Happy Valentine’s Day… to my wallet!

Without a sweetheart to spoil on this fine Hallmark’s Valentine’s Day, I thought I might spoil myself with a trip to Seattle or Chicago to visit some college friends. I may eventually do that sometime this year, but after some thinking, I decided to forgo that for now and instead spoil… my wallet!

Thanks to the quick turnaround of filing my taxes with TurboTax (I filed it just last week!), I now have a little more disposable income this month. My last 2 returns were spent on travel and a spankin’ new iPhone 4S. I certainly don’t regret spending time with my dear friends in SF, DC, or NYC, or buying the best phone ever, but I do know that I could be enjoying those 2 returns, even today, if I used it to pay down at least some of my debt.

So with advice from the likes of Five Cent Nickel, I’m finally putting it to wise use. I paid off the rest of my balance on one credit card and reached my first milestone in saving for an emergency fund. Now, I can use my credit card like it’s supposed to be used and take full advantage of the rewards program. And while I still plan to save money toward my EF, reaching my goal was well worth it.

Happy Valentine’s Day, Wallet. I’m happy this relationship is going really well, and it only goes up from here.

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Reblogging an article I posted exactly one year ago to remind us all of the smart things to do with your 2012 tax refund!

I’ll be doing 1, 2, & 3… How about you?

CHEERS to financial literacy!

alice, je t'aime

With Tax Day officially behind us, I thought I’d put together a list of things to do with your tax refund. Remember… Your tax refund isn’t some sort of magical windfall — it’s your money, and you worked hard for it. Do something smart with it.

1. Start an emergency fund. If you don’t have an emergency fund, consider opening a high-yield savings account and depositing your windfall for a rainy day. While it might not be enough to create a full-fledged emergency fund, it’ll be a good start. And if you already have an emergency fund, consider adding to it.

2. Pay down your debt. Whether it’s credit cards, an auto loan, or a student loan, you need to get that monkey of your back. So add your windfall to your debt snowball and keep on digging.

3. Invest in yourself. Use the money to cover tuition for…

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Single and Saving

Financial literacy has been an ongoing challenge of mine since I technically became economically independent from my parents during college. Excel and Mint have become my best friends, but it’s only good for tracking and analyzing what I’m spending my hard-earned money on.  What I need more now are good tools to help me break my bad habits of splurge spending, not planning long-term, and not having enough to save at the end of the month (to name just a few…). And there are a bunch of websites out there that cater to my demographic – mid-20s, new professional, and debt slave (also to name a few).

Enter Single and Saving, a blog (obviously) about living the single life on a budget. M chronicles her money-saving adventures as a mid-twenties single gal in Atlanta, and I’m going to try my best to apply that to my money-saving adventures as a mid-twenties single gal in Los Angeles. I’ll keep you posted.

20’s Finances is a wealth of straight-up financial literacy, written by a man who apparently has great advice. He recently graduated from college and is now pursuing a master’s degree, is living in an expensive U.S. city with his wife, who is also pursuing a master’s – and all of this without debt. The best thing about his blog: weekly lists of 5 frugal tips like 5 Ways to Cut Costs (a ten-week series) and furnishing your apartment for $600.

Finally, Gen Y Wealth is great for tips on investing and diversifying your income. His investment tips are worth leafing through, but personally, investing is not yet a priority. Don’t worry – it will be a priority once I have enough leftover from my income to invest.

20 Financial Milestones You Want to Reach in Your 20s

by RJ from Gen Y Wealth

The journey from your first paycheck to the time you reach thirty, is the most important time of your life for accumulating wealth. Wouldn’t it be great if there were defined milestones, to make sure you’re on the right path?

From my experience, there are. I have noticed 20 different milestones those who are on the right track accomplish financially by the time they’re 30, that you can learn from.

# 1 – Finance a dream vacation…in cash

There’s no better feeling of setting a goal, working hard towards that goal, and finally, enjoying that goal to the fullest.

Pick one dream vacation, research how much it costs, set a date, and automate your savings towards that goal.

# 2 – Pay off your student loans

After paying for a dream vacation in cash, paying off your student loans might not sound like a sexy milestone, but it’s just as important.

Debt restricts your freedom. The more freedom you have, the better life is.

# 3 – Automate paying your credit card bill in full

This milestone takes  2 minutes to accomplish but it’s one of the most important. Not only do you avoid interest and late fees, you hold yourself accountable to spending less than you have.

# 4 – Get rid of all bad debt

I’m a believer that all debt is bad debt. Yet, I realize this is unrealistic for some.

A good way to see what bad debt and good debt is is by asking yourself if the underlying asset appreciates or depreciates in value. If the asset appreciates, like a house, than categorize it as good debt. If the asset depreciates, like a car, etc… then it’s bad debt.

The goal is to have all bad debt paid off by the time you’re 30.

# 5 – Build an adequate emergency fund

An emergency fund works just like a parachute. Nobody looks forward to using it but they are sure glad it’s there.

By the time you’re 30, build an emergency fund that covers a minimum six months of expenses. A time will come when you’re sure glad it’s there.

# 6 – Make your first, and last, investment mistake

Investment mistakes are just like that guy or girl in high school that the entire school dated. You need to do it, just to get it out of your system.

It’s not a bad thing to make those mistakes when you’re young and have little money, than when you’re older have a family to support.

Hopefully, it will take only a few weeks to realize that beating the market year in and year out is impossible. The best strategy for getting rich is increasing your potential to earn more money. Don’t worry so much about beating the market by 1 or 2%.

# 7 – Develop a statement of cash flows

Imagine a business trying to operate without knowing how much money is coming in and out every month. As you know, successful businesses don’t operate this way.

Apply the same concept to your personal finances. Know how much money is coming in and out every month. (Hint: This is a lot easier than you think.)

# 8 & 9 Max out a Roth IRA & Contribute to your 401(k)

Let’s say you start contributing $5,000 combined to your Roth 401(k) and Roth IRA every year from the age of 22 until 30. All in all, you will have invested $40,000 over 8 years. At 60 years old, without any additional contributions and assuming a 10% return, you would have $1,097,505.

Now, say you get a late start and you invest $5,000 into your Roth 401(k) and Roth IRA from the ages of 30 to 60. All in all, you will have invested $150,000 over 30 years. Assuming you earn 10% a year, you would only have $904,717.

Start investing as early as you can!

# 10 – Get a degree or certification that increases your earning power

By going after educational opportunities that enhance you’re earning power at a young age, you give yourself more time to leverage your education. For example, it’s better to get an MBA (only if it actually increases your earning power) in your 20’s then it is your 30’s because it will increase your earning power for a longer period of time.

Plus, you’re not too removed from a school atmosphere in your 20’s. You’re used to sitting in a class room for a few hours, taking notes, dealing with group projects, and taking tests. This is a huge advantage.

# 11 – Take a career risk

Your 20’s is a perfect time to take a career risk. Generally, you’re only supporting yourself. If you had to move, you don’t have lots of stuff. If you don’t take the big risk to join that start up or start your own business now, you never will.

# 12 – Negotiate something

Negotiating is addicting. Once you have done it once, you can’t stop. Plus, you will start to notice opportunities to negotiate that you never thought were possible.

Inside of one week, I remember calling up my cable company and negotiating down my bill. A few days later, I was in Dick’s Sporting Goods store buying a fire pit, when all of a sudden I blurted out, “Will you accept $60 for it.” It worked. In just a few seconds, I saved $20.

Get into the habit of negotiating as many purchases as possible. Once you start, you will be surprised how much money you were throwing away.

# 13 – Earn your first side grand

It took me a lot longer than I thought to earn my first side grand, about 18 months to be exact. However, once I was able to $1,000 on the side, the next $1,000 was easy.

Diversifying your income is a habit you want to start a young age. The more streams of income you have, the less likely you are to lose everything all at once.

# 14 – Start a sub-savings account for an upcoming financial goal

What big expenses do you have coming up? Once you hit 30, do you plan to buy a house, a nice car, or an expensive vacation?

For whatever your goals are, start a sub savings account for that goal. If your bank doesn’t allow you to do this, join one that does, like ING Direct.

# 15 – Set a target retirement date

It’s not as if you need to pick out an exact date. It’s more important to have a general idea of when you want to retire. It’s understandable that this date will change over time, but without a target date, it’s hard to formulate a true investment plan.

For example, someone planning to retire young, at 50, needs a completely different investment plan than someone planning to work until they’re 65.

A good rule of thumb is that someone planning to retire at 65 needs to save 10% of their income. For every year earlier they set their target date, they should save 1% more of their income.

# 16 – Monitor your credit

If you’re waiting until you apply for a mortgage to start managing your credit, you’re costing yourself a lot of money. Take time in your 20’s to get a basic understanding of how credit scoring works. Personally, a good credit score has saved me thousands a year and can do the same for you.

A good start is to download my free eBook, The Gen Y Guide to Managing Your Credit.

# 17 – Say no to a financial salesman

A friend asked if he should get a whole life insurance policy. Someone he met through the local chamber was trying to sell him one.

After a few questions, I found out he had no Roth IRA, barely contributed to his 401(k), and even had some credit card debt. After finding this out, of course my answer to his question was no.

The first time you’re approached by someone trying to sell you something, is a mini financial milestone in itself. Salesmen usually don’t go after prospects with little money. However, the first time you say no, is a breakthrough. You’re saying to yourself that you can take matters into your hands or go through someone you trust, if you do need help.

# 18 – Give just enough to make it hurt

I wish with the first dollar I made, I donated 10% of it.  Because now giving up that much of my income is unrealistic.

For now, which I think is a good rule of thumb to follow if you have never donated before, I’m giving just enough to make it hurt. I imagine life after 30 is going to get a lot more expensive. If I don’t get into the habit of giving now, I likely never will.

2 Milestones for the Over Achiever

# 19 – Invest $1 for every $1 you spend

This is a personal goal of mine, but one that many others can benefit from also.

I’m not good at spending money on myself. There is nice stuff that I want, and that I have that money for, but I feel guilty buying it.

While reading financial advice from the legendary Sir John Templeton, I saw his rule was to invest $1 for every $1 he spent. He could buy whatever he wanted, as long as he invested just as much.

Once I started doing this, I felt like a weight was lifted from my shoulders. I no longer felt guilty for shopping at the nice grocery store. I didn’t feel guilty treating my wife to a nice dinner. The catch was, every time I spent, I had to also invest. (My rule is to invest $.50 for every dollar I spend. Eventually getting to a $1 to $1 ratio.)

# 20 – Start a 529 College Savings Plan

One of the most underutilized tax advantaged accounts is the 529 College Savings Plan. If only people knew how flexible they were, a lot more would use them to save.

Did you know that you can use a 529 plan to attend an international school? Or, did you know that you can use a 529 Plan to help save for the cooking or art class you have always wanted to take? Last, did you know that the transfer restrictions are very lenient for 529 Plans? For example, you can start a 529 Plan even before having kids, and then transfer it to your child once they are born, without any tax consequences?

If you get off to a good start and have your retirement savings under control, look into a 529 College Savings Planfor additional tax advantaged investing.

gotta get going… 

10 things to do with your tax refund

With Tax Day officially behind us, I thought I’d put together a list of things to do with your tax refund. Remember… Your tax refund isn’t some sort of magical windfall — it’s your money, and you worked hard for it. Do something smart with it.

1. Start an emergency fund. If you don’t have an emergency fund, consider opening a high-yield savings account and depositing your windfall for a rainy day. While it might not be enough to create a full-fledged emergency fund, it’ll be a good start. And if you already have an emergency fund, consider adding to it.

2. Pay down your debt. Whether it’s credit cards, an auto loan, or a student loan, you need to get that monkey of your back. So add your windfall to your debt snowball and keep on digging.

3. Invest in yourself. Use the money to cover tuition for a course about something that interests you, or which increases your earning potential.

4. Prepay your mortgage. Send your windfall to your mortgage lender. You’ll realize savings over the life of your loan, and you’ll own your house outright sooner than expected.

5. Refinance your mortgage. While refinancing your mortgage to a lower rate can result in substantial savings, you typically need to bring some cash to the table. In this case, your tax windfall could be just what the doctor ordered.

6. Fund your IRA. Did you know that you can have the IRS direct deposit your refund into your Roth, Traditional, or SEP-IRA? While it’s too late to arrange for that this year, it’s never too late to write a check to your IRA custodian when your refund arrives.

7. Invest in your children. Start a college fund for your kids. Whether it’s an Education Savings Account (ESA) or a 529 plan, there’s no time better than the present to get started.

8. Support your favorite charity. Not only does making a charitable donation help a worthy cause, it’s also deductible on next year’s taxes.

9. Add it to you “sunny day” fund. While emergency funds are all well and good, everyone needs a bit of fun and games every now and then. Why not set some aside for a future vacation or some other special expenditure?

10. Adjust your withholding. Last but certainly not least, you should consider adjusting your withholding so you don’t end up giving the government an interest free loan during the upcoming year.