest in whereas an IRA typically has thousands and thousands of options – a bit “the world is your oyster” so to speak. Maybe the options paralyze you or maybe they inspire you since you’re not tied down to the options offered by the 401(k) plan(s). Potato/potato.
6) How old are you, and when do you plan to stop working? If you are at or near retirement, sometimes rolling your funds into a 401(k) can be attractive. Given that if the funds are in an IRA you MUST begin taking withdrawals at age 70 1/2, the 401(k) can keep letting your funds defer past this age provided you’re still employed.

    Have you rolled funds over from a prior employer?
    Do you have a transition you are going through now?
    Tell us what you chose (and why).

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I want to talk about food.

Food food foodAJ: Kirby asked me if I could do a deep dive on my meal planning for the month of January, so here goes! In this post (and in future posts just like it), we’re going to link to some of our favorite recipes, so you can enjoy them in the comfort of your own home too!

First, I made January’s meal plan in November. December is always a month of heavier miscellaneous spending for us given all of the gift giving for family, friends and co-workers, and the charitable giving we do across November and December means that January is often a month where we try to catch up on increased savings contributions. Given that, January is always the month where I force myself to not buy proteins (I have a serious fear of going hungry that lends itself to having a 6 month supply of meat and seafood in our freezers at all time), to use the items I’ve already purchased and to be more diligent about not eating out. And not four days after I wrote this we modified the menu (as is so common for us)! I’ve tracked the changes below and have outlined the grocery list ramifications, too, so you can see what we often do to ourselves when we go off-plan. SO, here’s January:

1/1 Poached Eggs on Toast – a family favorite featuring my perfectly poached eggs on boiling, bubbly cheese.
1/2 Kirby’s company Christmas party.
1/3 We were supposed to have dinner with friends, but they had to reschedule, so we’re grilling steaks with creamed corn (even our back up meals are awesome).
1/4 Coconut Shrimp with broccoli – Kirby “wasn’t that hungry,” and I “didn’t feel like shrimp” after I already thawed them and we didn’t even have broccoli (add to my to-do list to come up with a better system for tracking foods I have in my freezers and pantry!), so we went to Taco Bell. I turned the thawed shrimp into shrimp tacos for lunch on 1/5. Don’t waste food just because you’re feeling flighty about what you planned!
1/5 Chicken pad thai with double sauce (because we like it saucy) – We weren’t hungry for dinner on Sunday, go figure. So we just moved the Pad Thai to Monday.
1/6 French toast with sausage links (we’re big breakfast for dinner people) – Chicken pad thai with double sauce
1/7 Pecan crusted chicken tenders with roasted brussels sprouts – We went out for Mexican and spent $29.31. Not earth shattering!
1/8 Chicken fried rice – I had a last minute work dinner pop up, so we got to indulge in a cost-free night out which is always a treat! Chicken fried rice will make an appearance later this month, though, it’s a crowd favorite!
1/9 Baked chicken parmesan
1/10 Grilled chicken with roasted sweet potatoes.
1/11 My parents’ anniversary dinner that we get to tag along for.
1/12 Crock pot chicken tortilla soup
1/13 Shrimp & veggie stir fry
1/14 Breakfast burritos with bacon
1/15 Taco turkey chili with cornbread
1/16 Broiled steak with corn and green beans
1/17 Shrimp & orzo with lemon beurre blanc sauce
1/18 Whole roasted chicken with roasted potatoes (that’s a lot of roasting)
1/19 Chicken and cheese enchiladas
1/20 Parmesan chicken with roasted broccoli (important to note that this is different than chicken parm from 1/9, as these are little chicken nuggets with parm on top, no marinara sauce)
1/21 Pierogi’s with beer cheese sauce
1/22 Chicken n dumplings
1/23 Thai red curry shrimp with brown rice
1/24 Chicken pot pie
1/25 I’m hosting a bridal shower for my soon-to-be sister-in-law so I’m banking on us being worn out. Papa John’s it is!
1/26 Cheesecake factory shrimp with angel hair
1/27 Chicken piccata with parmesan roasted potatoes
1/28 Cheese and avocado quesedillas
1/29 Hard shell tacos
1/30 Chicken “alfredo” (air quotes because it’s a cheese sauce I make that’s better than alfredo, but don’t tell him that)
1/31 Spaghetti with meat sauce

After I make my menu, I make my grocery list. This will seem ridiculously light, but given that I have already stocked up on the bulk of the items we need, here it is:

1/5 shopping list:

    - milk @ $2.29 (Tom Thumb Just for U sale, this would have been $0.70 more had I not pre-loaded the coupon to my card)
    - green onions @ $2 actual: $0.57
    - cilantro @ $0.40 – I realized that I still had cilantro in the fridge from last week that’s good, so I didn’t need it after all!
    - sweet potatoes $5 actual: $1.96
    - tortillas @ $1.57 (Tom Thumb Just for U sale) actual: $6.38, which is why YOU SHOULDN’T BUY THINGS THAT DON’T HAVE PRICE LABELS UNDER THEM! Damn the luck.
    - canned biscuits @ $3 (with a coupon for $0.40 off if I buy 3 cans which might just happen) actual: $2.20 with an unadvertised sale on the 5 biscuit cans for $1 each. I bought 3, so I could still use my $0.40 off coupon which they doubled because it was Sunday. I won’t lie, I didn’t even know this was a thing until today!

Plus all of the items I forgot we’d need and had to add when we didn’t eat the coconut shrimp, and I had to turn the shrimp into shrimp tacos:

    - red onion @ $0.65
    - cabbage @ $1.99
    - avocados @ $1.90 (This would have been $1.10 more had I not pre-loaded coupons to my card)

Total estimated for 1/5 shopping trip: $14.26

Actual total for 1/5 shopping trip: $21.23 which isn’t bad considering I spent $6+ on tortillas which is ridiculous. So, I spent $6.97 more than I had planned. All in tortillas :)

1/28 through 1/31:

    - avocados @ $4
    - taco shells @ $4
    - sour cream @ $4

Total estimated for the last few items of the month: $12

So, if we stick with this, we’re all-in on groceries for all of our dinner meals with leftovers for lunches at $26.26 for the month of January. Plus the $29.31 we spent on Mexican food out comes to $55.57.

Full disclosure, I’m budgeting $350 for all the food and beverage supplies I need for the bridal shower this month, so we’re estimating that we’ll spend $376.26 on all food expenses this month. Pending RSVPs to the shower invites I sent last week the overall food cost estimate might go down, but this is a worst case scenario which is how I prefer to do my planning. If we stick to this plan, we’ll wind up saving an extra $273.74 from our food budget for January which will help me sleep a little better at night.

I want to talk about food. 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.

Financial fasting: January budget challenge

AJ: As a result of creating this blog, Kirby and I meet people from all walks of life. The “H” Family recently came into our sights as they declared January their month of financial fasting which we LOVE. We’ve asked the H Family to keep us posted on their journey over the next month and we wish them luck!

Guest: The “H” Family – January Challenge of Financial Fasting.

Mr. H and I have decided to practice financial fasting for the first month of the year (hopefully this will be an annual occurrence!). One reason being, we realize we spend too much and have way more than we need! We did a kitchen remodel last year and while we tried to go minimal for Christmas, our girls ended up being spoiled by their grandparents yet again. We feel the need to simplify our life and use the resources we already have. We also need to get a good handle on our budget. Mrs. H is planning on a career transition from full-time banking to part-time bookkeeping to be able to spend more time with our two young children. With fixed expenses of a mortgage, car loan, student loan, and a home loan…we need a true idea of the minimum expenses we should budget while Mrs. H’s new career is ramping up.

Our goals:

1) Lower grocery bill to necessities. Use up food in pantry and freezer. No eating out! (Unless a family event or something planned with friends…as family and friends are important to us. But be very mindful of spending).
2) Choose only activities that are free for the month.
3) Clean out drawers, attic, garage…use up things we already have, look for things to donate, throw away.
4) Review current bills and expenses, and find ways to lower expenses.
5) Be INTENTIONAL with our money. Make only planned or necessary expenses.

We have two young daughters and want to be a good example to them of our stewardship of resources, and we want to prioritize our expenses to be able to afford school and activities for them. We know this won’t be easy, as we do enjoy eating out and Mrs. H loves shopping on Amazon. Our hope is that this focus on being intentional with our spending and resources will carry over to the rest of the year. We will update you as to the results at the end of the month…Here’s to January!

AJ: Looking to plan your own “no-spend” month, use our resources and refer to our past posts on:

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