How to Successfully Live Within Your Means

How to Successfully Live Within Your Means

SmartAsset Team   Sat, September 9, 2023

Have you ever wondered why some people seem to effortlessly manage their money despite earning a modest income? The answer probably lies in a financial strategy called “living within your means.” An essential part of personal finance, when mastered, can lead to long-term financial stability. This strategy essentially involves understanding your income, creating a budget and implementing strategic financial practices to spend less than you make. If you're struggling to save for retirement or invest in the right assets, consider working with a financial advisor.

What It Means to Live Within Your Means

Living within your means is a basic financial principle that involves creating a balance between your income and expenses so that you meet your financial responsibilities without resorting to taking on debt. Essentially your "means" is your income and living within that income puts you in the best financial position to handle the unexpected.

An individual’s ability to live within his or her means can be influenced by various factors, including income level, family size, cost of living and personal spending habits. For example, a high-income individual with no dependents living in a low-cost area may find it more comfortable to balance his or her budget than a low-income individual with a large family living in an expensive city.

Reasons You Should Live Within Your Means

Living within your means offers several compelling benefits. First, it can help reduce stress and anxiety. Numerous studies show that the majority of Americans feel stressed about money for at least some of the time. By living within your means, you can alleviate this anxiety, fostering better mental health and overall well-being.

Additionally, such a lifestyle ensures financial security. Many people struggle to deal with even the slightest emergency expense. Living within our means allows savings for emergencies and ultimately leads to freedom from fiscal worries. Having robust financial safeguards in place, like an emergency fund, are vital for unpredictable times.

Overall, living within your means gives the peace of mind and wherewithal to be protected no matter what may come your way.

Signs You Are Living Beyond Your Means

To continue reading, please go to the original article here:

https://finance.yahoo.com/news/successfully-live-within-means-145043428.html 

The Middle Class Money Trap That’s Keeping You From Being Rich

The Middle Class Money Trap That’s Keeping You From Being Rich

Sean Fisher  Wed, September 6, 2023

Navigating the labyrinth of financial decision-making can be an intimidating endeavor. The middle-class, in particular, find themselves embroiled in distinct challenges that can disrupt their journey towards wealth accumulation.

From pursuing potentially unrewarding academic endeavors to succumbing to societal pressure to live extravagantly, various money traps can pose significant setbacks to their financial progress.

High-Cost Degrees with Limited Returns

Education is often equated with brighter career prospects and a sound financial future. Yet, not all educational investments yield returns that validate the considerable debt acquired via student loans. In an era where certain degrees no longer guarantee high-paying jobs, individuals find themselves crippled by enormous student loan debts with meager incomes barely enough to cover monthly repayments.

Consider a student who pursues an art degree with a passion for painting, and incurs a student loan debt of over $100,000. Upon graduation, if the best available jobs only offer a yearly salary of around $30,000, the burden of debt can quickly become a long-lasting financial chokehold. It is therefore crucial to carefully scrutinize the potential return on investment when considering a degree.

The Financial Quagmire of New Car Loans

The allure of owning a brand-new vehicle can be irresistible, but it often represents a financial pitfall that many middle-class individuals succumb to. New cars depreciate rapidly, frequently losing up to 30% of their value in just the first year. Coupled with financing through a loan, individuals might find themselves owing more than the depreciated value of the car – a situation known as being “upside down” on the loan.

Overextending with Unaffordable Mortgages

To continue reading, please go to the original article here:

https://finance.yahoo.com/news/middle-class-money-trap-keeping-133009247.html

Dave Ramsey Says ‘Money Is Not Just Math, It’s Behavior’

Dave Ramsey Says ‘Money Is Not Just Math, It’s Behavior’ — 5 Bad Habits to Break Today

David Nadelle   Tue, September 5, 2023

Although it’s easy to blame our money woes on outside economic forces, healthy personal finances are governed by motivation and mindset. Fixing your current situation means taking responsibility about your financial decisions and making conscious choices because, as financial advisor and popular radio show and podcast host Dave Ramsey says, “Money is not just about math; it’s about behavior.”

“Personal finance is only 20 percent head knowledge,” Ramsey tweeted yesterday. “The other 80 percent — the bulk of the issue — is behavior. And it’s our behaviors with money that can get us into the biggest trouble or lead us into the biggest successes.”

Backing up her father’s viewpoint, Ramsey Show co-host Rachel Cruze stated, “If you want to get to the root of why you behave the way you do — why you spend, save, use debt, put off investing and more — you’ve got to learn about how the psychology of money affects you.”

Of course, every personal financial situation depends on a number of factors — what you earn and owe, your cost of living and your financial goals — but bad spending and saving behaviors are common to all and can be broken by practicing better self-discipline with your money.

Here are five bad saving and spending habits that you can start to break today:

1. Curbing Discretionary Spending

The gap between living and living well is narrowing all the time. With life’s essentials costing more than ever and savings and paying off debt more important than ever, non-essentials, or wants, need to take the hit.

Even in the best of economic times, you should be focusing on trimming your discretionary spending on things like entertainment, hobbies and leisure and travel expenses. Resisting impulse buys and discounts and getting rid of any unused streaming platforms and meal delivery services will leave you with more money to save, pay off debt and invest. Pause before buying anything non-essential and you will find that most discretionary expenses can wait.

2. Bad Budgeting

To continue reading, please go to the original article here:

https://finance.yahoo.com/news/dave-ramsey-says-money-not-181940442.html

5 Things Warren Buffett Says To Do Before a Recession Hits

5 Things Warren Buffett Says To Do Before a Recession Hits

Vance Cariaga  Wed, September 6, 2023

Whispers of a looming recession have been making the rounds for well over a year now, and don’t appear to be going away anytime soon. Despite the resilient economy and low unemployment, a recent column in Forbes still predicted a “mild recession” in late 2023 or 2024.

If that’s the case, get ready to invest in the stock market – but only if you want to follow the lead of Warren Buffett, the mega-billionaire CEO of Berkshire Hathaway. As Buffett famously wrote in a 2008 op-ed for The New York Times: “Be fearful when others are greedy, and be greedy when others are fearful.”

 This essentially means that when others are fearful of investing money — like ahead of or during a recession — you should take advantage by scooping up stocks and other assets at discount prices.

“In short, bad news is an investor’s best friend,” Buffett wrote in the op-ed. “It lets you buy a slice of America’s future at a marked-down price.”

That rule is still as relevant now as it was 15 years ago, during the height of the Great Recession. What you don’t want to do is sit around trying to predict when the economy and stock market will recover because even experts like Buffett can’t do that.

“I haven’t the faintest idea as to whether stocks will be higher or lower a month or a year from now,” Buffett wrote. “What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So, if you wait for the robins, spring will be over.”

Before a recession hits, here are five things Buffett recommends doing.

Build Liquidity

To continue reading, please go to the original article here:

https://finance.yahoo.com/news/5-things-warren-buffett-says-193334180.html

The Sneaky (But Smart) Place Millionaires Keep Their Money

The Sneaky (But Smart) Place Millionaires Keep Their Money

Rosemary Carlson  Wed, September 6, 2023

Where do millionaires keep their money? High net worth individuals put money into different classifications of financial and real assets, including stocks, mutual funds, retirement accounts and real estate. Most of the 20.27 million millionaires in the U.S. did not inherit their money; only about 20% inherited their money. More than two-thirds of all millionaires are entrepreneurs. Here are some of the places the genuinely rich keep their money.

Whether you’re a millionaire or not, a financial advisor can help you take significant steps toward achieving your goals.

Cash and Cash Equivalents

Many, and perhaps most, millionaires are frugal. If they spent their money, they would not have any to increase wealth. They spend on necessities and some luxuries, but they save and expect their entire families to do the same. Many millionaires keep a lot of their money in cash or highly liquid cash equivalents. They establish an emergency account before ever starting to invest. Millionaires bank differently than the rest of us. Any bank accounts they have are handled by a private banker who probably also manages their wealth. There is no standing in line at the teller’s window.

Studies indicate that millionaires may have, on average, as much as 25% of their money in cash. This is to offset any market downturns and to have cash available as insurance for their portfolio. Cash equivalents, financial instruments that are almost as liquid as cash. are popular investments for millionaires. Examples of cash equivalents are money market mutual funds, certificates of deposit, commercial paper and Treasury bills.

Some millionaires keep their cash in Treasury bills that they keep rolling over and reinvesting. They liquidate them when they need the cash. Treasury bills are short-term notes issued by the U.S government to raise money. Treasury bills are usually purchased at a discount. When you sell them, the difference between the face value and selling price is your profit. Warren Buffett, CEO of Berkshire Hathaway, has a portfolio full of money market accounts and Treasury bills.

Millionaires also have zero-balance accounts with private banks. They leave their money in cash and cash equivalents and they write checks on their zero-balance account. At the end of the business day, the private bank, as custodian of their various accounts, sells off enough liquid assets to settle up for that day. Millionaires don’t worry about FDIC insurance. Their money is held in their name and not the name of the custodial private bank.

Other millionaires have safe deposit boxes full of cash denominated in many different currencies. These safe deposit boxes are located all over the world and each currency is held in a country where transactions are conducted using that currency.

To continue reading, please go to the original article here:

https://finance.yahoo.com/news/where-millionaires-keep-money-070638027.html

Frugal People Need Spenders Like Money Needs a Wallet

Frugal People Need Spenders Like Money Needs a Wallet

by Annie Schutte

I’d like to say that there’s some wonderful and mysterious origin story that that explains who I am today, but it came about due to the most common and banal reason around: I was born and bred by two thrifty parents.

Having two cheap parents is the worst. New clothes shopping involved a trip to the fabric store to get materials for the three identical jumpers my mother would make me before school started; vacation every year was a drive to New Jersey to hang out at the pool in my grandmother’s retirement community; and the big splurge of the week happened on Friday when my mother would give me 35 cents to get an ice cream sandwich in the cafeteria at lunch.

Now, my mother would claim that all this was because we were poor, not cheap, but this is the woman who to this day thinks it’s normal to drive an hour and a half to buy a comforter from the JCPenny Outlet instead of going to the regular JCPenny five minutes from her house. And my father pretty much doesn’t give a gift unless its something he’s gotten free in the mail.

I came to this conclusion early on: two cheap people should never be in a relationship together. It goes against the laws of nature. Yin and yang, fire and ice, sweet and salty, and all that stuff. People need balance. When two cheap people get together, they’re never able to embrace the joys of capitalism, and their lives are the more boring for it. But the situation is even worse in relationships where neither person has any spending control.

Take, for example, this annoyingly popular girl that I went to high school with. She was super rich and pretty. Her parents drove BMWs; she looked like she got regular manicures and some kind of skin treatment; and I’m fairly certain that every article of clothing she owned and wore only once was from a designer I’d never heard of. Our senior year we had this conversation:

Me: God, I’m so tired of trying to figure out how in the world I’m going to afford going to college. I should probably just stay in state.

Rich girl: Ugh, I know!

Me: Don’t even! Isn’t your dad, like, a doctor or something?

Rich girl: Well, yeah, but they don’t have any money saved up for college.

Me: Um, what?

Rich girl: Yeah. My parents were having my work on the FAFSA last night, and it turns out that they, like, don’t even have any savings accounts. They just spend everything.

All the happiest people I know are in relationships with someone who is their spending opposite. The thrifty person helps keep the finances grounded and ensures that there’s always a comfortable cushion when the stuff of life happens; the non-thrifty person remembers that life is about more than just working and hoarding all your money.

Take, for example, a conversation I had at brunch a few weeks ago with a couple friends that have been happily paired off for more than a decade:

To continue reading, please go to the original article here:

https://www.thebillfold.com/2012/04/frugal-people-need-spenders-like-money-needs-a-wallet/

Your Money Problems: Why They're All Your Fault

Your Money Problems: Why They're All Your Fault 

By Tara Struyk

I love writing about money — not because I’m obsessed with wealth (or my relative lack thereof), but because I think the way we spend our money reflects who we are, good or bad. That’s probably why I bought the very first condo I saw. I’m known to be impatient, impulsive even, in just about all things.

Was it a mistake? So far so good, but I left a lot more to fate than is probably wise in a six-figure purchase. And let’s just say that I hope to exercise a little more self control next time. Of course, whether it’ll actually work out that way is another story altogether.

  But that’s really what issues that surround money are all about, isn’t it? The way we behave with our money is a lot like many other things in life — we know what we should do, but that hardly means we actually do it.

We know we should exercise, avoid fast food, and eat more vegetables just like we know we should spend less, avoid debt, and save more of our money. Most of us struggle with both, at least sometimes.

The key to solving money problems, then, often isn’t about outside factors (like making more money). Instead, it’s about our own habits and behaviors. (See also: Party Like It's $19.99: The Psychology of Pricing)

So how can we make better choices when it comes to money? First, I think, we need to accept that our money problems are (usually) all our own fault. Then, it’s time to stop relying on self discipline and develop habits that put bad choices out of reach.

What’s the Problem?

I think the key to unraveling any money problem is to first accept that the problem is probably an emotional one.

Just think about some of the money problems people tend to get into. Debt is one of the most obvious, and if you’ve ever watched Suze Orman or Dave Ramsay or Oprah address this, it’s pretty clear that debt goes much deeper than just a frivolous desire to acquire more.

For some people, a desire to give their kids all the things they never had growing up makes it impossible for them to say “no.” For others, a financial setback has them feeling too ashamed to admit they can no longer afford the lifestyle they’re used to.

And far too many people feel important, triumphant — even happy — when they come home from the mall with an armload of new purchases — whether they can afford them or not.

To continue reading, please go to the original article here:

https://www.wisebread.com/your-money-problems-why-theyre-all-your-fault

5 Best Ways To Stay Safer From Identity Theft When You’re Online

5 Best Ways To Stay Safer From Identity Theft When You’re Online

August 22, 2023  By Greg Garrison

Unfortunately, scammers trying to steal your information and identity online aren’t going away. The Federal Trade Commission received more than 1.1 million reports of identity theft from consumers in 2022, and that number has steadily increased as scammers get more advanced.

Having your identity stolen can have serious financial consequences and sometimes takes hours of work over months to sort out and repair. So while scammers get more advanced, you need to as well.

Here are our five best ways to keep your identity safer when you’re online:

Be Proactive

While many people wait until after their identity is compromised to act, one effective way to stay safer online is to be proactive. In addition to the other tips in this article, getting a comprehensive identity protection service now, before you suffer from identity theft, is one of the best ways to help protect your identity.

LifeLock is a leader in identity theft protection services for good reason. With Standard, Advantage and Ultimate Plus, there’s a LifeLock option for everyone. The products are designed to help protect your identity and sensitive personal information by continuously monitoring online activity, then providing assistance in case your identity is stolen.

For more comprehensive protection, the Ultimate Plus package stands alone. In addition to offering dark web monitoring, alerts of suspicious activity, data breach notifications and more, this service also provides reimbursement for stolen funds and other personal expenses if you become an identity theft victim.

The best part? If you’re concerned about a data breach you can start a free 30-day LifeLock trial (*terms apply) and get protection now.

Keep Your Sensitive Information Private

This starts with your Social Security number. Guard it closely, and if someone requests it, make sure to ask why. Then only share if it’s absolutely necessary. LINK

To continue reading, please go to the original article here:

https://www.gobankingrates.com/money/finance/best-ways-to-stay-safer-from-identity-theft-when-youre-online/?utm_term=incontent_link_7&utm_campaign=1242821&utm_source=yahoo.com&utm_content=10&utm_medium=rss 

Is a Lump Sum or Annual Payout Smarter?

Is a Lump Sum or Annual Payout Smarter?

August 31, 2023 By Nicole Spector

Lottery Winners Could ‘Make Bad Decisions,’ Says Financial Advisor — Is a Lump Sum or Annual Payout Smarter?

Lottery jackpots can reach epic heights. Case in point: the Mega Millions jackpot that surpassed $1.2 billion after the Tues, August 1 drawing. Someone (or some people) will win eventually, and the burning question for them will be, “What will you do with the money?“

The better question may be, “How will you safely and effectively manage this money?” Unfortunately, lottery winners are notorious for making poor decisions with their winnings. Some people have even ended up in even worse financial shape after landing a jackpot than they were previously. Where did things go wrong? It may have all started in the way they accepted their winnings: Lump sum (meaning getting all the cash in one fell post-taxed swoop) or taking an annuity, where the winnings are distributed over a number of years.

“It’s the most important financial decision you’ll ever make in your life,” wealth planner Robert Pagliarini of Pacifica Wealth Advisors told The US Sun. “Right off the bat, you’re making a life-changing decision that you cannot change your mind on.”

Pagliarini added that by taking a lump sum, “The advantage is they get to control the funds now, but that’s also the biggest disadvantage.”

Once you get the lump sum, you’re forced to manage a possibly unbelievable windfall in an instant. This means if you’re not making every financial move 100% correctly, you’re putting as much as your entire new fortune at stake. Unless you have an army of smart financial experts and lawyers at the ready, an annuity may make the most sense.

To continue reading, please go to the original article here:

https://www.gobankingrates.com/money/finance/lottery-winners-bad-decisions-financial-advisor-lump-sum-annual-payout-smarter/

Experts: Why Your Money Is Not Safe in Your Home or These 4 Other Places

Experts: Why Your Money Is Not Safe in Your Home or These 4 Other Places

Casey Bond  Thu, August 31, 2023

After battling inflation, rising interest rates, and a volatile stock market over the past couple of years, you may be worried about preserving your hard-earned money. Where can you stash cash and rest assured that it’s safe?

We reached out to a few experts and got their opinions on the worst places to keep your money–and where to put it instead. Find out if your cash could be at risk.

In Your House

Following the stock market crash of 1929, many Americans became deeply distrusting of banks and what they might do with their money. During the Depression era, it was common for people to keep cash hidden around the house, whether it was stuffed under the mattress or concealed in the ice box.

Although bank failures still happen, it’s less common today. However, there are a number of people who keep money hidden around their homes. Your house is one of the worst places you can store your money. “Keeping some spending money at home is handy, but keeping large sums at home leaves your fortune open to loss,” said Bill Waggoner, president at Stoney Creek Advisors in Rochester Hills, Michigan.

The problem is that if physical cash is lost, stolen or damaged, it’s near impossible to recover. A fire could wipe out your savings in an instant, or a thief could make off with your cash while you’re on vacation.

Your Wallet or Purse

Society is increasingly becoming cashless, but there are still situations when you might need some spending cash, such as when you’re shopping or traveling. A survey by Travis Credit Union found that among those who regularly carry cash, the average amount they keep on their person is $46.29.

https://news.yahoo.com/finance/news/experts-why-money-not-safe-120120035.html

4 Steps to Make Your Money Last a Lifetime

4 Steps to Make Your Money Last a Lifetime

By Jane Bryant Quinn, AARP Bulletin

A simple, easy-to-use formula to make sure you never run out of cash

As a financial columnist, I get asked the same heartfelt question over and over: “How do I make sure I don’t outlive my money?” And that makes sense. Surveys confirm that the No. 1 worry among older Americans is running out of cash.

 Fortunately, financial planners have come up with sound ways to prevent this. Collected here are their key rules for maintaining a livable income for life, plus case studies that show how to put these general rules into action. The goal is your peace of mind — knowing that you’re getting the most from the money you’ve saved and that you’ll always have enough.

The Magic Number

 The key to long-term planning is knowing one essential number: how much money you can afford to spend annually. From there, you can adjust your expenses to fit.

 You may be tempted to reverse the order — estimate your future expenses, then adjust your investment assumptions to make that spending appear possible. But that’s wishful thinking: a hope that big investment returns will rescue your budget. It leads to overspending early on, and regret later.

 Instead, let’s focus on the real, guaranteed money you’ll have. There are two main sources:

 Your personal savings and investments.

Your guaranteed income from other sources.

 Download this worksheet to help you find your sustainable income. The key steps:

 Step 1: Tally Your Guaranteed Income

The most common source is Social Security, which you may already be collecting. (If you’re not, get an estimate by calling Social Security or by opening a My Social Security account at ssa.gov.) You might also have a pension or annuity.

If you own a reliable rental property, include the amount of rent you receive after expenses.

Step 2: Estimate Your Income from Savings

How much annual income can you prudently take from your savings and investments? To get the answer, there’s a surprisingly simple rule of thumb:

Add up the current value of your spendable assets, such as bank accounts, mutual funds, stocks and bonds. Include both retirement and nonretirement savings.

 Subtract from that total a cash cushion to help cover near-term expenses.

To continue reading, please go to the original article here:

https://www.aarp.org/retirement/retirement-savings/info-2018/make-money-last-lifetime.html