What Is the 70/20/10 Budget Rule?

Living paycheck to paycheck leaves no room for saving, investing, paying down debt or donating to causes you care about. But a paycheck-to-paycheck lifestyle isn’t always the result of not earning enough money.

A February 2020 survey from Willis Towers Watson found that nearly 20% of six-figure earners lived a paycheck-to-paycheck lifestyle. A lack of a solid money management strategy can often be the culprit.

When you spend-spend-spend without a plan, it’s easy to quickly blow through your money with no relief until the next payday.

That’s where the 70/20/10 budgeting method comes in to disrupt that paycheck-to-paycheck cycle. The 70/20/10 budget is a percentage-based money management style that helps you make room for saving, investing, paying down debt and donating.

How the 70/20/10 Budget Rule Works

Following the 70/20/10 rule of budgeting, you separate your take-home pay into three buckets based on a specific percentage.

Seventy percent of your income will go to monthly bills and everyday spending, 20% goes to saving and investing and 10% goes to debt repayment or donation.

Use 70% of Your Income for Monthly Spending

With this budgeting plan, 70% of your net income (the money you make after taxes and other payroll deductions) will go to expenses such as:

  • Mortgage payments or rent
  • Utilities
  • Phone bill
  • Internet bill
  • Car note
  • Car insurance
  • Life insurance
  • Credit card bill
  • Student loan bill
  • Groceries
  • Gas
  • Dining out
  • Entertainment
  • Clothing
  • Personal care items
  • Child care
  • Medical costs
  • Travel costs
  • Gifts

You don’t have to get into specifics on what percentage you’ll spend in each of your budget categories. If you want to spend a large portion of this money on traveling and eating out, you’re totally free to do so (as long as your bills and necessities are covered, of course).

Set 20% Aside for Saving and Investments

Set up your future self for success. Following the 70/20/10 rule, you’ll divert 20% of your pay to saving and investing. This could include:

If you have little to no money in your savings account for emergencies, ideally you should focus on building up your emergency fund until you have enough to cover three to six months of essential expenses.

However, it’s also okay to save money for multiple savings goals at the same time. You may feel like retirement is a long way away but it’s best to start as early as possible to take advantage of the power of compounding.

Earmark 10% of Your Take-Home Pay for Debt or Donating

The remaining 10% of your income will go to either paying off debt or donating (or both). You might want to:

  • Pay down credit card debt
  • Make extra payments toward your student loans
  • Reduce the principal on your mortgage
  • Pay off outstanding medical debts
  • Repay personal loans
  • Tithe to your house of worship
  • Donate to a cause you care about
  • Give money to your college alma mater

You should be covering your minimum bill payments with the 70% of your income reserved for monthly expenses. This money, however, is for making additional payments that’ll help you crush your debt faster.

If you’ve got multiple debts you’re working to pay off, consider using the debt snowball or the debt avalanche methods. With the snowball method, you’ll start with the debt with the lowest balance. With the avalanche method, you’ll first focus on the debt with the highest interest rate.

If you are debt free, use the extra cash to give to organizations or causes that matter to you. Many budgeting plans don’t specifically factor in donating, which makes the 70/20/10 method unique.

An Example of the 70/20/10 Budget

You do have to do a little bit of math to figure out how much money to set aside for each of these three main categories, but it’s simple.

Just whip out the calculator app on your phone and multiply your monthly income by 0.7 to figure out how much money you can spend each month. Multiply your take-home pay by 0.2 to determine how much you’ll save, and multiply your earnings by 0.1 to find out how much to put toward debt or to donate.

For example, if you made $4,000 a month, your monthly budget would look like this:

  • $2,800 would go to covering your living expenses
  • $800 would go toward savings or investments, and
  • $400 would go toward debt or donations

Once you’ve come up with those three amounts, use the money in each category how it best works for you.

How the 70/20/10 Budget Compares to the 50/30/20 Budget

The 70/20/10 budget is similar to another money management method you may have heard about — the 50/30/20 budget. With the 50/30/20 rule, half your income goes to needs, 30% goes to wants and 20% goes to savings and other financial goals like investing or paying off debt.

These two budgeting methods are both percentage-based budgets. They divide your take-home pay into three broad categories. And they prioritize saving money and contributing positively to your financial future.

However, the 70/20/10 budget rule does not separate needs from wants when it comes to spending. It also stands apart by designating a portion of your pay to go toward donations or giving to others.

The Benefits of the 70/20/10 Budget

There are some great benefits to using the 70/20/10 budget rule.

It’s a pretty simple money management method to follow — similar to the “spend-save-share” money jars for kids. Once you’ve separated your take-home pay into the three categories, you’re free to spend how you like without worrying that you’ll derail your savings goals or debt payoff plans.

While this budget has some structure, it’s not super strict or restrictive. You don’t have to zero in on exactly how you’ll spend every dollar.

Another benefit of this budgeting style is that it prioritizes your financial future. You’ll be building up your emergency fund, investing for retirement, paying down debt and giving back to others consistently.

The Downsides of the 70/20/10 Budget

Despite the benefits of this budgeting style, it’s not for everyone.

If you’re living paycheck to paycheck because you don’t earn enough money, you won’t be able to squeeze out 20% for saving or 10% for extra debt payments. This budgeting method is only for those who can realistically spare using 30% of their income on something beyond essential living expenses.

Conversely, if you’re someone who can comfortably spend less than 70% of their income and you want to use a much larger portion of your income to pay off debts or to save up to retire early, the 70/20/10 budget may not be the most fitting for you.

It’s also important to note that while some people appreciate a budget that isn’t rigid, others thrive better with more detailed guidance on how they should spend their money. They might prefer to set a limit on fun money spending or to have a specific goal for emergency fund contributions rather than setting aside a broad amount for all savings.

If you’re someone who often overspends on impulse buys, you might benefit from a more structured budget, like a zero-based budget.

5 Tips to Help You Be Successful With the 70/20/10 Budget

Put this advice to use to truly excel using the 70/20/10 budget.

1. Use Direct Deposit to Your Advantage

Set up separate bank accounts for each percentage bucket. One account will be for spending, one will be for savings and investing and the third will be for debt and donating. Adjust your direct deposit allocations to match the 70/20/10 rule.

2. Automate Your Bills

Put your bills on autopay with the date set for right after you’re paid. This way, your financial obligations are covered every month before you start spending on takeout or new shoes.

3. Track Your Spending

Since there is no further guidance on how you should spend that 70% of your income, it’s a good idea to track your spending so you know where your money is going. Review your spending periodically to make sure you’re striking a good balance between needs and wants. A budgeting app can help you keep track of your spending with little effort on your part. Using cash envelopes can be helpful to make sure you don’t overspend in certain categories.

4. Tweak the Percentages to Best Fit Your Situation

If you want to save a bit more, you might find value in making it the 65/25/10 budget. If you’re paying child care expenses for multiple kiddos, you might need to do an 80/10/10 breakdown.

5. Split up the 70% Pool When Budgeting With a Partner

After you’ve covered paying the bills and other necessities with your combined income, split the remainder of that 70% with your significant other. It could be a 50/50 split or you may choose to structure it based on how much each partner earns. Schedule regular budget meetings to collectively decide what to do with the 20% earmarked for savings and the 10% for debt or donations.

Final Thoughts

The 70/20/10 budget is a good way to manage your money if you want to put funds aside to better your financial future but you don’t want to be super restrictive about your spending.

By dividing your money using the specific percentages, you’re free to spend 70% of your paycheck without stressing whether you’re contributing enough to your emergency fund or making a dent in your debt.

This money management style is also great for those who are philanthropic and want to share a portion of their earnings with others.

Overall, the 70/20/10 method is a solid budget plan that’ll easily help you break the paycheck-to-paycheck cycle so you can reach your financial goals.

Nicole Dow is a senior writer at The Penny Hoarder.

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Source: thepennyhoarder.com

Wedding Season is Back, Here’s How to Budget for it

After so many couples were forced to postpone their weddings in 2020, 2021 is shaping up to be a jam-packed wedding season. For many people that means a calendar filled with memorable weekends – if you can actually afford to attend.

Here are some practical ways to stretch your budget, so you don’t have to miss out on a single high-end buffet, open bar, or crowded dance floor.

Use credit card points

If you have credit card points, you can redeem them for flights, hotel stays, and rental cars. Play around with the redemption figures if you have several cards with significant point totals.

Don’t have a rewards card? It may not be too late to earn a free trip. Chase is currently offering a 60,000-point sign-up bonus for the Chase Sapphire Preferred card, along with a 100,000-point sign-up bonus for the Chase Sapphire Reserve card. Both of these offers are enough for a domestic round-trip flight and a couple nights at a hotel. Pro tip: compare reward cards and check the recommended credit score to ensure you’ll get approved before applying.

You can also redeem miles and points for gift cards at retailers like Target and Macy’s – perfect if you’re buying a gift off the registry. Also, look for coupons and discounts before making a purchase.

Be involved in the planning

If your best friend is getting married and you’re in the wedding party, encourage them to make budget-friendly decisions so you – and your other friends – can save some money.

For example, ask them to combine the bridal shower and bachelorette party so it’s on the same weekend. This minimizes the cost of travel and you won’t feel pressured to buy two big gifts.

If your friend is thinking of going of going on a trip for the bachelor party, help them find an affordable Airbnb or hotel arrangement. Look at flights for several different weekends to find the least expensive option.

Skip the hotel

Staying at a house or apartment can save you hundreds compared to staying at a hotel if you’re traveling for a wedding, bachelor or bachelorette party – especially if you can split a large house with several friends. When you find out you’ve been invited to an out-of-town wedding, coordinate with other guests to see if you can split a rental home.

If you’re getting a house or apartment with a decent kitchen, you can eat breakfast there and bring your own drinks and snacks. Some hotels charge extra for WiFi and parking, but if you stay at an AirBnB, those costs will be included in the price.

Minimize other expenses

Every time I get invited to a wedding, I’m tempted to buy a whole new outfit to prepare for the onslaught of pictures. But if you’re on a budget, skip the shopping spree. If you really do need a new dress or shoes, hit up a consignment store or ask a friend.

If you’re really struggling, don’t feel pressured to spend as much on a gift as you would normally. Alternatively, you can split a more expensive gift with several people so it still feels like you’re contributing something meaningful.

Create a budget

Before you mail back the RSVP card, go through your finances to make sure you can afford to go. See how much you currently have in your savings account, not including your emergency fund. Do you have a vacation fund you could put toward a wedding trip? Could you divert some discretionary money to a bachelorette party?

Then, plug the numbers into the travel budget calculator to see how much it will cost to attend the wedding. Add up the hotel, rideshare services, meals, and cost of boarding your pets. If the total amount is more than what you have available, you may have to decline the invitation.

Set boundaries

If you’re invited to several weddings, at some point, you may have to decline an invitation. Or you may have to choose between attending a wedding or going to the bachelorette party.

If you have to choose, ask the bride or groom what they would prefer. Don’t assume they would rather have you come to the wedding, especially if the bachelor or bachelorette party is a better way to spend quality time with them.

I knew a bride whose friends couldn’t afford to fly in for both the bachelorette party and the wedding. She told them to come to the bachelorette party, where she would get more one-on-one time with them, compared to the wedding where face time would be scarce.

If you lost your job at some point or don’t have the money to travel for other reasons, don’t feel pressured to attend. Call your friend and explain the situation. A true friend will understand if you can’t afford to go.

Send a heartfelt card before the wedding, expressing how excited for them you are and how sad you are that you won’t be there in person. Before or after the wedding, you can still schedule a special day focused on celebrating them, a girls day to get your nails done, dinner with the couple, a fun hike or something you know they enjoy.

Whatever you do, don’t lie and say you can’t go because of vacation days or a work conflict. Some people might interpret that as you not caring enough to attend. Being honest about your financial situation gives them a chance to understand why you can’t go.

Start a sinking fund

If you have a while to save before the next wedding on your schedule, start a sinking fund. A sinking fund is a special savings account dedicated to a short-term goal, like your best friend’s wedding.

I like to create separate savings account for each sinking fund, which makes it easy to track how much I’ve saved for my goal. You can easily set up a goal in the Mint app.

Once you figure out how much attending the wedding will cost, divide that amount by how many months you have left. Then, create automatic transfers for that amount from your checking account to your sinking fund.

Before setting up the transfers, verify that you can afford to save that much every month. You may have to cut back in other areas or turn to more creative solutions, like finding a side hustle or selling stuff around the house.

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Budgeting With a Part-Time Job

Whether it’s your only source of income or a side hustle on top of your regular gig, part-time jobs are a great way to make some money while keeping a flexible schedule.

But part-time work comes with some budget complications you may not be aware of. Here are some strategies to consider if you have a part-time job.

Track expenses

If your part-time job includes freelance or gig economy work, you may be eligible to deduct related expenses on your taxes to reduce your overall tax burden.

For example, if you teach Pilates a few nights a week, you may be able to deduct training courses, workout clothes, or equipment. You can also deduct the cost of driving to and from the Pilates studio.

Take time every week to go through your transactions and mark which ones are tax-deductible. If you’re not sure whether or not an item is deductible, contact a tax professional who specializes in your industry. You may have to pay a consulting fee, but there’s a good chance you’ll earn more money back on your taxes.

Save for estimated taxes

If your part-time job doesn’t withhold taxes, you’ll have to pay them yourself. This can come as a huge shock at tax time if you’re not prepared. Freelance workers and non-employees, like gig economy workers, are required to withhold their own taxes.

A basic rule of thumb is to save between 20% and 30% of your untaxed income for taxes. For example, if you complete a $200 freelance graphic design project, set aside between $40 and $60 for taxes. Many freelancers and contractors keep a separate savings account just for taxes, so they don’t accidentally spend the money.

Manage cash carefully

If you work part-time as a waiter or bartender, you may be paid in cash tips. If you want to avoid making frequent trips to a bank or ATM to deposit that money, you can start using the cash envelope budgeting method.

Here’s how it works. Divide your categories into individual envelopes and insert the predetermined amount of cash in each envelope. If you don’t want to carry a huge wad of cash in your wallet or purse, you can budget for a week of expenses instead of a whole month.

If you prefer to shop using a debit or credit card, deposit the cash in your bank account regularly so you don’t accidentally spend it. It’s hard to track cash transactions, so unless you plan to use the envelope method, deposit any cash you earn quickly.

If you only have a part-time job

Review your budget often

If you’re living on a part-time salary, you probably have little margin for error in your budget. The best way to avoid going over is to monitor your spending often. Check in at least once a week and see how your actual spending aligns with your projections.

If you spend more than you’ve allotted, see if you can cut back on a different category. If that’s not possible, try to find a way to pick up more hours at work. Always leave some wiggle room in your budget to account for going over.

Overspending regularly in one particular area can be a sign that you’re not allocating enough money in that category. If this keeps happening, you may have to revise your budget to make more room in that specific category. This may involve eliminating or reducing a fixed expense, like moving to a cheaper apartment, getting an extra roommate or cutting a subscription service.

If you have a full-time and a part-time job

Take advantage of benefits

Many companies offer benefits even if you’re only working part-time. These can include matching retirement contributions, tuition reimbursement, health insurance, stock options and paid time off.

Talk to the HR department and learn how you can take advantage of these benefits. You never know what kind of unusual perks may be included, like a free gym membership or discounts to other businesses.

These benefits may actually be better than what your full-time employer offers. Compare health insurance programs carefully and see which option makes more sense. If you work part-time for a major company, they may have a less expensive health insurance plan than your full-time job – especially if the latter is a small business or nonprofit.

Always utilize an employer’s 401(k) plan if they match employee contributions. Employer contributions are essentially free money, and the rule of thumb is to always contribute enough to receive the free match. You’re allowed to have multiple 401(k) accounts, as long as you don’t exceed the $19,500 annual contribution limit.

Have a reason for working more

Working a part-time job on top of a full-time job can be exhausting, and you’ll get burnt out if you don’t have a specific reason for working so many hours.

It’s not enough to want more money. It has to be something personal and motivating, like “I’m saving so I can take a three-week trip to New Zealand next year,” or “I’m working 60 hours a week so I can save for a down payment.”

Keep the reason top of mind by having pictures of your goal somewhere close, like on your phone’s background, your refrigerator door, or your bathroom mirror. This will serve as a consistent reminder why you’re working so many hours.

Avoid lifestyle creep

When you’re working a part-time and a full-time job, you may be tempted to treat yourself to alleviate the stress. For example, you might order takeout instead of making dinner. Doing this once in a while is fine, but making it a regular habit can negate the whole point of taking on extra hours.

Build in treats as part of your budget and find low-cost ways to relax, like hiking with a friend or hosting a game night at your house. If your part-time job is paid on a project basis, you could allocate a certain percentage for discretionary purchases. For example, you could decide to spend 20% of what you earn and save 80%.

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Dear Penny: Am I Cheap for Not Giving $500 for My Aunt’s Funeral?

Dear Penny,
The following day, I heard from Tom saying that Mary and her siblings decided to chip in 0 apiece to help out with the cost of the funeral. The full cost of the funeral was now covered. 
Source: thepennyhoarder.com
-H.
My aunt passed away. Her only daughter, Beth, could not afford the full cost of the funeral. She is 61 and working two jobs and sometimes three jobs to make ends meet. She has children who are in their 30s, but they struggle to make ends meet as well. 
It was a nice gesture of your brothers to send 0 to Beth, but you certainly did nothing wrong by not contributing. Most of us have finite resources. If you hadn’t seen Beth or your aunt in 30 years, it’s understandable that sending 0 wasn’t a high priority for you.
This situation has kept me up for nights on end. I’m not sure if I did the right thing by not contributing the 0. Do you have any advice?
Robin Hartill is a certified financial plBether and a senior writer at The Penny Hoarder. Send your tricky money questions to [email protected].
My brother went on to say that Beth would no longer have my aunt’s Social Security checks. (My aunt was living with Beth at the time of her death.) Tom was wondering if we would all like to contribute and send something. He said he was willing to match the 0 that my cousins were giving to Beth and asked if we would like to contribute 0 each. All my brothers agreed to do so. 
My cousin, Mary, and her siblings were thinking about helping her with the cost of the funeral. They are close to Beth and have had contact with her throughout the years. My brother, Tom, sent a message to me and my other two brothers saying Beth might not be able to pay for the funeral. Both of my brothers chimed in that they would be happy to help in any way they can. 

Ready to stop worrying about money?
You don’t say how long it’s been since your email exchange with your brothers. If it’s only been a couple of weeks or you aren’t particularly close, I wouldn’t automatically jump to the conclusion that they’re angry.
This whole conversation made me feel uncomfortable since I had not had contact with Beth or my aunt in over 30 years. However, my aunt was my dad’s sister, so I understood why my brothers wanted to help. I remained silent and didn’t reply until I had a chance to think about it. 
There’s no right or wrong answer here. If your frugality is important to you, hold your ground in the future. But if such requests are relatively rare in your family, it might be worth it to go with the herd just to avoid those sleepless nights.
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I suspect that you’re overthinking things a bit. It happens. You refused to do what everyone else was doing, which can cause you to second-guess yourself. Even if your brothers are annoyed with you, I’m guessing it will pass with a little time.
Dear H.,
Privacy Policy
If your brothers choose to stew about what you do with your money, they’re the ones with the problem, not you. Your brothers may not approve of your frugality. But they really don’t have to. You’re siblings, not spouses.
I told him I already sent something to Beth. I haven’t heard from my brothers since that email. I have always been frugal and it bothers Tom. It’s not a question of being able to afford it. To me, 0 is a lot to give to Beth considering we are not close and have had no contact in decades.  <!–

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Try calling, emailing or texting whichever brother you’re closest to just to say hi. There’s no need to bring up your aunt’s death or Beth’s hardship. But if the brother you reach out to calls you out for not contributing, don’t apologize. Just reiterate what you’ve already said, which is that you hadn’t seen either of them in 30 years and you’d already sent something on your own. Then, try to change the subject to what’s going on in your own lives.

Time for a Financial Checkup: 11 Healthy Steps to Take

You go to the doctor for your annual physical to make sure your body’s healthy. But when’s the last time you had a checkup for your financial health?

It’s important to know how well you’re managing your money and where you can make changes for the better. Without a regular financial checkup, you might continue to repeat poor money moves, like giving into frivolous impulse buys or only paying the minimum on your credit cards.

Here’s how to examine and improve your financial health.

11 Steps to Complete Your Own Financial Checkup

1. Update Your Budget

Budgets should not be static. Jump in and adjust yours if it’s not working for you.

Increase or decrease spending limits in your various budget categories so they fit your current priorities and desires. Test out a different budgeting method or combine a couple to create your own money management plan, like this woman did.

2. Track Your Spending

Do you often wonder where all your money goes? If so, logging every dollar you spend will give you some insight.

Practice tracking your spending for a month, but don’t just include dollar amounts and what you bought. Jot down notes on why you made that purchase and how it made you feel.

Pro Tip

Kakeibo is a budgeting method that incorporates mindfulness about spending.

If you’re overspending on take-out during the work week because you’re too tired to cook, that could be a sign to start meal prepping. If you love how you feel after taking a drop-in yoga class and realize you want to do that more frequently, you could save money with a monthly pass rather than paying per session.

3. Reduce Your Fixed Expenses

Your fixed costs — the unchanging amount you pay for things like rent, cell phone service and auto insurance — may seem inflexible, but they don’t have to be. Research competitors’ rates to negotiate your bills with your current provider or to switch to a new one.

When it comes to housing costs, getting a roommate can significantly reduce that fixed expense. Just make sure to screen all potential roommates so you don’t end up with a dud. Or if you’re cool with the nontraditional, these alternative housing options can help you save money.

4. Add to Your Emergency Fund

An unexpected crisis can pop up at any time. Having a robust emergency fund makes those situations a little less stressful.

During your financial checkup, review how much money you have set aside for emergencies. Many experts recommend having between three to six months worth of expenses saved, but some are advocating for even more — especially after so many people had their savings wiped during the Covid-19 pandemic.

If you have less, make a plan to add to your savings in the year ahead.

A man reviews his finances.
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5. Check Your Progress on Other Savings Goals

Even if you’ve automated your savings for, say, an upcoming vacation or a home down payment, your goals aren’t something to just set and forget. Use this financial checkup time to see how close — or far away — you are from meeting those goals.

Do you need to adjust your deadline or increase regular contributions to your sinking funds? Are you making the most of your money by putting it in a high-yield savings account or money market account?

6. Assess Your Retirement Contributions

Even though retirement may seem like a long way away, the best time to start saving for it is now. Retirement accounts grow the more time you give them to benefit from compound interest.

Are you meeting your employer’s 401(k) match? Did you up your retirement contributions the last time you got a raise? Could you free up a little more each paycheck to divert to your retirement account, even if it’s just an extra 25 bucks?

Every little bit helps.

7. Evaluate Your Debt Repayment Plan

There are different ways to tackle paying off debt. Use this financial checkup to determine if your current repayment plan is working for you.

If you want the gratification of clearing an entire credit card balance, the snowball method of debt repayment focuses on the smallest balances first. If you want to attack the debt with the monster-sized interest rate, try the avalanche method.

8. Improve Your Credit Score

Your credit score is important when it comes to things like taking out a loan or renting an apartment. A low credit score can mean getting denied — or paying significantly more in interest or for a security deposit.

Conversely, the higher your score, the less money you’ll have to pay.

You can raise your credit score by paying down the balance of your existing loans and credit cards, not incurring additional debt, requesting limit increases on your credit cards and paying your bills on time.

9. Pull Your Credit Report

Your credit report delves into the reasoning behind your three-digit credit score. It details who you owe, how much, recent credit inquiries and if you have any debts that have gone to collections.

You can get a free copy of your credit report from all three credit reporting bureaus — Experian, Equifax and Transunion — once a year at www.annualcreditreport.com.

Review your credit reports to check for any inaccuracies. If something is on your report in error, you can dispute it with the credit bureau and potentially raise your credit score.

10. Update Your Resume

Stay prepared to jump on a great job opportunity by keeping an up-to-date resume.

And while you’re making sure your resume is in stellar condition, here’s some advice on how to write a winning cover letter.

11. Protect Your Assets

To maintain good financial health, it’s smart to have a contingency plan for if something goes wrong.

Disability insurance lets you collect income when you’re sick or injured and can’t work. Home, renters and auto insurance pay to repair or replace your property after an accident or disaster. Life insurance takes care of your family in the event of your death.

Review your various policies to make sure you have the coverage you need.

Nicole Dow is a senior writer at The Penny Hoarder.

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Source: thepennyhoarder.com

Dear Penny: Do I Repay My Boyfriend for Vacation When I Dump Him?

Dear Penny,
This guy clearly likes to play head games. Even if he treated you to eight months of fancy dates, that doesn’t make you a mind reader. I suspect that even if you’d given him a Rolex, he’d be picking away at you for something else.
Source: thepennyhoarder.com
Try to avoid rehashing the past eight months. That will turn into an argument you simply can’t win with this guy.

-D.
Dear D.,
Privacy Policy
Regardless of how you approach this discussion, hold your ground. You’re not going to date this man any longer. This trip is now a vacation for one.
I’d suggest sending him the money via Venmo or Paypal right before you tell him you won’t be accompanying him. Boom. End of discussion. Don’t open the door for your soon-to-be-ex to hem and haw about why it really isn’t necessary for you to pay him back — while at the same time guilt-tripping you about the fact that he paid for this vacation.
Focus on how you’re feeling right now. You’re no longer enjoying his company as the result of his incessant complaining. I think paying not to go on vacation with this man sends a pretty strong message. I’m not holding out hope that he’ll actually hear the message. But at least you’ll have set the record straight for yourself.


Robin Hartill is a certified financial planner and a senior writer at The Penny Hoarder. Send your tricky money questions to [email protected].
But he was unhappy with a gift I bought him, and now he brings up that he always pays for our dates. He still wants to take me on a trip that he paid for. I won’t go. Should I pay for half of the trip and walk away?
Ready to stop worrying about money?
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What did this guy expect? That you’d quietly sock away your half of the check for eight months straight so you could buy him a Rolex?
I do think you should pay your half of the vacation, provided that you can afford to without causing yourself financial hardship. This isn’t really about him, though. <!–

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I have been dating a guy for eight months. He has always insisted on paying for our dates, generally meals, and wouldn’t hear my objections. So I relaxed. 

How to Budget for Insurance

The cost of insurance can be a big hit to your personal bottom line. That’s especially true when you consider all the types of coverage you may need to pay for, including auto, health, and life insurance plans. Here are some tips for how to budget for insurance without compromising your lifestyle.

A young Asian woman sits at a tabletop writing in a notebook about how to budget for insurance.

Steps for Budgeting for Insurance

In addition to being legally required in many instances, insurance is often a good investment for your wallet and your peace of mind. The expense of insurance can actually save you money in the long run.

Budgeting for insurance may seem complicated, but it really comes down to two simple actions: First, decide what type of insurance you need. Then, start budgeting for it. Here are five steps for incorporating insurance into your personal finances.

1. Decide how much insurance you need

For each type of insurance you decide to get, you’ll need to decide how much coverage to buy. When it comes to insurance, cost shouldn’t be the only factor in your purchase decision. Instead, think critically about how much coverage you need. If you’re not sure how much insurance or what type to get, consider talking with an insurance agent for advice.

Do you need your homeowner’s insurance to include liability in case someone else is injured on your property? Is term life or whole life insurance better for your situation? Who needs to be covered by your auto insurance?

2. Get quotes from agents or online

Once you know what type of insurance you want and how much coverage you need, get some quotes. Shop around and get quotes from multiple companies. Remember to compare the coverage and not just the premium price—you might find that you’re getting a much better value when paying only a little more a month with one company over another.

3. Find out what the payment schedule is

Discuss the payment schedule before you agree to an insurance policy. It’s common for auto insurance companies to offer a significant discount if you can pay for six months of insurance at a time, for example. Here are some common pay schedule options for various types of coverage.

  • Home Insurance: Paid annually or biannually, often out of escrow if you have a current mortgage
  • Car insurance: Paid every six months or monthly
  • Life insurance: Paid monthly
  • Health insurance: Paid monthly or via pretax deductions from your paycheck if the coverage is through your employer

Understanding the payment schedule will help you budget for insurance more effectively.

4. Set aside enough money monthly

However you plan to pay for insurance, break the amount down into a monthly budgeted amount. For example, if your home insurance is $900 every six months, set aside $150 every month. It’s much easier to budget for $150 than it is to come up with $900 all at once.

5. “Pay” the bill monthly

If you do pay monthly, go ahead and budget so that you can pay your insurance bill at least a week before it’s due. That leaves you plenty of wiggle room if something ever comes up.

If you don’t pay monthly, act like you do. Move the monthly budgeted amount into a savings account and don’t touch it. Act like it’s not there so you’re not tempted to use it on something else and risk not having the money when the bill comes due.

How to Budget for Different Types of Insurance

Trying to include a large insurance expense in an already tight budget can be difficult. Here are some tips for making various types of insurance potentially more affordable so they are easier to budget for.

Car Insurance

The average American pays around $2,388 per year on auto insurance. But your actual expense can vary widely depending on your age, state of residence, type of car, credit score, and many other factors. Here are some tips for saving money on car insurance.

  • Increase your deductible. You may need to shell out a bit more in the event of an accident, but you can save a lot of money on your premiums.
  • Ask about discounts if you’re married, have multiple cars, are buying different types of insurance from the same company, or are a good driver. Some insurance companies also offer discounts for students with good grades.
  • Lower your liability amounts. This can reduce premiums, but you should ensure that it’s a good move for you financially overall.

Health Insurance

According to numbers from the Kaiser Family Foundation in 2018, the average amount people were contributing to their employer-sponsored health care plans each year was $1,186 for single coverage. You don’t have to pay that much for health insurance, though. Some ways you can save on this expense, especially if you’re purchasing as an individual through the marketplace, include:

  • Buy a plan with a higher deductible.
  • Enter all your income data into the marketplace application form to see if you qualify for subsidies or credits.
  • Apply for Medicaid if you’re eligible.

Life Insurance

The cost of life insurance depends heavily on your age, the type of insurance, and how much you’re purchasing. If you’re young, you might want to buy a whole-life policy that you can pay for now and still have when you’re older. If you’re older, you may want to opt for term life insurance, which is cheaper than other types.

Homeowner’s or Renter’s Insurance

One of the reasons insurance costs might be lower is because the company sees you as less of a risk. Homeowner’s and renter’s insurance may be cheaper for those that invest in security measures such as home security systems.

The Bottom Line on How to Budget for Insurance

You can get discounts and great deals on insurance if you’re willing to do your research. But, in most cases, insurance may still be a sizeable expense. Planning ahead and budgeting every month for these expenses is one of the best ways to ensure you can afford the coverage you need.

And since your insurance costs are sometimes impacted by your credit score, make sure you’re keeping up on all your other bills and reviewing your credit reports regularly.

DISCLAIMER. The information provided in this article does not, and is not intended to be,  legal, financial or credit advice; instead, it is for general informational purposes only. 

Source: credit.com

These Budgeting Statistics Show Most of Us Don’t Track Our Spending

Never jumped on the budgeting bandwagon? You’re not alone.

A little over 55% of Americans do not use a budget to manage their hard-earned income, according to a new survey by The Penny Hoarder.

A similar 56% of survey respondents said they didn’t know how much money they spent last month.

But there’s a good case to be made for tracking your money. The survey of 1,900 Americans conducted in May also found that those who kept a budget were more likely to know how much they spent last month and were less likely to say they had splurged on something that hindered their ability to pay bills.

While following a budget can help people keep tabs on their spending and reach financial goals, many Americans simply don’t think it’s necessary. At least that’s what half (51%) of those who said they did not budget gave as their reason.

Nineteen percent said they didn’t budget because they didn’t have the time or energy and another 19% chalked it up to lack of organization. Just 6% of Americans said they don’t budget because they know they’ll overspend anyway.

These results didn’t particularly surprise Rebecca Wiggins, executive director of the Association for Financial Counseling and Planning Education.

But taking the time to create a meaningful spending plan goes beyond debits and credits, she said.

“It is all about creating alignment in your life — connecting your values to your money in a purpose-driven plan that allows you to stay in the driver’s seat,” Wiggins said.

How We Budget: Spreadsheets, Apps and Proven Methods

Of the survey respondents who said they do follow a budget, about 40% manage their money with a spreadsheet. Nearly 17% of those who budget said they use a zero-based budget, 14% use a budgeting app, 12% are fans of the cash envelope method and 7% follow the 50/30/20 method.

Of those who said they used budgeting app software to keep track of their spending, Mint was the most popular (accounting for nearly 42% of those who use a budgeting app). EveryDollar was second (17%), followed by Mvelopes (8%), You Need A Budget, or YNAB (4%) and finally, Personal Capital (3%).

What Else Our Spending Reveals

The Penny Hoarder asked people about their spending and budgeting habits broadly. Clearly, we have some dirty little secrets. Other key findings from the survey:

  • About 1 in 4 say they’ve hidden a purchase from a significant other in fear of how they would react.
  • Nearly 1 in 5 admit they have splurged on a purchase in the last two years that caused a strain on their ability to pay bills.
  • Fifty-nine percent of Americans view themselves as savers while 41% say they are spenders.
  • Half of Americans say they currently have no credit card debt. Twenty-two percent have less than $5,000 in credit card debt and about 8% have credit card balances between $5,000 and $9,999.

Here’s How to Get Into Budgeting — or Not

Budgeting doesn’t have to be painful. Think of it this way: It’s an opportunity for you to be in charge of where your dollars go.

You’re the master over your money. If your first budget isn’t serving you well, scrap it and try a new one.

However, if you’re among the half of Americans who just can’t get on board with budgeting, that doesn’t necessarily mean you’re destined to struggle. Living below your means and automating bill payments and savings deposits can help you meet your financial responsibilities and goals without a formal system.

You might also consider simply tracking your expenses rather than developing a full-blown budget. That way, you’ll be able to take note of how often or how much you’re spending and where you could cut back if you’re struggling.

Budget or no budget, we all want to live our best financial lives. Having awareness of how much money you make and where those hard-earned dollars are going will help you get there.

Methodology: The Penny Hoarder used Google Surveys to conduct a national survey about people’s budgeting habits with 1,938 people completing the survey from April 23, 2021 to May 18, 2021. Survey responses are weighted so that each response is representative of the U.S. population.

Sponsor: Credit Sesame sponsored this survey, which was conducted independently by The Penny Hoarder’s editorial team.

Nicole Dow is a senior writer at The Penny Hoarder. Chris Zuppa, The Penny Hoarder’s multimedia content creator, contributed to this report.

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Source: thepennyhoarder.com