Disability Insurance Can Be An Important Part of a Pregnancy—But It’s Much More

Pregnant woman holding a baby

Disability insurance — also known as income protection coverage — is one of the most important and overlooked pillars of financial planning.

Think about it. The average person is so dependent on their ability to earn a living, they couldn’t continue their lifestyle if they missed even a single paycheck.

The Federal Reserve asked adults in 2016 how they would pay for a hypothetical emergency expense that would cost $400. This amount is approximately the cost of an unexpected car repair, appliance replacement, or medical bill. Forty-four percent of people said this kind of bill would be hard to handle, and that they either could not pay the expense or would borrow or sell something to do so.

When people buy insurance, most choose some form of health, life, car, and homeowners’ or renters’ insurance. All of these purchases have one common denominator; the premiums are paid with your income. When you think about it, it seems foolish to forget to insure the one thing that lets you pay for everything else — your paycheck.

The connection between pregnancy and short-term disability

There are many types of accidents and illnesses that prevent people from working for a period of time: back pain, depression, heart disease, cancer, auto accidents, and so on. Yet many people don’t think of having a baby when they think of “disability.” Yet pregnancy is the most common cause of short-term disability claims.

Women are typically paid eight to 10 weeks of disability benefits when they take time off to have their child (two weeks before their due date and six weeks afterward). The duration can vary based on cesarean-section deliveries or other conditions that may require the claimant to limit work activities or work exposure.

One of the major differences between pregnancy and other types of disability claims is predictability. The timing of pregnancy for many can be the result of planning. For a healthy woman, purchasing coverage through their workplace in anticipation of a planned pregnancy can be a fairly easy transaction. The key is that you buy coverage before you become pregnant. This way there is little risk of underwriting issues or denial of your claim due to a pre-existing condition limitation.

Pregnancy and long-term disability insurance

Most long-term disability insurance offered through your workplace will also pay benefits for pregnancy-related complications if you can’t work for more than 90 days.

If you purchase individual disability coverage through a broker or agent, most insurance carriers will cover complications of pregnancy if your policy has a waiting period of longer than 90 days. (The waiting period — also called the elimination period — is how long you have to wait to receive benefits after you become disabled from work.)

The advantages of continuous coverage

Some consumers will purchase disability insurance in anticipation of a pregnancy and cancel the coverage after delivery. It’s also not uncommon to see ex-participants re-apply while planning a subsequent pregnancy. While this purchasing pattern is not illegal or unethical, it’s a risky approach to insuring your income, and it’s certainly not a pattern that disability insurance coverage was designed to endure.

So, what is a win/win for the carrier and policyholder? Maintaining continuous coverage.

It’s important to remember that disability insurance is designed to protect you against the unexpected loss of your work capabilities due to an accident or illness. While pregnancy is a common reason to file a claim, you always have additional risk for many unexpected events.

It’s also important to remember that voluntary coverage that you buy at work is often subject to underwriting guidelines. Your ability to obtain coverage could change at any time if you have an accident or develop a newly-diagnosed health condition. Trying to time when you have disability coverage is similar to trying to time when you invest in the stock market, and could easily leave you uncovered at an inopportune time.

None of us are immune to accidents or illnesses. They can strike at any time. It’s important to make sure that you’re covered. And once you’re covered, it’s important that you stay covered, regardless of the original reason you applied for your disability insurance. Get it, keep it, and rest easy knowing that you planned ahead.




The Spring Cleaning Task You Likely Forgot

Daffodils in the sunshine

It’s that time of the year where the sunlight has returned with vigor and vitality (here in New England at least) and you find yourself in spring cleaning mode. Those magazines that have been piling up – recycled. The junk mail you needed to attend to – filed. Your tax documents – complete.

As you survey your office, there’s one place you probably forgot, and that’s your desktop. No, not that desktop, the one where you have neatly color-coded pens and tablets lined up. The other desktop. The majority of our clutter today resides on our computers. All that clutter can lead to stress and a spiraling sense of being out of control. Here are tips on how to perform a digital, springtime detox:

Email

We’ll start with email because, well, it just keeps arriving doesn’t it? In fact, almost 270 billion emails are sent each day. And sometimes it feels like they are all coming to your account.

There are two types of people in this world: inbox zero folks and digital hoarders. Neither one is necessarily better than the other. It’s all in what works for your personal style. Nevertheless, there’s no harm in cutting down on email clutter. Here are three tips to help manage the madness.

  1. Do a mass deletion.

Don’t worry; we’re not asking you to delete stuff you might later need. We’re going to give you the gift of clearing out tons of clutter, one big swath at a time. The secret? Go to your inbox and/or your “deleted files,” and pick someone who sends you emails every single day. It might be the local newspaper or retail store. It might even be Aunt Martha who loves a great cat joke.

Change your email view to sort by sender. Then, take that particular sender, highlight every email they’ve sent you and delete. Pick another one and do it again. Doesn’t that feel good? Guaranteed you have wiped out thousands of emails with this one trick.

  1. Deal with email as it arrives.

Staying on top of email is easier if you create a system. Most productivity experts recommend setting aside a couple of times a day that you can process email, rather than reacting the second it comes in, which will distract you from your current task. Take three actions with each email:

  • Read and delete – ideal.
  • Take action immediately – best for things that just take five minutes or less.
  • Save for later – but not in your inbox, lest it become a “dysfunctional to-do list.” Rather, put the note in an appropriate file, then add it to your actual to-do list or save it to a reading folder for when you have some down time.
  1. Keep email from coming.

One word: Unsubscribe. Yes, it seems simple to just delete the daily email from the photo-sharing site where you purchased holiday cards three years ago, but really… it’s not. Resolve to click “unsubscribe” every single time an email comes in from a merchant or news provider that you don’t need to see.

Too worried you might miss something important? Try Unrollme.com, a tool that allows you to keep your subscriptions available, but out of your inbox, as it catches them in a neat “Rollup” you can access when you have time. With this handy tool, you’ll no longer have to dodge the latest BOGO missive when looking for your boss’ update.

Computer Files

Your physical filing cabinet might be relatively well organized, but your digital files are probably overflowing. With the massive storage available in today’s computers, it’s easy enough to just leave everything where it is. But there’s a better way to handle the voluminous computer files that likely keep proliferating.

  1. Categorize the folders.

For projects that are complete, as in, you need to save the files but don’t need to refer to them currently, create one big folder and send all appropriate documents there. Then if you do need something, it will be easy enough to sort.

For projects that are ongoing, nest folders within folders. For example, give the main folder the client name, then create separate files for reports, sales data, invoices, etc.….whatever makes sense given the scope of your work. Then when you open a working folder, you won’t have to scroll incessantly to find a certain document.

  1. Name files strategically.

To make it easier to find the appropriate document, choose a naming structure that makes sense, whether it’s client name, followed by weekly report, followed by date…or whatever works for you. If you are consistent going forward, you’ll realize it’s far easier to find what you need without having to open every file searching for something.

Then when a project is complete, it will be that much easier to send all related documents to another part of your computer so they aren’t cluttering up the main screen.

  1. Have a backup plan.

Make sure you have working back-up storage, whether it’s a cloud-based system that automatically backs up each evening, or an external hard drive – or ideally, both.

Spending time spring cleaning your computer will pay untold dividends in productivity for the months to come. By having a desktop that is clean, well-organized and full of potential (rather than about to crash), you might even get to those essential tasks like building or refining your budget and organizing your finances for the year to come.




Everything You Need to Know About Your Credit Score

Person checking their credit score on a phone.Have you checked your credit score lately? Nearly half of Americans haven’t looked in the past six months, and one in seven respondents to a recent survey never have. It could be costing you. For example, you might not be getting the best rates available on everything from cell phone service to car insurance to a mortgage.

Not sure what your credit score is or how to improve it? Here are the top three questions that will help you know the score.

What is a credit score anyway?

Whether you’re paying back student loans or trying to get a mortgage, lenders will check your credit score to see if you’re a smart risk to lend money to. Credit scores range from 300 to 850. The higher your number, the better — it means that in the past you have responsibly paid your debts, which means new lenders are more likely to give you favorable rates. Anything above 700 is likely to qualify you for the best rates.

Credit scores are developed by the three main credit bureaus — Transunion, Equifax, and Experian. Each one of them figures out your score usually a slightly different algorithm but for the most part your results will be similar among the three bureaus.

How do I build my credit?

What many people don’t realize is that your credit starts at zero and you have to build it up over time. Here are the ways that you can responsibly build your credit:

  • Pay your bills on time. Every single time. Believe it or not, even one late or missed payment can cause a negative effect on your credit score. In fact, this relatively easy task is thought to be the No. 1 element that impacts your credit score. FICO (which is a score generated from the three credit bureaus) estimates that your on-time payment history accounts for as much as 35 percent of your credit score. It’s worth also taking steps to protect your income through forms of insurance like disability insurance, which helps you pay your bills if you need to miss work for an illness, injury, or pregnancy.
  • Don’t take out too many credit cards. It can be tempting to say yes to the eager cashier who’s offering you a discount if you sign up for a store card, but having too many cards can make a lender leery. After all, you theoretically could charge them all up at once.
  • Don’t run your card up. If your limit is $2,500, it seems reasonable that you should be able to charge $2,400, especially if you plan to pay it all off at the end of the month (which you should every month). But credit bureaus don’t look at it that way. When considering your “credit utilization,” they prefer you keep it right around 30 percent. That means you should only charge about $650 on that $2,500 card. If you feel like you can responsibly pay off more than that each month, consider getting a second no-fee card, and spread your spend out evenly.
  • Keep your cards open. This seems to contradict the earlier advice, but stick with us: Part of your credit score is based on how long you’ve had credit so you want to pick a card and stick with it. If you find a card that offers better terms and it makes sense for your lifestyle, you can take it out, but don’t automatically close the first card. Consider putting one routine bill on it, like your utilities, or use it only for groceries so that you’re still using it occasionally but not running up a balance that might surprise you at the end of the month.
  • Don’t keep a balance. It’s a common fallacy that you build credit by keeping a balance on your cards, but that is simply not true. One of the smartest financial practices you can learn is to pay your credit card bill in full every single month so you don’t rack up interest charges.

How can I check my credit score?

Checking your score is smart, not only because you want to know how your efforts are paying off, but because errors are relatively common. In fact, a study by the Federal Trade Commission (FTC) found that one in five consumers discovered an error when checking their reports.

The good news is that it’s possible to check your credit for free. Many credit cards now offer this as a service, or you can visit Annualcreditreport.com which lets you check your score on each of the credit bureaus once a year for free. To keep frequent tabs, check just one bureau at a time, which will allow you to see where you stand on one of your reports every four months. While the bureaus’ numbers differ slightly, it lets you watch for anything that might be alarming.




Your Learning Style Affects the Way You Manage Your Money. Here’s How.

People learn differently — and these learning styles can carry over to how people interact with their finances, too. You may not have thought about this before, but tailoring the way you learn about money based on your preferred learning style means you’re more likely to excel at managing your finances.

Not sure what your learning style is? You can take an online quiz or simply do a self-assessment. Here are the most common types.

  • Visual: You learn best by looking at graphs, charts and maps. Information for visual learners is more easily processed when it can be drawn or visually categorized, like with infographics.
  • Auditory: You learn best by hearing and speaking. Auditory learners perform best when they can listen to the information, process it and then speak about it.
  • Verbal: Similar to auditory learners, verbal learners learn best when they can discuss or speak about a topic. However, unlike the auditory learners, verbal learners also learn through writing.
  • Physical: You learn best by doing instead of listening or speaking. Physical learners thrive when their entire body is involved in learning — like if they’re dancing, walking or practicing.
  • Logical: Logical, or mathematical, learners learn best when they classify or group information and establish patterns. Logical learners prefer when there are clear systems.

Once you know your type, you can tailor your money education and management.

Finances for Visual Learners

Seeing as these folks love charts and graphs, and the financial world is full of these visual aides, they’ve got the best tools right at their fingertips.

You can learn more about money management by watching YouTube videos or digesting information displayed on infographics. And when it comes time to put together a budget, apps that help you track your spending, savings and investments in chart or graph form are perfect for you.

Finances for Auditory Learners

If you’re looking to learn about a new financial topics or expand your money expertise, podcasts are the ideal way to do so. Luckily, there are a lot of high-quality money podcasts to choose from. If you’re unsure where to start, check out these nine money podcasts to improve your finances.

Auditory learners further process the information they hear by speaking about it. So after listening to a podcast, you’ll need an opportunity to discuss what you learned so you get the most out of it. Get a group of people together on a weekly or monthly basis to discuss a specific topic or podcast you listened to. This will help you (and others in the group) with your financial journey.

Finances for Verbal Learners

Talking with a friend or family member about your finances can really help you learn and grow. Want to talk your finances out with a professional? Perhaps a financial advisor could be the way to go. Choosing a financial advisor can feel intimidating, but the first step is simple: Determine the type of advisor that is best for you.

When it comes to learning about finances through writing, starting a blog is a great solution. Whether you decide to blog publicly or simply want to write privately to track your progress, the important part is that you are writing about your money experiences because, as a verbal learner, that means you’re also learning.

Genius tip: For money management, it might be helpful to track your net worth each month and reflect on your expenses. The process of writing about your expenses (and talking about it with your family or spouse) will help lead to change.

Finances for Physical Learners

When it comes to learning and managing money, the key for you is making it a tactical experience. Start by tracking your spending using pen and paper. The process of putting pen to paper and physically engaging with tracking the money you spent, will help you connect with your purchasing habits and determine whether or not they serve you.

From there, try the envelope budgeting system. In a financial world that is predominantly digital, the envelope budgeting system brings it back to the basics of cash you hold in your hand. Determine your monthly budget and divide it into specific categories — things like food, restaurants, clothes and household items. Once you’ve determined your categories, create and label an envelope for each. Stuff the envelope with the allotted cash budget. Once the envelope is empty, you’re done with that type of spending for the month. It’s as simple (and difficult) as that.

Finances for Logical Learners

As a logical learner, you like systems that make sense. So when it comes to money management, you’re in luck because tracking money, creating budgets and setting goals are all clearly defined (and easy to track) endeavors.

If you’re a logical learner who prefers to do-it-yourself, Excel spreadsheets (or an equivalent) will be your go-to money tool. Spreadsheets allow you to create money systems, track your progress and steadily work toward your goal. Need a starting point? Check out this budget template.

If you prefer the tracking is autmated, apps like Mint or Personal Capital would be good for you. Not only will Mint track and categorize your spending, but it will also create monthly reports with graphs and charts — a logical learner’s dream. Personal Capital, on the other hand, allows you to see a snapshot of all of your accounts—retirement, credit cards, banking and investments — all in one place.

Genius tip: Try experimenting with online financial calculators. There are calculators that will calculate your potential retirement date, potential investment returns and even hypothetical withdrawal rates. It’s yet another way to categorize and systematize your money.

This article originally appeared on Policygenius. The Council for Disability Awareness is an affiliate partner of Policygenius. 




7 Ways to Make Tax Time Easier

Couple working on their paperwork at a table.The countdown is on for Tax Day. Cue the groans. But you can enter April with a spring in your step — and extra money in your wallet — by using these seven tips to make tax time easier.

1. Figure out all the tax deductions or credits you might qualify for.

The first step is to make sure you’re not leaving any money on the table — which you might be if you don’t itemize. Tax payers who itemized claimed $1.2 trillion in savings due to tax deductions, while those who took the standard deduction only claimed about half that at $747 billion. It could well be that those who stuck with the standard figure shortchanged themselves.

Here are some categories you might not have thought of:

2. But don’t take any tax deductions you can’t prove.

Yes, you need a “paper trail,” which means receipts for business lunches and other expenses that you are trying to write off. And be especially careful about the home office deduction — setting up your laptop at the kitchen counter doesn’t cut it. The IRS specifically states the office must be for “regular and exclusive” use to qualify for the deduction.

3. Get your paperwork in order.

If you’re paying someone to do your taxes, it pays (literally!) to have your information at the ready: A survey from the National Society of Accountants found that three-quarters of tax preparers charged an average of $117 for disorganized or incomplete paperwork.

Here are some examples of the backup you should pull together to support your tax return:

  • W2s
  • Receipts for healthcare or dental work, plus prescription costs not covered by your health insurance
  • Details on your investment contributions, including debts if you intend to write them off as losses
  • Letters that prove your charitable donations in excess of $250
  • Receipts that support all your write offs, as mentioned in No. 1, such as childcare costs, moving expenses, and energy-efficient home improvements
  • Other paperwork as applicable to your situation

If all this paperwork seems arduous, take heart that this could be the last year you’ll pore over your deductions so carefully. That’s because the standard deduction for Tax Year 2018 is roughly doubled from $12,000 for single filers and $24,000 for couples.

4. Don’t overlook your side hustle income.

Got a burgeoning business as an Etsy crafter, dog walker, or Task Rabbit? Believe it or not, the IRS wants a piece of that income too, even though you won’t be issued a 1099 or W2 documentation to prove it.

Any income you earn from a side gig should be reported on a Schedule C form. The good news is that you can also deduct any expenses — leashes and dog treats included!

5. Decide if you’re going DIY or using a paid tax preparer.

Even among taxpayers making less than $50,000, one in three hired someone to do their taxes, such as an accountant or tax prep company. However, many might qualify for IRS Free File Software, available to taxpayers earning $66,000 or less. The IRS estimates that 51.1 million free federal tax returns have been filed since the software was first introduced in 2002.

Of course, if your tax returns are complicated, a tax preparer can save you time, and possibly even money if they are able to identify credits or deductions you didn’t know you were eligible for.

6. Vow to do better next year.

If your March is going out like a lion because you’re ripping through your house looking for tax backup, pledge to do better starting today. Whether you file receipts in a shoebox or use an app like Shoeboxed, there’s no time like the present to get in order for 2018 to avoid being an April fool yet again.

7. Take a breath — you have more time than you thought.

We saved the best for last. Traditionally April 15 is the last day you have to file your taxes, but in 2018 you get two extra days — until April 17, thanks to April 15 landing on a Sunday and Washington D.C.’s “Emancipation Day” hitting April 16. And as always, consult a CPA or tax advisor to answer questions unique to your situation.




6 Tips for Paying Off Large Medical Bills

Person at a laptop using their phone

If you’re trying to pay off a hefty medical bill, you are not alone. Medical bills are a leading cause of debt in the U.S. Many working Americans don’t have enough savings in place, yet they are facing high deductibles and out-of-pocket expenses. 

A report published in 2017 by the Consumer Financial Protection Bureau showed that medical bills were the most common type of past-due bill or payment for which consumers reported being contacted by collections agencies. More than half (59 percent) reported medical costs as the leading reason for being contacted. 

Here are six tips on how to deal with a looming bill in a way that is positive and proactive:

Don’t Ignore It

It’s tempting to stick your head in the sand, but this will not make the problem go away. Don’t leave the bills under a pile of papers but address the issue head-on. Establish contact with the medical provider to let them know you are working out the best way to make the payments. Once the bill goes to collections, it will be that much harder to negotiate.

Closely Check the Bill

Spend time reading your bill very closely. It could include mistakes. If you’re unclear about what the costs are describing or think you may have been overcharged, ask for an itemized bill from your provider. If you have health insurance, carefully compare the hospital bill against the summary of benefits from your health insurance company to make sure everything matches up.

Explore a Payment Plan

Most providers offer payment plans, sometimes these include interest and at other times they are interest-free. First work out what you can pay each month. Consult your budget and find out your realistic bandwidth for making monthly payments. When you call the provider, be aware that you can try to negotiate and ask, for example, whether the plan can be interest-free or if you qualify for any discounts. If you organize a payment plan with the provider over the phone, ask for them to send you the confirmed plan in writing. Then once you confirm the details, stick to the plan over the long-term.

Ask About Charity Programs

Many hospitals and medical providers include programs for those whose income is low or who may be moving through very difficult circumstances. Don’t be afraid to ask about whether they offer such a service. The provider will often mail you the application materials for this type of program to see if you qualify. You can also reach out to your state or local government, to find out whether they have assistance programs that may help offset the costs.

Build Up Emergency Savings

Your best defense against these kinds of bills is to have a stellar offense. Create an emergency savings fund to dip into when illness or accidents arise. You will ideally keep this fund in a separate account to the one you use for your daily living costs. Make sure you will be able to access it if you need it. Also be sure to actively replenish the money if you ever dip into it.

Insure Your Income

Those who have experienced an accident or illness that takes them out of work for weeks or months on end, will know the stress of losing your income during this time. Take steps to make sure that if you have an illness or injury, you will be able to earn an income during these times. This is what disability insurance is —it’s insurance for your income and allows a portion of your salary to be paid, while you recover. 

It’s no fun to have a large bill you need to pay. However, once you actively resolve the situation and work out an action plan you’ll feel a great deal of relief. That peace of mind will have a big impact on your overall recovery. 




4 Things to Know About Family Leave and Your Income

Mother holding a baby. Becoming a parent is an extraordinary and, at times, stressful endeavor. Your life is about to fundamentally change. And as you plan the myriad dimensions of this new reality, you may be wondering how you’ll cover all the bills while you take time off work.

Family leave is a complex issue and it requires a good amount of research. Begin by reading your employer handbook or asking a co-worker how they dealt with family leave and what they were offered. Consider what will work best for you, in terms of the time you’d prefer to take off work. If you do become pregnant, make sure you let your boss know before anyone else. Embrace it enthusiastically as an opportunity for growth. As Carol Walker, president of the consulting firm Prepared to Lead tells the Harvard Business Review: “Planning for your maternity leave is an opportunity to demonstrate to everyone that you’re in the game.” 

Here are a few ways you can replace your income during family leave: 

Paid Family Leave

This is the ideal situation of course, but don’t hold your hopes up too high. The National Compensation Survey (NCS) conducted by the Bureau of Labor Statistics, revealed that just 14 percent of civilian workers had access to paid family leave in 2016. There are a few states who are pioneering paid leave: These include California, New Jersey, and Rhode Island, and New York joined the group in January 2018. If you work in the tech industry, you could also be in luck: Tech companies offer some of the best family leave out there. Ask your HR team or boss if they offer this benefit. 

Short-Term Disability Insurance

Short-term disability insurance is another way to protect your income when you cannot work due to an illness or injury. This includes pregnancies — and it’s very commonly used for this purpose by employers. Short-term disability insurance plans often cover six weeks post-partum. It covers a portion of your income — normally around 60 percent. Several states such as New York, New Jersey, Hawaii and Rhode Island have short term disability laws in place. You can also purchase this form of insurance as an individual. 

Unpaid Family Leave

The vast majority of American workers don’t have access to paid family leave (88 percent according to the NCS study). So your next step is to see if you qualify for unpaid family leave — which keeps your job intact although it doesn’t offer a salary. The federal Family and Medical Leave Act (FMLA) was signed into law in 1993 and it guarantees eligible workers up to 12 weeks of job-protected, unpaid leave per year. FMLA does have its limitations though: it only applies to companies that have more than 50 employees within 75 miles of your workplace. You also need to have worked there for at least a year and put in a minimum of 1,250 hours. Laws around this also vary from state-to-state so you’ll need to research your local situation. FMLA applies to giving birth, adopting a child, or fostering a child — and it can also be used in the cases of caring for a spouse or parent with a serious health condition. There are ways of making it work while on unpaid leave—you just need to plan well.  

Paid Time Off (PTO)

Many people will use some of their PTO to cover their income for part of their leave. Your workplace may require you to use up your accumulated PTO before benefits can kick in. Others will allow the benefits to begin immediately, which may allow you to use some of your PTO to extend the length of time you can stay at home. 

Take the time to educate yourself on the benefits that apply to you. Know your rights and don’t be afraid to try to negotiate a better deal. If you are just starting to think about having a child, now is a great idea to build out a financial plan to help avoid the stressors down the line. With a plan in place, you can relax and enjoy the extraordinary gift of welcoming a new life into the world.




5 Steps to Reducing Credit Card Debt

Cutting up credit card

Credit card debt is a painful reality that more and more American families are living with. According to ValuePenguin, the average credit card debt for American households that carried a balance in 2017 was a massive $16,048. The 2017 American Household Credit Card Debt Study by personal finance website NerdWallet came to a similar conclusion, showing an average of $15,654 per balance-carrying household — with a worrying new trend of families increasingly using their credit cards to pay for medical costs.

The best way to deal with credit card debt is to take action. Rather than allowing the interest to accumulate, take a clear look at your situation and plot a strategy to firmer financial ground. Here are five steps to help you move in the right direction:

Take a Clear-Eyed Look at the Debt

Begin by taking stock of exactly where you are. What do you owe on each card and what are the interest rates? Write your numbers down on a piece of paper or type them into a spreadsheet. If you have more than one card, rank the debts according to the interest rates — so you can clearly identify which cards are costing you the most over the long-term.

Know Your Spending Habits

Now study your credit card statements in more detail. Run them by your budget. Analyze your habits over the past year. It’s all too easy to use a card and forget about all the small purchases that can add up. If you’re living above your means, you need to know this now so you can course correct and bring down your spending.

Get Better Rates

Call your bank to find out whether you can negotiate a better interest rate on a card. If you’ve been making your payments on time and have a solid credit score, you’ll have more bargaining power. You may need to have the primary cardholder around to join the call — and note that the conversation could take some time.

Build Your Plan

 There are two major strategies when it comes to paying off credit card debt:

  • The Debt Avalanche: This is where you focus on paying off the card with the highest interest rate first. You continue to make minimum payments on the other cards, but focus your energies — and cash — on eliminating the highest-cost card first.
  • The Debt Snowball: This is a different strategy entirely, where you focus on paying off the smallest debt first, while making minimum payments on the others. Just as the name suggests, it starts out small but as you wipe out each debt, that money then gets transferred over to paying the larger debts.

There has been much debate about which strategy is best. The math suggests that the debt avalanche is the winner, however the psychological boost of wiping out debt in the snowball method can be highly motivating. Depending on the degree of your debt, there are other options such as consolidating debt where you roll all your debt into one. You can also transfer your debt to a new credit card that has zero percent APR. Bear in mind that this approach generally works best for those with good credit scores, and it does require the discipline to not overspend. The Motley Fool recently compiled the best cards of 2018. Choose a strategy that works for you, then stick with it.

Grow New Habits

As you move ahead, build new habits. If you’re an impulse buyer, consider physically taking the cards out of your wallet and leaving them at home. You can also experiment with increasing the regularity of your payments. If your budget allows, try shifting payments from monthly to more frequent increments such as weekly. When you completely eliminate that debt, you can then start a practice of paying off all credit card purchases at the end of every month.

It’s all about living within your means — and taking back control. As Rod Griffin, director of public education at Experian recently told CNBC, good credit card management boils down to making payments on time and not buying things you otherwise can’t afford. “Ride the wave, don’t fall off the surfboard,” he said. “That’s the trick.”




How to Build a Basic Budget

Couple working on financesMany people are struggling to gain control of their finances. According to a LendingTree report in 2017, four in five Americans are in the red—and a quarter of those in debt do not have a plan to pay it off. By building a budget, you can gain clarity into your financial situation. This is a vital, first step that will help you chart a route to a far more sustainable place.

Here are the key steps in building a basic budget:

Set a Date

Building a budget requires time and patience; don’t set yourself up for failure by starting the process at a point in the day when you don’t have time to see it through. Peering into the cold reality of your finances can be an overwhelming and disheartening task, so take away any time stressors. Make a date for your budget by choosing a slot in the week where you’ll have a few hours to invest in the process. Invite anyone else who may need to be included—and even think about making a few snacks to power you through the process. Rather than approaching it as a chore, see this as a project that’s leading to your stability and peace of mind.

Choose Your Format

Are you going to use a spreadsheet? There are several great free templates online that you can download and work from. There is also a whole ecosystem of software tools that automate the process and increase accuracy. Or perhaps you’re far more comfortable with pen and paper. Choose a format that makes sense to you. As you build that budget, identify your goals. Are you trying to pay off a large medical bill? Do you have credit card debt to reduce or are you saving for an addition to the house? Identify what your realistic goals are, both short-term and long-term.

Gather Your Data

U.S. News recommends that you physically bring together all your bills, credit card reports, bank information, and paychecks. Spread this paperwork out on the table and gather the digital versions in your devices. Separate them into two parts: incomings and outgoings. Then start inputting all of these items into your monthly budget.

As you build out your budget, insert your income at the top—such as work, investments, and freelance projects. Then you’ll insert the various costs below. The first will be fixed costs such as utilities, mortgage or rent, and insurance costs. Then you can list discretionary costs—like gas, food, and entertainment. Don’t forget items that often go under the radar, such as car registration, memberships, and subscriptions.

Analyze the Data

Now comes the moment of truth: add everything up. If you earn more than you spend, congratulations, you have a surplus. If you spend more than you earn, the important thing is to spot the trend now and start correcting it. It’s vital to your long-term financial health that you see things realistically.

Now you can dig into the numbers and identify areas you can cut down on costs. Your fixed costs may be fixed—as the name implies—but perhaps you could find a better deal for some of your bills, such as your internet provider. If you have credit card debt, figure out how much you can pay off each month—you’ll want to do more than the minimum if you can. You can also review the dates for each payment. If they’re huddled close together in the month, see if you can spread them out.

Continue to work with the numbers until you get to a place where you can balance things out. Your discretionary costs are usually where the most cost cutting can occur. How much is that daily latte coming to on a monthly basis? You may also need to identify new sources of income to bring in.

Set Targets

Set a target for your costs for next month. If you’re giving yourself a limit for your spending on items such as groceries, one tried and true method is to put cash into envelopes for certain purchases, such as your weekly grocery shop or your money for lunch at work.

Then, as you move ahead, make sure you revisit your budget on a regular basis. Keep coming back and tweaking, and checking your progress on this document. By sticking with it long-term, you’ll start to see the gains and that budget may start to feel like your closest ally.




Family Planning: Daycare or Stay-At-Home?

Jan-childcare-imagePlanning for a family can be an exciting and daunting step, when you think of all the changes having a baby leads to. There’s the rewarding feeling of creating a bond with a tiny little human, even when you’re too tired to see straight. And then there’s the financial drain that comes with an extra person who must be fed, clothed and cared for 24/7. Child care, alone, is often one of the largest monthly expenses for working parents, unless you’re lucky enough to have a friend or relative who can’t get enough of changing diapers. This leaves many weighing the benefits and implications of child care vs. staying home with a new baby.

 

Those most impacted by this life-changing financial decision are millennials. In 2014, millennial moms accounted for almost 90% of all moms that year, up 50% from a decade ago. According to reports on the average salary for a millennial, in 2013, the median annual earnings for millennial women working full-time, year-round were $30,000, compared with $35,000 for their male counterparts. According to the National Association of Child Care Resource and Referral Agencies, the cost of center-based daycare in the United States can run up to $18,773 a year ($361 a week). With less than half their salaries left over, many millennials have some soul searching to do about what’s best for their families.

 

Assuming one has some financial flexibility, and can go without what’s left of his or her salary after childcare costs, how does one take on this decision? There are several factors to consider. Are you happy in your career? Are you driven to move your career forward? Do you dread the thought of being away from your child? Ultimately, you need to decide how this decision will affect the well-being of you and your family.

 

These days, American companies are starting to wake up to the idea that better parental leave is good for business. They are able to compete for a higher standard of employee by offering longer paid leaves. In addition, a new mother or father with an 8-week-old baby is not getting the quality of sleep he or she should, and may suffer at work. It may sound obvious as a parent, but companies are starting to recognize this as a priority benefit. These companies often combine short-term disability leave and paid parental leave, as their parental leave strategy. A few companies even offer on-site child care as a benefit to their employees, offering the best of both worlds.

 

An expectant mother or father can spend days, weeks or even months trying to figure out what to do. But when that little human comes into the world, everything changes. It’s good to have a plan. But it’s also good to be open to changing that plan. You may find that work is the perfect escape from the trials and tribulations of parenthood.